In recent years, binary options brokers have begun to provide cryptocurrencies as one of the financial assets for trading. On this page, we will describe the characteristics of bitcoin and other cryptocurrencies.
What is cryptocurrency?
Cryptocurrency is a form of currency that utilizes cryptography as a security measure. Cryptocurrency is also referred as digital currency. It uses peer-to-peer (P2P) network to process transactions. Because of its low transaction fees, cryptocurrency is starting to show a strong presence as a network settlement tool.
Cryptocurrencies are issued by all users who use the software programs and the network, which is a characteristic feature of cryptocurrency. Since 2009, after the invention of bitcoin, a variety of cryptocurrencies has been developed for transactions and investments.
European countries, in particular, have been seen to actively give recognition to cryptocurrency. The world's first Bitcoin ATM was opened in Canada. In addition, the Government of Canada has adopted MintChip, a digital currency which is similar to bitcoin. It's no exaggeration to say that there is an increasing demand for cryptocurrencies all over the world.
The legal status of cryptocurrency varies from one country to another. The cryptocurrency is also very volatile. In Germany, bitcoin has been recognized for its legal status as a private currency. In countries, such as China and Japan, bitcoin is not recognized as a currency and financial institutions are prohibited to process bitcoin transactions.
Although it is not necessary to pay attention when you trade cryptocurrency binary options, in which you do not directly use cryptocurrencies for transactions, it is very important that you fully understand the regulations and legality of cryptocurrency when you use cryptocurrencies for transactions directly.
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Auroracoin (symbol: AUR) is a digital currency that is released by Baldur Friggjar Odinsson (a pseudonym) in February, 2014. It is designed as the Icelandic national cryptocurrency in an attempt to replace Bitcoin. According to Forbes.com, Auroracoin is viewed as a digital currency to be used to "save Iceland's economy". The pre-mined auroracoins were scheduled to be distributed freely to all Icelandic citizens on March 25, 2014 and each citizen is supposed to have 31.8 auroracoins.
Bitcoin (symbol: BTC, XBT) is the first and the most popular cryptocurrency introduced under the pseudonym of Satoshi Nakamoto in 2009. The true identity of the inventor is unknown and once aroused a great deal of public interest. Bitcoin is characterized as a decentralized system. The bitcoins are generated by "miners" who compete to solve complex math problems by using computers. Bitcoin uses SHA-256 cryptographic hash function. The "mining" process generates new bitcoins roughly every 10 minutes. It will reach a maximum of 21 million bitcoins in circulation in 2140.
BlackCoin (symbol: BC) is an open source, decentralized cryptocurrency released by the developer Rat4 in February 2014 and it is one of the top ten digital currencies by market value. BlackCoin uses scrypt hashing algorithm and adopts the proof-of-stake system which enables faster transaction confirmation (64 seconds for each block). An initial 75 million blackcoins was distributed. While taking part in a "staking" process, a user can receive rewards every few days, which will add up to 1% interest per year. The minimum transaction fee is 0.0001 BC.
Dogecoin (symbol: DOGE) is a form of digital currency that is released by Billy Markus, a programmer from Oregon, USA, in December, 2013. It uses Shiba Inu as the "fun, friendly mascot". Dogecoin uses scrypt hashing algorithm. Compared with Bitcoin and Litecoin, Dogecoin requires less transaction time (i.e., one minute) for each block. Around 100 billion of new coins are scheduled to be generated by 2015 and 5.256 billion of new coins will then be issued in circulation every year. The Dogecoin community has been earnest in their charitable endeavors and has initiated several successful fundraisers.
Dash (symbol: DASH) is a form of decentralized digital currency. It was released under the name "Darkcoin" in January 2014. Then, on March 25, 2015, the lead developer Evan Duffield decided to rebrand the coin as "Dash" (short for Digital Cash). It is the first cryptocurrency that utilizes an anonymization technology to provide private transactions. Dash uses a two tier network called "Masternode network" and it adopts an innovative X11 chained hashing algorithm. It also uses a technology named "InstantX" which allows faster transaction confirmation. The maximum number of Dash that will be mined is approximately 22 million coins.
Litecoin (symbol: LTC) is listed as the second largest cryptocurrency. It is often mentioned as "the silver to Bitcoin's gold". Litecoin was released by former Google engineer Charles Lee in October, 2011. Different from Bitcoin, Litecoin uses "scrypt" hashing algorithm for the mining process which is more memory intensive. Litecoin is designed to require less transaction confirmation times (roughly every 2.5 minutes) and more efficient storage. The number of litecoins that will be generated is capped at 84 million, which is four times greater than bitcoin.
Peercoin (symbol: PPC, PPCoin) is the fourth largest cryptocurrency in terms of market cap and it is introduced by Scott Nadal and Sunny King (a pseudonym) in August, 2012. New coins are generated through mining and minting. It is said to be the first proof-of-stake coin in the world and it uses a hybrid system that combines the proof-of-work and proof-of-stake. This hybrid system is developed so as to decrease energy consumption. Different from digital currencies such as Bitcoin and Litecoin, Peercoin do not have a hard limit on the total number of coins in circulation.