A Bitcoin is a digital currency that offers the following benefits:
- Lower transaction fees
- Faster transactions
- Currency independent of central banks
- Permanent and accurate transactions
There are no physical Bitcoins however, and Bitcoins are not backed by physical assets as well.
Bitcoins can however be used as a method of payment for increasing numbers of goods and services across the world. Transactions between Bitcoin holders are powered by peer-to-peer verification using a growing network of powerful computers spread across the world, run by both professional “bitcoin miners” and individuals contributing their computing power.
The sum of all transactions and account balances of Bitcoin holders are permanently kept on publicly available, publicly viewable ledgers maintained by Bitcoin miners.
Relevant terms to understand how Bitcoin works
Also known as Distributed Ledger Technology (DLT), blockchain is the technology that “powers” cryptocurrencies. In a nutshell, DLT tracks all ownership of Bitcoin, and allows for instant transactions.
Using DLT, sets of data/transactions are validated and stored in standardised “blocks” by all participants to the network. That data is then stored in publicly accessible ledgers across all participants as well (hence the “de-centralisation”).
This means that it is virtually impossible to falsify transactions and account balances for Bitcoin because that would require someone to gain control over a majority of the computers in the network.
Miners are participants to the cryptocurrency networks that help to verify and store transactions, using high-speed computers. Bitcoin miners are paid in newly-minted Bitcoin for their efforts, although the rewards for mining Bitcoin are regularly halved (hyperlink to writeup 4 here about Bitcoin mining) every four years or so in a form of deflationary pressure to regulate its supply.
As a cryptocurrency, Bitcoins are literally code that gives you the rights to certain amounts of de-centralised Bitcoin, and can only be read by a sender and a receiver. These codes or “keys” are therefore usually stored in wallets, where “hot wallets” refer to storage of your bitcoin “keys” on an exchange or similar provider which is easily accessible through the internet, or “cold wallets”, such as personal thumb drives.
Cryptocurrency CFD is available for trading on Phillip MetaTrader 5 (MT5).
Features of trading CFD:
- Trade in both the bull and the bear markets
The ability to enter a long and/or short position allow traders to take advantage of both rising and falling markets.
- Smaller barrier to entry
CFDs typically have flexible and smaller contract sizes. This means that traders will be able to enter into a CFD contract with a modest amount of capital.
- No expiration date or risk of delivery
Unlike futures which commonly have a fixed expiration date, CFDs allow traders to perpetually hold the position(s). CFDs are cash settled, no need to worry about the delivery of the underlying asset.
Benefits of using Phillip MT5:
Trade at zero commission on a dynamic platform that offers low spreads. Integrated with Autochartist and Trading Central Indicators, and available on mobile, web and desktop app, you will never miss a trading opportunity with Phillip MT5.