What are stocks?

 

What Are Stocks?

A stock, also known as equity, is a security that represents the ownership of a fraction of the issuing corporation. Units of stock are called "shares" which entitles the owner to a proportion of the corporation's assets and profits equal to how much stock they own. 

Stocks are bought and sold predominantly on stock exchanges and are the foundation of many individual investors' portfolios. Stock trades have to conform to government regulations meant to protect investors from fraudulent practices.

How Do You Buy Stock?

Most often, stocks are bought and sold on stock exchanges, such as the Nasdaq or the New York Stock Exchange (NYSE). After a company goes public through an initial public offering (IPO), its stock becomes available for investors to buy and sell on an exchange. Typically, investors will use a brokerage account to purchase stock on the exchange, which will list the purchasing price (the bid) or the selling price (the offer). The price of the stock is influenced by supply and demand factors in the market, among other variables.

How Can You Earn Income From Owning Stock?

There are two ways to earn money by owning shares of stock is through dividends and capital appreciation. Dividends are cash distributions of company profits. If a company has 1,000 shares outstanding and declares a $5,000 dividend, then stockholders will get $5 for each share they own. Capital appreciation is the increase in the share price itself. If you sell a share to someone for $10, and the stock is later worth $11, the shareholder has made $1.

Is It Risky to Own Stock?

All investments have a degree of risk. Stocks, bonds, mutual funds, and exchange-traded funds can lose value if market conditions decline. When you invest, you make choices about what to do with your financial assets. Your investment value might rise or fall because of market conditions or corporate decisions, such as whether to expand into a new area of business or merge with another company. Historically, stocks have outperformed most other investments over the long run.

Article from : Investopedia

What is copy trade?

The idea behind copy trading is simple: use technology to copy the real-time forex trades (forex signals) of other live investors (forex trading system providers) you want to follow. So, every time they trade, you can automatically copy their trades in your brokerage account.

Is it legal to copy trade?

Most countries allow copy trading as long as the broker is properly regulated. When you open an account with a regulated broker to invest in the stock market, there are procedures in place to make sure it is legal for you to trade (depending on your country of residence).

How do you copy trade?

With copy trading, a trader (called a "signal provider") shows other traders how to trade in real time (users). Users can automatically copy the trades of the signal provider in real time using a copy trading platform. Each copy trading platform has controls that investors can choose to use to keep their money safe. For instance, traders can choose how much of their capital to risk and which signals to follow.

Is it a good idea to copy trade?

Even though automating your trading strategy might seem like a good idea, copy trading still requires active account management. It's not a quick fix or an easy way to make money. Copy trading isn't for everyone, but if you use it right, it can help you diversify your portfolio, and the best copy-trade brokers will give you tools to help you manage your account.
Whether or not copy trading is a good idea for you depends on your preferences, overall goals, willingness to take risks, and how much of your portfolio you plan to put into it. You'll still have to choose different risk/reward parameters, maximum drawdown thresholds, and which providers, if any, to copy.
Copy trading still requires work to set up because it is considered a self-directed account in most countries, unlike a set-it-and-forget-it investment fund or other passive investments where other people make investment decisions for you.

How do you copy a trade?

To start copy trading, you must first choose which investors you want to follow on the copy trading platform and then give each of them a certain amount of your account balance.
For example, if an investor you are copying buys 100,000 units of the EUR/USD currency, you will see the same proportionally-sized trade in your account, depending on how much you put in (the trade size in your account may be smaller or larger, depending on how you configure your account when initially subscribing to copy each investor).

How do I choose the best forex copy trading system?

Features in MTX are what make the exchange platform special. Our special trade and the PAMM CopyTrader system are both made to help traders find new ways to make money.

It is very important to match your risk parameters with the investment strategy that fits your goals best. A more cautious investor, for example, might choose a system with a lower average loss per trade compared to the average profit. A more risk-taking investor, on the other hand, might choose a strategy with higher volatility, which means there is a higher chance of losing money, but also a higher chance of making money.
There are hundreds or even thousands of signal providers on many new copy trading forex platforms. Because of this, it can be hard for traders to figure out who to follow. So, you should always do your research, start with a small amount, and never put more money at risk than you can afford to lose.

What is NFT?

NFT stands for Non-Fungible Token. Non-fungible means that something cannot be exchanged for another item because it's unique. For instance, one piece of art is not equal to another. Both have unique properties. Fungible items, on the other hand, can be exchanged for one another. For instance: one dollar or Bitcoin is always equal to another. But what is an NFT? NFTs are tokens that live on a blockchain and represent ownership of unique items. Why is that useful?

Well, tracking who owns a digital file is tricky because it can be copied and distributed effortlessly. So how can you prove who's the original owner when everyone has an identical copy of the file? NFTs solve this problem. Imagine that you made a piece of digital art, essentially a JPG, on your computer. You can create or mint an NFT out of this. The NFT that represents your art contains a bit of information about it, such as a unique fingerprint of the file, a token name, and a symbol.

This token is then stored on a blockchain, and you, the artist, become the owner. Now you can sell that token by creating a transaction on the blockchain. The blockchain makes sure that this information can never be tampered with. It also allows you to track who the current owner of a token is and how much it has been sold in the past. It's important to know that the artwork itself is not stored in the NFT or the blockchain. Only its properties, like the fingerprint or hash of the file, a token name and symbol, and, if desired, a link to a file hosted on IPFS, are.

Now here's where NFT's become weird. When you buy an NFT that represents an artwork, you don't get a physical copy of it. Heck, most of the time, everyone can download a copy for free. The NFT only represents ownership, and that is recorded in a blockchain, so nobody can tamper with it. Some say that NFTs give you digital bragging rights. And to make it even weirder, while the token owner owns the original artwork, the creator of the NFT retains the copyright and the reproduction rights. So an artist can sell his original artwork as an NFT, but he can still sell prints. Aside from digital art, NFT can also be used to sell concert tickets, domain names, rare in-game items, real estate, and basically anything that is unique and needs proof of ownership.

For example, the founder of Twitter sold his first tweet as an NFT. Anyone can see that tweet on their profile, but now, only one person can own it. And that person paid over 2.9 million dollars for it. I could even make an NFT out of this video. You could then buy it and be the owner of this video, even though it's free to watch for everyone. Why are some NFTs worth millions?

Well, their worth is determined by what people are willing to pay for them. If I'm willing to pay a hundred dollars for a particular NFT, then it's worth a hundred dollars.

Prices are driven by demand, so be careful because an expensive NFT becomes worthless if nobody wants to buy it. Okay, one more thing before we end: how do they work technically? NFTs are smart contracts that live on a blockchain.

In this case, the contract stores the unique properties of the item and keeps track of current and previous owners. An NFT can even be programmed to give royalties to the creator every time it exchanges hands.

What is consensus mechanism?

Once you start getting into the cryptocurrency space, you inevitably hear terms like Proof of Work (PoW), Proof of Stake (PoS), and Proof of History (PoH).

To a new investor, this might sound like complicated terms you don't need to know. However, these protocols are critical to how popular cryptocurrencies like Bitcoin and Ethereum work. In fact, it is these protocols that help cryptocurrencies remain decentralised by validating blockchain transactions without the need for a third party.

Ultimately, the more you know about the difference between PoW vs PoS vs PoH, the better. Cryptocurrencies are an emerging asset class with incredible opportunities. However, understanding the technology behind the scenes is critical so you can make an informed investment decision.

What is a consensus mechanism?

A consensus mechanism, also known as a consensus algorithm, is how nodes in a network come to a consensus on which blockchain transactions are valid.

Remember, a blockchain is basically a digital ledger of information that is distributed to everyone in the network. This means that each node has the same description of the blockchain state and previous transactions. In order to update this ledger and maintain its universal consistency, nodes in the network must agree on which new blocks are valid and should be added to the chain.

To reach consensus, at least 51% of nodes on a network must agree that a block is valid and should be added to the ledger.

This is a simple explanation of what consensus mechanisms are and how they are used in cryptocurrencies. However, different cryptocurrencies have different consensus mechanisms, which have significant implications for energy usage, security, and scalability.

What is Proof of Work (PoW)?

Proof-of-Work is probably familiar to most junior cryptocurrency investors as it is the consensus mechanism used by Bitcoin and Ethereum. This is also a mechanism at play when you hear people talking about Ethereum and Bitcoin mining.

How does PoW work?

With proof-of-work, blocks with transactions must be verified by network participants before being added to the chain. To validate blocks, validators use computing power to solve complex cryptographic puzzles. When a participant successfully validates a block, the block is added to the chain and the participant receives bitcoin as a reward.

This process of using computing power to solve complex problems in exchange for block rewards is mining. In the case of Bitcoin, as the total amount of BTC in circulation increases, the mining reward for completing a block is halved every four years or so. Currently, miners can get 6.25 BTC for successfully validating a block.

Proof of work is very energy-intensive. The computing power (known as hash power) to mine cryptocurrencies such as Bitcoin is enormous. This has led to increased energy expenditures worldwide. This also affects the global GPU market, as miners buy expensive computer hardware to mine more efficiently.

Energy consumption is a downside of proof-of-work. Furthermore, PoW follows a "longest chain" rule, i.e. the longest chain in the blockchain is considered a valid chain by users. This means that PoW cryptocurrencies are more vulnerable to a 51% attack, which occurs when an entity reaches 51% of total computing power, builds the longest chain with fraudulent blocks, and double spends their cryptocurrency.

Finally, PoW has been criticized for its lack of scalability. For example, Bitcoin miners validate blocks on average every 10 minutes, while PoS and PoH validate transactions much faster. Clearly, this is why Bitcoin and Ethereum are not ideal for doing a lot of day-to-day transactions, especially when you factor in costs like ETH gas fees.

Pros and Cons of Proof of Work (PoW)

Advantage

• Security: The chance of a 51% attack is impossible on a mature cryptocurrency with a large and diverse hashrate.

• Rewarding Miners: PoW allows miners to be rewarded for validating blockchain transactions, thereby incentivizing people to help validate blocks and keep things running smoothly.

Disadvantage

• Barriers to entry: Today, global mining operations hold most of the computing power in cryptocurrencies such as Bitcoin and Ethereum. Being an independent miner is expensive in terms of hardware and electricity costs.

• Energy consumption: Cryptocurrency mining is often criticized for its impact on the environment. In fact, Bitcoin mining uses more electricity than some countries!

• Validation time: Validating blocks with PoW takes a few minutes for Bitcoin. This means that cryptocurrencies like Bitcoin are more of a store of value and less useful for making multiple quick transactions.

What is Proof of Stake (PoS)?

Proof-of-Stake is the main alternative to Proof of Work, the consensus mechanism that cryptocurrencies like Algorand, Cardano, Solana, and Tezos use to verify transactions.

To improve scalability and security, Ethereum also switched from PoW to PoS in its Ethereum 2.0 upgrade.

How does PoS work?

With Proof-of-Stake, depositors act like cryptocurrency miners, only locking up the cryptocurrency they own as validator nodes. The likelihood of validating a new block and getting a block reward depends on the amount of cryptocurrency you stake. This means that the more cryptocurrencies and stakes you hold, the better your chances of being selected to validate blocks.

The main difference between Proof of Stake and Proof of Work is that PoS does not require nearly as much energy to validate blocks. This is because the founders use smart contracts to lock up funds and do not need to use mining to solve energy-intensive cryptographic problems.

PoS is also more scalable than PoW because PoS allows more transactions per second (TPS). While it takes around 10 minutes to verify a Bitcoin transaction, Cardano has a TPS of around 257. The founder of Ethereum, Vitalik Buterin, believes that the upgrade of ETH 2.0 will promote the TPS of ETH to reach 100,000.

Finally, you can make the argument that PoS is a fairer consensus mechanism because it truly rewards stakeholders. With PoW, large entities take up a large percentage of computing power, and mining is expensive. But with PoS, even novice investors can stake their cryptocurrencies independently or through staking pools to earn rewards.

Additionally, PoS provides protection as an additional layer of security. The odds of a 51% attack on PoS cryptocurrencies are impossible for mature coins. This is because the attacker must own 51% of the cryptocurrencies being staked. Not only is this very expensive, but attacking a cryptocurrency and potentially lowering its price is counterproductive when you are an important stakeholder.

Pros and Cons of Proof of Stake (PoS)

Advantage

• Efficiency: PoS is more energy efficient than PoW because validators do not need computational power to solve complex cryptographic problems.

• Scalability: The PoS network achieves consensus before blocks are actually added, so it can process many more transactions per second than PoW.

• Safety: You have to be a stakeholder to participate in the staking, and this self-governing system naturally increases safety.

Disadvantage

• The Nothing-At-Stake problem: In theory, if a PoS cryptocurrency forks, stakers can focus on validating one chain rather than validating multiple chains simultaneously. This has the potential to facilitate a double spend attack, as an attacker can buy something on one fork with their cryptocurrency, send the same cryptocurrency to the second fork, and then spend their staking power on the second fork a fork. If the second fork becomes the longest chain, it is accepted by the network, and the transaction for the first fork is returned.

• Concentration of wealth: Another potential problem with PoS is that the largest stakeholder gets the most rewards. This "rich get richer" situation isn't a problem by default. However, this creates and propels those who control a large supply of various cryptocurrencies into giants.

What is Proof of History (PoH)?

Proof of History is a consensus mechanism, and Solana, one of the largest cryptocurrencies by market capitalization, is used with PoS to help solve the general timing problem of blockchains and increase network speed.

The advantage of Solana is that it is extremely efficient. It processes transactions much faster than cryptocurrencies such as Bitcoin and Ethereum due to the use of PoH and other innovations.

How does PoH work?

In Solana's white paper, founder Anatoly Yakovenko explains how PoH utilizes a verifiable clock to create a ledger so that nodes in the network know the passage of time recorded without having to rely on other nodes.

In short, with PoH, nodes have their own internal clocks to verify events and the passage of time. The proof uses a verifiable delay function (VDF) to hash incoming events while recording when the event occurred. When other nodes look at the sequence of hashes, they can immediately know the order in which events occurred without the need to verify time with other nodes.

Since many authors discussing PoH are engineers/programmers/cryptologists, it can be very confusing to read. But the following Solana video itself is a short and to the point explanation to help anyone get a better grasp of how PoH works.

Solana has several other technological innovations to improve efficiency. For example, it uses the Turbine protocol, which compresses data into smaller sizes to reduce bandwidth requirements and improve TPS. It also uses Sealevel, which allows smart contracts to run in parallel.

Thanks to all these improvements, Solana can achieve over 60,000 TPS. Fast transaction speeds and incredibly low fees are why Solana is often called the "Ethereum killer" by its advocates.

But despite Solana's efficiency, there were some bumps along the way. On September 14, 2021, Solana's network crashed and went offline for 17 hours. The crash was caused by a bot attack that basically hit the network with over 400,000 transactions per second, crashing validators and bringing the network to a standstill.

The crash cost Solana around $20 billion in market value. Although Solana's price has recovered, this shows that Solana is still in its infancy and may experience more growing pains.

Pros and Cons of Proof of History (PoH)

Advantage

• Low Fees: Solana has significantly lower fees than other cryptocurrencies like Ethereum. This makes it more feasible for recurring spending or transferring money.

• Scalability: More transactions per second increases the scalability of cryptocurrencies.

Disadvantage

• Centralization concerns: Solana currently has less than 1,200 validators validating transactions on its network.

• Fewer Decentralized Applications (DAPPs): Solana is often called the Ethereum killer, and according to its website, there are over 350 DAPPs built on Solana. By comparison, there are nearly 3,000 DAPPs on Ethereum, and this is where DeFi currently needs more development time and innovation.

What do these mean for investors?

Terms like Proof-of-Work, Proof-of-Stake, and Proof-of-History may seem like pure jargon. But as with any asset type, it's important to understand what you're actually investing in and why it might be valuable in the first place. For cryptocurrencies, this means understanding the underlying technology behind different projects.

Furthermore, innovations like PoS and PoH have created new opportunities beyond buying cryptocurrencies on exchanges. For example, by staking, you can earn passive rewards with your cryptocurrency. You can also investigate lending-based platforms like BlockFi and Celsius that let you deposit your cryptocurrency to earn interest.

In conclusion, Proof of Work and Bitcoin lay the foundation for the consensus mechanism of cryptocurrencies. But the field is still developing rapidly, and investors should at least consider the long-term viability of token verification technology before choosing to invest.