Today is the era of tech and digital supremacy, specially with technological advancements like digital currency. Digital currency, as the term suggests, is a currency, coin, or token, i.e., a medium of trade or exchange that is non-tangible and exists only digitally.
Digital currency is commonly referred to as cryptocurrency. Cryptocurrency is produced by a technological process called mining, which means a computer solves mathematical puzzles or equations to create a unique cryptocurrency. The whole concept of crypto became a possibility due to technology, and it’s now advancing rapidly too. If you own digital currency, you can trade it for multiple purposes, like buying and selling or trading for profit, etc. Technological advancements have enabled us to handle digital currency more easily than ever before.
Here we shed light upon four ways technology helps in digital currency trading.
Trading Platforms and Smartphone Accessibility
Technology has provided us with all the latest trading tools and crypto trading platforms available at our fingertips. Many reputable crypto trading platforms now make trading crypto a seamless effort, even for a newbie, that one can access on their smartphones.
Crypto trading platforms serve as exchanging platforms as well. On these platforms, you can exchange your cryptocurrency from one type to another. These platforms also give live updates about the market rates of different cryptocurrencies. There are several cryptocurrencies like Ethereum, Tether, Binance, Solana, and many more. You can also exchange your cryptocurrency for fiat currency, keeping in check the live rates on the platform. For example, you can trade Ethereum for the Canadian dollar with ETH/CAD rates live on the trading platform.
On the platform, you can look at the technical indicators and charts that make it easy for you to understand the rapidly changing currency and financial market trends. A trading platform will equip you with all the necessary knowledge of cryptocurrency. Thus, the advancements in tech have made it easy to do crypto trading on the go. With every crypto trading platform also accessible from a smartphone, you can trade crypto wherever and whenever you want.
One cannot talk about trading digital currency without mentioning blockchain technology. It has changed the face of financial transactions. Blockchain is a public, immutable ledger that records transactions and tracks assets. It’s a database that stores all information in an electronic format.
Blockchain technology is remarkable in the world of transactions because of its encryption, complete security, and decentralization. It’s not a centralized database regulated by any authority. Being decentralized means that no one can corrupt its use. It ensures complete fidelity, leading to gaining the trust of people.
Blockchain is the technology that allowed digital currency trading to overcome the problems it faced earlier. One of the common problems was people making copies of their digital currency and reusing the same one for different purposes. Blockchain solved this problem. The transactions made through blockchain cannot get edited, destroyed, or altered in any way.
The application of blockchain in secure, transparent, and encrypted transactions has attracted other financial industries to adopt blockchain too. Now, it’s used in Decentralized Finance (DeFi), Non-Fungible Tokens (NFTs), and smart contracts.
The technology that makes crypto trading mechanisms like blockchain secure is a Peer-to-Peer trading system or P2P. Without P2P, crypto trading through blockchain will just be like any other centralized exchange system or database. But P2P enables people to exchange cryptocurrencies directly with each other without the involvement of a third party. This reduces the chances of data alteration. P2P makes digital currency trade less vulnerable, as your currency never goes into the hands of an unknown middle agent during any part of the trade process.
When a person places an order via P2P exchange, it is matched with the pending orders from other users. This way, the trade takes place instantly, and the person pays only a small network fee, much less than fees charged by centralized exchanges. In P2P, there are many servers, but they all run the same software with the help of smart contracts. A smart contract executes itself automatically when a set of certain instructions is met. When two parties have an agreement, resulting in the transfer of funds from one account to another, the smart contract automates this process. It releases funds from the selling party and transfers the ownership rights of the item to the buyer.
The P2P system efficiently verifies transactions and prevents double spending with the help of consensus algorithms. In a P2P network, every participant has equal rights and obligations. A copy of the ledger that contains all information about every transaction made by other participants is available to everyone on the network. So, no one can hide any information, which means complete transparency. The P2P systems also have ratings of traders to allow participants to avoid getting duped.
Where will you keep your cryptocurrencies? Technological developments have your back here, too, as you can use a digital wallet or e-wallet for your cryptocurrency. Your cryptocurrency wallet will serve the purpose of holding unique digital codes that you need to send and receive crypto assets. Crypto wallets provide the owner with a public and a private key to access their digital assets stored in blockchain networks. You receive funds in your e-wallets with the public key, and to access assets and make transactions, you use the private key.
The e-wallets can locate the cryptocurrencies associated with your address on the blockchain. The two major categories of crypto wallets are cold and hot wallets. Cold wallets come in a physical form like a hard drive, etc., while hot wallets are digital and connected to the internet. Hot wallets are famous for their flexibility. You can use your e-wallet on a trading platform on your desktop or mobile phone, thus allowing you to trade on the go. Most crypto wallets today are hybrid wallets, meaning you get to take advantage of desktop, web, or mobile trading while connecting it to a hard drive to enjoy extra security and backup.
Technology has transformed our world. Every industry has benefited from technological advancements. Similarly, technology plays a crucial role in digital currency trading. Tech has made digital currency the powerful force it is today. Hopefully, understanding these four tech tools will help you easily trade digital currencies on the go.