Blockchain
Blockchain, and the related concept of cryptocurrency, are phrases that have been thrown around a lot following the rise of Bitcoin. Blockchain technology has potential in all manner of computing-related fields. 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
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1
eToro USAInvest $100 and get $10https://www.daytrading.com/ is not an affiliate and may be compensated if you access certain products or services offered by the MSB and/or the BD.
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$10$10SEC, FINRAStocks, Options, ETFs, CryptoeToro Trading Platform & CopyTraderACH Transfer, Debit Card, PayPal, Wire TransferUSD -
2
NinjaTrader
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$00.01 Lots1:50NFA, CFTCForex, Stocks, Options, Commodities, Futures, CryptoNinjaTrader Desktop, Web & Mobile, eSignalACH Transfer, Debit Card, Wire TransferUSD -
3
OANDA USCFDs are not available to residents in the United States.
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$00.01 Lots1:50NFA, CFTCForex, Crypto with Paxos (Cryptocurrencies are offered through Paxos. Paxos is a separate legal entity from OANDA)OANDA Trade, MT4, TradingView, AutoChartistWire Transfer, Visa, Mastercard, Debit Card, ACH TransferUSD, EUR, GBP, CAD, AUD, JPY, CHF, HKD, SGD -
4
IGForex trading involves risk. Losses can exceed deposits.
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$00.01 Lots1:30 (Retail), 1:250 (Pro)FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOBCFDs, Forex, Stocks, Indices, Commodities, ETFs, Futures, Options, Crypto, Spread BettingWeb, ProRealTime, L2 Dealer, MT4, AutoChartist, TradingCentralPayPal, Wire Transfer, Mastercard, Credit Card, Visa, Debit CardUSD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD -
5
UpholdTerms Apply. Cryptoassets are highly volatile. Your capital is at risk.
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$0$1CryptosDesktop Platform, Mobile AppWire Transfer, ACH Transfer, Bitcoin Payments, Debit Card, Credit Card, Mastercard, Visa, Ethereum PaymentsUSD, EUR, GBP -
6
IQCent20% to 200% Deposit Bonus
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$250$0.011:500IFMRRCBinary Options, CFDs, Forex, Indices, Commodities, CryptoOnline Platform, TradingViewCredit Card, Debit Card, Wire Transfer, Bitcoin Payments, Ethereum Payments, Visa, MastercardUSD, EUR -
7
xChief$100 No Deposit Bonus
$100.01 Lots1:1000VFSCCFDs, Forex, Metals, Commodities, Stocks, IndicesMT4, MT5Wire Transfer, Bitcoin Payments, Credit Card, UnionPay, Skrill, Neteller, WebMoney, Perfect Money, Debit Card, Ethereum Payments, FasaPay, VoletUSD, EUR, GBP, JPY, CHF -
8
Plexytrade120% Cash Welcome Bonus
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$500.011:2000UnregulatedCFDs, Forex, Indices, Stocks, Commodities, CryptoMT4, MT5Bitcoin Payments, Ethereum PaymentsUSD, EUR -
9
FirstradeDeposit Bonus Up To $4000
$0$1SEC, FINRAStocks, ETFs, Options, Mutual Funds, Bonds, Cryptos, FixedOwnACH Transfer, Wire Transfer, Cheque, Automated Customer Account Transfer ServiceUSD -
10
Binarium
$5$1Forex, Stocks, CryptosOwnQIWI, Yandex Money, Bitcoin Payments, Neteller, WebMoney, Wire Transfer, Visa, Mastercard, Credit Card, Debit CardUSD, EUR, AUD, RUB
Here is a short summary of why we think each broker belongs in this top list:
- eToro USA - eToro US offers 24 tradeable cryptoassets, with just a 1% buying/selling fee added to the spread. Additionally, there are 80 different coins available through the broker’s proprietary wallet service. You can also practice your crypto strategies easily by switching between live and demo mode. Crypto asset investing is highly volatile and unregulated. No consumer protection. Tax on profits may apply.
- NinjaTrader - You can get exposure to micro Bitcoin futures through the CME Group’s centralized exchange, which is highly regulated by the US CFTC. Micro contracts allow you to trade a fractional size of one Bitcoin, giving you more risk control and order flexibility.
- OANDA US - Cryptocurrency trading is offered via Paxos, a separate entity from Oanda. 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.
- IG - IG's modest selection of 11 crypto CFDs trails top crypto brokers like Vantage which offers 40+ tokens. That said, it stands out with its crypto index, which tracks the value of the top 10 digital currencies by market cap and provides a holistic way to speculate on the value of the crypto market.
- 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.
- IQCent - IQCent offers 17 crypto pairs through its proprietary terminal, including Bitcoin, Ethereum and Litecoin. Leverage on crypto CFDs is capped at 1:10, whilst binary options payouts vary by token but remain competitive. OTC assets, for example, pay out up to 95%.
- xChief - xChief’s range of 5 cryptocurrencies paired with USD is smaller than most competitors. In addition, the average BTCUSD spread of 30 pips is not the cheapest. That said, the broker does offer some useful crypto trading guides for beginners.
- Plexytrade - Plexytrade lets traders capitalize on the inherent volatility of the cryptocurrency market by offering leveraged trading on 5 popular cryptocurrencies, including Bitcoin. However, the threadbare offering of digital tokens seriously trails leading brokers like Eightcap with its 100+ crypto derivatives.
- Firstrade - Take positions on dozens of leading cryptocurrencies with low fees and 24/7 investing. Traders need just $1 to start speculating on popular tokens like Bitcoin. Clients can also buy cryptos instantly in a few straightforward steps.
- Binarium - Trade binary options on three Bitcoin pairs – BTC/USD, BTC/GBP and BTC/EUR – with flexible contract lengths. Simply bet whether the price of the asset will rise or fall.
eToro USA
"eToro remains a top pick for traders looking for leading social investing and copy trading services. With a low deposit, zero commissions and an intuitive platform, the broker will meet the needs of newer day traders."
eToro USA Quick Facts
| Bonus Offer | Invest $100 and get $10 |
|---|---|
| Coins | BTC, ETH, BCH, DASH, LTC, ETC, MIOTA, XLM, EOS, NEO, ZEC, XTZ, MKR, COMP, LINK, UNI, YFI, DOGE, AAVE, ALGO, MANA, ENJ, BAT, MATIC, FLR, SHIBxM |
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | BTC 0.75% |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | eToro Trading Platform & CopyTrader |
| Minimum Deposit | $10 |
| Regulator | SEC, FINRA |
| Account Currencies | USD |
Pros
- The online broker offers an intuitive social investment network with straightforward copy trading on cryptos
- The broker's Academy offers comprehensive learning materials for beginners to advanced-level investors
- A free demo account means new users and prospective day traders can try the broker risk-free
Cons
- Average fees may cut into the profit margins of day traders
- There's a narrower range of day trading instruments available compared to competitors, with only stocks, ETFs and cryptos
- The proprietary terminal doesn't support trading bots and there are no additional stock market analysis tools
NinjaTrader
"NinjaTrader continues to meet the demands of active futures traders looking for low fees and premium analysis tools. The platform hosts top-rate charting features including hundreds of indicators and 10+ chart types."
Tobias Robinson, Reviewer
NinjaTrader Quick Facts
| Coins | BTC |
|---|---|
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | Floating |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | NinjaTrader Desktop, Web & Mobile, eSignal |
| Minimum Deposit | $0 |
| Regulator | NFA, CFTC |
| Account Currencies | USD |
Pros
- You can get thousands of add-ons and applications from developers in 150+ countries
- Low fees are offered, with $50 day trading margins & commissions from $.09 per micro contract
- NinjaTrader continues to deliver comprehensive charting software for active day traders with bespoke technical indicators and widgets
Cons
- There is a withdrawal fee on some funding methods
- Non forex and futures trading requires signing up with partner brokers
- The premium platform tools come with an extra charge
OANDA US
"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."
OANDA US Quick Facts
| 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 |
| Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, CHF, HKD, SGD |
Pros
- The broker's API facilitates access to 25 years of deep historical data and rates from 200+ currencies
- Day traders can enjoy fast and reliable order execution
- Seasoned day traders can access industry-leading tools, including an MT4 premium upgrade and advanced charting provided by MotiveWave
Cons
- There's only a small range of payment methods available, with no e-wallets supported
- It's a shame that customer support is not available on weekends
- The range of day trading markets is limited to forex and cryptos only
IG
"IG continues to provide a comprehensive package with an intuitive web platform and best-in-class education for beginners, plus advanced charting tools, real-time data, and fast execution speeds for experienced day traders."
Christian Harris, Reviewer
IG Quick Facts
| Coins | BTC, BCH, LTC, ETH, ADA, DOT, DOGE, LINK, UNI, XLM |
|---|---|
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | Variable |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | Web, ProRealTime, L2 Dealer, MT4, AutoChartist, TradingCentral |
| Minimum Deposit | $0 |
| Regulator | FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB |
| Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD |
Pros
- IG is amongst the best in terms of its range of instruments, which includes stocks, forex, indices, commodities, and cryptocurrencies, providing ample diversification opportunities
- The IG app offers a superb mobile trading experience with a clean design that helped it secure Runner Up at our Best Trading App award
- As a well-established broker, IG operates under strict regulatory guidelines in multiple jurisdictions, maintaining a high level of trust
Cons
- IG applies an inactivity fee of $12 per month after 2 years, deterring casual investors
- While there is negative balance protection in the UK and EU, there is no account protection or guaranteed stop losses for US clients
- Stock and CFD spreads still trail the cheapest brokers like CMC Markets based on tests
Uphold
"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."
Uphold Quick Facts
| 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 |
| Account Currencies | USD, EUR, GBP |
Pros
- UK users can get the Uphold card with up to 2% cashback in XRP
- Two-step authentication bolsters user security
- Fees are competitive based on tests, with 26 underlying platforms helping to source the best prices
Cons
- There is a 2.49% fee if you want to use debit or credit cards
- The charting analysis features on the platform trail specialist exchanges
- Customer service is slow based on tests, with limited contact options
IQCent
"IQCent will appeal to day traders looking for a straightforward binary options and CFD trading platform with low fees, a range of accounts, and copy trading. Getting started takes less than 1 minute and a $250 deposit. "
IQCent Quick Facts
| Bonus Offer | 20% to 200% Deposit Bonus |
|---|---|
| Coins | BTC, ETH, LTC, ETC, DOGE, MATIC, QNT, SOL, XRP, USDT, XMR, BNB |
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | Variable |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | Online Platform, TradingView |
| Minimum Deposit | $250 |
| Regulator | IFMRRC |
| Account Currencies | USD, EUR |
Pros
- IQCent is one of the few binary options brokers that also offers a copy trading service for hands-off traders
- The broker offers up to 98% payouts on binary options, which is more than alternatives like Pocket Option, only offering up to 92%
- The proprietary terminal offers TradingView-powered charts which deliver dozens of technical indicators and studies
Cons
- The market analysis is very basic with limited technical summaries and insights from analysts
- IQCent charges a punitive $10 monthly inactivity fee if you fail to place at least 1 trade per month
- The broker is not overseen by a respected regulator, though this is common among binary options firms
xChief
"xChief continues to prove popular with investors looking to trade highly leveraged CFDs on the popular MetaTrader platforms. The broker's rebate scheme and investment accounts will particularly appeal to seasoned traders. However, the lack of top-tier regulatory oversight is a major drawback."
xChief Quick Facts
| Bonus Offer | $100 No Deposit Bonus |
|---|---|
| Coins | BTC, BCH, ETH, LTC, XRP |
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | Variable |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | MT4, MT5 |
| Minimum Deposit | $10 |
| Regulator | VFSC |
| Account Currencies | USD, EUR, GBP, JPY, CHF |
Pros
- Traders can access a copy trading solution via the MetaQuotes Signals service
- xChief delivers a high-quality day trading environment via the MT4 and MT5 platforms, with market-leading charts, indicators and tools
- The broker offers several account types to suit different traders, including a Cent account for beginners and pro-level hedging/netting accounts
Cons
- The Classic+ and Cent accounts provide access to fewer instruments than the other account types, at 50+ and 35+, respectively
- The total range of 150+ assets is much lower than most competitors who typically offer hundreds
- The broker trails competitors when it comes to research tools and educational resources
Plexytrade
"Plexytrade is a newcomer in the brokerage scene with attention-grabbing features like 1:2000 leverage, zero spreads on select instruments and fast execution speeds of less than 46 milliseconds. However, the absence of regulation is a significant concern, while the non-existent research and educational tools place it far behind industry frontrunners."
Plexytrade Quick Facts
| Bonus Offer | 120% Cash Welcome Bonus |
|---|---|
| Coins | BTC, ETH, LTC, SOL, XRP |
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | 1.1 |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | MT4, MT5 |
| Minimum Deposit | $50 |
| Regulator | Unregulated |
| Account Currencies | USD, EUR |
Pros
- There are various VPS packages starting from $50 per month, but they become complimentary once specific deposit thresholds are reached.
- Plexytrade offers among the highest leverage we’ve seen, up to 1:2000, catering to advanced traders willing to forego regulatory protections.
- Despite lacking regulation, Plexytrade provides negative balance protection and reinforces safety protocols by holding client funds in segregated accounts.
Cons
- There are no social or copy trading features for inexperienced traders to replicate the trades of more experienced investors, trailing category leaders like eToro.
- Deposits and withdrawals are exclusively facilitated through cryptocurrencies, as Plexytrade does not support bank cards, bank wire transfers, or e-wallets.
- There are no research and educational materials, falling short of alternatives like IG, while access to the economic calendar is restricted to clients with balances of $500.
Firstrade
"We recommend Firstrade for beginner investors looking to trade US stocks with no commissions. There is a wealth of free education plus premium-quality research and trading ideas from Morningstar, Briefing.com, Zacks and Benzinga."
Firstrade Quick Facts
| Bonus Offer | Deposit Bonus Up To $4000 |
|---|---|
| Coins | ALGO, AVAX, BAT, BTC, BCH, ADA, LINK, ATOM, CRO, CRV, MANA, DOGE, ETH, ETC, FTM, LTC, LRC, MATIC, REN, SHIB, SOL, XLM, SUSHI, GRT, UNI, YFI |
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | Variable |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | Own |
| Minimum Deposit | $0 |
| Regulator | SEC, FINRA |
| Account Currencies | USD |
Pros
- Accepts US traders
- Stop limit and trailing stop orders supported
- Premarket trading
Cons
- Some withdrawal fees
- Visa Credit/debit card deposits and withdrawals not accepted
- No forex or futures trading
Binarium
"Binarium is a good binary options broker for traders looking for an experienced brand with low deposit requirements and a welcome bonus."
Binarium Quick Facts
| Coins | BTC |
|---|---|
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | N/A |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | Own |
| Minimum Deposit | $5 |
| Account Currencies | USD, EUR, AUD, RUB |
Pros
- Low minimum deposit requirements
- Demo account with virtual funds
- Flexible payment methods and account currencies, including support for crypto payments
Cons
- Limited information on broker’s website
- No industry established trading terminals
- Lower payouts than other binary options brokers
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.
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 potential 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.
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
- 1982 – A protocol blockchain is first proposed by David Chaum
- 1991 – Stuart Haber and W. Scott Stornetta produce further work on cryptographically secured blockchains with an aim to produce a system where timestamps couldn’t be tampered with
- 1992 – Stornetta, Haber and Dave Bayer incorporated Merkle trees into the system to associate several bits of information with a block, improving its efficiency
- 2008 – The mysterious Satoshi Nakamoto publishes a paper coining the term ‘Bitcoin’ and outlining its peer-to-peer verification and blockchain structures
- 2010 – First purchase using Bitcoin is carried out for two pizzas using 10,000 BTC, worth £38 at the time but now worth more than $246million
- 2011 – BTC achieves parity with the USD and several organizations start accepting donations in BTC
- 2013 – Bitcoin market cap surpasses $1 billion and its value reaches $100/BTC. The ‘Ethereum Project’ paper is published, exploring other possible uses of blockchain
- 2014 – Ethereum crowdfunds over $18 million in Bitcoin, PayPal integrates BTC payments and 200 blockchain firms form R3, a company aimed at expanding the uses of blockchain
- 2015 – Over 100,000 merchants now accept BTC and NASDAQ tests blockchain trading shares in private companies
- 2017 – JP Morgan CEO gives blockchain a vote of confidence and Dubai announces a goal for its government to be 100% blockchain-powered by 2020
- 2018 – Meta, previously Facebook, starts a blockchain group and discusses the inception of a new cryptocurrency, IBM creates a blockchain-based platform with large banks getting involved
- 2019 – Over a million transactions per day are made on the Ethereum network
- 2020 – Stablecoins (cryptocurrencies pegged to the price of a fiat coin like USD) start rising to fame. AI is also introduced into blockchains to speed up business tasks
- 2021 – Cryptocurrencies are being used more and more in everyday practical applications from real estate to fitness and voting
- 2022 & the future – Cryptos are set to become mainstream and a huge part of how society functions. Web 3.0 (a decentralized version of the web), NFTs (non-fungible tokens) and dApps (decentralized applications) are more popular than ever
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.
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 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:
- Finance and Banking – Implementation of blockchain structures with automated clearing protocols would allow transactions to be completed securely even while financial institutions are closed. There would also be less processing and verification to be carried out, significantly reducing fees for consumers.
- Supply Chains – Blockchains could be leveraged by suppliers to ensure the origins and paths of their materials. For example, De Beers has implemented blockchains to ensure the authenticity of diamonds and that fair working conditions were involved in their mining. A similar approach could be taken for the artwork trade; blockchain could verify the authenticity and track the ownerships of high-profile artwork securely and confidentially. This is already being done with digital art like NFTs.
- Voting – Crypto-based chains could be used to reduce voter fraud and improve turnout, something demonstrated by the 2018 midterm elections in West Virginia. Votes would be very difficult to tamper with, fewer people would be needed to conduct the election and counting would be both automatic and accurate.
- Smart Contracts – These are sets of code that can be integrated with a blockchain to verify or facilitate an agreement. A set of conditions are agreed upon by users and the contract is actualized automatically once these are met. This is something widely used in blockchain trading but could spread to many other forms of deals, such as property signing or insurance. The use of smart contracts is already being leveraged when it comes to cryptocurrency lending.
- Healthcare – The security of blockchains could be applied to healthcare services. Writing medical records and updates into a blockchain would provide confidence and proof that they will not be altered. Privacy can be ensured by encoding records with private keys that only certain individuals would have access to.
- Safer Web and Data Storage – The technology can be used to encrypt personal details, passwords and data. Since the information is stored on a decentralized platform, it makes it harder for hackers to access online accounts and tamper with data. Not only that, but data storage in a decentralized environment could give companies greater access without a convoluted process or reliance on another firm’s operations.
- Gambling – Online casinos can provide better transparency to their customers by storing their information on a public ledger. A fair casino that pays its winners will attract bettors.
- International Access – On many decentralized open source platforms anyone can invest. This opens blockchain trading up in India, Kenya, South Africa and many other countries. Not only that, but the technology itself can be used internationally without a specific company’s restrictions. This can help the crypto space evolve at lightning speed.
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.
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.
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.
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.