The Steemit Crypto Academy Week 2: Cryptocurrency Exchanges and Cryptocurrency Market CapitalizationsteemCreated with Sketch.

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Course Outline

  • Introduction

  • Cryptocurrency Exchange

  • Brief History About Cryptocurrency Exchange

  • What is a Decentralized Exchange

  • What is a Centralized Exchange

  • Difference Between Decentralized Exchange and Centralized Exchange

  • Cryptocurrency Exchange and Who Owns the Asset Transferred to It

  • Initial Exchange Offering

  • Cryptocurrency Market Capitalization

  • Market Capitalization

  • Diluted market capitalization

  • Conclusion

  • Task

  • Image Source

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Introduction

Welcome to the second week of the Steemit Crypto Academy, I am still your distinguished crypto academy professor @gbenga and in our today's class, we will be looking at Cryptocurrency Exchanges and Cryptocurrency Market Capitalization.

What gives a coin a price is the value placed during a buy and sell and in other to do this, there need to be a medium where the trade can take place and this is where Cryptocurrency Exchanges come in. You should join me in the course, and I can say that at the end of the course, you will get a better understanding of Cryptocurrency exchange and Cryptocurrency market Capitalization.

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Cryptocurrency Exchange

For the purpose of this course, I will be referring to Cryptocurrency exchange as an organized financial market/marketplace where buyers meet with sellers and vice versa to trade crypto assets. There are exchanges far beyond the Cryptocurrency market, exchanges that trade Commodity, Foreign currency, Security, etc.

Just like the commodity, forex or security market serves as a medium of exchange and provides liquidity, so does the crypto exchange market provide liquidity for both spot, derivatives, and futures trading.


cryptocurrency exchange

Brief History About Cryptocurrency Exchange

After the introduction of Bitcoin, the next fundamental business was the cryptocurrency exchange as people needed to trade Bitcoin for fiat and fiat for Bitcoin. Do not forget that most of the earliest usage of Bitcoin was for gambling so people needed to trade fiat for the coin. Bitcoin had no price value until Laszlo Hanyecz bought Two Pizzas for 10,000 BTC. 1

A lot of us know Mt.Gox as an early exchange for cryptocurrency (as a result of its scandal) but I should let you know that Mt.Gox wasn't the first cryptocurrency exchange. On January 15, 2010, at 09:42:18 AM, a Bitcointalk full member dwdollar wrote about his plans to start a cryptocurrency exchange called Bitcoin Market. In his writings;

Hi everyone. I'm in the process of building an exchange. I have big plans for it, but I still have a lot of work to do. It will be a real market where people will be able to buy and sell Bitcoins with each other. In the coming weeks I should have a website with a basic framework set up. Please bear with me 2.


bitcoinmarket.com

In March of the same year, he launched the Exchange and it was trading buy and sell with PayPal 3. Bitcoin market was successfully launched with a few trades, one of the notable trade was selling 5050BTC for $5.02 by Martti Malmi 4. You can see the blockchain transaction here. Although, there was a means to trade Bitcoin thanks t Bitcoin Market, but it had its set backs as there were charge back with PayPal 5. After the establishment of Bitcoin market, other exchanges such as Mt.Gox which launched in July of the same year 6. Mt. Gox was the first exchange to determine the last price of the coin based on the last buy and sell. Immediately after the birth of Mt.Gox, other cryptocurrency exchanges began to emerge like Britcoin which was founded on March 27, 2011 6, BitMarket.eu, founded on April 5 7, and many more.

Just as it is inevitable for online businesses to experience a cyber attack, a lot of cryptocurrency exchanges did experience cyber attack and so many lost huge sum of money. Mt. Gox, which is the popular was attacked in June 19, 2011. Mt. Gox lost over 200 thousand BTC worth about $500 Million as at the time of announcement. A lot of people lost their funds and this particular event shook the industry 8. Some other exchanges were hacked at the early stage of cryptocurrency exchange and they include Bitomat, MyBitcoin, TradeHill and Bitcoinica.


Mt.GOX

What is a Decentralized Exchange

After the Mt.Gox Hack which led to loss of funds, decentralized exchange came to being. The exchange requires a pear to pear trading of currencies without the exchange being a middle man. The first set of decentralized exchanges were OmiseGo and BitShares which were founded in 2013. With Decentralized Exchange (DEX), trading orders are executed on-chain with smart contracts or off-chain, thereby not allowing the user to lose custody of their coin at any time to a custodian or intermediary 9.

On-chain order books DEX

Just like Bitshares exchange, these decentralized exchanges are recorded on a chain (blockchain) making it the most transparent exchange. Most on-chain DEX requires a several nodes to record the transaction order as well as transfers. This nodes serve as miners on the blockchain and they keep the blockchain safe from hackers. Examples of such exchanges are Stellar Term DEX, Bitshares DEX, Wave DEX and so on 10.

Off-Chain order books DEX

As the name goes, the orders are not stored transparently on the blockchain, instead they are stored/hosted by a centralized exchange. The reason for this is to have other blockchain coins function on the DEX as well as increase the speed when transacting. Off-Chain decentralized exchange do not keep custody of the tokens. They use relayer framework to manage off-chain orders. After submitting the order to the Relayer, the market maker waits for the taker to fill the order which is executed on the blockchain. Decentralized exchanges that uses Off-chain order books are Binance DEX, 0x, Poloni DEX, EtherDelta, Fork Delta, IDEX, and so on 11

Automated Market Makers (AMM)

This is the latest type of DEX in the industry. This type of decentralized exchange came into full flesh in 2020 with no market maker or taker. The traditional order books are replaced with liquidity pools. AMM uses a bunch of smart contracts to determine the price. In order to ensure there is liquidity in the market, the exchanges implement incentives so users can stake coins for both assets in the trading pair and the incentives are gotten from transaction fees. Exchanges that uses Automated Market Markers (AMM) are Uniswap, SushiSwap, and Kyber Network, and it has been made easy for users to use these exchanges with wallet such as Trust Wallets, Meta Mask and so on 12


centralized exchange and decentralized exchange

What is a Centralized Exchange

Centralized exchanges are the most recognized exchanges in the cryptocurrency exchange industry. These exchanges are operated by companies. With Centralized exchange, there is a third party which needs to be trusted with traders assets.

When traders deposit funds into the centralized exchange, the trader do not get the tokens rather, a corresponding amount of IOUs representing the asset is issued to the trader. The traders then trade IOUs on the exchanges but this IOUs become real asset s when they are moved out of the exchange to an external wallet. Most centralized exchange adhere to government regulations and require KYC by users before trading or increasing limit of trade. Example of Centralized exchanges includes Kraken, Poloniex, Binance, Bittrex, Huobi, Okex, Mercatox and so on 13

Difference Between Decentralized Exchange and Centralized Exchange

FunctionDecentralized ExchangeCentralized Exchange
SpeedSlow, Requires nodes to verify ordersFast (in milliseconds)
KYCNo KYC neededKYC/AML needed
ControlComplete controlNo complete control, Platform controls activities
Listing CoinsEasy to list coinsRequires a long procedure
LiquidityLow liquidityHigh liquidity
Compliance to RegulationDifficult to regulateEasy to regulate by government bodies
FeesLittle or Low feesHigh fees which is used to run exchange activities
SecurityVery SecuredExperienced few attacks
Featuresvery Little FeaturesLots of Features and always adding more with upgrades


Cryptocurrency Exchange and Who Owns the Asset Transferred to It.

Have you heard of the phrase "not your private key, not your coin"? If you are trading on a decentralized exchange, you own your coin and you are only trading peer to peer or with contracts which gives tokens directly back to you on exchange. On the other hand, if you send assets to centralized exchanges, then you do not own the coin rather, you own IOUs of the coins not the actual coins. So when you send coins to exchanges, the coin automatically becomes the property of the exchange while you own rights to the corresponding IOU.

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Initial Exchange Offering (IEO)

With the Ethereum smart contract, projects started conducting Initial Coin Offering, to enable project raise money while giving investors their coins in exchange. This process was very successful but there was a problem with ICO projects which was listing on an exchange. I would take up to a year or two before listing on a major exchange and most cases, the projects were fraudulent, so Initial Exchange Offering (IEO) came to being.

With IEO, projects can raise funds on an exchange using designated currencies usually the exchange based currency and get listed shortly after depending on the agreement signed with the exchange. With exchanges getting involved in the initial offering of a project it help investors ascertain the credibility of the project, proven business model of the project, credibility of the team and trust for the future of the project 14.

Cryptocurrency Market Capitalization

I am sure you must be conversant with the word market Capitalization with stock markets, the same thing applies with cryptocurrency and the cryptocurrency market. There are a lot of coins and cryptocurrency project and each of this project has a valuation, knowing the market capitalization of a coin helps to see an estimation of the cumulative value of the project and cryptocurrency asset currently as well as in the future.

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Market Capitalization

Regarded as the current valuation of a coin or project, it is calculated by multiplying the price of an individual unit of a crypto asset by the circulating supply of a crypto asset.

Mathematically

Market cap = price of a single unit of crypto asset × circulating supply of the asset

On the other hand, the total market cap is the total value of Bitcoin, altcoin, stablecoin, and other tokens listed on the cryptocurrency market. The total market cap may defer from one market to another as they list different coins depending on their criteria. A few cryptocurrency market include Coinmarketcap, CoinGecko, BlockFolio, etc. 15

Diluted market capitalization

This word is used in the stock market but we are currently discussing cryptocurrency so I will explain with cryptocurrency. Diluted Market Capitalization is the valuation of a crypto asset, if all coins (max supply) are circulating and is multiplied by the current price of the coin.

For example, there are going to be a total of 21 million BTC to ever be minted but currently, there is a circulating supply of 18,628,687BTC which makes the market cap to be $905,303,125,371 at the current price of $48,812.79. To determine the Diluted Market Capitalization, the total BTC of 21 Million BTC is multiplied by the current price of BTC ($48,812.79) to give $1,024,012,038,577.

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Conclusion

Over the years, there have been several decentralized exchange and there have also being improvement to them whilst still giving holders right to their coin, we should expect that there will be improvement to decentralized exchanges following that the cryptocurrency industry is very young and growing. For centralized exchanges, we cannot have enough of them as there is a large team of innovative people, programmers and marketers to push the business while innovating. I cannot say for sure which of the exchange will be the most chosen in the future but currently, people still go with centralized exchanges due to its features.

You need to understand that the beauty of cryptocurrency is the fact that it is a relatively new industry and not everyone has started investing in it which means that the industry could go to a total market capitalization in hundreds of trillions. You can use the cryptocurrency market capitalization to depicts how the market moves as well as market trends.

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Task

Will You Keep Your Crypto Assets in a Wallet or on an Exchange? Make a post to why you would prefer to keep your asset in one over the other.

The Rules

  • You are to choose either to keep your coin in a wallet or on an exchange and then make a post stating why you prefer the one you picked over the one you left.
  • Everyone is eligible to participate in this task.
  • The Post should be a minimum of 300 words and should be submitted in the crypto-academy community for visibility.
  • You should include the exclusive tag #steemitcrypto and a tag of your country (for example #nigeria).
  • Post should be your original content. Show references for images used when writing your post.
  • Task runs until Sunday, February 21st, 2021

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Image Source

Coin motion
news.bitcoin.com
Pinterest
Coinmarketcap
Icoshock
crypto wisser

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Hello! 🙂 I would like to introduce you to something! It’s kinda difficult to sail in the crypto world nowadays, with all the scams and fake info around, with unsecure data and unreliable facts.
Would you like to learn more about Blockchain or to better understand Bitcoin? Or just to upgrade your knowledge with fresh blog topics and with instant help from our experts? You can ask them anything related to cryptocurrency and be sure you will get a fast, reliable, and correct answer!
Register today for FREE at https://blocksafecrypto.com/private-registration/ and solve all the insecurities by chatting with our advisors, or read interesting and current news in our professional blog articles.
Looking forward to seeing you as a new member today!

Thanks a lot for participating in my class, I hope to see you in subsequent classes.

It is really wonderful and very informative lecture dear @gbenga. You have written almost everything about your topic in full details. You have done it in good way by wordings and arrangement. I like your post very much. I have prepared here my post about your given topic
https://steemit.com/hive-108451/@azamrai/crypto-academy-week-2-homework-post-for-gbenga

Hello! 🙂 I would like to introduce you to something! It’s kinda difficult to sail in the crypto world nowadays, with all the scams and fake info around, with unsecure data and unreliable facts.
Would you like to learn more about Blockchain or to better understand Bitcoin? Or just to upgrade your knowledge with fresh blog topics and with instant help from our experts? You can ask them anything related to cryptocurrency and be sure you will get a fast, reliable, and correct answer!
Register today for FREE at https://blocksafecrypto.com/private-registration/ and solve all the insecurities by chatting with our advisors, or read interesting and current news in our professional blog articles.
Looking forward to seeing you as a new member today!

Thanks a lot for your time, I am glad you enjoyed every moment spent in my lecture theater, I hope to see more of you.

Hello! 🙂 I would like to introduce you to something! It’s kinda difficult to sail in the crypto world nowadays, with all the scams and fake info around, with unsecure data and unreliable facts.
Would you like to learn more about Blockchain or to better understand Bitcoin? Or just to upgrade your knowledge with fresh blog topics and with instant help from our experts? You can ask them anything related to cryptocurrency and be sure you will get a fast, reliable, and correct answer!
Register today for FREE at https://blocksafecrypto.com/private-registration/ and solve all the insecurities by chatting with our advisors, or read interesting and current news in our professional blog articles.
Looking forward to seeing you as a new member today!

I will take this as spam and I do not like when people spam my post.

I will take this as
Spam and I do not like when
People spam my post.

                 - gbenga


I'm a bot. I detect haiku.

I am so sorry, never meant it to seem like spam. Just still testing how this thing work and how can I spread the word about something good and useful. Sorry once again!

I must confess that i am starting to like every lecture of yours as i keep through them. I hope you continue to lecture as you are a good teacher.

I must commend your referencing, it helped me to read more on each point, sub topics and headings.

Expect my task to be submitted ASAP

Thanks for being a part of my class, I hope to see your task as well as interaction on other students' tasks

Thanks a lot for your participation, I hope you enjoyed the lecture for the week. Hope to see more of you as well as interaction with other students. I will check out your post immediately.

This is a very interesting topic as well as a cool task I will like to be a part of. I will be submitting my homework soon

I will be waiting for your post. I am glad you liked it

Okay, I think I'm gonna try to do these tasks.

You should give it a try, you will surely enjoy it my friend.

I did, I posted yesterday. Yep, missed writing a bit! Thanks!

Let's give this task a ride, I can say for sure that I will enjoy this.

Let's give this task a
Ride, I can say for sure that
I will enjoy this.

                 - busted1


I'm a bot. I detect haiku.

Hello! 🙂 I would like to introduce you to something! It’s kinda difficult to sail in the crypto world nowadays, with all the scams and fake info around, with unsecure data and unreliable facts.
Would you like to learn more about Blockchain or to better understand Bitcoin? Or just to upgrade your knowledge with fresh blog topics and with instant help from our experts? You can ask them anything related to cryptocurrency and be sure you will get a fast, reliable, and correct answer!
Register today for FREE at https://blocksafecrypto.com/private-registration/ and solve all the insecurities by chatting with our advisors, or read interesting and current news in our professional blog articles.
Looking forward to seeing you as a new member today!

OK, I know get it. Thanx for the information and lecture notes/assignments @gbenga

I am glad you learnt a lot from the class. Do enjoy your steemit ride.

Thanks a lot for the time taken to create your content and participating in my class, I will surely go through your post.

Hello team here I leave the task, I would like you to evaluate it, I arrived a little late, it is not so easy for me these topics. I will be more attentive with task #2. Today I just published assignment #1

Thanks for giving it a try. Growth is a continuous process.

Wow. This is a wonderful lecture. I really enjoyed it and learn a lot too.

This is my homework link here.

Thanks a lot for participating. I am glad you did find time to go through the class

Through which exchanhe can we trade SBD at the moment?

Bittrex and Bithumb do trade SBD currently.

Insightful and educating!

Greetings teacher @ I really enjoyed your talk, very clear. I did my best to do the homework you gave me, I hope you like it.
My homework 2

I will surely read and leave a comment on your post. Thanks for participating.

Thanks a lot @shajj, I am glad to have you in my class

Thank you so much sir for your kind words. It's inspiration for me 🙏

Hi Steem I am up for connecting let's work together and grow together check out my latest post:
https://steemit.com/hive-119463/@clarvin/silver-opportunity-all-eyes
Tell me what you think of this content and would you like to see more...

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As much as I would have like to click to see what you have in stock from Namibia, you didn't take the right approach.

This is great, thank you very much!

You're welcome

@senicbliss, I am glad you are able to attend the class, I will surely take my time to read through your post

Wow... Thank you so much

Hello @gbenga
This has helped a lot to learn about exchanges and crypto market capitalization. here is my homework post. Thanks for sharing your knowledge with us.

https://steemit.com/hive-108451/@alokkumar121/steemit-crypto-academy-or-homework-task-2-for-gbenga-cryptocurrency-exchanges-and-market-capitalization

I am glad you learned from the class, I will be expecting you in subsequent classes. Thanks for attending

Thanks for your entry, I wil check it out

I understand. In this instance and circumstance it shouldn't be right of you to leave me be but to help me and correct me for I show promise and the fact that I have tried. Professor what shall I do to rectify this miss communication...?

This is quite a great lecture, and I wish to engage in it, please look out for my post sir, thanks.

Saludos @gbenga. Esta es mi Entrada

Hello, cordial greetings, here I leave my participation. Task 2

Hi @gbenga
Excellent work and masterful material to enjoy it.

My Homework Task from week 2

Esta es mi entrada
Entrada

Hey @gbenga thank you so much for this informational lecture post it helped me alot and clear many of my concepts. Here is my homework post please have a look.

Estimado profesor, aqui le dejo mi tarea

Hola amigo @gbenga he realizado la tarea #2. Saludos, hasta la próxima tarea.


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Compartido en twitter: tweet-link

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What will bitcoin be worth in 2030?
His net worth is estimated at north of $2 billion. In an exchange with Business Insider in May 2017, Liew said that the Bitcoin price can “realistically” reach $500,000 by 2030.

Hello, I hope you are well, here I leave my participation.

Thank you for your time and dedication.

Thanks a lot for attending the class and for participating in the task. I hope to see you in subsequent classes.

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