Throughout the past century, centralized exchanges have again and again proven to be not only unreliable, but also untrustworthy. Whether it is Mt.Gox, MF Global, Cryptsy or Bitstamp, many people have been defrauded simply because they trusted a third party, or an intermediary, to store their funds. No matter how big these funds are, or how many insurers, regulators or auditors are involved, every form of theft, deception and fraud can take place. These transgressions take place rather frequently with centralized retail banks and exchanges all over the world. Bitshares BTS represents the first ever decentralized exchange.
What Are Bitshares BTS?
Bitshares represents an innovative cryptocurrency, that was designed to utilize the blockchain technology in trading of various digital as well as tangible assets. BitShares’s platform is structured to handle a trading volume as big as that of NASDAQ’s, with a scalability that settles orders the second they are submitted.
BTS relies on Smartcoins, so what are SmartCoins?
A SmartCoin is a unique form of cryptocurrency whose value is pegged to that of another currency or commodity such as the USD or gold. 100% of the value of SmartCoins is backed up by BitShares’ core cryptocurrency, BTS; thus, SmartCoins can be converted to BTS at any time, according to an exchange rate that is formulated via a trustable price feed. At any point of time, except during utmost conditions, SmartCoins are insured to be worth at least their face value (but probably more, in most cases). Just like any blockchain based crypto currency, SmartCoins are divisible, fungible and fully decentralized.
The BitShares platform is a “Decentralized Autonomous Corporation” whose board of directors is represented by 101 “delegates” who are elected by owners of the BTS cryptocurrency. Technically speaking, BitShares is a decentralized exchange where almost any asset can be traded including assets that are hedged to the value of conventional commodities such as gold, fiat currencies like the USD and cryptocurrencies such as bitcoin, without having to rely on any form of third parties e.g. brokers, banks, exchanges…etc.
The BTS decentralized exchange offers a myriad of opportunities for traders to make profits. Throughout this tutorial, I will present you with a simple guide on how to use BTS to trade various assets.
Downloading and Installing Bitshares’ Application:
1. Download the latest Bitshares client for Windows by visiting this page.
2. Run the downloaded package to install the client.
3. After the installation procedure is complete, run the BitShares client and you will be presented with the main screen of the application that includes the top tradable assets, as shown on the below screenshot.
Creating an Account:
1. Now, to create an account, click on the “Create Account” button on the top right corner of the application’s main screen. You will be prompted with 2 models to choose from, as shown on the below screenshot, to create your account:
a. Wallet model:
This model stores the wallet’s data on your browser. The wallet is encrypted via a password of your choice, and it can be backed up via means of a brainkey or an encrypted file that includes all of your wallet’s private keys. This model allows you to use multiple accounts simultaneously.
Although the wallet model offers the highest level of security, it will be restricted to your present browser and machine. In order to move your wallet to a different browser or computer, you will have to use either the brainkey or the backup file.
b. Account model:
This model utilizes your account’s handle in addition to your password to generate the wallet’s private keys on the fly. With this model, you are restricted to only log onto one account at a time. Even though the account model enables you to log onto your wallet from any device via only your account’s handle and password, its security is relatively low as your password will be vulnerable to bruteforce attacks, so it is highly recommended to use a long password e.g. at least 20+ characters.
2. For the purpose of this tutorial, we will create an account using the wallet model, so click on the “Use the wallet model” button. You will be prompted to choose an account name and password. Note that the account name cannot include uppercase letters and has to have a “dash” and at least one number. As we mentioned earlier, choose a strong password with at least 20 characters. Don’t use words; instead, use a randomly chosen combination of numbers, letters and special characters. Services like Passwordsgenerator.net can be very helpful. Save your password in a safe place. After entering your account name and password and reentering your password, press the “create account” button.
3. After successfully creating your account, you will be prompted to backup your wallet, so press the “Create backup now” button, as shown on the below screenshot, to download a binary file that will help you restore your wallet on any computer.
4. After downloading your wallet’s backup file, you will be set to go and you will be prompted with a confirmation screen as shown on the below screenshot.
Understanding the concept of “Bitassets”:
Bitshares’ exchange relies on digital assets known as “BitAssets”, which represent digital assets whose value is pegged to assets that are not related to the BitShares cryptocurrency. To better illustrate this, 1 BitUSD is set so that it will always be worth 1 USD, 1 BitCNY is set so that it will always be worth 1 CNY and so on. Just like it works for fiat currencies like USD, Euro, CNY…etc, it also works for various commodities e.g. gold, oil….etc, or new digital currencies such as Bitcoin, Ethereum, STEEM….etc. You can see a full list of all available BitAssets by clicking on the “Exchange” button on the top bar of your BitShares client.
Depositing Coins Into Your BitShares Account To Start Trading:
There are two forms of transfer services that can help you deposit cryptocoins to your BitShares wallet to start trading BitAssets; gateways and bridges. Gateways enable you to deposit various cryptocurrencies into your Bitshares account including Bitcoin (BTC), Ethereum (ETH), DASH, STEEM, Steem Backed Dollars (SBD), DigixDAO (DGD), Maker (MKR) and Tethered USD (USDT). On the other hand, a bridge enables you to deposit and exchange one asset into the other, for example Bitcoin to Bitshares.
So, let’s see how you can deposit some bitcoin to your Bitshares account:
1. On the main screen of your BTS client, click on the Deposit/Withdraw button on the top menu bar. When you do so, you will be prompted with the main page for depositing and/or withdrawing various cryptocurrencies, as shown on the below screenshot.
2. Under the “Transfer Service” drop down menu, you will have four options to choose from; Openledger (OPEN.X), Blocktrades (TRADE.X), Transwiser and BitKapital. To deposit Bitcoin, we will choose the Openledger gateway from the drop down menu. Then, choose bitcoin from the drop down menu labeled “Please select the coin you would like to deposit”. As such, your wallet’s bitcoin address will appear, as shown on the below screenshot. Send bitcoin to this address and it will be added to your Bitshares’ client wallet after it has received at least three confirmations.
3. Now, before you can buy BitAssets, you have to have some BitShares. You can either deposit BTS directly to your wallet or exchange your deposited bitcoins to Bitshares via a bridge service. To do so, select the BlockTrades (TRADE.X) from the dropdown menu labeled “Transfer Service”. Your Bitshares address will appear as shown on the below screenshot; use it to send BTS directly from an exchange’s wallet such as Poloniex, Bittrex….etc. You can also exchange your bitcoins directly to Bitshares via BlockTrades (TRADE.X).
Trading BitAssets On Bitshares Platform:
Now, that you have BTS in your wallet, you can start trading BitAssets.
1. Click on the “Exchange” button on the top menu bar of your Bitshares client. The exchange’s main screen will appear with a list of all available BitAssets as shown on the below screenshot.
2. At this point, buying and selling are similar to trading on any cryptocurrency exchange. (Please, refer to our previous tutorial “Altcoin flipping: Making money online via trading cryptocurrencies” for more details.
For example, if you want to buy BitUSD, you will first define the price at which you want to buy it in the “price” box. Then, you will have to either define the amount of BitUSD coins you want to buy, or the total amount of BitShares you wish to spend on buying BitUSD at the predefined price.
3. The same rules we presented in our tutorial “Altcoin flipping – Cryptocurrency trading strategies that always win” will apply to trading BitAssets on BitShares’ decentralized exchange. So, always follow the news for trading clues. Never put all your eggs in one basket; divide your portfolio into 4-5 parts and use each part to buy one form of BitAssets….etc.
This was a simple guide to help you start trading BitAssets on BitShares’ decentralized exchange. Always remember, that cryptocurrency trading is very risky, so trade only the amount that you can afford to lose.