Cryptocurrencies only exist in digital format. There are no physical cryptocurrencies. Instead, public and private keys are used to successfully complete a crypto transaction.
These keys need to be securely stored to maintain the integrity of your cryptocurrencies. Without your private keys and the recipient’s public keys, a crypto transaction is impossible.
Thankfully, crypto wallets can be used to prevent your keys from being lost or stolen. There are several different types of crypto wallets available. Let’s examine the most popular wallets. For the purpose of this conversation, we will discuss Bitcoin wallets. However, all crypto wallets are basically the same.
A paper wallet is a physical document that contains a public address and a private key. The public address is needed for receiving Bitcoin. The private key is needed for sending Bitcoin.
The most common paper wallet exists in the form of a QR code. This type of arrangement allows the wallet owner to scan the QR code, add the keys to a software wallet, and conduct a transaction.
There are many different services available in the crypto universe which allow users to create a random BTC address with its own private key. The generated keys can simply be printed on a piece of paper for future use.
Advantages of Paper Wallets
Without question, the main advantage of a paper wallet is that the keys can be stored offline, thus preventing a hacker attack. These days, the most popular attack among hackers is keylogging. A keylogger is a type of spyware that can record and steal the keystroke activity that users enter on a device. Using a paper wallet eliminates a keylogger attack.
Disadvantages of Paper Wallets
The biggest disadvantage of a paper wallet is misplacing or losing the document containing the private keys. Another major concern is the theft of the paper wallet. It is highly recommended that paper wallet users store the document in a sealed plastic bag to prevent water damage.
One of the most common mistakes among paper wallet owners is using a “smart” printer to print their private keys. These types of printers are connected to a network of computers and other electronic devices. Some of the more advanced printers have internal storage and hard drives that record and preserve copies of all printouts.
By using a smart printer, you are vulnerable to the theft of your private keys by someone who has access to the printer. Additionally, it’s not uncommon for smart printers to be hacked. It’s also critically important to properly dispose of all printing devices rather than just throwing them in the trash. Hackers and thieves have been known to capture sensitive information from printers thrown into the garbage.
As you can see, paper wallets have advantages and disadvantages. There is no such thing as a perfect crypto wallet. However, using common sense will go a long way in preventing the theft of your private keys when using a paper wallet.
Do you actively use Bitcoin daily? For example, do you pay for goods and services with Bitcoin? Do you frequently buy and sell BTC?
If so, a mobile wallet is a necessary tool. This type of wallet is connected to a mobile device through an app. The mobile device is usually a smartphone. The app provides direct access to the wallet owner’s Bitcoin, allowing the owner to use the BTC for daily purchases. Additionally, the majority of these crypto apps allow users to actively trade BTC.
When mobile wallets first appeared on the scene, they were not very user-friendly because the apps required several gigabytes of storage based on the fact that the entire Bitcoin blockchain was stored on the user’s mobile device. The blockchain was growing daily, which constantly required additional storage space.
During the past few years, several companies have introduced mobile wallets that take advantage of simplified payment verification technology. This technology does not require users to store the entire blockchain on their devices, thus eliminating the need for increased storage capacity. As a result, mobile wallets have become substantially more popular in recent times.
Are mobile wallets safe? That’s a difficult question to answer. It depends on how well the user protects her/his device. The most common theft of Bitcoin from a mobile wallet occurs when the wallet owner misplaces the device or allows other people to use the device.
If the wallet owner constantly maintains possession of her/his mobile phone, the chance of theft will decline substantially. Hackers can use malware if the owner accidentally installs a corrupt program or responds to a malicious email. The best way to prevent the theft of Bitcoin on a mobile device is to always remain vigilant.
With the exception of mobile wallets, web wallets are the most popular form of Bitcoin wallets. This type of wallet stores your private keys on a server, which is constantly connected to the internet. Web wallets are similar to mobile wallets based on the fact that users have direct access to their Bitcoin.
The wallet can be linked to any device such as desktop, laptop, tablet and mobile phone. In fact, a web wallet can be linked to any device with an internet connection.
Users need to be aware of the fact that web wallets are controlled by a third party. This has the potential to be a major security threat. The third party has control of your private keys and can have complete access to your Bitcoin.
It’s not uncommon for web wallet users to have their Bitcoin stolen by a third party. Without question, the most famous Bitcoin confiscation was the Mt Gox scandal, which resulted in the theft of 850,000 Bitcoin over the course of several months between mid-2013 and February 2014. Mt Gox ultimately declared bankruptcy. Most of the Bitcoin was never recovered.
Web wallets operate on crypto trading exchanges. If you have an account with a crypto exchange, most likely you have a web wallet linked to your account. The exchange serves as the intermediary between you and your crypto. It’s critically important for the customer to choose a trading exchange with a superior reputation.
Desktop Wallet (Software Wallet)
Desktop wallets are downloaded and installed to the hard drive of your computer. The majority of crypto experts agree that a desktop wallet is much safer than a web wallet because the private keys reside on the user’s hard drive. Additionally, desktop wallets don’t rely on third parties for data. Consequently, this alleviates the need of a third party to gain control of your private keys.
Are desktop wallets 100% secure from hackers and other online attackers? The answer is no because the wallet is connected to the internet. Any device that is connected to the internet has a chance of being hacked or exploited.
The best way to prevent the theft of Bitcoin through a desktop wallet is to always remain vigilant. Never allow others to share your desktop computer. Your computer should always be password protected. Hackers use malware so be cautious of malicious emails or downloading a suspicious attachment.
Desktop wallets are well suited for all types of Bitcoin traders and HODLers. However, they are probably most appropriate for those who trade small amounts of Bitcoin or for those who are considered long-term HODLers. If you are an aggressive trader, always on-the-go, a desktop wallet is probably not the best choice. Instead, a mobile wallet would probably be more compatible.
Hardware wallets have exploded in popularity during the past few years. This is probably attributed to the fact that this type of wallet is considered to be the safest way to store private keys within the crypto community. The wallet’s security hinges on the fact that the owner’s private keys are not linked or connected to the internet. With the exception of a paper wallet, the hard wallet is the only mechanism capable of storing private keys without the use of the internet. As an added bonus, hardware wallets are immune from computer viruses.
The Bitcoin community has witnessed a substantial rise in the number of new BTC traders and HODLers. Consequently, the surge in Bitcoin ownership has shone a light on the importance of safely securing private keys.
According to crypto security experts, there has never been a verifiable incident of funds being stolen from a hardware wallet. This is a remarkable achievement for the makers of hardware wallets. The most popular hardware wallets are Ledger and Trezor.
When Satoshi Nakamoto launched Bitcoin on 3 January 2009, he probably never envisioned that regulators would allow United States banks to act as custodians for Bitcoin. On 22 July, the Office of the Comptroller of the Currency (OCC) officially allowed US banks to offer BTC products and services to customers.
The Wall Street community is predicting that the large money center banks will enter the crypto business within the next 12 months. Most likely, banks will act as custodians for their customers’ Bitcoin. This service would include the safekeeping of private keys on behalf of their customers.
Historically, banks have a great track record of providing custody services. The safekeeping of private keys will be no different. It is widely believed within the financial services industry that banks will capture a dominant share of the crypto custody market when they begin offering crypto services.
Brief Summary of Crypto Wallets
- Crypto wallets are used to secure private keys.
- There are several different types of crypto wallets.
- A paper wallet is a document that contains a public address and a private key.
- The most common paper wallet exists in the form of a QR code.
- Mobile wallets are designed for those who actively use BTC on a daily basis.
- This type of wallet is connected to a mobile device through an app.
- Web wallets store your private keys on a server, which is connected to the internet.
- Web wallets provide users with direct access to their BTC.
- Users need to be aware of the fact that web wallets are controlled by a third party.
- Web wallets operate on crypto trading exchanges.
- Desktop wallets are downloaded and installed to the hard drive of your computer.
- Third parties do not have access to private keys for desktop wallets.
- Hardware wallets are the safest way to store private keys within the crypto community.
- The owner’s private keys are not linked or connected to the internet.
- Hardware wallets are immune from computer viruses.
- There has never been a verifiable incident of funds being stolen from a hardware wallet.
- The most popular hardware wallets are Ledger and Trezor.
- Most crypto experts agree that banks will soon offer crypto custody services.
- Therefore, they will store private keys on behalf of their customers.
Everything You Need to Know About Binance USD
Binance USD (BUSD) is a fiat-backed stablecoin designed to address issues of accessibility, flexibility, and speed on the blockchain. A cryptocurrency exchange leader, BUSD, is currently the second-largest stablecoin on the blockchain by market cap.
This flexible cryptocurrency is stable, regulated, and can be swapped on multiple blockchains. Investors can use BUSD on the Ethereum chain, Binance Chain, and Binance Smart Chains.
Binance USD (BUSD) was created to be a safe investment for cryptocurrency investors looking to invest in a low-volatility stake. This cryptocurrency is pegged at the value of the US Dollar. The New York State Department of Financial Services regulates Paxos, the creators of this currency.
USD is a fiat-backed stablecoin backed by Paxos instead of a government. As a result, Paxos holds the equivalent of the total amount of BUSD in US dollars in its financial reserves. BUSD is a stablecoin that keeps pace with the price of the United States dollar.
When the price of the dollar rises or falls, the price of BUSD fluctuates as well. Paxos issues monthly audits to verify collateralization.
1. BUSD is regulated
2. Fiat-backed stablecoin backed by a reserve
3. 1:1 ratio price fluctuates with US Dollar
4. Operates on multiple blockchains
Paxos and Binance created Binance USD.
Binance USD (BUSD) was launched in September 2019 as a partnership between Paxos and Binance.
They first issued BUSD on the Ethereum blockchain as ERC-20 tokens. Binance USD is one of only three cryptocurrency tokens currently approved by Wall Street regulators. The New York-based financial company Paxos issues BUSD tokens.
Paxos collateralize BUSD tokens by holding equivalent dollar amounts in regulated US bank accounts. Paxos is also responsible for creating and burning BUSD tokens.
Paxos and Binance designed BUSD to be a low-volatility investment for crypto traders seeking highly liquid investments. Investors can easily convert their BUSD investment into fiat-backed currency during times of volatility.
Cryptocurrency experts recommend taking security measures like using two-factor authorization (2FA) to manage online Binance USD accounts and wallets. Serious investors use Binance USD wallet software to store, protect, and manage investments. They do this by using public and private keys to store value.
We do not provide investment advice. Cryptocurrency traders looking to invest in Binance USD should do their research on the history and performance of BUSD and choose the best options that fit their investing style and budget.
It’s important for investors to consider how much they can afford to lose on investments with downturns before committing to any investment. The creators of Binance USD designed BUSD as a low-volatility asset for crypto traders seeking high liquidity. This stablecoin’s goal is to remain stable and as close to the value of one dollar as possible. While its performance appears stable, this can change at any time.
What are Candlesticks and How to Read Them
A candlestick is a type of price chart used in technical analysis to forecast the future price direction of stocks, commodities, and cryptocurrencies. Each candlestick is a graphical representation of a price movement for a specific period. Four different price points are displayed on each candlestick. They include open, high, low, and close.
Candlesticks are one of the oldest forms of technical analysis. According to historical records, candlestick charting can be traced back to Japanese rice merchants during the 18th century. Most financial historians agree that Munehisa Homma was responsible for popularizing candlestick charting.
Candlestick formations are based on a strict set of rules which are universally accepted among all traders and investors. Let’s review a few of the most basic candlestick formations and patterns.
A solid red candlestick is displayed if the opening price is above the closing price (Chart #7).
A hollow candlestick is displayed if the closing price is above the opening price (Chart #8).
Bullish Candlestick Patterns
Big White Candle – The market opens near the low and closes near the high (Chart #9).
Doji – The opening and closing price is virtually identical (Chart #10).
Hammer – A candlestick that consists of a small body near the daily high with a long lower tail (Chart #11).
Bearish Candlestick Patterns
Big Red Candle – The market opens near the high and closes near the low (Chart #12).
Inverted Hammer – A red or white candlestick within an upside-down hammer position (Chart #13).
Shooting Star – A red or white candlestick with a small body, a long upper shadow combined with little or no upper tail (Chart #14).
Brief Summary of Candlesticks
- A candlestick is a type of price chart used in technical analysis.
- Each candlestick represents price movement for a specific period of time.
- Four different price points are displayed on each candlestick.
- The price points include open, high, low, and close.
- Candlesticks are one of the oldest forms of technical analysis.
- Candlestick charting was first used by Japanese rice merchants during the 18th century.
- Munehisa Homma was responsible for popularizing candlestick charting.
- Candlestick formations are based on a strict set of rules.
- These rules are universally accepted among all traders and investors.
What Is an IEO?
An Initial Exchange Offering (IEO) is a type of token sale administered by a cryptocurrency exchange. The entire process is controlled and managed by the exchange on behalf of the crypto company. Both parties have a vested interest in the success of the IEO. Neither party receives a payout unless investors purchase the token through the participating exchange. Therefore, it’s not uncommon for the exchange and the token issuer to join forces to help with marketing, promotions, and advertising.
Before launching the IEO, the crypto exchange and token issuer sign an agreement outlining the payout structure. Typically, the token issuing company is required to pay a listing fee along with a percentage of tokens sold through the crypto exchange. The majority of IEO agreements stipulate that the new token must be listed on the exchange for a predetermined amount of time following the initial sale of the token.
Investors who participate in the IEO are required to open an account with the participating crypto exchange. Instead of sending money to the token issuer through a smart contract, the investor deposits funds into his/her crypto account. Funds are dispersed by the crypto exchange to the crypto company.
IEO Versus ICO
As you may recall from our ICO discussion, the first ICO was launched in 2013. However, the ICO explosion did not occur until 2017, followed by its peak in 2018. Without question, the chief complaint within the crypto community concerning ICOs was a large number of failures and outright scams. In fact, the failure rate approached 90% in 2018.
As we have discussed several times, the cryptocurrency community is incredibly innovative. This community is filled with some of the brightest minds in global finance. Not surprisingly, a small group of young men and women were quick to replace problematic ICOs with IEOs in early 2019. The first major crypto exchanges to join the IEO wave occurred in January 2019. IEO activity continues to flourish in 2020.
The main difference between IEO and ICO is the level of success. In a typical ICO, the crypto company received funding immediately upon issuance of the token. Investors had very little recourse once the tokens were dispersed. They were trapped in a vulnerable position. Sadly, many unscrupulous start-up firms basically disappeared upon receipt of the funds commonly known as a ‘rug pull’.
IEOs solve this problem by preventing the token issuer from receiving funds immediately upon the distribution of the tokens. As we discussed earlier, both parties work together to ensure the success of the project, which increases the likelihood of a rising token price.
Although IEOs have only been in existence for two years, the popularity of this new fund-raising method has increased substantially. The success rate of projects launched on IEO is much higher compared to ICOs. Most likely, this trend will continue.
IEO Regulatory Environment
As you may recall from our ICO discussion, crypto companies struggled to clear all of the regulatory hurdles to satisfy financial regulators. Unfortunately, IEO participants, are experiencing the same type of regulatory problems that plagued the ICO marketplace. This by and large means that regulators dissuade people from taking part in IEOs.
A positive to this is that IEOs are largely unregulated and don’t have to satisfy bureaucracy that can stifle innovative projects.
Financial regulators, particularly in the United States, claim that an initial exchange offering is similar to an initial coin offering, even though the token issuer is not directly involved in the sale of the token. An ongoing problem with regulation is whether or not any particular token counts as security and needs regulation, or whether they are utility tokens. Exchanges will typically avoid listing securities on an IEO as it means they have to submit to regulation.
To avoid the strict regulation requirements around securities, crypto exchanges may even opt not to offer tokens in countries like the United States where there is ambiguity about regulation. As long as the IEO is not soliciting in a particular country, registration is not required.
Due to the overwhelming success of IEOs, many of the world’s largest crypto exchanges are becoming heavily involved in IEOs by offering tokens on behalf of start-up companies. Most likely, this trend will continue.
Brief Summary of IEO
- An initial Exchange Offering is a token sale administered by a crypto exchange.
- The entire process is overseen by the crypto exchange.
- Neither party receives a payout unless investors purchase the token.
- The exchange and token issuer will often collaborate with marketing and advertising.
- Both parties sign an agreement outlining the payout structure of the IEO.
- The new token will be listed on the exchange for a predetermined time period.
- Participating IEO investors are required to open an account with the exchange.
- Investors pay for the token by depositing funds into their crypto account.
- IEOs have proven to be safer than ICOs.
- Many crypto exchanges are not participating in heavily regulated countries.
- IEOs have become very popular in the crypto universe.
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