Summary: As a retail investor or a digital asset venture capitalist, the cryptocurrency market has exploded quite unlike anything in the past few decades of traditional finance. The innovative reconstruction of financial technology, the breakthrough computer science of decentralized networks, and the wild parabolic investment returns of blockchain sets this investment niche apart from all the rest. It takes a hardened mind and a fervently unemotional approach to the daily hbar price fluctuations to hold fast to one’s investment convictions without panicking from the market at a loss. The relentless 24-7 active trading fever of crypto exchanges, the rapid-fire news stories sending crypto prices up or down in minutes by double-digits, and the multitude of multimillion dollar exchange hacks are not for the weak-hearted investor. However, understanding the risks and benefits of cryptocurrency investments and their relationship to any hbar exchange is critical for success. In this article, the hazards of using a cryptocurrency hbar exchange is discussed as well as the near future potential that a decentralized hbar exchange (DEX) could provide.
Every investor that buys or wants to know how to buy when hbar on exchange, should consider several variables in the equation. Every cryptocurrency exchange in the world is less scrutinized and regulated than any other stock market exchange, carries serious custodial risk to users and could be replaced with a fairer decentralized exchange in the near future. The rapidly growing industry of crypto exchanges and their monetization through transactions fees comes with an investor risk by keeping one’s individual cryptocurrency on exchange servers between trades. It is highly recommended to become familiar with the process of hbar exchange policies and risks. In addition, it is advised to understand what custodial risk is and how hbar exchange hacks can affect you, as well as becoming comfortable with stablecoins in the time between trades.
Discussion: The cryptocurrency investment ecosystem is unlike any antecedent market possibly in the history of modern finance. The explosion of fundraising on the back of the ethereum network has taken the market by storm, surprising all forms of traditional finance and even baffling the likes of the U.S. Security Exchange Commision (SEC). To date, the SEC has yet to determine what the legislation of cryptocurrencies should be and have even regressed in policy enforcement of ICO fundraising in light of the unassailable technology that is embodied in bitcoin. It may be factual to state that the bitcoin network outmaneuvered the SEC and US Department of Justice by the anonymous formation of a distributed network that has proven to be indestructible by conventional means. In this financial technological (fintech) revolution other distributed technologies have arisen in the Ethereum network, the EOS blockchain and the Hedera Hashgraph public network, rivaling the breakthrough of bitcoin. The amazing adoption of the bitcoin network, its massively global growth in public crypto exchanges and the fervent fanbase of blockchain have become a force for authorities to reckon with. However, a significant downside to this fintech exuberance has been in the systematic crypto exchange hacks that have depleted investors of billions of dollars in virtual currency in the past few years. Even though the Hashgraph token has not yet traded on hbar exchanges as of this writing, the anticipation of hbars on exchanges is intense and could have a profound effect on the cryptocurrency market based on its breakthrough technology. It is strongly advised that any hbar investor be aware of the major risks and benefits of the best cryptocurrency exchanges to reduce loss and maximize gains.
Hbar Exchanges -General Info: The Hashgraph public network named Hedera, is anticipated to open to unlicensed access in the summer of 2019. The Hedera network should offer cryptocurrency transactions as well as smart contract capabilities and secured file storage. The utility token is the hbar and is expected to be on exchanges by open network access. In essence, one should be able to buy hbar or sell hbar on exchanges as early as the summer of 2019 unless otherwise announced. As an investor, it is important to fully understand the risks and benefits of public exchanges in order to avoid the pitfalls of the custodial risks and to know the average transaction fees and costs that will be incurred throughout the process of trading. A public cryptocurrency exchange, and particularly an hbar exchange, is a presumed regulatory compliant server-client business that allows the sales and purchase of cryptocurrency between users. In every part of the hbar exchange process, a client must use their wallet private key to sign-off a transaction to send their funds to an hbar exchange. A small fee will be incurred and taken from the total funds being transferred from wallet to exchange. The average fee of most cryptocurrency exchanges is near 0.1%, which is much less than any fee in the traditional stock market.
However, in the process of interacting on an hbar exchange, a user must understand the nature of the native transactions, the purpose of their account and the security of the process of using a public exchange. In the original design of crypto exchanges, third parties have been an assumed feature as an agent managing a digital asset trade agreement. In the context of hbar cryptocurrency, this means that an exchange that receives and sends hbar between hbar buyer and hbar seller, must have an important level of security to ensure that transactions do not result in total loss or transactional error. In order to ensure from total loss, some reputable exchanges incur an insurance policy to give confidence to their platform at a minor fee.
Custodial Risk of Hbar Exchanges: The risk in these kinds of transactions between user and exchanges is called ‘custodial risk’. This means that the ‘custodian’ of a user’s hbar tokens has the power to digitally sign off any transaction of the client while on the exchange. What’s more is that the sign-off capability that the hbar exchange has while on the hosting servers is that it is also susceptible to hackers that could also use the digital signature ability to steal hbars. In the history of blockchain, many billions of USD equivalent in digital currency has been taken from crypto exchanges, largely due to the inherent security risks with hosting public servers and insecure custodial practices exploited by international hackers. It has also been proven that some of these hackers are state-sponsored from North Korea and other rogue nations. The most recent crypto hack that occurred with the Canadian exchange, Quadriga CX involved an unknown hacking event that completely depleted the liquidity of the exchanges $190 million USD. Although this is still under investigation, the culprit in the hack may have been the CEO of the exchange himself, a person with a previous criminal history that left with the funds. The fact that this exchange allowed the security risk of a single user, the CEO, to control the private keys of the exchange is inexcusable. When choosing the right hbar exchange, a Hashgraph token owner must consider this risk and fully understand the disclosures of security design of the trading platform. The majority of cryptocurrency trading exchanges use a multi-key signature process, much like with atomic weaponry controls, to ensure that several people are involved with any major financial decision. This distribution of authority has over time ensured that major errors in judgment are obviated and that interdepartmental responsibility is maintained by a dispersion of power. It is highly recommended that a user of an hbar exchange thoroughly investigate the reputation of the crypto trading service they use and that they consider using one that has insurance of underlying assets. Exchanges such as Coinbase, Coinbase Pro, Gemini, Xapo and Circle are a few of the cryptocurrency trading platforms that offer insured trading services. Any exchange using the Federal Deposit Insurance Corporation, or FDIC-certified institutions, an upper limit of insurance per account is enacted that cannot exceed $250,000 USD in lost value. The FDIC is a United States government organization that guarantees deposit insurance to customers in U.S. banks and financial institutions. Using this kind of financial control to insure a cryptocurrency investment is both wise and prudent. REF: https://flagshipcrypto.com/which-cryptocurrency-exchanges-are-insured/
Hbar Exchange -Customer Risks: Once a user has created an account on an hbar exchange, a certain amount of security provisions are strongly recommended. This set of instructions are easy to follow and should never be minimized or avoided out of convenience. The first recommendation is to fully understand the difference between cold and hot wallets. An hbar wallet is a metaphor of a physical wallet and simply represents an account number, such as the wallet ID and the public/private keys that are associated with it. When an user’s wallet is offline and not stored anywhere but in printed form, such as an hbar paper wallet, this is consider either a cold wallet or cold storage. If a thumb drive device is used to store that wallet ID, and public/private keys, this is also called a cold storage device. This is the safest way in which a person can prevent digital asset theft as long as they do not misplace or lose the cold storage paper wallet or thumb drive (i.e/ Ledger Nano S, Trezor, etc). If a user’s hbar wallet is on their mobile phone or saved on an hbar exchange, this is termed a hot wallet or hot storage. Since mobile phone technology has improved to include 2-factor authentication, using biometrics (fingerprint, face ID, etc) this is consider a safer hot storage device. However, the riskiest way to maintain your cryptocurrency is to save it on an hbar exchange. The grand majority of digital asset theft or embezzlement in the last 10 years has been through exchanges and their respective hot wallets.
A few hacks that have robbed crypto owners of their assets has been through less secure hot wallet storage and only rarely from cold storage. In the process of using these hot wallet services, it is also strongly advised to use a complex password with 2 or even 3-factor authentication (multi-factor authentication) for the greatest defense against a crypto hack. REF: https://strongpasswordgenerator.com/ https://en.wikipedia.org/wiki/Multi-factor_authentication
Choosing an Hbar Exchange: The top 5 major issues to consider if you wish to buy hbar on exchanges at open access, include the following: hbar exchange liquidity, exchange security, hbar trading fees, hbar trading pairs and overall customer support. These issues should only be considered after already reviewing exchanges for the reasons listed above. In regards to liquidity, an exchange is only so good as its ability to host a large amount of buyers and sellers, and therefore its trading volume. The metaphor of liquidity simple indicates the amount of hbars on exchange that are willing to be traded (liquid state) versus held in a long term state and not traded (solid state). In this metaphor, an hbar exchange that provides both liquidity and volume, is an exchange that has a lot of buyers and sellers, large amounts of tradeable hbar volume and is a reference point for liquid indices. An index of a tradable asset is a real time fair value assessment of an equity, or cryptocurrency, that uses trade and order book data from the most reputable and highest volume trading exchanges in the world.
Hbar Exchange Liquidity: Bitcoin and Ethereum have recently been represented by the NASDAQ liquid indices based on their time and volume weighted trading averages, in order to determine the fair market value of each in 30 second intervals per day. This serves as the best possible estimate of an underlying digital currency in real time spot price and valuation based on free market principles. REF: http://www.nasdaqtrader.com/TraderNews.aspx?id=fpnews2019-3 When hbar is freely traded on exchanges, this liquid index metric will become increasingly important in order to understand its real world market value apart from its hyped or perceived technological breakthroughs. Finding a highly liquid exchange is important to buy hbar and sell hbar at competitive prices since it will likely represent the most realistic free market hbar price. If one uses a low liquidity hbar exchange, the consequences of price action can be wildly abnormal. For instance, if an exchange has a very low volume of buyers and a large volume of sellers, the hbar price will dramatically favor the sellers. This is what occurs in emerging markets and over-the-counter equities on small exchanges. Because of the nature of bids and asks in a free market, and the buying or selling pressure that occurs on small trading platforms, wild swings in price can occur. Using bitcoin price action as an example, in the fall of 2017, Zimbabwe had experienced a run of hyperinflation that destroyed their native currency. In response, many Zimbabwe citizens began bidding the price of bitcoin to over $30,000 USD on the local African exchanges in order to flee the currency crisis. The wealth of those citizens was destroyed in a short period of time and even validated that fact that cryptocurrency could be used as a safe haven from a bank run or hyperinflationary monetary crisis. However, the local price of bitcoin on those Zimbabwean exchanges did nothing to the overall global price of bitcoin from a volume-weighted average due to the small amount of trades. Understanding this aspect about free markets and liquidity will help one invest wisely when hbar on exchange dates are released. REF:https://btcmanager.com/reserve-bank-of-zimbabwe-bans-the-countrys-only-monetary-hope-bitcoin/
Hbar Exchange Security: As previously described in the section on Hbar Exchange Customer Risks, choosing the hbar exchange that has FDIC-insurance, up to $250K USD, will help the general user be secured. Additionally, discovering the hbar exchange that also enforces strong password creation, multi-factor authentication and insures from cryptocurrency hacks or lost, will serve an hbar investor well. In this limited scenario, the use of a hot wallet, or holding ones hbar on exchange will be safer than even holding in one’s own possession since insurance would cover the loss of theft. Another feature that is unique to some hbar exchanges is the use of a cryptocurrency ‘vault’ or cold storage option. This option is rare, but protects a user on exchange by permitting the trading platform to print and physically store one’s digital assets in a physical safe to prevent a hot wallet hack or theft. At Coinbase, this is only offered currently for bitcoin and has to be specifically placed into the vault, which takes some time to physically move back to the exchange for trading. Hbar exchanges that offer multi-factor authentication and demand strong password formation are safer than others. Additionally, one should be very careful with the use of web-based exchanges, by verifying each and every time that a secure connection and proper web address are being used. For example, when using Binance as a cryptocurrency exchange, they specifically remind the user to check the URL, or web address, to ensure that it matches their site. If the web address appears differently, then it may be that you have been redirected to a ‘spoofing’ website. A secured website will have a padlock icon, use an https:// URL and will exactly match their web address. If there is any irregular letter or symbol in the address, the website may be a fake and should be permanently avoided. In other words, if the URL appeared as “https://www.b!nance.com”, then you are likely being spoofed. REF:https://www.psafe.com/en/blog/the-danger-of-spoofed-websites-learn-to-tell-the-difference/
Hbar Trading Fees: Every digital asset exchange platform has to be compensated for the daily trades that occur and incur a small fee with each transaction. Although it is not customary in the cryptocurrency market to charge for an account or for crypto deposits, any withdrawal from an hbar exchange will cost the user. There are a few that charge for deposits or account setups though. Additionally, any transaction involving US dollars will incur both a deposit and withdrawal fee. The great majority of large exchanges have very small fees due to the large amount of competition in the market. Currently, an average trading fee on the top 10 exchanges is only 0.1% of any transaction. So if a user sells hbar for $100, and Coinbase charges 1.49% per transaction, a user will gain $98.51 USD and Coinbase will receive $1.49 USD. Researching the exchange you use and fully understanding the fee structure will help a user not be surprised at the amounts in their hot wallets on exchanges after transactions. REF: Coinbase:https://support.coinbase.com/customer/en/portal/articles/2109597-coinbase-pricing-fees-disclosures Kraken:https://support.kraken.com/hc/en-us/articles/201893638-Overview-of-trading-fees-on-Kraken Gemini:https://gemini.com/trading-fee-schedule/#overview Binance: https://www.binance.com/en/fee/schedule Hbar Maker Fees: The concept of a ‘market maker’ is related to the way that a user of an exchange places an order to buy or sell a cryptocurrency. If a person sets a fixed price of hbar on exchange, such as $0.25 USD in a limit order, they are considered a ‘market maker’. This process of using a set hbar price instead of just buying or selling at whatever the market price is adds liquidity to an exchange. Because liquidity is a favorable thing for a trading platform, market makers are given a discount with each trade, called a ‘maker fee’. Using limit orders helps provide liquidity, creates price discovery in a more stable manner and affords stability on an exchange. This is the preferred method of hbar trading on exchange and is incentivized with the lowest trading fees. However, the downside of using limit orders is that they may not be fulfilled for hours or days, depending on the market demand. In some cases, if hbar price moves far from the limit order it may never fill and be neglected. A market order on the other hand would be immediately filled but can move price action much faster than
Hbar Taker Fees: The concept of a ‘market taker’ is the opposite of a market maker. A ‘taker’ is a user on an hbar exchange that is willing to buy hbar or sell hbar at whatever price available and places an order without regard to hbar price. For instance, if a digital asset trader is anxious to buy hbar at market price in a short period of time and does not want to wait for a limit order, the trader will place a market order for a certain number of tokens. When the order executes it will pull the top asking hbar price from the order book and match it to the buyer. This is called a ‘market taker’ since they are taking whatever price from the market and reducing liquidity in the process. The practice of market taking is less favored by exchanges, since it can cause rapid price action to the downside or upside. In order to reduce this effect on hbar exchanges, trading fees are higher for market takers compared to market makers. Understanding this important difference will be helpful to avoid the higher fees from market taking unless absolutely necessary as a part of one’s hbar trading strategy.
Hbar Trading Pairs: For any stock, bond or commodity on open exchanges, a currency is usually used to accommodate the trade for interconversion between buyers and sellers. In the United States, stock markets use the US dollar as the trading pair, and on foreign trading platforms the native currency is usually swapped in equity trades. However, in the cryptocurrency ecosystem, the difficulty of handling actual state-issued currencies (fiat currency) like the USD is tantamount to mounds of paperwork and regulatory restrictions. In light of this fact, many international crypto exchanges have resorted to using non-fiat currencies and have used bitcoin as the direct trading pair.
Using a blockchain coin directly tied to the value of another cryptocurrency, such as hbar, poses both risks and benefits of the process. The single greatest benefit is that the US dollar is not involved in any transaction and therefore requires no strict international regulations on an exchange. However, the pegging of bitcoin with hbar does create a correlation of value between the two, such that whenever one is sold, the other is bought at the same time. This causes a direct and opposing value relationship and places either buying or selling pressure on one another during trades. This is not favorable for investors that would solely like to have hbar exposure and do not care to trade in bitcoin. In order to avoid this, an hbar trader would be better to find an exchange that allows US dollar pairing with hbars in order to avoid this problem.
A benefit of using bitcoin or even Ethereum as a trading pair, also has to do with transaction times and trading fees. Any transaction on the bitcoin network or Ethereum incurs a transaction cost. However, since most exchanges do not directly use the blockchain networks with most trades, except when users care to deposit or withdraw from the exchange, this fee is avoided. However, with the rise of decentralized exchanges (DEX), every single trade will incur a cost on the hbar Hashgraph platform as well as the trading pair coin network. If hbar trading pairs include USD coin or a similar stablecoin, a small fee will be applied by both networks, but the price correlation will have no correlation with bitcoin in that case. So, in order to avoid these additional fees or intercurrency correlations, an hbar trader should use exchanges that give the most diversity of options with cryptocurrency trading pairs.
Hbar Exchange – Customer Support: One of the top complaints with the use of centralized exchanges, such as Coinbase and Kraken, is the limited human customer support available. As the majority of the corporate world continues to automate customer service and use artificial intelligent solutions to assist, less human support will be available in the foreseeable future. However, some problems incurred while learning about cryptocurrency trading are just not easily solved by an automated assistant. In cases of locked accounts, password loss or even apparent missending of digital assets to an intended exchange, a human customer support is vital to fixing the problem in a timely way. As digital currency investment continues to gain mainstream attention, the issue of customer support should gradually improve for the end user However, it is highly recommended that a new investor in cryptocurrency assets thoroughly research the customer service policies and user reviews of the exchange they wish to buy or sell hbars. Understanding how to resolve problems on exchanges before they occur will greatly help an hbar trader as they learn how to use their account. Choosing the highest reviewed and best rated hbar exchanges will also be a predictor of success for anyone new to the cryptocurrency ecosystem. REF: https://www.bitpremier.com/best-exchanges
Hbar Decentralized Exchange: The distinction of a centralized versus a decentralized exchange is straightforward. Any digital asset trading platform that uses a central server structure that handles and signs transactions on a platform for an end user is centralized. Centralized exchanges cost more, may be insured in the process, can offer hot and cold storage options and are most likely to be hacked. However, the rise of decentralized exchanges (DEX) have helped diversify the trading experience by allowing users to directly trade with others in a peer-to-peer (p2p) manner in an automated way. In a typical p2p DEX trade, a user will enter an agreement based upon offers seen on a public platform, execute a trade and sign a smart contract that manages the transaction. The counter party involved in the p2p trade will likewise enter the smart contract, agree to the terms and also sing off the transaction in a similar manner. Since the smart contract allows for hbar currency escrowing, or mutual holding of the funds, both parties are capable of trading without knowing each other. This is the most direct method for executing an hbar trade and ensures that no counterparty, or third party risk is involved with the digital asset trade. Since no third party is involved, the custodial risk is no longer an issue, fees will be lower and the transaction is direct from one user’s wallet to another’s. The difficulty with using decentralized exchanges lies in the user interface and technical sophistication of executing smart contracts in their current state. Any error in the process of a DEX trade can result in a complete and irrevocable loss of cryptocurrency. This is a technical barrier to adoption for DEXs, but with time and improved user interface and comfort with digital assets, this may become a large part of the crypto trading ecosystem.
On DEXs, a user is always in control of their funds and therefore has a lower chance of ever being hacked or losing their funds if experienced enough with the trading process. Additionally, DEXs rely on no centralization of services, and should therefore have less downtime or delays. Finally, the process should never have to require a know-your-customer (KYC) process thereby allowing for anonymous trades. With time, hbar decentralized exchanges should begin to appear and allow these excellent benefits to the hbar investor as the hbar market matures.