How is the supply of cryptocurrency determined?
To know the supply of cryptocurrency, you have to first understand the Total Supply of cryptocurrency. Total Supply is the total amount of coins in existence right now (minus any coins that have been verifiably burned). Bitcoin, for example, is hard coded to have 21M coins in total. Some other, cryptocurrencies, however, can indefinitely increase supply. The Market Cap of a cryptocurrency is calculated by multiplying the Circulating Supply with the price of the coin or token.
How have cryptocurrencies performed compared to other assets’ class?
Bitcoin is one of the best performing assets of the 21st century, posting returns of +305% in 2020 and +187% YTD. An investment in BTC since 2016 has outperformed other assets including S&P, gold, aggregate bond index, and MSCI World index. One of the key narratives around Crypto is that monetary stimulus given around the world by governments, paid by printing fiat currency, is positively impacting Bitcoin as an alternative investment solution to hedge against potential inflation. Companies like Tesla, Microstrategy and Square have allowed an accelerated increase in adoption for Crypto as an institutional investor buy in, as a reserve currency or as a payment option. Bitcoin holdings also allow businesses to take advantage of peer-to-peer payment opportunities
When is a good time to invest in cryptocurrency?
We recommend you do your own research, as we cannot provide financial or investment advice. Check cryptocurrency’s long history, and take a look at how Bitcoin has performed since its incubation. You can head to Bitbuy Resources to learn more on Cryptocurrency and Blockchain.
What are key crypto terms to know?
HODL: In the cryptocurrency community, the term HODL originated as a misspelling of the word “hold’. On December 18, 2013, a trader with the username GameKyuubi posted on Bitcointalk forum: “I AM HODLING”, Ultimately the acronym, “Hold On For Dear Life” became synonymous with the term.
De-Fi: DeFi is short for decentralized finance. DeFi was formerly known as open finance. DeFi is built on the Ethereum blockchain network, and is the next step in revolutionizing financial technology.
Altcoin: Altcoins are cryptocurrencies other than Bitcoin. They share characteristics with Bitcoin, but are also different from them in other ways. They distinguish themselves from Bitcoin by providing new or additional capabilities, such as smart contracts or low-price volatility.
ATH/ATL: The abbreviations ATH (all-time high) and ATL (all-time low) are used by traders to indicate the maximum or minimum price of an asset for its entire existence.
Can anyone create a cryptocurrency?
The short answer is yes, anyone can create a cryptocurrency with limited knowledge of coding on how cryptocurrency works. Most crypto developers share their work as open source files, so information on how to do this is extremely easy to find.
That being said, there are several ways in which you could create your own cryptocurrency, with varying degrees of difficulty. The main decision that would need to be made would be to create a token on an existing blockchain, or to create your own blockchain by forking code or starting from scratch.
Using the Ethereum network, you could easily create an ERC-20 token that utilizes the Ethereum blockchain in a matter of hours. The same can be done on other blockchains, such as Binance Smart Chain or Solana. Creating a new blockchain that does not use existing protocols, would be an extremely arduous task, but is often done for specific use cases.
Other than cryptocurrencies, what are blockchains used for?
Blockchain comes in particularly handy when it comes to monitoring supply chains. By removing paper-based trails, businesses should be able to pinpoint inefficiencies within their supply chains quickly, as well as locate items in real time. Further, blockchain would allow businesses, and possibly even consumers, to view how products performed from a quality-control perspective as they travelled from their place of origin to the retailer.
In a world with growing internet access, copyright and ownership laws on music and other content has grown hazy. With blockchain, those copyright laws would be beefed up considerably for digital content downloads, ensuring the artist or creator of the content being purchased gets their fair share. The blockchain would also provide real-time and transparent royalty distribution data to musicians and content creators.
The good news is the medical sector has already been moving away from paper for record keeping purposes for years. However, blockchain offers even more safety and convenience. In addition to storing patient records, the patient, who possesses the key to access these digital records, would be in control of who gains access to that data. It would be a means of strengthening the HIPAA laws that are designed to protect patient privacy.
What factors should be considered when deciding where to store crypto?
Cold storage devices are considered to be the most secure places to store your crypto for long term safe keeping. They are digital storage mechanisms which have both a public key and a private key. The private key (the one that can give others access to your crypto) lives on the device, and can never be shared over the internet. Hence, why these wallets are called “cold”, because they have no connection to the internet unless they are in the act of sending or receiving. Check out our guide for getting started with cold storage, and how to send from Bitbuy to your personal cold storage wallet.
What are key safety measures I can take to avoid being scammed or hacked?
Cryptocurrency is a powerful and unique asset, but because of crypto’s unique properties, you need to be extremely careful to avoid scams and phishing attempts. We take security extremely seriously here at Bitbuy, but we need your help in order to make Bitbuy Canada’s safest cryptocurrency platform. Check out our guide for the top 10 tips for cryptocurrency safety.
What metrics should be used to evaluate cryptocurrencies?
Uniqueness of the Crytpocurrency
There are a variety of metrics to evaluate cryptocurrency, but the most important one is measuring the uniqueness of the Cryptocurrency. Ask yourself how is this coin different from the many that came before it. Check the team behind the Cryptocurrency, and consider the community behind the vision. What their backgrounds are, and what their road map is to bring the unique cryptocurrency to fruition. It is essential to understand that cryptocurrencies that have a much active community are destined for greatness.
The size of the community of a digital asset usually indicates how well the ideas and the functions of the cryptocurrency are being accepted and how far it can spread. To properly check the community behind a coin, go through their fan bases on Twitter, Facebook, Reddit or Telegram to determine the size and how active they are on social media. Remember to do your due diligence whether the team has any history of scam or fraudulent schemes.
The second metric is looking at tokenomics. Tokenomics in actual sense talks about how and why a token is implemented within an ecosystem for easy adoption by the people for a transaction of goods and services and other uses. To successfully launch a coin into the market, there is a framework within which the fate of the token can be decided. The question of why the cryptocurrency was issued and how this was done defines whether its tokenomics is good or not. In other words, the tokenomics defines how well a cryptocurrency or token has been designed and, it provides a good insight into its future performance.
You can also look at circulating Supply (the number of coins that have been mined and technologically available in the market) This does not include coins that are yet to be mined or coins that have been mined but not available in the market. Bitcoin, for instance, has a Total supply of 21 million out of which 17 million are available in the market. The circulating supply is important in the quest to identify the potential of a cryptocurrency through its market capitalization.
Last but not least, trading volume provides a good indication of the number of cryptocurrencies that are exchanging hands within a period. It is worth noting that different exchanges provide different volumes depending on the total transactions that happened within the specified period. Finally, find out what is the total supply (coins that have been made available in the market + new coins that are not available in the market).
What government regulations exist?
Our users have been asking us questions about Bitbuy and our approach to Canadian securities regulators (the CSA).
As you may have seen in the press, the Canadian Regulators have introduced new guidelines that all crypto trading platforms servicing Canadians must comply with. The overall goal of these guidelines is to ensure there is a balance between facilitating innovation in the Canadian capital markets and upholding the regulators’ mandate of promoting investor protection and fair and efficient capital markets. Recognizing the importance of these goals, Bitbuy has been taking the necessary steps to comply with these new guidelines so that its users can benefit from a safe, fair and efficient trading environment.
Bitbuy is also registered with FINTRAC as a money-services-business in the virtual asset service provider category, and has a robust KYC and compliance program. We are proud to be the only crypto trading platform in Canada to have a director of our company invited to join the crypto-asset working group for the regulatory body of Canadian investment dealers (IIROC). You can read more about it here.
What is the difference between Ethereum and Ethereum 2.0?
Ethereum 2.0, eth2, or ‘serenity’ is an upgrade to the Ethereum blockchain. The upgrade aims to enhance the speed, efficiency, security and scalability of the Ethereum network, and allow the network to process more transactions and ease bottlenecks. The main difference is that Ethereum 1.0 uses a consensus mechanism called proof of work (PoW), while Ethereum 2.0 uses proof of stake (PoS). Under PoW, miners use computer hardware processing power to solve complex mathematical puzzles and verify new transactions. When a miner solves a puzzle, they add a new transaction to the blockchain. This process is called mining, and it comes with its limitations, like by being energy-intensive and network only supports 30 transactions per second. Under PoS, transaction validators stake crypto for the right to verify a transaction. These validators are selected to propose a block based on how much crypto they hold, and how long they’ve held it. With enough attestations from validators, a block can be added to the blockchain. This process is called minting, and it has its advantages like using less computing power and the network supports 100,000 transactions, per second. This process also implements shard chains. With the introduction of shard chains, the blockchain is split up, enabling transactions to be handled in parallel chains instead of consecutive ones. This speeds up the network, and scales much more easily. Ethereum 2.0 requires a minimum of 16,384 validators, making it much more decentralized—and hence, secure. If you want to learn more on Ethereum 2.0, you can head here.
What can one expect for the future of crypto?
The most immediate step to expect from crypto in the near future is cryptocurrency regulation. Lawmakers on the Canadian front and in Washington, D.C. and across the world are trying to figure out how to establish laws and guidelines to make cryptocurrency safer for investors and less appealing to cybercriminals. Legislation could make it easier for government agencies to find cases of tax evasion, though investors should already keep records of any capital gains or losses on their crypto assets. But the new rules may also make it easier for investors to properly report crypto transactions without any ambiguity. Mainstream companies across industries have taken interest, and in some cases themselves invested, in cryptocurrency and blockchain in 2021. Fintech companies like PayPal and Square are also betting on crypto by allowing users to buy on their platforms. And with Amazon’s recent rumours, what does the future hold for institutional adoption? While paying for things in cryptocurrencies doesn’t make sense for people now, more retailers accepting payments changes the landscape. Bitcoin’s volatility is more reason for investors to play a steady long game. If you’re buying for long-term growth potential, then don’t worry about short-term swings. The best thing you can do is not look at your cryptocurrency investment, or “set it and forget it.” For more information on emerging trends in crypto, checkout this article.