Decentralized blockchain

Decentralized Blockchains: A Beginner's Guide to Trading

Welcome to the world of cryptocurrency! This guide will explain decentralized blockchains and how they relate to cryptocurrency trading. It's designed for complete beginners, so we'll break down everything into simple terms.

What is a Blockchain?

Imagine a digital ledger – like a record book – that everyone in a group shares. Every transaction that happens is written down in this ledger. This ledger isn't kept in one place; instead, it's copied and distributed across many computers. That's essentially a blockchain!

• Block* refers to a group of transactions that are recorded together.
• Chain* refers to the way these blocks are linked together chronologically and securely using cryptography.

The key thing is, once a block is added to the chain, it’s very difficult to change or delete it. This makes blockchains very secure and transparent. For more information, read our guide on Cryptography in Crypto.

Decentralization: The Core Idea

Most traditional systems, like banks, are *centralized*. This means a single entity (the bank) controls the information and transactions. Decentralization means no single entity has control.

In a decentralized blockchain:

• No one person or organization owns it.
• Transactions are verified by many computers (nodes) in the network.
• This makes it resistant to censorship and single points of failure.

Think of it like this: instead of trusting a bank to keep track of your money, you're trusting a network of thousands of computers.

How Does Decentralization Work?

The process relies on something called *consensus mechanisms*. These are rules that ensure everyone agrees on the validity of transactions. Two common mechanisms are:

• **Proof of Work (PoW):** Used by Bitcoin, requires computers to solve complex puzzles to verify transactions. This requires a lot of energy.
• **Proof of Stake (PoS):** Used by many newer blockchains like Ethereum after the Merge, relies on users "staking" their cryptocurrency to validate transactions. It’s more energy-efficient.

When you make a transaction, it's broadcast to the network. Nodes then verify it using the consensus mechanism. Once verified, it's added to a block and linked to the chain.

Decentralized Exchanges (DEXs) vs. Centralized Exchanges (CEXs)

This is where it gets really important for trading! There are two main types of exchanges where you can buy and sell cryptocurrencies:

• **Centralized Exchanges (CEXs):** Like Register now Binance, Coinbase, or Kraken. These are run by companies that act as intermediaries. You deposit your crypto with them, and they handle the trades.
• **Decentralized Exchanges (DEXs):** Like Uniswap, SushiSwap, or PancakeSwap. These operate on a blockchain and allow you to trade directly with other users *without* an intermediary.

Here's a quick comparison:

Feature	Centralized Exchange (CEX)	Decentralized Exchange (DEX)
Control of Funds	Exchange holds your funds	You control your funds (via wallet)
Trust	Trust the exchange	Trust the code/smart contracts
KYC/AML	Usually required	Often not required
Speed	Generally faster	Can be slower, depending on network congestion

DEXs are more in line with the decentralized ethos of crypto, but they can be more complex to use. You'll need a crypto wallet to connect to a DEX.

Trading on a Decentralized Blockchain

Trading on a decentralized blockchain typically involves using a DEX. Here's a simplified overview:

1. **Set up a Wallet:** You'll need a wallet like MetaMask, Trust Wallet, or Ledger to store your crypto and interact with DEXs. 2. **Connect Your Wallet:** Connect your wallet to the DEX you want to use. 3. **Swap Tokens:** Select the tokens you want to exchange and the amount. The DEX will show you the current exchange rate. 4. **Confirm the Transaction:** Review the transaction details and confirm it in your wallet. 5. **Gas Fees:** Be aware of *gas fees* – these are transaction fees paid to the blockchain network (like Ethereum) to process your trade. Gas fees can fluctuate.

Popular Decentralized Blockchains for Trading

• **Ethereum:** The most popular blockchain for DEXs and DeFi (Decentralized Finance). See Ethereum and DeFi.
• **Binance Smart Chain (BSC):** A faster and cheaper alternative to Ethereum. See Understanding Binance Smart Chain.
• **Solana:** Known for its high speed and low fees.
• **Polygon:** A layer-2 scaling solution for Ethereum, offering lower fees and faster transactions.

Risks of Trading on Decentralized Blockchains

• **Impermanent Loss:** A risk specific to providing liquidity on DEXs (explained in Liquidity Pools).
• **Smart Contract Risk:** DEXs rely on smart contracts (self-executing code). Bugs in these contracts can lead to losses.
• **Volatility:** Cryptocurrency prices are highly volatile.
• **Gas Fees:** Can be high, especially on Ethereum.
• **Slippage:** The difference between the expected price and the actual price you pay.

Advanced Trading Concepts (Links)

• Technical Analysis Basics
• Understanding Trading Volume
• Candlestick Patterns
• Moving Averages
• Relative Strength Index (RSI)
• Fibonacci Retracements
• Scalping Strategies
• Day Trading Techniques
• Swing Trading Explained
• Position Trading Strategies

Resources for Further Learning

• Start trading
• Join BingX
• Open account
• BitMEX
• Decentralized Finance (DeFi)
• Crypto Wallets Explained
• Understanding Market Capitalization
• Reading Order Books

Conclusion

Decentralized blockchains are the foundation of the cryptocurrency revolution. Understanding how they work is crucial for anyone wanting to participate in the crypto space, especially when it comes to trading. Remember to do your own research and be aware of the risks involved.

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BingX Futures	Copy trading	Join BingX - A lot of bonuses for registration on this exchange

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• Register on Binance (Recommended for beginners)
• Try Bybit (For futures trading)

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⚠️ *Disclaimer: Cryptocurrency trading involves risk. Only invest what you can afford to lose.* ⚠️