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Blockchain

Blockchain, and the related concept of cryptocurrency, are phrases that have been thrown around a lot following the success of Bitcoin. Blockchain technology has great potential in all manner of computing-related fields, which nowadays is almost all of them. Blockchain is essentially a new system for keeping records, but its relevance to trading and its investment potential are not immediately obvious.

This guide will lay out the basic concepts behind blockchain, some of the reasons for its fame and the advantages and disadvantages it carries with it for all manner of financial instruments, especially cryptos and commodities. Also explored is how blockchain trading is evolving and some of the possible uses of blockchain beyond finance.

Crypto Brokers

  1. AvaTrade
  2. eToro
  3. OANDA US
  4. Eightcap
  5. Uphold

#1 - AvaTrade

Why We Chose AvaTrade

Regulated in five continents, AvaTrade offers a secure way to access crypto markets. There's a great range of digital currencies including Bitcoin, Ethereum and Ripple, plus a crypto index. You can access competitive crypto spreads in the broker's wide choice of platforms as well as 1:2 leverage.

"AvaTrade offers the full package for short-term traders. There is powerful charting software, reliable execution, transparent fees, and fast account opening with a low minimum deposit."

- DayTrading Review Team
  • Coins: BCH, BTC, BTG, ETH, LTC, XRP, EOS, DASH
  • Crypto Mining: No
  • Auto Market Maker: No
  • Crypto Spread: BTC <1%, ETH 2%
  • Crypto Lending: No
  • Crypto Staking: No
  • Platforms: WebTrader, AvaTradeGO, AvaOptions, MT4, MT5, AlgoTrader, TradingCentral, DupliTrade
  • Regulator: ASIC, CySEC, FSCA, ISA, CBol, FSA, FSRA, BVI, ADGM

About AvaTrade

AvaTrade is a leading forex and CFD broker, established in 2006 and regulated across 9 jurisdictions. Over 400,000 users have signed up with the broker which processes over 2 million trades each month. The firm offers multiple trading platforms, including MT4, MT5, and a proprietary WebTrader. 1250+ financial instruments are available for day trading, alongside a comprehensive education center and multilingual customer support.

Pros

  • There's a great range of fee-free deposit methods, including bank wire, credit cards and popular e-wallets like Skrill
  • WebTrader is well-suited to beginners and features a strong suite of technical analysis tools and market research for day traders
  • AvaTrade is a heavily regulated and trustworthy broker with licenses from the ASIC, CySEC and more

Cons

  • There is no ECN account with raw spreads
  • Traders from the US are not accepted
  • A high $2000 minimum investment is required to use DupliTrade, which will be out of reach for many beginners
Visit AvaTrade

#2 - eToro

Why We Chose eToro

eToro leads the way in cryptocurrency trading, offering competitive spreads and a fixed 1% commission, plus their own wallet service. The broker offers a vast list of 95+ tokens which is continually being updated. Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more

"eToro's social trading platform leads the pack with a terrific user experience and active community chat that can help beginners find opportunities. There are also competitive fees on thousands of CFDs and real stocks, plus excellent rewards for experienced strategy providers."

- DayTrading Review Team
  • Coins: BTC, ETH, BCH, XRP, DASH, LTC, ETC, API3, CRO, SKL, IMX, ADA, MIOTA, XLM, EOS, NEO, TRX, ZEC, BNB, XTZ, DOT, MKR, COMP, LINK, UNI, YFI, DOGE, AAVE, FIL, ALGO, ATOM, MANA, APE, LRC, ENJ, BICO, BAT, BNT, OGN, MATIC and many more
  • Crypto Mining: No
  • Auto Market Maker: No
  • Crypto Spread: BTC 1%
  • Crypto Lending: No
  • Crypto Staking: Yes
  • Platforms: eToro Web, CopyTrader, TradingCentral
  • Minimum Deposit: $50
  • Regulator: FCA, ASIC, CySEC, FSA, FSRA, MFSA

About eToro

eToro is a top-rated multi-asset platform which offers trading services in thousands of CFDs, stocks and cryptoassets. Launched in 2007, the brand has millions of active traders globally and is authorized by tier one regulators, including the FCA and CySEC. The brand is particularly popular for its comprehensive social trading platform. Cryptoasset investing is highly volatile and unregulated in the UK and some EU countries. No consumer protection. Tax on profits may apply. 76% of retail accounts lose money.

Pros

  • There's a comprehensive online training academy with accessible resources, from bitesize articles to comprehensive courses
  • Top copy traders can receive annual payments up to 1.5% of assets under copy in the broker's Popular Investor Program
  • eToro has bolstered its investment offering, most recently with new crypto assets, now offering over 90 digital currencies

Cons

  • The lack of additional charting platforms like MT4 will reduce the appeal for seasoned day traders accustomed to using third-party software
  • There is a $30 minimum withdrawal amount and a $5 fee, which will affect novices with low capital
  • There are no guaranteed stop loss orders which would be a useful risk management feature for beginners
Visit eToro

#3 - OANDA US

Why We Chose OANDA US

You can speculate on the world’s biggest cryptos by market cap. Commissions are lower than many peers starting at 0.25%. Through the broker’s partnership with Paxos, clients can spot trade cryptocurrencies on the itBit exchange through the OANDA native platform.

"OANDA remains an excellent broker for US day traders seeking a user-friendly platform with premium analysis tools and a straightforward joining process. OANDA is also heavily regulated with a very high trust score."

- DayTrading Review Team
  • Coins: BTC, ETH, LTC, BCH, PAXG, LINK, UNI, AAVE
  • Crypto Mining: No
  • Auto Market Maker: No
  • Crypto Spread: $100
  • Crypto Lending: No
  • Crypto Staking: No
  • Platforms: OANDA Trade, MT4, TradingView, AutoChartist
  • Minimum Deposit: $0
  • Regulator: NFA, CFTC

About OANDA US

OANDA is a popular brand offering exceptional execution, low deposit requirements and advanced charting and trading platform features. The top-rated brand has over 25 years of experience and is regulated by trusted agencies, including the NFA/CFTC. Around the clock support is available for short-term traders, alongside flexible contract sizes and automated trade executions.

Pros

  • The proprietary OANDA web platform continues to deliver a highly competitive charting environment, including 65+ technical indicators powered by TradingView
  • There's a strong selection of 68 currency pairs for dedicated short-term forex traders
  • Beginners can get started easily with $0 minimum initial deposit

Cons

  • There's only a small range of payment methods available, with no e-wallets supported
  • The range of day trading markets is limited to forex and cryptos only
  • It's a shame that customer support is not available on weekends
Visit OANDA US

#4 - Eightcap

Why We Chose Eightcap

Eightcap’s crypto offering is best-in-class with 250+ crypto derivatives, surpassing that of almost every alternative. Testing also reveals Bitcoin spreads of 12 pips, coming in lower than most competitors, while it offers real-time trading ideas through the Crypto Crusher market scanner. Add in convenient deposits and withdrawals in digital currencies, and Eightcap offers the complete package for serious crypto traders.

"Eightcap delivers in every area for day traders with a growing selection of charting platforms and AI-powered tools. Now sporting 250+ crypto CFDs and the Crypto Crusher market scanner, it's also become a stand-out choice for crypto trading, winning our 'Best Crypto Broker' award two years in a row."

- DayTrading Review Team
  • Coins: BTC, ETH, LTC, BCH, XRP, XMR, DSH, EOS, XLM, ADA, TRX, DOGE, BNB, DOT, MATIC, VET, AXS, NEO, SOL, UNI, AAVE, KSM, THETA, CAKE, SUSHI, ATOM, XTZ, SNX, COMP, FLOW, EGLD, PUNDIX, RAY, ZIL, QTUM, BAND, OMG, FIDA, BADGER, NEAR and many more
  • Crypto Mining: No
  • Auto Market Maker: No
  • Crypto Spread: $12 (BTC)
  • Crypto Lending: No
  • Crypto Staking: No
  • Platforms: MT4, MT5, TradingView
  • Minimum Deposit: $100
  • Regulator: ASIC, FCA, xCySEC, SCB

Pros

  • After bolstering its roster in 2021, Eightcap offers one of the most extensive selections of cryptocurrency CFDs in the market, with crypto/fiat pairs, crypto/crypto pairs, plus crypto indices for broader exposure to the market.
  • Eightcap stands out with a selection of powerful trading tools, including MT4 and MT5, the innovative algorithmic trading platform Capitalise.ai, and more recently the 50-million strong social trading network TradingView.
  • With tight spreads from 0 pips, low commission fees, and high leverage up to 1:500 for certain clients, Eightcap provides cost-effective and flexible trading conditions that can accommodate an array of strategies, including day trading and scalping.

Cons

  • Despite a useful library of educational guides and e-books, Eightcap still trails IG’s comprehensive toolkit for aspiring traders with its dedicated IG Academy app and 18 course categories.
  • In spite of an increasing variety of tools, Eightcap doesn't offer industry favorites like Autochartist or Trading Central, which offer cutting-edge charting analytics, live news, and market insights for short-term traders.
  • The demo account expires after 30 days and can only be extended upon request - a notable inconvenience compared to the likes of XM with its unlimited demo mode.
Visit Eightcap

#5 - Uphold

Why We Chose Uphold

You can buy and sell 250+ crypto assets with fiat currencies or in crypto pairs using the straightforward mobile app or through Uphold's browser-based account homepage. This is significantly more than many rivals. You can also earn up to 16% APY by staking one or more out of 32 valid tokens, or send tokens to an external wallet.

"Uphold remains a top choice for crypto investors looking for a one-stop-shop solution to accessing the markets. There are over 250 tokens to buy, sell and trade through flexible platform options."

- DayTrading Review Team
  • Coins: BTC, BTCO, AAVE, ALCX, DYDX, INH, XYO, API3, GHST, LSK, AUDIO, GLMR, NMR, CAKE, GODS, REQ, CHR, TRB, DAO, ROOK, XRP, ETH, BAT, ADA, ALGO, ATOM, AVAX, AXS, BCH, BAL, BTG, CSPR, COMP, CRV, DASH, DCR, DGB, DOGE, DOT, EGLD and many more
  • Crypto Mining: No
  • Auto Market Maker: No
  • Crypto Spread: Up to 1.5%
  • Crypto Lending: No
  • Crypto Staking: Yes
  • Platforms: Desktop Platform, Mobile App
  • Minimum Deposit: $0

About Uphold

Uphold is a digital asset platform offering a range of services, from crypto trading and staking to payment cards that provides rewards and easy multi-currency payments. The company was established in 2015 and has enabled $4+ billion in transactions. Uphold is now active in 180+ countries and deals in 200+ crypto and fiat currencies.

Pros

  • The proprietary app is extremely easy to use with a slick design and navigation
  • Uphold is 100% reserved which helps to protect client funds
  • Two-step authentication bolsters user security

Cons

  • The charting analysis features on the platform trail specialist exchanges
  • Customer service is slow based on tests, with limited contact options
  • Uphold operates with limited regulatory oversight
Visit Uphold

What Is Blockchain?

Fundamentally, a blockchain is a form of database, or ledger, that electronically stores information. Database information is typically tabulated, appearing much like a spreadsheet, and allows several users to concurrently access and filter a large amount of information.

Blocks

One of the primary aspects that separate blockchains is the way the data is structured. A blockchain groups information together into sets, or blocks, of data. Each block has a limited capacity and, when it is filled, it gets appended to the previous block. This process continues, with blocks of data chaining together to form, you guessed it, a blockchain.

What is blockchain

These blocks, once confirmed and added to the chain, cannot then be amended. This forms a linear timeline of data as each block is timestamped at the exact time it becomes part of the chain. This is important for security and transparency in the blockchain. Blockchain trading networks have increased in popularity mostly because a combination of this and its decentralization.

Decentralization

Another important and often argued to be definitive, characteristic of a blockchain database is its decentralization. Large traditional databases manage such huge quantities of data and run several concurrent tasks by holding everything on big servers formed of many powerful computers. In these cases, one entity normally owns the property, the servers and the database, controlling the information within.

Similarly, blockchains require many computers to store their data and run their tasks. However, computers are split by geography and ownership so that many different people or groups help to operate the blockchain, with no single entity owning the database or controlling the information. This means that, when investing in blockchain trading instruments, there is no risk of a controlling entity rejecting your trade or halting your profits.

Each computer in a blockchain is called a node, and each node has a full record of the data stored since the database was created. For any change to be made to the chain, be it the addition of a new block or amendments to previous blocks, most of the nodes must approve the changes. This helps prevent tampering, improve security and maximizes data accuracy.

Blockchain & Cryptos

The first live implementation of the distributed ledger technology system, Bitcoin (symbol: BTC) has stolen the spotlight, especially in trading circles. But in reality, all cryptocurrencies run on a form of blockchain, providing decentralized, transparent and secure digital transactions.

All traditional currencies, be they fiat or commodity-based, are managed and distributed by a central bank or authority. This means that all related data is centralized and controlled by a single entity, producing several risks. If a bank were hacked, not only would the assets of all those holding money in the bank be at risk, but so would their personal information.

The bank could also collapse, in which case the money held by consumers may be worth much less than before, or their taxpayer money may be used to bail it out.

Blockchain trading

Bitcoin was created with these worries in mind, made to be decentralized and follow a proof of work system, which means that there are no entities involved with more authority than any others. Furthermore, it is much harder to hack as every node must agree on the correct blockchain, so one would need to hack over 50% of the nodes, a massive task. This decentralization is a key reason that many people have shifted to blockchain trading instruments.

Many more cryptocurrencies have since sprung up, following Bitcoin’s decentralized approach, and more will continue to explore possibilities.

Blockchain Timeline

Blockchain Trading Options

If you are wondering how does blockchain help trading, we break down a few of its uses for investors…

Cryptocurrencies

The most intuitive way to combine blockchain and trading is with cryptocurrencies. Run using blockchain systems, cryptos can be traded on a vast array of platforms through a wide range of brokers. Most cryptos are traded as currency pairs, like forex, against a fiat or other traditional currency, typically the USD. However, many brokers also provide options to trade one crypto directly against another.

Peer-To-Peer Energy

Also called prosumer power or the crypto-trading blockchain-oriented energy market, P2P energy trading is the sale of excess energy from one consumer with the ability to produce electricity, usually from solar power, to another consumer on the same grid. Cryptocurrency helped facilitate the start of this trading concept, with Ethereum (symbol: ETH) used in 2018 to buy power from a neighbor.

This idea can be seen in many places in the world, often using a blockchain trading energy platform to invest in renewable energy credits amongst prosumers connected to a microgrid. P2P energy trading challenges the traditional centralized energy supply but provides users with control over where they buy or sell excess energy from or to.

Emissions Trading

Another form of trading is emissions trading schemes (ETSs), which is a government environmental policy to reduce emissions, typically carbon emissions, by selling a limited number of pollution permits to businesses. These permits must be bought by any business releasing a significant quantity of emissions, and more must be purchased if the company wishes to increase its pollution. Beyond the direct purchase and sale of permits, financial derivatives of the permits are available to be traded on secondary markets.

Blockchain is implemented into some of these markets, both primary and secondary, to better and more efficiently connect suppliers and demanders. The format of the database also helps to record and transfer information quickly, reduce entry gates by minimizing costs and helpS against fraud and double counting of credits thanks to its transparency.

Exchange Structures

Many firms in the finance and technology sectors believe that current exchange systems could be upgraded using blockchain trading. Commodity exchanges typically rely on paper for transaction processing and verification, though some companies implement blockchain technology to automate processes and store information more efficiently.

Two notable projects are Vakt (oil trading platform) and OneOffice (gas trading platform), which have created greater transparency with their services. S&P is also using blockchain to store data and publish oil stock levels transparently and clearly.

Blockchain online investing

The improved transparency of the chain, coupled with its security and confidentiality, is particularly attractive, as it could let all stock levels be public without locations being released and help track down fraudulent purchases.

It is not only oil and gas exchange markets that stand to benefit from blockchain, stock trading exchanges, derivatives markets and other commodities, such as gold or agriculture could stand to gain for all the same reasons.

Trading The Technology

Another, less direct way to start blockchain trading is by looking at those industries and companies that stand to benefit from its use and development. At the first level, there are specific technology consulting businesses that work to implement blockchain solutions. Such companies include Hive, Riot, Argo and TXQuick, though there are many more.

As crypto-systems gain traction, big tech companies and financial technology businesses have begun to aid their development. Amazon, CME and Mastercard are but a few whose shares can be easily invested in at many online brokers.

Finally, computing hardware manufacturers stand to gain from blockchain thanks to the heavy computational requirements to mine different cryptocurrencies and support the networks. More specifically, GPU (graphics processing unit) manufacturers like Nvidia have created and sold many of their products for mining purposes.

Non-Trading Blockchain Uses

Blockchain has great potential in financial trading systems, as has been proven with cryptocurrencies and many stock and commodity trading platforms. However, there are many other uses and opportunities that it provides, many of which have barely been explored to date:

Pros & Cons Of Blockchain Trading

Transaction Accuracy

A blockchain is operated by many computers at once, often thousands, which must approve a transaction before it is carried out. This removes the possibility of human error when verifying the transaction and, even though computers can produce errors, more than half the nodes in the network must produce the same error for it to pass through.

Third-Party Cost Reductions

Third parties are involved in almost all verification processes, be it a minister for a marriage or an exchange for an instrument trade. Crypto-based chains, and their inherent verification process, reduce or eliminate additional costs.

Efficiency

Transactions placed through a body that only works during certain hours in the week can take several days to settle if attempted at the start of the weekend, for example. Much like forex trading markets, blockchains improve efficiency by running 24/7, 365 days a year, facilitating and beginning transactions as soon as they are requested.

One drawback of blockchains, partly due to the immaturity of the concept, is the time taken for a transaction to be completed. Bitcoin, for example, can process approximately seven trades per second, whereas Visa can carry out 24,000.

That being said, many other cryptocurrencies boast throughputs in the low thousands of trades, as blockchain technology has improved. For example, Ethereum 2.0 is expected to process 100,000 transactions per second.

Confidentiality

It is often thrown around that Bitcoin transactions are anonymous. Each user has a unique public key that is associated with any transactions they make, rather than any private information. This makes all transactions confidential, as users can only decode their own public keys. However, some transactions require identification, and these will link the user’s name to their blockchain address.

Security

The authenticity of any amendment or trade within a blockchain network must be verified by nodes. Once verified by the majority, and only then, can a new block be added to the chain.

Blockchain security

Each block is also identified with a unique hash and the hash of the block prior, and any changes made to a block will also change its hash. This would make the new and the old hash mismatch, making any tampering noticeable.

Transparency

Most blockchains are decentralized and publicly accessible, with open-source platform software (available for all to see for free). This means auditors can easily assess its security and anyone can propose changes to the blockchain’s code. The full ledger is also publicly available, allowing anyone to look at all trading in the blockchain’s history.

Technological Complexity & Costs

While blockchain trading offers reduced third-party fees, there are still great costs associated with them. The validation system in place for Bitcoin, for example, uses so much power that the entire network consumes more than the quantity of electricity annually used by Argentina.

The incentive to rack up such high energy requirements comes from a Bitcoin reward for miners that add blocks to the chain. However, not all blockchains are for cryptocurrencies, so other incentives or offsets must be implemented.

Regulation

A big reason for the creation of Bitcoin and the advent of cryptocurrencies was to avoid central authorities controlling currency and its users. However, there are growing concerns that governments will try to regulate cryptocurrencies, be it directly or by criminalizing ownership. In 2021, for example, China banned the trading and mining of crypto.

With that said, China is an outlier as in recent years many major first-world countries have become more open to the use of cryptocurrency and have created friendlier regulations.

Illegal Opportunity

The confidentiality and lack of regulation offered by blockchains can also be attractive to those wishing to partake in illegal activities. One such example was the Silk Road, a marketplace run on the dark web using blockchain trading to deal in drugs and other illegal goods for cryptocurrencies.

There have also been cases of insider trading debates and halts with companies such as Hive and Riot, which have occurred thanks to ambiguity in the relevant laws that have not advanced alongside the technology.

While this is most certainly a disadvantage, there are debates as to whether the legal and moral possibilities of blockchain outweigh this criminal potential, especially considering how much of the criminal world runs on cash.

Blockchain Trading Resources

If you are interested in further exploring blockchain trading systems, there are many resources available online, from blockchain bots to helpful guides. For greater depth on the technologies behind the scenes, websites such as the Blockchain Training Academy, the Blockchain Council or the Blockchain Training Alliance provide more technical detail, reviews and learning courses.

For tips, guides and advice on strategy and the best platforms for blockchain trading cryptos, see here.

Final Word On Blockchain Trading

Blockchain has potential, there is no doubt about it, but it is a young technology that has not yet been fully realized in many sectors. However, it has maintained momentum after its Bitcoin success, being implemented in finance for trading all instruments, including bonds, equity, fixed income funds and more obscure assets, such as emission permits. This momentum looks likely to continue, causing not only blockchain-specialized businesses but many other related companies to grow and succeed.

There are worries, however, regarding blockchain trading platforms and currencies as governments and regulatory agencies have not yet caught up with it. The main attractions of blockchain are its decentralization and confidentiality, two things authorities tend to dislike. The future of blockchain, therefore, is not clear-cut. However, if allowed to continue its development, it will likely grow and revolutionize many areas of society and business, not to mention financial trading and investing.

FAQ

What Is Blockchain?

A blockchain is a form of information database that can be likened to a ledger. Moving away from a traditional, overwritable tabular format, a blockchain sifts new information into a unique block that gets appended to the previous one. This technology is designed to be decentralized, secure and transparent.

What Is A Blockchain Trading Platform?

A blockchain investing platform uses a distributed ledger system to process trading settlements. Blockchain was first used in this way by NASDAQ in 2015, which now runs Linq, a blockchain-based trading platform that speeds up transaction verification and improves the transparency of its data.

What Blockchain Companies Can be Traded?

Many companies specialize in blockchain solutions all over the world, from Australia to South Africa to China. These companies can be traded directly on their respective exchanges. For example, Riot Blockchain can be traded publicly on NASDAQ.

Can You Trade Gold Using Blockchain?

All investing could theoretically move to crypto-based networks, including securities trading for commodities such as gold and platinum, company stocks and options. There are many online brokers and exchanges available that currently link such instruments, including gold, with cryptocurrencies to be traded on a decentralized network.

Is Blockchain Secure?

This technology is essentially a decentralized ledger system, meaning that the computers operating the database are spread amongst different people and places throughout the world. If someone were to attempt to hack the system, they would need to hack more than half the computers within the system, which is harder than hacking a singular server system in a centralized network.

How Can I Buy Bitcoin On Trading 212?

You can’t buy Bitcoin directly from this online broker. However, they offer crypto-related stocks and EFTs. Popular Bitcoin trading brokers include UpHold and Coinmama.