After dominating headlines recently following an impressive bull run, many traders are looking to get in on the action. As we explore what Solana (SOL) is, we take a look at the project's intentions, successes and of course why it is often referred to as the leading "Ethereum killer".

Since Bitcoin was created in 2009 an entire crypto ecosystem has been created, valued at almost $3 trillion to date. While Bitcoin was designed to provide a global payment system to address problems in the traditional financial sector, other platforms like Ethereum and now Solana have been created to facilitate the development of the blockchain industry as a whole through programmable functionalities.

What is Solana (SOL)? 

Recognised as being one of the fastest-growing protocols in the DeFi space in 2021, the blockchain network provides a platform on which developers can create decentralized applications (dapps) and smart contracts. While this may sound like something you've heard before in the crypto industry (like Ethereum for instance), the Solana network sets itself apart from the crowd by offering faster operations and lower transaction fees. 

The project has two main heads, the Switzerland-based non-profit organisation Solana Foundation which is responsible for promoting the platform and working with international partners, and the San Francisco based Solana Labs, responsible for spearheading the project's development. 

Contributing to a more eco-friendly world, Solana uses a Proof-of-Stake consensus to maintain operations on the platform, alongside a unique Proof-of-History (PoH) consensus that one of the founders created. Revolutionary to the blockchain space, PoH enables the network to process 50,000 transactions per second and is described as a "timekeeping technique to encode the passage of time within the data structure."

As one of the fastest programmable blockchains in the cryptocurrency space, Solana has created a well-deserved following, as indicated by the SOL demand and subsequent price increase. It has also become home to a wide range of cryptocurrencies, including the likes of Chainlink, The Graph, Waves, REN among many others. 

Who Created Solana?

Software engineer, Anatoly Yakovenko, is responsible for creating the Solana platform. He started working on the blockchain project in 2017, three years prior to its launch, alongside his former colleagues Greg Fitzgerald and Eric Williams. They teamed up with several other former colleagues and together built the programmable network we know today.

Anatoly Yakovenko also developed the PoH protocol, an innovative contribution to the blockchain space that allows for greater scalability, thereby boosting usability. A key factor in impressing investors that have tired from traditional coins like Bitcoin and are looking for more innovative platforms.

How Does Solana Differ From Ethereum?

One of the platform's main aims is to improve on several of the Ethereum platform's computing functionalities. While ticking the "faster" box when it comes to transactions, Solana has also managed to improve its scalability and cost structure. 

Scalability

While the project's leads say that Solana will process up to 700,000 transactions per second (TPS) as the network grows, it can currently handle around 50,000 TPS, still a far cry from Ethereum's 15 to 45 TPS.

Solana is one of the few layer-one solutions from a computing platform that is able to support thousands of transactions per second without the use of off-chains or second layers.

Cost

Due to the nature of the Solana network, it is able to provide much more cost-effective transactions, generally costing around $0.00025 per transaction. A sizable decrease from Ethereum transactions can cost in the realm of $50

What Is SOL?

SOL is the native cryptocurrency to the Solana platform powering its scalability and reduced cost structure. The cryptocurrency acts as a utility token, used for staking and paying transaction fees.

Following the token's success, it has increased by a whopping 88,900% (at the time of writing) from its initial ICO price of $0.22. The proof is in the pudding here.

Solana Performance In 2021

Since launching in 2020, Solana has seen impressive growth and increased industry interest. It has also become known for increasing in value while most of the other crypto markets were on the decline. 

Over August and September, the cryptocurrency increased over 200%, before rallying to its all-time high of $218.73 on 25 October. 

A key contributor to Solana's success is its backings from various companies and individuals, including Alameda Research, FTX, Andreessen Horowitz and Polychain. 

Able to support a multitude of sectors, the Solana ecosystem currently incorporates over 230 companies spanning from oracles to automated market makers (AMM) to wallets, exchanges and stablecoins. Solana has also been popularized by the NFT boom, with the first major NFT project (Degenerate Ape Academy) launching on the blockchain collecting a large amount of attention. 

How Can I Buy SOL?

If you're interested in expanding your crypto portfolio to include Solana, we have some exciting news for you! Tap supports Solana's token SOL, and is providing users with a hassle-free way to buy, sell, trade, and securely store SOL right from the Tap app.

‍‍Slippage plays an important role in trading cryptocurrencies for retail investors as it determines the difference between the amount that you expected to pay in a transaction and the amount the trade was executed at. Below we're uncovering what slippage in crypto is, explaining how it can contribute to risk, and providing some practical examples on how to avoid it. 

What is slippage in trading?

Slippage is when an trader opens a trade but between creating the trade and the trade executing, the price changes due to price movements in the greater market. This can often be a costly problem in the financial sector and particularly when trading digital currencies on crypto exchanges.

How does slippage occur?

The two main causes of slippage are volatility and liquidity, outlined in more information below.

Volatility is when the price changes rapidly, as is common in cryptocurrency markets, and as a result the price changes between the time of creating the buy or sell order and the time of execution. 

Liquidity concerns on the other hand are when the coin you are trading is not traded very often and the range between the lowest ask and the highest bid is wide. This can cause sudden and dramatic price changes, resulting in slippage. Fewer people trading an asset results in fewer asking prices, resulting in less favourable prices. 

This is common among altcoins with low volume and liquidity. While slippage can occur in forex and stock markets too, it is much more prevalent in crypto markets, particularly on decentralised exchanges (DEXs). 

There are two types of slippages:

Positive Slippage

Positive slippage is when a trader creates a buy order and the executed price is lower than the price initially expected. This will result in the trader getting a better rate. The same is true for a sell order that experiences a higher price point at trade execution, resulting in more favourable value for the trader. Positive slippage banks profits.

Negative Slippage

Negative slippage is when the trader loses out on the trade, with the price of the buy order higher than expected at the time of execution. The opposite is true for sell orders, meaning that the execution price is lower at the time of execution, similarly resulting in losses for the trader. 

Can slippage be avoided? How to avoid slippage

While one can't eradicate slippage entirely, there are several measures one can take to better manage slippage, as regularly falling victim to negative slippages can result in losing a lot of money. 

• Create limit orders

Instead of creating market orders, traders can instead create limit orders as these types of trades don't settle for unfavourable prices. Market orders are designed to execute a trade service as quickly as possible at the current available price.

• Set a slippage percentage

Traders can create a slippage percentage that eliminates trades happening outside of the predetermined range. This can range from 0.1% to 5%, however, if the slippage percentage is too low this could lead to the trade not being executed and the trader missing out on large drops/jumps.

• Understand the coin's volatility

When in doubt, get educated. Learn about the coin's volatility as well as the volatility on the trading platform you are using. Understanding more about previous patterns can assist in making more informed decisions on when to open and close a position, and avoiding negative slippages.

How to calculate slippage

Slippage can be calculated in two ways, either in dollar amount or percentage. Although to work out the percentage, you will first need the dollar amount. This is calculated by subtracting the price you expected to pay from the price you actually paid. This amount will indicate if you incurred a positive or negative slippage. 

Most exchanges express this amount in percentages. This is calculated by dividing the dollar amount of slippage by the difference between the price you expected to get and the limit price. Then multiply that by 100. 

For example, say you are looking to buy Bitcoin for $50,000, but are not willing to pay more than $50,500. When the price is at $50,000 you will create a limit order of $50,500, however, the order executes when the price reaches $50,250. This will result in a $250 slippage. 

To calculate the percentage, divide $250 by $500 (the difference between the price you expected to pay and the limit order). 0.5 multiplied by 100 equals 50%. 

In this case, your slippage was $250 or 50%. 

Want to know more about cryptocurrencies and trading? Check out all our other educational articles here. 

Spot trading is a simple way to invest and trade a financial instrument, commodity, or foreign currency or a cryptocurrencies on a specific date. Your first experience with forex or crypto investing will most likely be a spot transaction in the spot market, for example, buying Bitcoin at the market price and holding it in a secure wallet. Below we explore what spot trading is exactly. 

Spot exchanges exist for a variety of assets, including cryptocurrencies, equities, commodities, forex, and bonds. You're probably more familiar with spot markets and spot trading than you think. NASDAQ or the New York Stock Exchange are both examples of spot markets. 

What is spot trading?

Spot traders attempt to make money in the market by purchasing assets and waiting for them to appreciate in value. When the price of a commodity rises, spot traders will sell their assets for a profit. Spot traders can also short markets. This method involves selling financial assets and repurchasing them when the price drops.

The spot price of an asset is the current market value. You can purchase or sell your assets immediately at the best available spot price using a market order on an exchange. However, should there not be enough liquidity in that market at the time your order might not be executed. There also may not be sufficient volume to meet your demand at that price.

For example, if your order is for 5 BTC at the spot price, but only 2 are on offer, you will have to fill the rest of your order with BTC at a different price. Spot prices change in real-time, and are updated and changed in real-time as orders are matched. Over-the-counter spot trading is different than this (more on this below).

Delivery times vary depending on the asset, with cryptocurrencies typically executed instantly while stocks and equities might take a few days. This might be displayed as T+2 which illustrates the trade date plus two business days. With modern-day digitized systems, delivery is almost immediate, particularly with the crypto markets operating 24/7, while OTC and peer-to-peer trading might take a little longer.

Spot trading vs margin trading

In some spot markets, margin trading is available, but it isn't the same as spot trading. Spot trading necessitates that you immediately fully acquire the asset and take delivery of it. 

In contrast, margin trading allows you to borrow money from a third party with interest, allowing you to enter larger bets/trades. As a result, borrowing provides a margin.

However, just like any other investment, trading cryptocurrency carries the risk of massive losses if you don't know what you're doing. Margin trading is advised for seasoned traders only. 

Spot markets vs futures markets

Spot markets allow you to make fast exchanges with a guaranteed delivery time. On the other hand, futures trading is based on contracts that must be paid for in the future. A buyer and seller agree to exchange a specific quantity of items at a specified price in the future. When the settlement date arrives, most buyers and sellers will typically choose to make a cash settlement instead of delivering the asset. 

How OTC exchanges differ from other exchanges

While most people will do spot trading on exchanges, you may also trade directly with others without the assistance of a third party. Over-the-counter trades are the prime example of this. Here we explore how OTC exchanges differ from centralized and decentralized exchanges. 

Centralized Exchanges

Exchanges are divided into two types: centralized and decentralized. A centralized exchange manages the trading of assets like cryptocurrencies, foreign exchange, and commodities. The exchange serves as a go-between for market participants and protects the traded assets as a custodian. 

A centralized cryptocurrency exchange is a marketplace where buyers and sellers of cryptocurrencies trade one for another with one authority overseeing all operations. It is responsible for ensuring that operations like regulation, KYC (Know Your Customer), fair pricing, security, and customer protection are in order and running optimally at all times. 

In return, the exchange takes a cut on transactions, listings, and other trading activities. As long as an exchange has enough users, these exchanges can make money through bull and bear markets. 

To use a centralized exchange, you must first load your account with the fiat or cryptocurrency you want to trade. A reputable centralized exchange must ensure that transactions run smoothly.

Decentralized exchanges

A decentralized exchange (DEX) is another trading platform popular in the cryptocurrency industry. A DEX provides many of the same basic services as a centralized exchange, although instead of matching orders through the use of traditional technology, it does so via blockchain technology. In most cases, DEX users do not need to create an account and can trade peer-to-peer without having to load funds onto the platform. 

DEXs operate using smart contracts which execute trades directly from the traders' wallets, bypassing exchanges entirely. Many individuals appreciate the freedom and privacy that comes with a DEX because it provides greater anonymity than a typical exchange. This, however, has its drawback, such as security concerns. 

Over-the-counter

Lastly, there is over-the-counter trading (OTC), also known as off-exchange trading. OTC exchanges allow brokers, traders, and dealers to trade financial assets, currencies and securities through direct transactions. Spot trading on the OTC market uses a variety of communication channels to arrange trades, including phones and instant messaging.

OTC trades avoid the use of an order book providing certain benefits. If you're trading a low-volume liquid asset like a small-cap coin, a big order on a centralized or decentralized exchange may cause slippage. Because the exchange is unable to completely fill your order at the desired price, you must accept greater prices in order to complete it. With large OTC trades, the trader will get better prices.

Even liquid assets like Bitcoin can suffer from slippage when orders are too big. So, large BTC purchases may also profit from OTC transactions.

Final thoughts

In the realm of trading, spot trading stands as a favored method, especially among novice traders. Its simplicity and ease of execution make it an attractive choice. However, it's crucial to approach spot trading with a wealth of knowledge and a strong educational foundation. By staying informed and continuously learning, you can navigate the market with more confidence and make well-informed decisions. Remember, the path to knowledgeable trading begins with a commitment to understanding the intricacies of spot trading.

If you’re new to the world of investing, you've likely come across a myriad of unfamiliar terms and concepts that can leave you feeling overwhelmed. While it may sound complex, understanding what spread means is essential for navigating the investment landscape with confidence. 

In this article, we'll demystify the concept of spread and equip you with practical knowledge to make informed investment decisions. Empower yourself on your financial journey by staying informed and educated. Let's dive into the world of spreads in investing and build your financial understanding.

What is spread?

The spread definition refers to the difference between the bid and ask prices. Let’s first grasp these two concepts. When you're looking to buy a stock, the bid price refers to the highest price that a buyer is willing to pay for that particular security. 

On the other hand, the ask price represents the lowest price at which a seller is willing to sell the stock. The bid-ask spread is the difference between these two prices. 

Understanding the importance of spread in investing is crucial for informed decision-making. Bid-ask spread directly affects trading costs, with wider spreads leading to higher expenses. It also reflects market efficiency and liquidity, as narrower spreads indicate a more liquid market. 

By recognizing the significance of spread, investors can manage expenses, adapt to market conditions, and make informed choices aligned with their goals.

How to calculate the spread

Calculating the spread using bid and ask prices is a straightforward process. Here's a step-by-step explanation:

Identify the bid price

Look for the highest price that buyers are willing to pay for the security.

Identify the ask price

Locate the lowest price at which sellers are willing to sell the security.

Calculate the spread

Subtract the bid price from the ask price. The result is the spread.

For example, if the bid price is $10 and the ask price is $11, the spread would be $11 - $10 = $1. This means the spread for this particular security is $1.

The different types of spread

When it comes to investing, here are three common types of spreads:

Fixed spreads

Fixed spreads remain constant regardless of market conditions. This means the difference between the bid and ask prices remains consistent, providing investors with predictable transaction costs. 

Fixed spreads are commonly offered by market makers and are suitable for traders who prioritize stability and transparency in their trading expenses.

Variable spreads

Unlike fixed spreads, variable spreads fluctuate based on market conditions. During times of high volatility or low liquidity, variable spreads tend to widen, reflecting increased uncertainty. Conversely, in stable market conditions, variable spreads can narrow. 

Variable spreads are typically offered by brokers and can be advantageous when trading in more liquid markets or during periods of lower volatility.

Commission-based spreads

In addition to the bid-ask spread, some brokers charge a separate commission fee for each trade. This commission-based structure may provide traders with tighter spreads as the bid-ask spread is often reduced. However, it's important to consider the overall transaction costs, including both the spread and commission, when evaluating the affordability of such trading arrangements.

Each type of bid ask spread has its advantages and considerations. Fixed spreads offer stability, variable spreads adapt to market conditions, and commission-based spreads can provide tighter bid-ask spreads. It's crucial for investors to assess their trading style, market conditions, and cost preferences when choosing the most suitable spread type.

Understanding the differences between these spread types can help investors to select the most appropriate trading environment for their investment strategies.

Factors that affect the bid ask spread

The spread in investing is influenced by several factors that can vary from market to market and even within different securities. Understanding these factors is essential for assessing trading costs and making informed investment decisions. Here are some key factors that can impact the spread:

Market volatility

Spread tends to widen during periods of increased market volatility. Increased uncertainty and rapid price fluctuations lead to a wider gap between the bid and ask prices. This widening of the spread compensates for the additional risk market participants face during volatile market conditions.

Market liquidity

Liquidity refers to the ease with which an asset can be bought or sold without causing significant price movement. In highly liquid markets with a large number of buyers and sellers, spreads tend to be narrower. Conversely, in illiquid markets with limited trading activity, spreads widen as finding a counterparty for a trade becomes more challenging.

Broker fees 

Different brokers may charge varying fees or commissions for executing trades. These fees can directly impact the overall spread and transaction costs. Some brokers offer lower spreads but may compensate by charging higher commissions, while others may have wider spreads but lower or no commission fees. It's important to consider both the spread and broker fees when evaluating the total cost of trading.

Trading volume

The volume of trading activity in a security or market can influence the spread. Higher trading volume generally indicates greater liquidity and tighter spreads. Conversely, lower trading volume can result in wider spreads due to reduced market depth and fewer available buyers and sellers.

Instrument or security type

Different types of securities or financial instruments may have varying levels of liquidity and trading characteristics, leading to differences in spreads. For example, major currency pairs in the foreign exchange market typically have tighter spreads compared to less frequently traded currency pairs or exotic options.

The significance of spread in investing

Spread holds significant importance in the market as it influences multiple aspects of trading and investment. Here are three key points:

Impact on profitability 

The spread directly impacts trade profitability by representing the immediate cost that investors need to overcome, as wider spreads reduce potential profits due to higher entry costs and lower selling prices, making managing and minimizing spreads essential for optimizing profitability.

Spread and market efficiency

Spreads contribute to market efficiency by reflecting a fair and efficient marketplace, with narrow spreads indicating healthy competition, transparency, and price discovery that allows buyers and sellers to transact closer to the fair value of the underlying asset.

Spread and market liquidity

The relationship between spread and market liquidity is closely intertwined, as narrow spreads indicate high liquidity with a robust pool of buyers and sellers, resulting in greater trading activity, tighter bid-ask spreads, and lower transaction costs. 

In contrast, wider spreads are common in less liquid markets, making it more challenging to find trading counterparts and potentially increasing trading costs and impacting execution quality, emphasizing the significance of understanding the spread-liquidity relationship for investors.

Overall, the significance of spread lies in its impact on profitability, contribution to market efficiency, and reflection of market liquidity. By monitoring spreads, investors can optimize their trading strategies, and navigate the market landscape with greater efficiency and potential for favourable outcomes.

Understanding spread in different asset classes

For investors looking to diversify their portfolios, understanding spread across different asset classes can prove valuable.

Stock Markets

In stock trading, the spread represents the difference between the bid and ask prices of a stock. The spread is influenced by factors such as the stock's liquidity, trading volume, and market conditions. Highly liquid stocks with significant trading activity often have narrower spreads, ensuring better price efficiency. 

For example, a stock may have a bid price of $50 and an ask price of $50.10, resulting in a spread of $0.10. Investors need to consider the spread when executing trades to assess the impact on their potential profits.

Foreign Exchange (Forex)

Spreads play a vital role in Forex trading. In this market, the spread refers to the difference between the buying (bid) and selling (ask) prices of currency pairs. Forex brokers typically earn their profits from the spread. Currency spreads can vary based on factors like market liquidity, economic indicators, and geopolitical events. 

Major currency pairs, such as EUR/USD or GBP/USD, tend to have tighter spreads due to their high liquidity, while exotic currency pairs may have wider spreads.

Bonds

In bond investing, the spread refers to the yield difference between a specific bond and a benchmark bond with similar characteristics (e.g., maturity and credit quality). The bond spread reflects the additional compensation investors demand for taking on the credit risk associated with that particular bond. 

Widening spreads indicate higher perceived risk, while narrowing spreads suggest improved credit conditions. Understanding bond spreads helps investors assess the relative value and risk associated with different bond investments.

Commodities and derivatives

Spreads are also relevant in other asset classes like commodities and derivatives. In commodity markets, spreads can represent price differences between different delivery months or different quality grades of a commodity. 

In derivative markets, such as futures or options, the spread is the difference between prices for the same commodity or security at different delivery dates. These spreads are influenced by factors specific to each market, including supply-demand dynamics, storage costs, and market sentiment.

Cryptocurrencies

Cryptocurrency markets also involve spreads that impact trading activities. The spread in the cryptocurrency refers to the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a particular cryptocurrency. 

Spreads in cryptocurrency trading can vary widely due to factors like market's liquidity, trading volume, the underlying market, and the specific exchange platform being used. Understanding and monitoring cryptocurrency spreads is important for assessing trading costs and executing transactions effectively in this dynamic and evolving market.

How to navigate spread costs when investing

Navigating spread costs is essential for optimizing investment returns. Here are strategies to help investors manage spread costs effectively:

Choose the right broker

Look for brokers offering competitive spreads and low fees. Research and compare brokers to find the most favorable trading conditions that align with your investment goals. 

Strategically time trades 

Timing trades can play a significant role in minimizing spread impact. Monitor market conditions and aim to trade during periods of higher liquidity and lower volatility. Additionally, avoiding high-impact news events or volatile market hours may help minimize the widening of spreads.

Consider alternative investment options

Explore alternative investment options that have narrower spreads or lower transaction costs. For example, exchange-traded funds (ETFs) or index funds often have lower expense ratios and narrower spreads compared to actively managed mutual funds. 

Risk management techniques

Set stop-loss orders to limit potential losses and protect profits. Utilize limit orders to specify the maximum price you are willing to pay or the minimum price you are willing to accept, helping control the execution price within the spread range.

These practices help optimize investment returns by minimizing transaction expenses and maximizing the benefits of their trading strategies. Regularly reviewing and adjusting these strategies based on market conditions can further enhance the management of spread costs.

In conclusion

Understanding spread in investing is crucial for making informed decisions and optimizing investment returns. Spread impacts profitability, market efficiency, and market liquidity. Calculating and monitoring spreads across different asset classes provides valuable insights into trading costs and market dynamics. 

By choosing the right broker, timing trades strategically, considering alternative investments, and implementing risk management techniques, investors can navigate spread costs effectively. Staying informed, evaluating market conditions, and adapting strategies accordingly are essential for managing spread costs. 

Empower yourself on your financial journey by understanding spread and its significance in different asset classes. By applying the strategies outlined in this article, you can enhance your trading approach and strive for more successful investment outcomes. Remember, informed decision-making and continuous learning are key to navigating spread costs and achieving your financial goals.

Stocks are essentially shares in a company that the company sells to shareholders in order to raise money. Shareholders are then entitled to dividends if the company succeeds, and might also receive voting rights when the company makes big decisions (depending on the company).

What are stocks?

Stocks play an important role in the global economy, assisting both companies (in raising capital) and individuals (in potentially earning returns). Traders can buy and sell stocks through stock trades facilitated by various stock exchanges. The stock price is determined by supply and demand, largely influenced by the company's success and media representation.

These "units of ownership" are sold through exchanges, like Nasdaq or the London Stock Exchange, under the guidance of regulatory bodies, such as the Securities and Exchange Commission (SEC) in the United States. These regulatory bodies set specific regulations on how companies can distribute and manage their stocks.

What are the different types of stocks?

There are two types of stocks, common stocks and preferred stocks, as outlined below.

Common Stock

Shareholders of common stock typically have voting rights, where each shareholder has one vote per share. This might grant them access to attending annual general meetings and being able to vote on corporate issues like electing people to the board, stock splits, or general company strategy.

Preferred Stock

For investors more interested in stability and receiving regular payments rather than voting on corporate issues, preferred stocks are often the security of choice. Preferred stock are shares that provide dividends but without the voting rights. Like bonds, there are a number of features that make them attractive investments. For example, many companies include clauses allowing them to repurchase shares at an agreed-upon price.

Stocks vs bonds

Although both stocks and bonds signify an investment, they vary in how they operate. With bonds, you're essentially lending money to the government or a company and collecting interest as a return. While with stocks you're buying part-ownership of a company. Another key difference is that bondholders usually have more protection than stockholders do.

In contrast to stocks, bonds are not normally traded on an exchange, but rather over the counter (the investor has to deal straight with the issuing company, government, or other entity).

Stocks vs futures and options

Futures and Options contrast stocks in that they are derivatives; their value is reliant on other assets like commodities, shares, currencies, and so on. They are contracts established off the volatility of underlying assets instead of ownership of the asset itself.

Stocks vs cryptocurrencies

While stocks provide a unit of ownership in a company, cryptocurrencies are digital assets that operate on a network. Cryptocurrencies are decentralized, meaning that no one entity is in charge, while stocks are shares in companies that are heavily centralized and held accountable for their price movements. Both the stock price and the price of cryptocurrencies are determined through supply and demand.

Another key difference is that stocks are regulated while, at present, cryptocurrencies are not.

Where did stock trading originate?

The first recorded instance of stock-like instruments being used was by the Romans as a way to involve their citizens in public works. Businesses contracted by the state would sell an instrument similar to a share to raise money for different ventures. This method was called 'lease holding.'

The 1600s gave rise to the East India Company (EIC), which is considered by many the first joint-stock company in history. The EIC increased its notoriety by trading various commodities in the Indian Ocean region. Today, we see the limited liability company (LLC) as a watered-down version of the joint-stock company.

How does the stock market work?

The 'stock market’ is an umbrella term that refers to the various exchanges where stocks in public companies are bought, sold, and traded.

The stock market is composed of similar yet different investment opportunities that allow investors to buy and sell stocks, these are called "stock exchanges." The best-known exchanges in the United States are the New York Stock Exchange (NYSE), Nasdaq, Better Alternative Trading System (BATS), and the Chicago Board Options Exchange (CBOE).

Together, these organizations form what we call the U.S. stock market. Other financial instruments like commodities, bonds, derivatives, and currencies are also traded on the stock market.

An example: the New York Stock Exchange

The New York Stock Exchange (NYSE) is the largest equity exchange in the world, and it has a long and rich history. Established in 1792, it was originally known as the "Buttonwood Agreement" between 24 stockbrokers who gathered at 68 Wall Street to sign an agreement that called for the trading of securities in an organized manner.

Since then, the NYSE has become a global leader in financial markets, with more than 2,400 companies listed and nearly $26.2 trillion in market capitalization. The exchange has an average daily trade volume of $123 billion.

Investing in common stock or preferred stock on the NYSE can be done through a broker or online stock trading platform. When trading on the NYSE, investors have access to a wide range of products and services, including stocks, bonds, mutual funds and ETFs (exchange-traded funds).

Investors can also take advantage of the numerous benefits that come with trading on the NYSE, such as access to real-time information and the ability to buy and sell quickly. The trading platform is regulated by the Securities and Exchange Commission (SEC).

Terminology associated with the stock market

• Broker: A broker is someone who buys and sells assets on behalf of another person, charging a commission for their services.
• Stockholders equity: The value of a company's stock can be better understood by this metric, which is the company's assets remaining after all bills are covered (liabilities).
• Stock splits: Conducting a stock split is one way that companies make their stocks more accessible to investors. Although it won't change the market capitalization or value of shares, it will increase the number available.
• Short selling: If an investor wants to bet on a stock's price going down, they can take a "short" position. To do this, they must borrow the stock from either a broker or a financial institution.
• Blue-chip stocks: Companies that are large and have a lot of capital typically fall into the blue-chip category. They usually trade on famous stock exchanges, like the NYSE or Nasdaq.
• Pink sheet stocks: 'Penny' or 'pink-sheet' stocks are those that trade below the $5 threshold and are typically OTC (over the counter). These can be high risk.
• Buying on margin: Buying on margin is using borrowed money to buy stocks, bonds, or other investments in the hopes of making big returns and paying off the loan.
• Market order: When placing an order for a trade, the investor needs to pick from several types of orders. A market order is executed at whatever the next price is, which can be risky if there's a big gap between what buyers and sellers are offering.
• Limit order: A limit order is an order to buy or sell a security at a specified price, with a maximum amount decided on before executing the trade.
• Stop order: A stop order, also referred to as a stop-loss order, is an order placed with a broker to buy or sell once the stock reaches a predetermined price.

In conclusion: what is stock?

Shares, or stock, are units of fractional ownership in a company that investors buy to gain capital appreciation and tap into a company's earnings if the company's stock pay dividends. Companies, through listing their stock on an exchange, can raise capital to further develop the business.

Stock is traded on an exchange, and the stock prices are determined by supply and demand.

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Sitting among the 30 biggest cryptocurrencies by market cap, Stellar is focused on bridging the gap between the business of blockchain and the traditional financial institutions. The platform provides a means for users to send assets and money through the blockchain, utilising a decentralised network of authenticators.

Redefining the financial landscape, Steller presents a digital transformation on the traditional services users have become accustomed to. Merging innovation with a practical application, the network is able to help users around the world, as well as financial industries, achieve a more streamlined service. Let's explore what Stellar is.

What is Stellar (XLM)?

Before we dive into the "what", let's first stipulate that one stellar is known as a lumen and uses the ticker XLM. Stellar launched in July 2014 and soon afterwards changed its strategy to be more focused on integrating blockchain technology into financial institutions. 

The concept behind Stellar is to provide a space in which users can transfer everything from traditional crypto and fiat currencies to tokens representing new and existing assets, increasing their transaction performance by using lumens.

Similar to the Ripple XRP network, Stellar is designed to cater to both payment providers and financial institutions, building a bridge between the blockchain and traditional financial sector. Developing on the Ripple concept, Stellar has also positioned itself as an exchange as its ledger has an inbuilt order book that keeps track of all the assets on the network. 

Who Created Stellar?

The founders of Stellar are Jed McCaleb and Joyce Kim, both previously employees at Ripple. McCaleb, who founded and was acting CTO of Ripple, and lawyer Joyce Kim, decided to create Stellar after they left the Ripple team in 2013 following a disagreement on the direction that Ripple was taking. McCaleb is also credited with creating the first successful Bitcoin exchange, Mt Gox. 

McCaleb described Stellar's aim as giving people a means of moving their fiat into crypto and more seamlessly conducting international payments. The network provides cross border transactions with low transaction fees and fast executions. With leading technology and innovative problem solving, the network has made a healthy impression on both institutions and investors alike.

How Does Stellar Work?

Stellar is a hard fork off of the Ripple network with several similarities in design and functionality, however, the platform set itself apart by building in several key features. The platform is secured through the Stellar Consensus Protocol which revolves around these core business concepts: decentralised control, flexible trust, low latency, and asymptotic security.

The biggest upgrade launch came in 2015 when the platform replaced its consensus mechanism with a concept called federated Byzantine agreement. This required nodes to vote on transactions until quorums are reached. Anyone is able to join the consensus, and there are measures in place to inhibit bad actors operating with ill intent on the network.

The software behind the platform is called Stellar Core and can be altered to adhere to the needs of the operation using it. The nodes making up the network can be created to function as either Watchers, Archivers, Basic Validators or Full Validators. For example, watchers can only submit transactions while Full Validators can vote on which transactions are valid and maintain a ledger of all node activity.

Another element to the network is the Stellar Anchors. These gateways are responsible for accepting deposits of currencies and assets and issuing depictions of these on Stellar.

What Is XLM?

Known as lumens, XLM is the native cryptocurrency to the Stellar platform. XLM acts as an intermediary currency for transactions taking place on the network. With cost-effective experience priorities, every transaction on the Stellar network costs 0.00001 XLM, a fraction of a dollar (at the time of writing). 

When the platform launched in 2014, 100 billion lumens were minted, programmed to increase by 1% annually until the total supply reached 105 billion. Five years later the Stellar uses voted to end this process. 

That same year, in 2019, the Stellar Development Foundation (a non-profit organisation) reduced its share of XLM in order to regulate the Stellar economy. This brought the total supply down to 50 billion. At the time of writing, roughly 49% of this total supply is in circulation. 

How to get XLM? 

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