A Technical I.T./DevOps Blog
Question
You have heard of smart contracts in cryptocurrency contexts. What is a smart contract?
Answer
It is a automated or self-executing bid to buy or sell cryptocurrency when a condition is met (e.g., a price point is reached). As with stock trading with limit orders based on price, a smart contract is the equivalent with cryptocurrency. Usually the contract will execute exactly with the parameters you set forth or more in your favor (e.g.,
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Question
In cryptocurrency, what are privacy coins?
Answer
Monero (XMR), Zcash (ZEC), and Dash (DASH), are examples of privacy coins. They afford greater privacy to the users. Zcash and Dash can be purchased on Coinbase. With Kraken, you can buy XMR (Monero) with cash; you can link your bank account, and the fees as of early 2024 are very low.
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Problem scenario
You have a significant amount of cryptocurrency, but you want to benefit from what you think will be a certain decline. You want to hedge against loss to insure your total investment is not purely correlated or dependent on high cryptocurrency prices. How do you short cryptocurrency prices (to make money)?
Answer
Short selling is an option. You must be cognizant of the risks.
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Continue reading “How Can You Profit from a Sudden Decline in Cryptocurrency Prices?”
Question
What is layer 2 in the context of cryptocurrency?
Answer
It is a secondary blockchain that facilitates smart contracts (link). Layer 2 is a second layer of a blockchain, an assistant blockchain, or a sidechain (https://www.ledger.com/academy/topics/blockchain/what-are-ethereum-layer-2-blockchains-and-how-do-they-work). A layer 2 for a cryptocurrency can support more features and more transactions per second (thus more users). A layer 2 can increase the speed which can be attractive to the adoption of a given cryptocurrency.
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Continue reading “What is Layer 2 in the Context of Cryptocurrency?”
Question
You heard about the Bitcoin halving. Will the price be cut in half or will the quantity of Bitcoin in circulation be cut in half when the halving happens?
Answer
Neither of those things will happen. New Bitcoins are awarded to miners regularly. When the “halving” happens, the Bitcoin reward for mining will be cut in half.
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Continue reading “Will the Price of Bitcoin be Cut in Half at the Halving?”
Problem scenario
You want to be sure your cryptocurrency is secure. What should you do?
Solution
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Continue reading “How Do You Secure Your Cryptocurrency Assets?”
Question
You want to know about cryptocurrency forking and inflation. What are these concepts?
Answer
Cryptocurrency can have inflation; for example as more bitcoin is mined, there is more in circulation. See [1] for more information about cryptocurrency inflation. Cryptocurrency forking can mean two different things [2]. There can be a new type of cryptocurrency that is not compatible with the older coin (a hard fork).
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Continue reading “What is Cryptocurrency Forking and Cryptocurrency Inflation?”
Problem scenario
You want to know if a security should be registered with the SEC based on the Securities Act. When is an asset considered to be a security?
Solution
It depends on if it is an investment contract. The 1946 lawsuit of SEC v. W.J. Howey Co., 328 US 293 provides guidance or a test. https://supreme.justia.com/cases/federal/us/328/293/
The four criteria for a scheme or asset for the “Howey Test” are as follows:
(The four points were taken from https://www.investopedia.com/terms/h/howey-test.asp;
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Problem scenario
You see the US Dollar rate of a cryptocurrency that is much lower than you thought it would be. You have found on www.coinmarketcap.com and www.coingecko.com an expected rate. The exchange you use does not have fees. You want to convert a cryptocurrency into a different coin. But the value/rate is discrepant with other sources. Why is there an error in the rate for the exchange website you use?
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Continue reading “Why Is Your Cryptocurrency Selling for a Lower Price?”