Can You Trade Digital Currency?

Forex traders deal in US dollars, Euros and the like. But can you trade digital currency? This thought came to mind after reading an article in Bloomberg Technology about a new digital currency used by drug dealers, the Monero.

Forget bitcoin. There’s a new digital currency that is surging as online drug-dealers begin adopting it to conduct business with more anonymity.

The two-year-old currency Monero has more than quadrupled this month after gaining support from prominent websites that anonymously peddle drugs. It spiked to as much as $10 on Sunday after AlphaBay, one of the most popular sites for buying drugs like liquid LSD and hybrid cannabis, said last week it will begin accepting the currency on Sept. 1. The total value of all Monero in circulation pushed past $100 million on Monday, up from about $25 million at the end of last month, according to coincap.io.

“Following demand from the community, and considering the security features of Monero, we decided to add it to our marketplace,” AlphaBay announced on Reddit last week. “We expect this to cause a spike in the price, so if you are an investor, now is the time to purchase Monero.”

So, why would you want to buy and sell bitcoins or Monero? To the extent that either of these things is the next big thing you can get in cheap and sell when the price runs up making a lot of money. Forex traders know about this and it is why speculators trade currencies. However, Forex trading takes place in specific regulated markets. How does this work with digital currency? How can you trade digital currency and how can you make sure that your account isn’t being tampered with? This has to do with the miners.

Digital Currency Mining

Coin Desk describes bitcoin mining which is similar to what is used for Monero.

People are sending bitcoins to each other over the bitcoin network all the time, but unless someone keeps a record of all these transactions, no-one would be able to keep track of who had paid what. The bitcoin network deals with this by collecting all of the transactions made during a set period into a list, called a block. It’s the miners’ job to confirm those transactions, and write them into a general ledger.

In addition to collecting and tabulating trade data the miner encrypts the data into what is called a hash and attaches it to the block of ledger data. If someone tampers with data in the ledger it will not match what is in the hash when it is decrypted.

Digital Currency Secrecy

Another reason that people use digital currencies is that they want their transactions to be and remain secret. Because various bad actors use digital currencies to hide their ill-gotten gains, the FBI, NSA, Interpol and other commonly seek to track these transactions and break their codes. The reason that big league drug dealers have become interested in Monero is that their protocol for transfers is more complex and thus harder to track. In any case you can trade a digital currency online with other owners or through an exchange, all of the trading being so that when you buy or sell you use a credit card for payment or receipt of funds.