What is Forex Trading? This field is a vast trading market where people can deal with several trading instruments such as futures, CFDs or even tokens and cryptocurrencies. If you are one of the individuals who wish to be enlightened on the nature of each trading instrument that is associated with forex trading, you will probably find this article quite helpful as we will discuss two of the commonly used instruments for forex— cryptocurrency and tokens.
What are cryptocurrencies
Cryptos are virtual currencies that are used for trading and its safety is assured with the use of encryption. As mentioned earlier, a cryptocurrency is merely a digital currency, thus it can only be considered a legitimate currency if it represents a unit of account, a store of value, and a medium of exchange. Due to these conditions, the Bitcoin which is known as the very first cryptocurrency was designed to meet the previously stated standards. Thus, bitcoins along with the rest of the cryptocurrencies that originated from Bitcoins were already regarded as a currency.
2 Types of Cryptocurrency
1.Coin or Altcoins
Altcoins are general terms for coins that do not belong to the Bitcoin category. Though altcoins were created as a fork of Bitcoin and built using Bitcoin’s original protocol with a couple of changes to its underlying code, the minute difference in the code makes altcoin differ from Bticoins. Some samples of these Bitcoins are Namecoin, Litecoin, Dogecoin, Bitcoin Cash, Bitcoin Private, Auroracoin and others. Coins such as Ethereum, Ripple, Bitshares, NEO, Waves on the other hand are coins that were made by having their own blockchain.
If coins represent currencies, tokens represent assets or utilities that live on top of another blockchain. Unlike altcoins, tokens do not have their distinct blockchain despite being able to represent any tradable asset. In order to be transacted, tokens come in the form of commodities or even loyalty points. In terms of creation, administrators find token creation much easier than coin creation because codes for the token protocol no longer need modification just like coins. Moreover, a self-executing programmable computer code that meets the needed terms for a token is one of the must needed elements in the creation of tokens. Tokens do not operate via third parties and since they came from the same block chains, they normally have the same templates and characteristics. Thus, traders can store different tokens in a single digital wallet.
Conclusion: As you go through your journey on discovering “What is Forex Trading? “ You will surely meet terms that talk about financial instruments and this sector includes cryptocurrencies. Under this category, it is a must to note that coins and tokens are related instruments that can be stored in digital wallets but in terms of creation and elements of blockchain, these two instruments have distinct features. Coins are created in a more complicated manner while tokens are made following a much simpler procedure and standard.