Algorithmic Trading – A complete guide

What is algorithmic trading?

 

Algorithmic Trading in simple words is to use computer programs to automate the process of trading (buying and selling) financial instruments (stocks, FX pairs, Cryptocurrency, options). These computer programs are coded to trade based on the input that has been defined for them. Inputs could be based on the aimed strategy to take advantage of different market behaviors such as the specific change of a price could trigger the algorithms to make some specific trades, or other factors like volume, time or sophisticated algorithms that trade based on trading indicators. 

Algorithmic trading strategies and backtesting

 

Almost all trading ideas are first converted to a trading strategy and coded into an algorithm that then comes to life and ready for execution. Most algorithmic trading strategies are created on the basis of wide trading knowledge on the financial market combined with quantitative analysis and modeling, later the strategies are given to quants programmers who will convert the strategy to executable algorithms. 

 It is widely common to perform testing on trading strategies before they go live on the market, this practice is known as Backtesting. This is where the algorithm is being tested on historical data to check the algorithm and apply further modifications. 

The main idea behind Backtesting is to evaluate the performance of the algorithmic strategy to see if the strategy is behaving the way it was programmed and check the profitability of it using real market data. 

For more sophisticated algorithms and firms with more advanced tools, algorithmic strategies perform on what so-called paper trading, where the strategy performs virtual trading without committing any commercial value (trading without money). 

The most popular programming languages used to write algorithmic trading strategies are JAVA, Python, and C++. Matlab is also a good tool with a wide range of analytic tools to plot and analyze algorithmic strategies. 

Who uses algorithmic trading?

 

By far the most common fans of performing trades algorithmically are larger financial institutions as well as investment banks alongside Hedge Funds, pension funds, broker-dealer, market makers. 

 

Some well-known algorithmic strategies:

 

On a broad sense most commonly used algorithmic strategies are Momentum strategies, as the names indicate the algorithm start execution based on a given spike or given moment. The algorithm basically detects the moment (e.g spike) and executed by and sell order as to how it has been programmed. 

One another popular strategy is Mean-Reversion algorithmic strategy. This algorithm assumes that prices usually deviate back to its average. 

A more sophisticated type of algorithmic trading is market making strategy, these algorithms are known as liquidity providers. Market Making strategies aim to supply buy and sell orders in order to fill the order book and make a certain instrument in a market more liquid. Market Making strategies are designed to capture the spread between buying and selling price and ultimately decrease the spread. 

Another advanced and complex algorithmic strategy is Arbitrage algorithms. These algorithms are designed to detect mispricing and spread inefficiencies among different markets. Basically, Arbitrage algorithms find the different prices among two different markets and buy or sell orders to take advantage of the price difference. 

Among big investment banks and hedge funds trading with high frequency is also a popular practice. A great deal of all trades executed globally is done with high-frequency trading. The main aim of high-frequency trading is to perform trades based on market behaviors as fast and as scalable as possible. Though, high-frequency trading requires solid and somewhat expensive infrastructure. Firms that would like to perform trading with high frequency need to collocate their servers that run the algorithm near the market they are executing to minimize the latency as much as possible. 

Algorithmic Trading Software

 

Based on the given use case like the size of orders, customizability and experience level there are options available for algorithmic trading software. Larger firms like hedge funds, investment banks or proprietary trading firms use rather more tailored custom-built and advanced tools. When it comes to more individual traders or quants with less capital to trade they will rather use more readymade algorithmic strategies, some on the cloud, some stand-alone. 

The most common features of algorithmic trading software are ways to analyze profit/loss of an algorithm on a live market data. There are different protocols available to get, process and send orders from software to market, such as TCP/IP, webhooks, FIX and etc. One important factor for this data processing from receiving to processing and pushing order is measured with latency. Latency is the time-delay introduced to the movement of data from points to points. Considering the changes in price in the market the lower obtained latency the better software reacts to market events hence a faster reaction. 

Backtesting is another useful feature that should be included in algorithmic trading software, usually, this software allows traders to apply their algorithmic trading strategies and test it with historical data to evaluate the profitability of their strategies. 

Pros and cons of algorithmic trading

 

Just like any other choice, there are pros and cons to using algorithmic trading strategies and automating the process of trading. Let’s get down with the pros. Based on many expert opinions in investments human emotions could be toxic and faulty when it comes to trading, one perhaps most acknowledged pros of Algorithmic Trading is taking away human emotions and errors out of trading.

Another huge advantage of algorithmic trading is the increase of speed in action of execution to the market as well as possibilities to test strategies using Backtesting and paper-trading in a simulated manner. Testing algorithmic strategies determine the viability of the idea behind trading strategies.

Another vastly discussed advantage of algorithmic trading is risk diversification. Algorithmic trading allows traders to diversify themselves across man accounts, strategies or market at any given time. The act of diversification will spread the risk of different market instruments and hedge them against their losing positions. 

Making trading automatically using algorithmic trading decreases the operational costs of performing large volumes of trade in a short period of time. 

There are also a few other advantages such as automation in the allocation of assets, keeping a consistent discipline in trading and faster execution.

Now let’s get on with some of the cons of using algorithmic trading. Perhaps one very discussed issue with using algorithmic trading is constant monitoring of the strategies which to some traders could be a bit stressful since the human control in algorithmic trading is much less. Though it is widely common to have lost control features included in strategies and algorithmic trading software (automated and manual ones). 

For most individual traders having enough resources could be another disadvantage of algorithmic trading. The algorithmic trading itself reduces the cost of executing large orders but it could come expensive as it requires initial infrastructure such as the software cost or the server cost.

 

Pros Cons
Emotionless trading Needs for monitoring 
Less error Technological infrastructure 
Higher trading speed Programming skills required for updating strategies
Backtesting and paper trading
Risk diversification 
Lower operational costs 
Consistent trading discipline 

 

Algorithmic trading in Cryptocurrency

 

Unlike more mature instruments like stocks, options or CFDs, the Cryptocurrency market is quite volatile. Typically higher volatility leads to more frequent jumps in the price of instruments, higher and lower. Hence, some professional traders find this amusing and opportunistic to make the most of the profits.  

Generally, for Cryptocurrency traders, there are plenty of cloud-based solutions using trading bots, though for very professional and institutional traders this may not flexible enough. There are few algorithmic trading platforms for cryptocurrencies which can utilize the need for more sophisticated and institutional traders. 

 

Algorithmic Trading Trends:

 

On average 80% of the daily traders across the US are done by algorithmic trading and machines. Though the volume of the algorithmic trading can change based on the volatility in the market. According to J.P. Morgan, fundamental discretionary traders are accounted for only 10% of trading volume in stocks. This is the traditional way of checking the companies business performance and their outlook before deciding whether to buy or sell a position. 

 

The growth in the number of algorithmic trading since last year comes close to 47% and there is 41% growth in the number of users executing their trades algorithmically. Mobile also plays an important role in the tools provided there is around 54% growth in trading FX algorithmically using mobile devices. 

New technologies, Artificial Intelligence, Machine Learning, Blockchain:

 

According to another J.P. Morgan research, Artificial Intelligence and Machine learning are predicted to be the most influential for shaping the future of trading. Based on this analysis Artificial Intelligence and Machine Learning will influence the future of trading by 57% and 61% in the next three years.  

Interestingly this report states that Natural Language Processing alone will count to 5% of the change in the next 12 months and up to 9% in the next three years. 

J.P. Morgan report shows that around 68% of the traders believe that Artificial Intelligence and Machine Learning provide deep data analytics. Around 62% believe that Artificial Intelligence and Machine Learning optimize trade execution and 49% of traders believe that Artificial Intelligence and Machine Learning represents an opportunity to hone their trading decisions. 

The same report indicates that Blockchain within the next 12 months will influence the trading up to 9% and 19% within the next three years. Within the same report, the usage of mobile trading applications is to influence the trading market up to 28% within the next 12 months and 11% within the next 3 years. 

Independent initiatives that analyze crypto exchanges liquidity and quality

Volume is flawed metric of crypto exchanges liquidity. Because of wash trading practices of many crypto exchanges as well as token issuers, using trading volume as a basis of comparison is misleading. Many exchanges have problems attracting professional market makers and are trying to make shortcuts on the way to attract retail investors. Moreover attracting professional investors requires investments in crypto exchanges system development with stable and performant APIs so they could connect their algorithmic trading systems.]

There are more and more independent initiatives that are taking a closer look at what constitutes a high quality crypto exchange. Three major ones are Blockchain Transparency Institute, CryptoCompare Benchmark and Cointelligence Report. I also take a quick look at the Bitwise report for SEC from March 2019.

 

Read more about our tool for measuring crypto exchange quality – Liquidity Analytics Dashboard

 

Blockchain Transparency Institute

BTI concentrates on analyzing crypto exchanges data feeds to spot wash trading mechanisms and provide the real volume metric which is cleaned out of suspicious activities.

BTI identified 17 of the CoinMarketCap Top 25 crypto exchanges to be over 99% wash traded. This one number alone shows the magnitude of the problem, as well as how volume is a false measure.

According to BTI Report crypto exchanges which are faking their volumes use a variety of different tactics to try and swindle investors. These tactics include buying twitter followers and likes, filling up fake order books, mirror wash trading the largest exchanges with real volume, and trying to disguise their wash trading using various bot settings to not affect price. On many of these exchanges trading high volumes closing the spread would make the volume plummet as the trading bots had no room to wash trade with themselves. Welcome to the wild wild west of no regulation and surveillance.

BTI finds that “all crypto exchanges combined are currently reporting around $50 Billion in daily volume on CMC. After removing all the wash traded volume via our algorithms the accurate number is around $4-5 Billion. About 88-92% of daily trading volume is fabricated depending on the day. Bitcoin’s daily trading volume is about 92% fabricated, which is in line with the space as a whole when comparing our findings to top data sites reporting wash traded volumes.” 

And further “On our list of the top 40 largest exchanges with actual volume, Bitcoin’s volume is about 65% fabricated. Almost all of this fabricated volume comes from OKEx, Bibox, HitBTC, and Huobi. Of the top 25 tokens by market cap, Tron and Ethereum Classic are the highest wash traded tokens on our list at 85% fake volume each and coming in at #24 and #25 of the most wash traded tokens.”

Top 10 cryptocurrency exchanges according to real (not wash traded) volume by BTI

  1. Binance 
  2. Kucoin
  3. Liquid
  4. Huobi
  5. Coinbase
  6. OKEx
  7. Bitfinex
  8. Upbit
  9. Kraken
  10. Bitstamp

CryptoCompare

CryptoCompare’s Exchange Ranking methodology utilises a combination of 34 qualitative and quantitative metrics to assign a grade to over 100 active crypto exchanges. Metrics were categorised into several buckets ensuring that no one metric overly influences the overall exchange ranking. Each crypto exchange grade is derived from a broad due diligence check using qualitative data, followed by a market quality analysis that uses a combination of order book and transactional data.

Due diligence check comprises of 6 main categories that attempt to qualitatively rate each exchange on the basis of:

  • Geography
  • Legal and regulatory metrics
  • Calibre of investment
  • Team and company quality
  • Quality of data provision
  • Trade surveillance

Although at Empirica we believe in numbers, I like the qualitative approach, as it’s also possible to prove a correlation of metric like number of employees and business size of the exchange, therefore proving this way it’s quality. 

Another important factor is Market Quality. Crypto compare measures the market quality of each exchange using a combination of 5 metrics (derived from trade and order book data) that aim to measure the:

  • Cost to trade, 
  • Liquidity, 
  • Market stability, 
  • Behaviour towards sentiment
  • “Natural” trading behaviour

Exchanges were rated based on a combination of 9 of the most liquid BTC and ETH markets.

It’s worth taking a closer look how CryptoCompare report approaches Spread and Liquidity metrics:

“Generally, those exchanges which offer incentives to provide liquidity through either low or negative maker fees will achieve the tightest spreads. Due to the spread being calculated using the best bid and offer, it is misleading to use it as a sole gauge of liquidity and therefore as the market cost to trade; it must be used in conjunction with a depth

measurement to find the likely transaction price for any given size of transaction.”

 

Good point. And liquidity:

“Market depth is the total volume of orders in the order book. It provides an idea of how much it is possible to trade on crypto exchange, and how much the price is likely to move if large amounts are traded. An exchange with greater average depth is likely to be more stable (i.e flash crashes are much less likely) and allows trading of greater amounts at better prices.

We consider the depth up to 1% either side of the mid price. 

Depth = E(depthUp+depthDown)/2

Where depthUp is the total volume that would be required to move the price by 1% upwards from the mid price, and

depthDown is the total volume that would be required to move the price by 1% downwards from the mid price.”

 

Top 10 crypto exchanges according CryptoCompare quality benchmark:

  1. Coinbase 
  2. Poloniex 
  3. Bitstamp 
  4. bitFlyer 
  5. Liquid
  6.  itBit 
  7. Kraken 
  8. Binance 
  9. Gemini 
  10. Bithumb 

 

Cointelligence Rating System

Cointelligence is the most qualitative rating of crypto exchanges from the above. The methodology of the team was to manaully open accounts on all analyzed crypto exchanges and check from the user perspective the core aspects of beeing an exchange customer. The aspects cover:

Usability – covers KYC process, the quality of exchange website, extent of features and how easy it is to get a human answer from support staff. 

Performance – functionalities and historical robustness of exchange matching engine, fees height, trading instruments like futures contracts and margin trading.

Team – analysis of the available information about management team behind the crypto exchange, especially business and technical experience of C-level staff, including person responsible for exchange’s security

Risk – information on past hacks, insurance status, account security layers but also regulatory status of cryptocurrency exchange. Based on the geographical location of the exchange headquarters and registration any potential run-ins with the local law or any sign of authorities involvement.

 

This way Contelligence analyzed 85 crypto exchanges, but only 15 is rated with good quality mark, lead by Liquid and Gemini. 

Top 10 cryptocurrency exchanges by Cointelligence by qualitative criteria 

  1. Liquid (Quoine)
  2. Gemini
  3. Binance
  4. Bitstamp
  5. Gibraltar Blockchain Exchange
  6. OKEx
  7. Bittrex
  8. itBit
  9. Kraken
  10. ABCC

Bitwise report for SEC

Bitwise analysis is based on detecting wash trading patterns in public marked data published by crypto exchanges. Out of 81 exchanges they have analyzed in March 2019 only 10 were identified as be free of wash trading practices. These exchanges are:

  1. Binance
  2. Bitfinex
  3. Kraken
  4. Bitstamp
  5. Coinbase
  6. bitFlyer
  7. Gemini
  8. itBit
  9. Bitrex
  10. Poloniex

Bitwise identified that only 4,5% (about $275M daily) of officially reported volume (eg by the public sources like coinmarketcap) is the actual volume. The rest is wash traded.

The Bitcoin market is more orderly and efficient than is commonly understood. The 10 exchanges trade as a uniform, highly connected market. They form a singular price. Average deviations from the aggregate price for the ten exchanges is well within the expected arbitrage band when you account for exchange-level fees (~30 basis points), volatility and hedging costs. Arbitrage is operating well. Sustained deviations (defined as deviations >1% that last more than 100 seconds) appear as single white lines on the graph below. The graph demonstrates that the ten exchanges trade at a single unified price.

So although the message about the amount of wash traded volume is alarming, the report shows that the real crypto market is quite concentrated, ordered, efficient and well performing. The rest is just noise.

 

 

Read more about our tool for measuring crypto exchange quality – Liquidity Analytics Dashboard

 

 

Blockchain meetup sponsored by Empirica, Wroclaw

Monday June 19th a beautiful sunny day in IT-friendly Wroclaw, tech start-ups and cryptocurrency enthusiast gather together at IT corner Tech meetup, sponsored by Empirica.

The event was planned to focus on key areas of current trends in Blockchain and Ethereum.

The event began with Mr Wojciech Rokosz, Ardeo CEO presentation. The session was dedicated to introduction to the economics of token. Explaining the new changes and updates we are and we will face in our economy with this huge entrance of virtual currencies.

The event later carried on with Mr Marek Kotewicz on introduction to Blockchain, Bitcoin and Ethereum. The session was summarizing the differences between Bitcoin and Ethereum.

The third and last part of the event was conducted with Mr Tomek Drwga, Blockchain meetup organizer,  diving deeper into smart contracts and programming ( introduction to Solidity) for Ethereum.

The event ended with open discussion between the audience and speakers, and visitors were served with beverages.

Empirica is a Wrocław-based company that supports many local IT initiatives. Empirica is offering solutions such as an Algo Trading Software implemented by major institutional investors in Poland, market makers software, wealth management system framework, cryptocurrency trading bots and trading software development services for companies from capital and cryptocurrency markets.

 

Bitcoin and Arbitrage: hand in hand

Everything one needs to know about DASH

What Is Dash? Dash is a linguistic mix of the words “digital” and “cash.” It is an instant-transaction, privacy-centric, digital money dependent on the Bitcoin computer software. It launched since XCoin, later shifted to Darkcoin, and eventually settled Dash. A significant Dash cryptocurrency advantage is that Dash transactions can remain anonymous (like money transactions). Dash […]

Do traditional exchanges see Blockchain as an opportunity?

Distributed ledgers technology also known as Blockchain, offers a new way to data management and sharing that is being used to propose solving many inefficiencies affecting the financial industry. Technology experts, Fintech start-ups, banks and market infrastructure providers are working on underlying technologies and its potential use in the industry. However the journey of such transformation may take long. In this post we will focus on the benefits and architectural changes Blockchain could bring to capital market, and some example from such appliances across exchanges around the world.

The potential benefits of Blockchain technologies could cover different process within different stages in capital markets. In order to expose why capital markets would pursue to Blockchain technologies its worth taking a look at the benefits across pre-trade, trade, post-trade and security servicing.

Pre-trade:

Blockchain technology will establish more transparency on verification of holdings. Additionally it reduces the credit exposure and making Know-your-customer way simpler.

Trade:

For this stage, Blockchain technologies provide a more secure, real-time transaction matching and a prompt irrevocable settlement. Blockchain could also help automating the reporting and more transparent supervision for market authorities, we could add higher standards for anti-money laundering.

Post-trade:

In this regard it eliminates the demand for central clearing for real time cash transactions, reducing collateral requirements. Blockchain technology enables quicker novation and effective post-trade processing.

Securities and custody servicing:

Distributed asset ledgers with flat accounting structures could remove some of the role which custodians and sub-custodians play today. Custodians’ function might change to that of a ‘keeper of the keys’, managing holdings data and ensuring automatic securities servicing operations are done correctly. To that end we could also add advantages such as common reference data, simplification of fun servicing, accounting, allocation and administration.

Nasdaq has become the forefront of blockchain revolution, they have and are currently involved with many blockchain jobs. To name these endeavors, it started with Nasdaq Linq blockchain ledger technology. Linq is the primary platform in a recognized financial services firm to show how asset trading could be managed digitally through the usage of blockchain-based platforms. Nasdaq has continued more to blockchain, showing that, it is working to develop a trial utilizing the Nasdaq OMX Tallinn Stock Exchange in Estonia which will discover blockchain technology being used as a way to reduce obstacles preventing investors by engaging in shareholder voting. The intention is to boost efficiency in the processing of purchases and sales of fund units and also to make a device ledger — a place which currently is primarily characterized by manual patterns, longterm cycles and newspaper driven processes.

Read more about Nasdaq activities in Blockchain here.

London Stock Exchange developed to simplify the tracking and management of shareholding information, the new system plans to make a distributed shared registry comprising a list of all shareholder trades, helping to open up new opportunities for investing and trading.

Read more about LSE and IBM activities in Blockchain here.

Australian Securities Exchange (ASX), is all about the replacement of this system that underpins post-trade procedures of Australia’s money equity marketplace, known as CHESS (the Clearing House Electronic Subregister System). ASX is working on a prototype of a post-trade platform for the cash equity market using Blockchain. This initial phase of work was completed in mid-2016. In December 2017 ASX completed its own analysis and assessment of the technology which included:

  • Comprehensive functional testing of the critical clearing and settlement functions currently performed by CHESS
  • Comprehensive non-functional testing (scalability, security and performance requirements) for a replacement system when deployed in a permissioned private network
  • A broad industry engagement process to capture users input on the desired features and functions of a replacement solution
  • Third party security reviews of the Digital Asset DLT based system.

Read more about ASX procedure here.

The Korea Exchange (KRX), South Korea’s sole securities market operator, has established a new service where equity shares of startup businesses may be traded on the open marketplace. The Coinstack platform will offer record and authentication options for your KSM by checking against client references which have already been provided to the platform by Korean banks such as JB Bank, KISA, Lottecard, Paygate in addition to others.

Deutsche Börse Group has developed a theory for riskless transfer of commercial bank funding through an infrastructure based on distributed ledger technology. By combining blockchain technology using its proven post-trade infrastructure, Deutsche Börse aims to achieve efficiencies while at exactly the same time investigating possible new business opportunities enabled by this technology.

Read more about Deutsche Börse Group activities in Blockchain here.

Japan Exchange Group: IBM had teamed up with Japan Exchange Group, which works the Tokyo market, to begin experimenting with blockchain technology for clearing and other operations. IBM says it expect the technology will reduce the cost, complexity and speed of settlement and trading procedures.

About us

Empirica is a Wrocław-based company that supports many local IT initiatives. Empirica is offering solutions such as Automated Cryptocurrency Trading Software implemented by major institutional investors in Poland, market making software, portfolio management system framework, crypto trading bots and trading software development for companies from capital and cryptocurrency markets.

The evolution in ERC20 and the era of ERC223

The ever evolving Ethereum Blockchain brought to Cryptocurrency and ICO investors a new gift, the ERC223 a new standard for tokens created on Ethereum. Up until now the newly created tokens on Ethereum public Blockchain should have followed the ERC20 convention. This by all means was a huge success and relief for both token owners and the investors for that token. ERC20 makes sure the behavior of the token on Ethereum is standard with a defined common list of rules. The ERC223 is an improvement of ERC20 protocol, and is backwards compatible to ERC20, meaning every wallet and software that supports ERC20 does work with ERC223. So to get a better picture from this improvement, maybe its better to breakdown how these tokens are created and lets start with the ERC20 tokens.

ERC20 and how does such tokens are created? 

ERC20 protocol allows token owners and developers to create a token that complies with common, essential behavioral rules. The standard is now very popular, specially among ICO investors and their communities. Thanks to ERC20 investors can be certain that the following statement can be true if the token is ERC20:

  • Technically tokens can be accepted by almost all exchanges
  • Tokens are transferable, and all Ether wallets will automatically store the newly created tokens
  • Transactions using that token is done smoothly

A token is compliance with ERC20 if the developer of the token contract implement the following interfaces:

  • The token name with function name, it returns the name of the token.
  • The token symbol with function symbol, it returns the symbol that token will use.
  • The token decimal places, function that returns the unit8 decimals the token uses.
  • How much the owner want to start off with: function balanceOf, it returns the account balance.
  • The amount of tokens in circulation: function totalSupply, it returns the total token supply.
  • The transfer value: function transfer (address _to, unit256 _value), this function is in charge of the transfer events. the function should revert a transaction if the sending account _from does not have sufficient balance.
  • The transfer from: function transferFrom, this function is used for withdrawal workflow, it allows contracts on the Blockchain to transfer tokens on token holder behalf.
  • The crediting permission, function allowance (address _owner, address _spender), it returns the amount which the buyer (_spender) is allowed to withdraw from the owner (_owner).
  • The events: with function transfer (address indexed _from, address indexed _to, unit256 _value) its triggered when a token has been successfully transferred and function approval (address indexed _owner, address indexed _spender, unit 256 _value) this must trigger on any successful call.

 

What did ERC223 has added to ERC20 and what are the advantages?

Initially the idea of ERC223 came to play when the amount of lost tokens on Ethereum Blockchain went sky rocketing, this was due to lack of possibility to handle incoming transactions. Ethereum Blockchain is a leading network for number of lost tokens. Top 8 ERC20 contracts with losses will come up to approximately 3 million USD worth of tokens. how does this happen? once an ERC20 token is sent to a contract that is not designed to work with that ERC20 tokens, the contract will not reject the tokens because the contract does not recognize an incoming transaction. Consequently the token will get stuck the that contract balance. ERC223 will allow users to only send their tokens to either wallet or contracts with the same transfer function, this way it prevents the loosing of the token. ERC223 introduces the function transfer (address _to, unit _value, bytes _data). This function transfers tokens with invoking the function tokenFallback in _to, only if _to is a contract. This will allow the smart contract to actively handle sent tokens. Whereas when an ERC20 token is transferred, the token contract is not notifying the receiver that the transfer has occurred, to that end the address receiver has no possibility to handle the incoming transaction and therefore no way to reject not supported tokens.

A seamless token transfer is another advantage of ERC223 over ERC20. An ERC20 transaction between a regular (not a contract) and contract are two different transactions. There two functions need to be triggered, first the approve function on the token contract and latter the transferForm on the other contract (the receiver). ERC223 has addressed this more efficiently by allowing to use the same transfer function. ERC223 could be sent by only calling the transfer function on the token contract with no if the receiver is a regular address of a wallet or a contract. Due to this shortcut another advantage that ERC223 has is the gas cost, ERC233 consumes almost half as much as an ERC token.

So as discussed above ERC223 advantages over ERC20 comes down to the following points:

  • provides a possibility to prevent accidentally losing tokens
  • Allows users to transfer tokens anywhere (owned address or contract) using one function
  • allows contract developers to manage incoming transactions, contract developers could implement contract in a way that only works with some specific tokens incoming and handling them in a specific way which could also each tokens could be handled in a specific way.
  • ERC223 consumes almost half gas as ERC20

Currently is not possible to upgrade existing ERC20 token contract to ERC223, but if you are planning to create your own maybe its a good idea to go with ERC223.

About us

Empirica is a Wrocław-based company that supports many local IT initiatives. Empirica is offering solutions such as Automated Trading Software implemented by major institutional investors in Poland, market making bot, wealth management software framework, crypto trading bots and trading software development for companies from capital and cryptocurrency markets.

 

 

Bitcoin

What’s BITCOIN?

Bitcoin is known as virtual money, but a much better term is cryptocurrency. Unlike actual cash, there are not any coins or paper money formally produced. No government entity determines how much and when to discharge it in the world. Bitcoins are made digitally by individuals as they solve complicated math problems with their own computers. In most senses, it’s truly decentralized.

Among the intriguing things about the virtual money is that all trades are saved and printed publicly. The money is traded by means of a huge peer-to-peer network which encompasses the whole globe. When there are not a great deal of rules concerning Bitcoin, you will find a few, and this also assists with creating bitcoins a real currency that functions just like “normal money”

 

BITCOIN EXCLUSIVES

Next, we are going to have a look at a few of the ways which Bitcoin is different than conventional currencies. It is these differences which make Bitcoin this kind of potent potential. Nobody individual, government or corporation controls the Bitcoin network. This is not the sole difference, but so let us peek at some things which are exclusive to Bitcoin.

Bitcoin vs. Traditional currencies

  1. Bitcoin is decentralized

As it functions as a peer-to-peer system, all trades and confirmation of trades are done by several folks in the network.

  1. Bitcoin is virtual currency

Another thing which sets Bitcoin aside from conventional money is the fact that it is virtual. Rather, all bitcoins exist within virtual space. As a consequence, that you can not visit an ATM and withdraw bodily cash. Conventional currency which may be published when governments choose to publish more. To distribute the production of bitcoins being introduced into the planet, the amount that are made by “mining” will half each four decades. It follows individuals will continue to have the ability to make them before the year 2140. At that moment, no fresh bitcoins will be generated and the present design will enjoy the advantages of lack – i.e. getting more precious.

So as to save the block string of trades in consecutive Purchase, Bitcoin trades aren’t reversible. Furthermore, a Bitcoin trade can take ten minutes or longer to confirm. That is different compared to other currencies that normally procedure trades in seconds and allow for turning a fee to a credit or debit card.

  1. Bitcoin isn’t ubiquitous

In many areas, you’re going to have the ability to exchange your countries money for invoices of the country you are visiting. And regardless of where you go on the planet, you are likely to have the ability to exchange your money for services and goods. Bitcoin has not yet been adopted by the entire world at large. This will change in years to come as more companies start to take Bitcoin for repayment, but for now it is a gap that matters to lots of individuals.

 

Good and Poor of Bitcoin

As it is decentralized and normally has reduced prices for trades, a lot of men and women have started to take note and become enthused about this and other cryptocurrencies.

Another thing to notice is that a few People today worry about that controls the Bitcoin network. The fact is that because it utilizes peer reviewed technology, no 1 individual or business can have the Bitcoin network. This might seem frightening to some while it is exciting and revolutionary to others.

The demand for all variants of Bitcoin applications to be harmonious and be able success, most people that are involved realize that this and also have worked together to enhance the Bitcoin applications and community substantially in just a couple of short decades.

And that just might be what is equipped to assist Bitcoin grow much faster across the world. This may prove to be the fiscal system which brings the world together.

How Can BITCOIN WORK?

The basics you should know

Let us start by taking a look at the different items you want to get a cryptocurrency working. We are going to begin with the fundamentals and then move to more details about what you will have to begin.

The transaction – the very first thing that you want to think about using a digital currency is the trade – that the true exchange of value from 1 individual to another. Though this might seem easy, in several ways it can be simple to devise a trade to attempt and cheat the machine. With physical money, transactions are regulated by banking associations that affirm they are not forged and therefore are unique.

A serial number – to prevent people seeking to forge trades or reuse them with virtual money, you require a means to connect a special serial number to every individual and each trade too. Bitcoin does so by utilizing a personal and public encrypted secret. These hashes are utilized to create certain transactions are not replicated in the system and there is no way to cheat the system. When Bitcoin was set up, it had been understood that banks might be taken from the image entirely if a peer reviewed network was produced to confirm the transactions between two things. This decentralization of fiscal transactions is among the largest reasons so many clever men and women are becoming excited about Bitcoin.

Bitcoin Mining – The following bit is necessary to create Bitcoin work. When it’s too simple for trades to be confirmed, folks may program robots to flood the system with verifications, which makes it tricky to really check the transaction. To fight this, the notion is to make it computationally tough to check the transaction. This assists battle against the bad guys while at precisely the exact same time offering a means to reward individuals who provide up computing ability to check the transaction. The computational mystery needs to be tough enough to make it impossible to hack on simple enough to still enable individuals to resolve in a reasonable period of time.

Create a private and public key that’s unique for you. This can be used to move bitcoins for you also as enable you to move bitcoins to other folks in the network.

Speech if you would like to get BTC from somebody else on the community. At precisely the exact same time, you may use a different Bitcoin address created so as to cover services or goods.

The following step is a trade being created when the real swapping of BTC happens between a seller and buyer. This can be added to the block series where others are going to check the trade (by solving the mathematics problem) and publish particulars of this trade publicly.

 

The Way to OBTAIN BITCOIN

Recognizing how Bitcoin functions may be intriguing to some, but there are actually a couple of ways that you can lawfully get bitcoins – regardless of where you reside on the planet. Provided that you have an online connection as well as the Bitcoin software installed, then you are likely to have the ability to start using this digital money. The best news is that it is really rather simple to start to develop your Bitcoin wallet should you’ve got a little spare time.

First, It Ought to Be noted that it is really tough to buy bitcoins It is quite simple to issue a chargeback on charge card. If a person purchases BTC using a charge card then reverses the fee, it is really hard to prove to the credit card companies the trade actually occurred.

It is important to keep in mind that the worth of a single BTC is quite volatile at this time, which means you probably don’t need to spend everything you’ve got in this digital money. At precisely the exact same time, the prevalence of Bitcoin is increasing across the world and a number of people happen to be getting wealthy by building up big heaps of bitcoins virtually through method and means we will explain below.

Regardless of which kind of computer you are running, there is likely to become an installer app to get you up and running in almost no time in any way. Many men and women find it takes about 5 to 10 minutes to acquire a Bitcoin customer installed and attached to the community.

Make certain that you take your time to discover a client you are familiar with using. Most are extremely similar, but a few have a few additional bells and whistles which may make it much easier for you to begin.

Even though you might have the ability to discover a service which delivers a high degree of safety, it is not exactly the exact same level you would have if you set up the applications in your computer in which you have full control. Coinbase is among the very popular online Bitcoin wallets today.

Whichever you decide on, once it is set up the next step is simple. You will Create a private and public key. This is the Bitcoin speech which will enable folks to send BTC to your accounts. As soon as you’ve got your own Bitcoin wallet installation, you have a couple of distinct choices about the best way best to accrue BTC on your wallet.

Bitcoin Exchanges

Bitcoin exchanges were not about when Bitcoin first came out, but they are now an essential component of the way the entire Bitcoin ecosystem functions. There are exchanges which have Bitcoin among other digital currencies on the internet in addition to marketplaces that deal exclusively by BTC trades.

It is intriguing to note that some of those marketplaces will maintain a balance For you – out of your Bitcoin wallet – to be able to make it simpler to conduct transactions. Deciding on the ideal Bitcoin exchange is important when you would like to remain safe rather than risk losing your BTC equilibrium because of a scam or technical issues.

Security — the most essential aspect that you wish to consider is safety. In case a Bitcoin exchange is fresh to the world wide web and is lacking contact info, this is a great indication that they probably don’t care a lot about the safety of your private info. Fortunately, if you spend any quantity of time around the numerous Bitcoin forums and communities on the internet, you will see which exchanges suffer from issues and then exchanges are advised. As an instance, some Bitcoin exchanges may not let you withdraw money into a US bank accounts. It is a fantastic idea to ensure whatever market you are considering using has a means that you convert your BTC to the regional money safely and easily. In 2013, a few people started complaining about the amount of time that it required MtGox to move funds into the US, therefore it is a fantastic idea to once more hit on the forums and attempt to gauge public opinion about any trade you are considering using. Then let us have a glance at a few of the main Bitcoin Exchanges currently working. New ones are emerging all of the time, but it is usually a safer bet operating together with a single which has been in existence for some time and has managed to accumulate a history of being reliable and fair.

CoinBase — This is among the hottest Bitcoin exchanges right now. They give the capability to move money to US bank account. That being said, if you reside elsewhere in the world, you might not be pleased about being unable to move funds to the regional bank accounts.

MtGox — At once, MtGox was accountable for the vast majority of all Bitcoin trades on the Planet. This has changed lately as they have run into some legal issues in various nations around the world, but they are still an extremely popular Bitcoin exchange which a lot of men and women utilize on a daily basis.

BTC-E — This site is located in an unknown town in Bulgaria, and that means you may be careful about maintaining any BTC here. The costs per BTC are usually a whole lot lower, but that is only because it requires a ridiculous quantity of time to validate that a trade. Nonetheless, it’s a choice you may look at based on where you live now.

Bitstamp — This market is comparable to CoinBase at a great deal of ways. The most important distinction is they do regularly work with individuals in countries aside from the USA, which makes it effortless to move BTC to overseas currencies. If you’re searching for a really international Bitcoin exchange, this is a great place to get started. We mean you could exchange different cryptocurrencies too. If your digital money investments go beyond Bitcoin, then you will want to check out Cryptsy.

BTer — With slow trade speeds and limitations on how big trades, this is not really recommended, however we believed they deserved a place on the list only because they do serve the demands of some men and women who utilize Bitcoin.

BTC-China — Some of the quickest growing Bitcoin exchanges — based on Wired magazine — is BTC-China, that has ramped up their attempts lately. By some reports, they have overtaken MtGox since the location where many Bitcoin trades occur on daily basis.

About us

Empirica is a Wrocław-based company that supports many local IT initiatives. Empirica is offering solutions such as Crypto Algo Trading Software implemented by major institutional investors in Poland, market making strategy, wealth management software framework, crypto trading bots and trading software development for companies from capital and cryptocurrency markets.

Ethereum

WHAT IS ETHEREUM?

Dapps are computer applications that eliminate the need for intermediaries in any present centralized service by enabling anybody to rely upon an anonymous counterpart to execute the most varied kinds of agreements and deals at a 100% electronic method.

In Ethereum, programmers may also write business logic and arrangements in the kind of smart contracts, which can be implemented automatically when their requirements are satisfied by both parties and educated to the community. These contracts may save information, send and receive trades and also interact with different contracts, irrespective of any controller.

At first, the expression “smart contract” was used to describe using computer systems (or other automatic methods) which aimed to influence particular agreements.

As an illustration of a clever mechanical arrangement, we could mention a machine which sells soft drinks or snacks. When you put a coin or note on those machines, a computer system programmed to spot the amount received along with the selected product enforces an arrangement between the customer and the machine operator, executing an automatic purchase.

The dapps and intelligent contracts operate from the Ethereum blockchain, which had its first architecture conceived with a young Russian genius in the time in age 19, called Vitalik Buterin, who picked the subsequent name due to his white paper: “Ethereum: A Platform of smart contracts along with next generation decentralized software”

From “second generation,” Buterin describes the instruments added to his creation that in theory can resolve in an easy and objective manner a number of bitcoin’s blockchain constraints and thus usher in stage 2.0 of their cryptocurrencies.

Everyone can upload programs or smart contracts into the Ethereum network. The platform development group sought to make everything as straightforward as possible to amplify accessibility to technologies.

As an application programmer, you may need anti virus infrastructure to install and install your own applications. Anything which may be represented mathematically could be mimicked, ensured, and exchanged through Ethereum. Once being written in a programming language approved by the stage, just upload the code onto the stage, fill in the first variables and ship. Following that, the task becomes the stage, which within a couple of seconds converts the code into machine language, compiled in bytecode, and afterwards mined it’ll have the ability to run.

Once uploaded, the arrangement is going to be saved from the blockchain and other customers will have the ability to get it directly via the system or via any API (Application Programming Interface) designed to get it. Because of this, the arrangement, depending on the identification of these terms established inside, will automatically meet the assumptions specified there and may, as an instance, ship or receive numbers from 1 individual to another.

Additionally, like bitcoin, with that you don’t need to rely upon a lender or central ability to maintain your fiscal funds protected; from Ethereum your private data, identity, and capital will also be under your control at all times, given inside your wallet. And of course that their software are also protected from denial of service attacks, because of the nature of its technologies.

Whats Ethereum good for?

Most of the services we use today have one factor in common: they’re centralized. So, for Example, you hope that your bank can keep your money secure, be audited independently and honestly.

The same goes with Facebook, when you carry an image of your kids, once you send a document to the Dropbox or even once you go to an appointment in the hospital and enroll from the health network your personal medical advice. If you work as a developer, you have to file your application to a program shop and you risk getting it removed for the most trivial and varied reasons.

History has continuously shown this centralized model is flawed, but essential to ensure levels of confidence between counterparts. Nonetheless, this is complex and too costly for everyone involved.

Remember that everything that’s centralized makes it easier to strike because it provides one Purpose for a goal, including a website firewall.

Applications built on Ethereum don’t require your customers to trust developers with personal information or money. Back in Ethereum, your personal information remains yours your funds remain yours and your articles stays yours. Because it is decentralized, its most important benefits are that it is a transparent, hackerproof system that’s constantly live.

Since Ethereum permits you to start your own currency, you can make any kind of company stock on the stage or represent ownership of any object, such as a car or a house.

You can think of this as a programmable dispersed system. The fact that Ethereum is, by its very design, resistant to fraud and adulteration, means that it offers a fresh range of solutions to the daily problems which are currently solved at exorbitant costs. Voting machines, domain registration, registration of legal records, medical applications, transfer of goods, services, smart property and contracts between individuals, standing systems and financial derivatives. Everyone these programs can be produced on a network where users keep track of their funds and individual data constantly.

A DAO is composed of a couple of contracts and could be funded by a group of individuals with similar notions. A DAO operates completely independent and transparent of any human intervention, for example its original creators. A DAO will stay in the community for so long as it covers its survival costs and supply a useful service to its customer base.

Ethereum also allows programmers to create, for example, different decentralized markets, shop debt documents or guarantees of payments, transfer funds according to previous instructions (for instance, a Purchase / sell purpose or a prospective contract), and several other items which have been Devised, all this automatically, without an intermediary or counterparty risk.

About us

Empirica is a Wrocław-based company that supports many local IT initiatives. Empirica is offering solutions such as Cryptocurrency Algorithmic Trading Software implemented by major institutional investors in Poland, market making strategywealth management software framework, crypto trading bots and cryptocurrency software development for companies from capital and cryptocurrency markets.