Learning the friendly way

Generally when one mentions investing, one thinks of stocks. Forming the foundation of more investment journeys, stocks or equities provide a tried and tested option for using capital to gain profits. In this article, we’re guiding you through the most important concepts you need to know when it comes to investing in the stock market, from what stocks are exactly to how to stock market basics. 

What are stocks? 

Also referred to as equity or shares, individual stocks are securities that provide fractional ownership in a company. Units of stock are called shares and entitle holders to "own" a small part of the issuing corporation. This can also entitle the owner to receive dividends from any profits the company might earn.

Other terms one might hear are exchange-traded funds (ETFs) which are stocks based on pooled investments that mimic the price of the underlying asset allocation while mutual funds are professionally managed investment funds. An investment portfolio can be made up of a collection of the above, or individual stocks, depending on your financial goals.

Stock market vs stock exchange

Stocks are traded on stock exchanges around the world and their price is driven by supply and demand. The term stock market refers to the entire industry while the term stock exchange refers to the platforms on which stocks are traded. 

What is a stock exchange?

A stock exchange is an exchange platform where publicly-traded stocks can be purchased and sold through buyers and sellers, like the New York Stock Exchange for example. Initial Public Offerings (IPO's) are the primary mechanism of raising capital, where organizations sell shares to the general public in exchange for capital. This process allows the business to expand without incurring debt. 

In exchange for being allowed to offer shares to the public, companies are obliged by law to publish financial information about the company's performance and grant shareholders a voice in how the business operates.

Advantages of investing in stocks 

Before engaging in any stock market investing it is important to determine your risk tolerance. This pairs your current financial situation with the amount of risk you are willing to endure, anywhere from low risk to high risk. It's best to consult a financial planner should you be unsure. 

Once this has been determined, you can build a strategy for your stock investments and partake in the many advantages that the stock market has on offer. 

Profits

Should a company's share price increase, investors can make considerable profits by selling the shares at the right time. 

Ownership

Shares provide investors with ownership in the company relative to the number of shares they own. As a shareholder, you gain access to a portion of the profits and may also receive voting rights within the business. 

Dividends

Investors can earn passive income by receiving dividends from a company they have invested in when they pay out the profits made over a certain time period. Some companies offer quarterly dividends while others are annual. 

Income and growth

Stocks deliver an ideal investment opportunity that can provide both income and growth. Investors looking for a more risk-averse investment and stronger financial stability will benefit from engaging in the stock market. 

Experts can leverage your earnings

Skilled fund managers understand mutual funds inside and out, gaining skills that allow them to optimize investments to capitalize on market fluctuations. Constantly monitoring equity funds for opportunities to better position clients' portfolios, these experts continually revise their strategies as needed.

Disadvantages of investing in stocks

Requires time

If you are new to the industry and intend to invest on your own, you will need to undergo a considerable amount of research on each company before investing in it. You will also need to learn how to read financial statements and annual reports and keep an eye on the news when determining whether a company might be profitable in the near future. 

No guarantees

While considered one of the "safer" investment options, individual stocks can still be high risk as there is no guarantee of what might happen to a company on a year-to-year basis or that you won't lose money. Always determine your risk tolerance before investing in the stock market.

Fluctuating prices

All markets are subject to volatility and the stock market is no exception. Be sure not to fall into the trap of making trading decisions based on emotion and stick to the golden rule: buy low, sell high. 

How to invest in the stock market

Ready to start investing in the stock market? The process is probably simpler than you thought it would be. 

1. Find a brokerage account most suitable for your investment goals
   Consider your short and long-term goals and determine which account is best suited to you, from college savings accounts to an individual retirement account to everything in between. 
2. Find a brokerage company
   Next, you'll want to find a brokerage company. Consider their available investment options, reputation, and fees when looking for the right fit. If you're looking to invest in stock mutual funds, individual stocks, or index funds, be sure that the brokerage account (or brokerage firm) provides the relevant services.
3. Deposit funds
   Once you've opened your account you will need to deposit money to get started. This is generally in the form of a lump sum, however, monthly recurring payments can also be set up.  
4. Determine which investments you want to open
   After opening an account you can begin to purchase and sell stocks, as well as bonds, stock mutual funds or general mutual funds, index funds, and ETFs that are composed of hundreds of securities. Whether investing in various individual stocks or the investment options listed above, consider using a diversified, risk-friendly approach whereby you don't put all your eggs in one basket. 
5. Confirm your investments by purchasing them
   Once you've decided what to purchase, simply enter the ticker symbol in the buy field and specify how many shares you would like to acquire. And that's how you enter the stock market world.

Final thoughts

By their very nature, stock market investing can be volatile with numerous internal and external factors outside of the control of retail investors affecting stock prices. While exchange-traded funds and mutual funds might diversify this risk, it's best to assume that you are still susceptible to it.

During times of extreme price fluctuations within the stock market don't make emotional decisions and instead maintain patience. Consider writing down your goals beforehand and referring to this in times of market turbulence. Having a diversified portfolio of individual stocks will help mitigate risk. 

It's critical to understand your risk tolerance before investing in the stock market and make sure you get investment advice from an expert so that you can determine the best course of action for yourself. By analyzing your personal financial situation, they are able to advise you on the best route for your financial goals, from whether it's best to invest in individual stocks or index funds before you start investing.

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In the exciting world of crypto staking you can earn passive income while supporting the decentralization and security of cryptocurrencies. By understanding the concept of crypto staking and embracing its benefits, you can unlock the full potential of your crypto assets. In this article, we will explore the concept of crypto staking and delve into its importance and numerous benefits within the cryptocurrency ecosystem.

What is crypto staking?

Crypto staking refers to the process where individuals hold their cryptocurrency funds in a supported wallet to support the operations of a blockchain network and in turn earn rewards. By participating in staking, users contribute to verifying transactions and building consensus on blockchain networks.

To compensate for their contribution to the network, stakers earn additional cryptocurrency rewards. Staking promotes network security, as participants are incentivized to act honestly and uphold a certain level of financial commitment. It also enables holders to earn passive income by utilizing their crypto holdings. Overall, crypto staking offers a way to actively participate in the blockchain ecosystem and potentially earn rewards for supporting the network.

The benefits of staking in the cryptocurrency ecosystem

Staking plays a vital role in the cryptocurrency ecosystem, offering several key advantages. Firstly, by staking your crypto, you actively participate in securing the network, ensuring its resistance to attacks and maintaining its integrity. This service helps in fostering the decentralized nature of cryptocurrencies, making them less vulnerable to centralized control.

Another significant benefit of staking is the ability to earn passive income. By staking your crypto assets, you can receive regular rewards in the form of additional tokens or transaction fees. This incentivizes users to keep their funds in the network and actively support its operations, ultimately leading to increased network participation and stability.

Moreover, staking frequently offers greater returns compared to conventional financial paths. While investments like stocks and bonds can generate profits over time, staking offers the opportunity to earn additional tokens from newly issued or transaction fees. This potential for compounded returns makes staking an appealing choice for crypto enthusiasts seeking to optimize their financial engagement and earn additional funds.

In conclusion, crypto staking combines financial gains with active participation in the cryptocurrency ecosystem. 

Understanding Proof-of-Stake

Proof-of-Stake (PoS) is a consensus algorithm used in crypto staking. Unlike Proof-of-Work (PoW), which relies on computational power, PoS determines block validators based on the number of coins they hold and "stake" in the network. Bitcoin is a PoW network while Ethereum utilizes a PoS mechanism.

As mentioned above, stakers lock up their coins in a wallet, making them eligible to participate in block validation and consensus. The algorithm selects validators based on their stake, and they take turns proposing and validating new blocks. By staking their coins, participants demonstrate their commitment to the network's security and integrity, as losing their stake would be financially costly.

Stakers play a crucial role in the validation of transactions and creation of new blocks. When a transaction occurs, stakers verify its validity and ensure it complies with the network's rules. They propose new blocks by assembling transactions into a block and digitally signing it. 

The probability of being chosen as a block validator is directly proportional to the staker's stake in the network. Once a validator is selected, they add the proposed block to the blockchain, making the transactions permanent and secure. Stakers are incentivized to act honestly and in the network's best interest, as dishonest behavior can result in penalties and the loss of their staked coins.

Users looking to engage in staking can decide how actively involved they want to be in the network, either storing funds in a wallet that generates returns, or actively participating in the network (and earning more returns).

A look at staking rewards

Staking enables participants to earn rewards in the form of additional tokens or transaction fees. In return for their participation, stakers receive rewards. These rewards can be in the form of newly minted tokens, which are typically distributed proportionally to the staked amount. 

Additionally, stakers may also receive a share of the transaction fees generated within the network. The exact reward structure varies depending on the specific blockchain protocol and can be adjusted through consensus-driven mechanisms.

Several factors influence the calculation of staking rewards. The most significant factor is the amount of cryptocurrency staked by an individual. Generally, the more coins one stakes, the higher the potential rewards. 

The duration of the staking period also plays a role, with longer commitments often resulting in greater rewards. Additionally, the overall network participation level and the specific rules of the blockchain protocol can impact reward calculations. Some protocols may consider factors such as node uptime, reputation, or voting power in determining the distribution of rewards among stakers.

How the staking process works

Anyone can participate in staking, and the process typically involves the following steps. Once you have chosen the cryptocurrency network, be sure to check what their specific steps are.

• Set-up a wallet

First, select a compatible wallet that supports staking for the specific cryptocurrency. Install and set up the wallet following the instructions provided. Ensure you have a sufficient balance of the cryptocurrency you wish to stake in your wallet.

• Network participation

Some blockchains require you to delegate your coins to a validator or a staking pool. Access the staking section of your wallet and choose a validator or pool to delegate your stake to. Confirm the delegation transaction and wait for it to be processed by the network.

• Claiming rewards

As you actively participate in staking and contribute to the network, you will accumulate rewards over time. Depending on the specific blockchain, you may need to manually claim these rewards. Access the staking section of your wallet and follow the instructions to claim the rewards earned. The rewards will typically be added to your wallet balance once the transaction is confirmed by the network.

5 blockchain networks that support staking

Here are five blockchain networks that support this rewarding mechanism.

Ethereum (ETH)

Ethereum is a popular blockchain platform that recently transitioned from Proof-of-Work (PoW) to Proof-of-Stake (PoS). The staking mechanism on Ethereum 2.0 involves locking up a minimum of 32 ETH in a special wallet called the "validator deposit contract." Stakers participate in block validation and consensus, earning rewards in ETH for their contributions.

Cardano (ADA)

Cardano is a blockchain platform that utilizes a PoS consensus algorithm called Ouroboros. ADA holders can participate in staking by delegating their tokens to a stake pool or operating a personal stake pool. Stakers earn rewards in ADA based on their stake and the performance of the delegated pool.

Polkadot (DOT)

Polkadot is a multi-chain network that employs a variation of PoS called Nominated Proof-of-Stake (NPoS). DOT holders can nominate validators to secure the network or become active validators themselves. Stakers receive rewards in DOT for their participation and can also participate in governance decisions.

Tezos (XTZ)

Tezos operates on its own PoS mechanism called "Liquid Proof-of-Stake" (LPoS). XTZ holders can delegate their tokens to bakers (validators) or become bakers themselves. Stakers receive baking rewards in XTZ and may also participate in the governance of the Tezos network.

Cosmos (ATOM)

Cosmos is a network of interconnected blockchains that uses a PoS consensus algorithm called Tendermint. ATOM holders can delegate their tokens to validators and earn rewards in ATOM. Additionally, ATOM holders can participate in network governance through on-chain voting.

These are just a few examples of blockchain platforms that support staking, each with its unique staking mechanism and token rewards. It's important to research and understand the specific staking requirements and rules of each platform before participating.

Earning a passive income through staking

​​Staking provides an opportunity to generate passive income from cryptocurrency holdings. By staking your coins, you can earn regular rewards without actively trading in other assets. Staking offers a way to put idle crypto holdings to work and potentially increase their value over time.

When comparing staking to traditional financial opportunities, staking stands out for its accessibility and lower barrier to entry. . Unlike traditional financial activities that often require substantial capital or market knowledge, staking allows individuals to participate with relatively small amounts of cryptocurrency. Additionally, staking can provide more predictable and stable returns compared to the volatility of traditional markets.

The advantages of staking as an alternative income source include the potential for compounding returns, as rewards are often put back automatically. Staking also aligns with the principles of decentralization and actively supports blockchain networks. 

However, it's important to consider the risks associated with staking, such as the potential loss of the staked coins if the network suffers an attack or if the staker behaves maliciously. Stakers should also assess the security and reputation of the staking platform or validator they choose to ensure the safety of their funds.

In conclusion

Crypto staking offers an exciting opportunity to earn passive income while actively participating in the cryptocurrency ecosystem. By understanding the concept of staking, the underlying Proof-of-Stake consensus mechanism, and the specific staking processes of different blockchain networks, individuals can unlock the potential of their crypto assets. 

Staking provides benefits such as the ability to earn regular rewards and the potential for higher returns compared to traditional financial endeavors. However, it's important to weigh the advantages against the associated risks and carefully choose reliable platforms or validators for staking. With proper research and consideration, staking can serve as a valuable alternative income source for crypto enthusiasts.

There's a time-old debate over whether hodling or trading leads to better profits when it comes to buying into the cryptocurrency market. While both are great options, in the article below we look at the pros and cons of each option and weigh them up.

What is trading?‍

Trading refers to the buying and selling of financial instruments, assets, or commodities in financial markets with the aim of making a profit. Trading requires continuous monitoring of the charts and frequent study, whether in the commodities or stock market. Crypto trading involves buying and selling crypto at various intervals, whether minutes, hours, days, weeks, months, and years. Despite the greater risks involved, the potential for big percentage returns attracts individuals to trading.

If you want to trade crypto assets, it's essential to have a basic knowledge of the industry and how events in the news may influence Bitcoin's price. Remember to set stop losses and take profits so that you can protect your trade.

The pros of trading

• Potentially sizable profits

Crypto is known to be a volatile market and it's not uncommon to see price movements of 30% or above when crypto trading. With some strong analytical skills, one can observe, analyze and trade these waves and yield sizable profits.

• You're in control

Some people make a living trading part-time or full-time, particularly day trading. Day trading is where you enter and exit positions typically within a 24-hour period. Either way, you are in control of your own hours and workload, allowing you to take a break after you've met or exceeded your daily or weekly earnings targets.

The cons of trading

• Need to know trading fundamentals and technical analysis

Before you commence trading, you must acquire the skills to conduct fundamental and technical analysis of charts. This process demands dedicated effort and a time commitment.

• Need to be able to manage emotions

The prices of cryptocurrencies can change rapidly, making this a more risky proposition than long-term holding. You must be prepared to sell a losing cryptocurrency when it's plunging or decide to hodl for it to recover. Anything might happen in this fast-paced market, so you must make wise decisions without getting emotional.

What is hodling?

The term first came about in 2013 from a misspelled work in a BitcoinTalk Forum. The inebriated trader made the now infamous typo, and the word stuck. Almost a decade later, the term "hodl" remains a permanent fixture in the crypto ecosystem. Some have since branded it as "Hold On for Dear Life".

The term refers to holding a particular cryptocurrency for long periods of time, ignoring market volatility and knuckling through a bear market. As a passive strategy designed for long-term time frames, hodling requires a trader to simply buy a cryptocurrency and hold it in a secure place for months or even years until it reaches your price target.

You can buy Bitcoin or your favorite cryptocurrency at regular intervals if you're planning to HODL. This term is associated with buying a small amount of Bitcoins weekly or monthly. For example, let's say you have $1,000 to buy over time.

In this case, you might purchase $30 in Bitcoin each week or $50 worth every month. By staggering your buys like this rather than putting it all at once, you minimize the likelihood of price fluctuations having as much impact on the price per coin. This strategy prefers to buy Bitcoin over trade Bitcoin.

The upside to hodling

• Minimal effort

Hodling requires initial research into the cryptocurrency you wish to buy in (very important ans crucial to do your own research). From there establish your budget and strategy.

• Minimal stress

The crypto market is known for its significant swings in value. Thankfully with hodling there is no need to time the market for entry and exit positions or watch the chart all of the time.

• Minimal trading fees

Save money on trading fees by conducting on a few transactions, versus the many you will need to do when day trading. Some countries won't even charge tax on your crypto gains after a certain period of time (but be sure to check this in your area).

The downside of hodling

• Need patience

As hodling is a long-term strategy approach it requires patience and mental endurance. If you decide to use the Hodling strategy you'll need to manage emotions during tough market fluctuations and might need to wait years before being able to cash in on any ROI (return on investment).

• Funds are locked in

Because this is a long-term strategy, your funds would be inaccessible for an extended period. This could lead to missed opportunities to allocate resources elsewhere in the crypto space or any other market.

However, this can be avoided by leaving your funds in a crypto interest account. Tap provides users access to yield-generating wallets that allow you to enjoy both the long-term price gains as well as the returns.

In Conclusion: hodling vs trading

If you're a novice cryptocurrency investor, proceed with caution. There is no right or wrong answer to which of these strategies is "superior" and you could always combine both methods to match your portfolio depending of your risk appetite. Always keep in mind that before making any decisions, always do your homework, research about the asset you wish to purchase and about diversifying your portfolio to reduce risk regardless of the strategy you pick.

Since the advent of cryptocurrencies in 2009, the world has seen a substantial shift in the way that people transact and manage their money online. The first cryptocurrency, Bitcoin, sparked a wave that has impacted almost every corner of the globe, significantly shifting the financial landscape as we know it. Let’s explore how crypto is expanding economic freedom on a global scale.

What is economic freedom?

Before we evaluate how this $2 trillion industry is contributing to financial liberation, let’s first establish what economic freedom is. Explained simply, the term refers to measures that grant users the freedom to manage their money, property, and labour in each country, which is then compared globally.

More accurately, the measure of economic freedom is determined by using the Index of Economic Freedom, which weighs up 12 factors contributing to a country’s overall measure. This is broken down into 4 categories, each carrying varying subcategories, such as market openness measuring a country’s trade, financial and investment freedom. The others are regulatory efficiency, rules of law, and government size, each with its own subcategories.

This index was first published in 1995 by The Heritage Foundation and The Wall Street Journal and is used around the world today. This year, Singapore, New Zealand, Australia, Switzerland, and Ireland have ranked as the most financially free countries in the world.

Crypto and economic freedom

Cryptocurrencies were first established to provide an alternative monetary solution to the global financial crisis that sent the world into disarray in 2007. Satoshi Nakamoto created the new age payment system to empower individuals to hold control over their own finances, allowing them to manage and transact their money without the control of an authoritarian entity. For the first time in history, people were able to send money overseas without incurring the usual costly and time-consuming setbacks incurred with regular, global fiat transactions.

Due to the decentralized nature in which they are run, people are responsible for managing their own crypto wallets and specialised users on the network positioned across the globe are responsible for verifying and executing transactions. After Bitcoin entered the scene a significant number of new cryptocurrencies have been launched, over 12,000 at the time of writing. While some maintain the same “medium of exchange” model, many new cryptocurrencies have emerged providing alternative solutions to the industry.

Ethereum, the world’s second-biggest cryptocurrency, for example, provides a platform on which developers can create their own decentralized apps and cryptocurrencies, while other cryptocurrencies revolve around faster transaction times, cloud storage and private transactions. Each of these projects utilizes a blockchain network that was designed to improve and innovate the crypto and blockchain space.

Spanning beyond government control and lengthy paperwork, cryptocurrencies are able to provide a global currency that operates entirely online and is not confirmed to the borders of a country. Cryptocurrencies are global, accessible 24/7 and cannot be frozen in accounts.

How crypto is driving economic freedom

Requiring only an internet connection and start-up funds, Bitcoin (and cryptocurrencies in general) allows anyone around the world to create a wallet and start trading. One doesn’t need access to a large bank branch or lengthy paperwork, one simply needs an internet connection and a smartphone.

Curling back to the factors that contribute to economic freedom, cryptocurrencies are able to seamlessly check six of twelve of the categories of the Index of Economic Freedom through their innate properties. 

• Trade Freedom [Market Openness]
• Financial Freedom  [Market Openness]
• Business Freedom  [Regulatory Efficiency]
• Labour Freedom  [Regulatory Efficiency]
• Monetary Freedom  [Regulatory Efficiency]
• Property Rights  [Rule Of Law] 

The remaining categories however revolve around the governments running the nations in question, particularly the rule of law and government size categories. Nevertheless, cryptocurrencies can still assist in creating better-functioning economies and provide the technology that allows for a more open and free financial system.

A free and open financial system

As cryptocurrencies remove the barriers of borders, they allow people to transact their money in the same way that they communicate with each other (through the internet). As the digital age continues to evolve, we are likely to continue seeing a significant increase in the level of economic freedom that crypto provides to users around the world, empowering both the individual and the nation.

Since Bitcoin entered the financial landscape in 2009 it has made immense leaps and bounds in becoming the internationally recognised digital currency it is today. Despite the giant progress, crypto still has the potential to further infiltrate many aspects of society, particularly how we travel. 

This unprecedented technology can ultimately revolutionise the way we live our lives. Let’s take a look at how crypto is easing international travel, and how you can use it to your advantage.

Blockchain in travel

Many are familiar with cryptocurrencies, but few are aware that blockchain is the technology behind them. Blockchain technology, in simple terms, is a giant public ledger that stores data in a chronological, immutable manner. Particularly flourishing in supply chain management and the broader tech space, blockchain is also proving to be a useful asset to companies operating in the travel sector. 

With a wide range of options within the sector, from flights to car rental to hotels, blockchain is slowly starting to prove to be a powerful force in each case. Already several companies have adopted the technology and used it to add more streamlined and efficient services to the travel industry. 

For example, a French company, Sandblock is harnessing the technology and allowing travel companies to create their own loyalty tokens to attract and retain customers. These tokens can then be traded for a variety of services (beyond the company that issued them) or exchanged for alternative coins or fiat currencies. 

Another example is a Swiss-based, blockchain based company called Winding Tree which was designed to minimize fees for travelers while reducing costs for service providers. The non-profit company aims to cut out the middleman adding high fees to travelers' bookings and connect travelers directly to the service providers using smart contracts. 

These are just two in a wide range of companies already implementing blockchain technology into their businesses, illustrating the unlimited potential the nascent technology holds. 

Crypto bridges the gap

Like blockchain, cryptocurrencies are too playing an impressive role in easing cross-border travel, with plenty more room for development and better adoption. 

Cryptocurrencies facilitate seamless transactions without having to exchange one currency for another when going abroad. Say you lived in America and were visiting Australia, you wouldn’t need to exchange your US dollars for Australian dollars incurring high exchange fees and company-chosen exchange rates if you could just scan a QR code that automatically accesses funds in your universal crypto wallet.

Top tourist destinations around the world have started embracing cryptocurrencies, with a large amount likely to follow. For example, several destinations in Queensland, Australia, that provide access to the Great Barrier Reef have started implementing crypto payments into their tourist-focused businesses, and the reception has been impressive (see more below). 

El Salvador on the other hand approved Bitcoin as a legal tender in 2021, effectively making it very simple for any crypto-savvy tourist to travel around. One doesn’t even need to take a fiat card with them as all transactions can be completed using their mobile device. If that’s not the future of travel, what is?

Advantages of using crypto to travel

For the sceptics out there we’ve outlined several advantages of using cryptocurrencies when traveling, below. 

• It reduces the chance of theft or money loss
• It eases the booking process
• It allows users to avoid excessive exchange rates and ATM fees
• It minimizes the risk of credit card fraud
• Your smartphone functions as a wallet
• No left-over currency when you leave the country
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Globalisation meets blockchain

With increased awareness around countries and societies around the world, thanks to both mainstream and social media, companies expanding on a global level are becoming more and more common. 

However, this level of globalisation is often plagued with inconsistent means of distributing funds, causing delays, disruptions and unnecessary expenses. Cryptocurrencies and blockchain technology provide the infrastructure to change these difficulties, stablecoins even more so. 

The mobile revolution

According to a recent study, there are 6.37 billion smartphone users around the world, with 80% of the population in possession of one device. This is a significant rise from 2016’s statistics where only 49% of the world owned a smartphone.

Ownership levels are unsurprisingly highest in developed countries like the United States, Germany and the United Kingdom, where on average 80% of the population own a smartphone. Bangladesh, Pakistan and India are among the lowest percentages, with an average of 27% of the country owning one. 

Despite this, 80% of the developing world are still crypto-capable. All that is required is a smartphone and an internet connection. In the future, more local businesses, hotels, and shops in these countries will set up crypto wallets, enabling them to accept global payments in a matter of seconds (depending on the coin of choice).

This is likely to happen faster in the developing world than elsewhere, as demand for convenient and reliable payment solutions is on the rise. Less developed countries like the Bahamas are already catching on. 

An industry on the up

Crypto is easing international travel and contributing to a growing industry. Since the pandemic emerged, travel was put on a back foot but has since experienced a surge as people seek an alternative change of scenery. Now, cryptocurrency is making travel to remote areas, a growing demand, all the more possible.

Of course, government collaboration is paramount. Brisbane Airport in Australia is the first in the world to accept cryptocurrency at 30 merchants. As mentioned above, Queensland itself is a trailblazer in the crypto world. Agnes Water, a town located at the south of the Great Barrier Reef, has more than 40 businesses that accept Bitcoin. This kind of initiative is precisely what is required from governments and businesses for crypto to help grow the travel industry.

Ironing out foreign currency wrinkles

It is clear that crypto has the potential to revolutionise the way we operate around the world. Cryptocurrencies can make travelling easier and more accessible, and bolster tourism industries in developing countries. Solutions offered by several payment-focused cryptocurrencies could very well take over, as more and more tourists demand easier payment options.

Tap a streamlined cryptocurrency platform, is also contributing to the movement by providing a mobile app that facilitates rapid purchasing, trading, and secure storage of cryptocurrencies.

Welcome to the world of APY (Annual Percentage Yield). If you're looking to delve into the fundamentals of investing and understand how returns are calculated, you've come to the right place. In this article, we'll explore the concept of APY, digging into its significance, calculation methods, and how it factors in the power of compounding interest. 

What is APY?

In conventional finance, a savings bank account frequently offers both a low-interest rate and an annual percentage yield (APY). Let's explore these definitions below:

• The simple interest rate is the amount earned on the original deposit. 
• The Annual Percentage Yield (APY) is the annual return from the original deposit plus accumulated interest on investments or savings, expressed as a percentage.

By definition, the annual percentage yield (APY) is a key metric that reflects the true rates of return on an investment, taking into account the impact of compounding interest. Unlike simple interest, which remains constant over time, compounding interest is calculated and added to the principal at regular intervals (more on this below).

This results in a growing account balance, leading to larger interest payments as time goes on. By harnessing the power of compounding, investors have the potential to see their investments grow at an accelerated pace, enabling them to potentially earn higher returns compared to simple interest calculations.

APY captures this compounding effect and provides a more accurate measure of investment performance. For example, a certificate of deposit (CD) provides a secure investment option with a fixed term and a guaranteed APY, allowing investors to earn a predictable return on their savings over a specific period.

Compound interest and APY

Compound interest is a powerful concept in finance that enables investments to grow exponentially over time. Unlike simple interest, which is calculated only on the initial principal, compound interest takes into account the accumulated interest. This means that with each compounding period, the interest is added to the principal, leading to a larger base for calculating subsequent interest.

Annual Percentage Yield (APY) goes a step further by quantifying the impact of compounding. APY reflects the true rate of return on an investment product, factoring in the compounding effect. It provides a more accurate measure of growth potential and allows for effective comparisons between different investment options in the global market.

To calculate the effective annual rate of return with APY, consider the compounding frequency. Using the APY, you can determine the annual rate that, when compounded at the given frequency, yields the same overall return. This calculation enables investors to assess investment opportunities with all the information, based on their true growth potential, accounting for the compounds factor.

A practical example of APY

Suppose you have $10,000 that you deposit into a savings account with an APY of 5% and the interest is compounded annually. After one year, the 5% APY means that your investment will have grown by 5% of the initial amount, which is $10,000 * 5% = $500. Therefore, at the end of the year, your account balance will be $10,000 + $500 = $10,500.

Now, let's see how compounding interest affects your returns over time. Assuming you keep the money in the account for another year, the 5% APY will be applied to the new balance of $10,500. This results in an additional $525 ($10,500 * 5%) of interest earned, bringing the balance to $11,025.

As time goes on, the compounding effect becomes more pronounced. After five years, your initial $10,000 investment will have grown to approximately $12,762, thanks to the compounding interest.

This example demonstrates how APY takes into account the compounding of interest and enables your savings to grow more significantly over time compared to simple interest calculations.                       

A comparison of the terms: interest rate, APY and APR

The APY takes into account the impact of compounding, whereas the interest rate does not. The APY is the projected rate of return earned annually on a deposit after taking compound interest into account.

Compounding interest is the interest that a person accrues from their initial deposit, as well as the interest they earn from their original investment (or in other words, the initial deposit amount plus the interest generated).

The terms APY and APR are frequently used interchangeably, although they represent two different things. These words are sometimes confused due to their close resemblance. However, APY and APR aren't the same things.

The APR (annual percentage rate) is a formula that determines how much interest you'll pay when borrowing money and is the rate of return earned if your funds are invested in an interest-bearing account. 

When a consumer takes out a loan, their lender sets an APR that varies based on the loan. APRs are either fixed or variable depending on the type of loan the user requires. However, the APR is a rather basic interest rate and does not take compounding into account, unlike APY. 

Investors are typically on the lookout for opportunities that offer high-yield, such as investments with a competitive APY, as they aim to maximize their returns and grow their wealth.

How Is APY Calculated?

APY represents your rate of return, also known as the amount of earnings or profit you can make. Of course, your ultimate earnings will vary depending on how long you keep your assets invested while the holding period will influence how much you will earn. 

APY measures the rate of the annual return earned on any amount of money or investment after taking into account compounding interest.

The following is the formula for calculating APY:

APY = (1 + p/n)ⁿ − 1

Where:

p = periodic rate of return (or annual APR)

n = number of compounding periods each year

Bear in mind that an APY can be calculated in a variety of ways depending on the provider.

Conclusion

APY is a crucial measure reflecting the true rate of return, accounting for compounding interest. By harnessing the power of compounding, investors can potentially earn higher returns. Understanding APY empowers informed investment decisions, leading to wealth accumulation and maximizing growth potential.