Cryptocurrency is rapidly becoming a mainstream investment option, and the need for safe and secure storage solutions has never been more critical. According to recent data, the total market capitalization of cryptocurrencies exceeded $1 trillion, with Bitcoin alone accounting for over 40% of the market share. As more institutions and investors enter the market, the demand for reliable storage options continues to grow. This is where custodial and non-custodial wallets come in, providing users with a safe and convenient way to store and manage their digital assets. As you read-on you will get to know the differences between these two wallets so you can in turn make better business decisions.

### What is a Custodial Wallet?

A custodial wallet is a type of wallet where a third party, such as an exchange, holds the private keys to your cryptocurrencies. Popular exchanges like Gemini, and Coinbase offer custodial wallets that make it easy for investors to transfer, store and manage their cryptocurrencies. These wallets are convenient and require less responsibility, but it’s important to note that using a custodial wallet means trusting a third party with your assets. As a result, you may not have full control over your cryptocurrencies.

### Pros of Custodial Wallets.

**User Friendly:** Most custodial wallets have a user-friendly design. You can easily figure out a wallet's features without any technical background.

- **It is Easier to Use:** Ease of use is the primary motivation for the existence of hot wallets. Tokens in custodial wallets can be used and/or traded right away.
- **It is Cheaper:** Custodial wallets are digital wallets offered by centralized third parties, like exchanges, which means they typically run on services and will require no gas or other costs.
- **Risk of losing your private key is low:** Keeping your keys safe is a major concern. With most of them, you can even get your passwords to reset or confirm your identity to regain access to your account should you lose it.
- **Higher backup possibility:** Another advantage of custodial wallets is that the central authority managing your wallet offers backup facilities. This makes it easier to undo any transaction or restore a previous version

### Cons of Custodial Wallets.

In the same way that a bank has your money, or a casino holds your chips, a custodial wallet owes you tokens that it holds and can use for its own purposes in the meantime — such as providing liquidity for trading.

- **Need for KYC:** Compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulation is required in many cases depending on jurisdictions and legislations applicable. You won’t be able to access your funds or any of the connected services until you can prove your identity. The requirement of identifying verification obstructs the fundamental idea of cryptocurrency, namely anonymity.
- **Data Breach/Hack:** Hot custodial wallets of exchanges hold a lot of tokens and Personal Private Information (PPI), which makes them prime targets for malicious actors such as hackers or other attackers.
- **Internet Dependency:** In order to view or transfer your tokens, you need internet access. Being cut from accessing the internet implies being cut from your capital.

### What is a Non-Custodial Wallet?

It is a type of Blockchain wallet that lets you be your own bank. This implies that users have full control over their funds and their private key.

Non-custodial wallets could be browser-based, software installed on mobile devices or desktop computers, or hardware devices.

While non-custodial wallets don’t require you to trust a third party, they require you to trust yourself to keep your keys and your wallet secure. If you were to lose your wallet, destroy your wallet, or forget your password, and you haven’t taken precautions to be able to regenerate your wallet, you could lose access to your funds. However, there is a backup procedure typically, you will have generated a sequential string of 12, 18, or 24 words that are displayed upon setting up your crypto wallet.

### Pros of Non-Custodial Wallet

- **You Have Control Over Funds:** A non-custodial wallet offers you control over wallet private keys, so you don’t have to rely on a third party to handle your cash or perform any related operations when you have control of a private key.
- **Lower Risk of Data Breach/Hack:** Everyone is a potential target for hackers, just like everyone is a potential target of theft. But being a single wallet with a relatively small amount of tokens compared to what an exchange would hold, reduces your risk of being targeted by attackers.
- **Instant Withdrawals:** Having complete control means you can move your tokens whenever you want, without any preset delay period imposed by third parties, which is a common practice with exchanges.
- **Non-Internet Reliant:** Local cold wallets can be accessed without any internet access, you may not be able to transact but you can at least see how many tokens you hold and that they are safe.

### Cons of Non-Custodial Wallets

- **No customer Service:** If you make a mistake, you are stuck with the consequences. One typo can mean a loss, and there’s no way of undoing mistakes.
- **Keys Lost = Money Lost:** If you lose your password & seed phrase, there is no one who can help you restore your wallet or information. Be very careful !
- **Higher Fees:** Fees are based on ETH gas costs, which depends on the price of ETH and the congestion of the network. These fees fluctuate wildly, and get pretty high at times.
- **More Responsibility:** If it is your first crypto purchase, you may not be comfortable sending funds to a cold wallet, or setting one up. Although, it is not technically difficult, it can be emotionally overwhelming.

![custodial vs non-cuctodial.png](https://res.cloudinary.com/samvwede/image/upload/v1677514242/custodial_vs_non_cuctodial_acc876b1b3.png)

### Which Wallet is better?

Custodial wallets are easier to deal with, and more convenient if you’re looking to move assets or participate in the markets. But the fear of major problems like attacks and bankruptcy should be enough to make you want a second non-custodial cold wallet to store your assets. Many people use a combination of both wallet types. It is much safer to distribute assets between multiple wallets. [Bitpowr](https://bitpowr.com/product/wallet-infrastructure) offers different wallet types to satisfy varying customer needs, including smart contract wallets, secure MPC custody, and non-custodial wallets.

If you need help with more info on wallets check out [Bitpowr technologies](https://bitpowr.com/product/wallet-infrastructure). We provide a variety of wallet services for your businesses. We also help you build and scale your crypto business, and manage your digital assets. [Sign up today for access](https://bitpowr.com/contact-sales)

Choosing the right wallet for your digital asset will save you a lot of losses. Here is a comparison between the two major type of wallets to help you make informed decisions.

Barticle27_2.jpg

Custodial and Non-Custodial Wallets: Which is best for your Business?

Stellar is an open-source, decentralized payment protocol that facilitates cross-border transactions between any pair of currencies. The company behind the protocol, also called Stellar, was founded in 2014 by Jed McCaleb and Joyce Kim. The Stellar protocol is supported by a non-profit organization, the Stellar Development Foundation (SDF), which aims to promote financial access and inclusion.

The native cryptocurrency of the Stellar network is called Lumens (XLM). Lumens are used as a bridge currency to facilitate transactions between different currencies on the network. They also serve as a means of anti-spam protection by requiring a small fee to be paid in Lumens for each transaction.

Stellar has received funding from a variety of sources, including Stripe, a payments company, and FastForward, a non-profit organization that supports open-source projects. In addition, the SDF has received funding from the likes of BlackRock and Google.

Stellar's mission is to connect people to low-cost financial services to fight poverty and develop individual potential. The organization aims to make it possible for people to transact with each other without the need for intermediaries, like banks, and to create a more inclusive global economy.

## How it Works

The Stellar network uses a consensus algorithm called the Stellar Consensus Protocol (SCP). SCP is based on the Federated Byzantine Agreement (FBA) model, which allows for fast and efficient transactions while maintaining a high level of security. SCP uses a network of validators responsible for verifying and confirming transactions on the network. This allows for quick confirmation times, typically just a few seconds.

The Stellar protocol uses a consensus algorithm called the Stellar Consensus Protocol (SCP) to verify transactions on the network. This algorithm is based on a federated Byzantine agreement (FBA) model, which allows for faster and more efficient consensus than traditional proof-of-work or proof-of-stake algorithms.

## What are its different uses?

One of the main use cases of the Stellar network is as a cross-border payment system. The network allows for fast and efficient money transfers between individuals and businesses in different countries, with low transaction fees. The network also supports the issuance of digital assets, such as tokens, which can be used for a variety of purposes, such as raising funds for a project or representing a company's stock.

 Here are several other use cases of Stellar

1. **Cross-border payments:** The Stellar protocol allows for fast and efficient cross-border transactions between any pair of currencies. This can help to reduce the cost and complexity of international payments, especially for individuals and small businesses.
2. **Remittances:** The Stellar protocol can be used to facilitate remittances, which are money transfers from one country to another. This can be particularly useful for migrant workers who want to send money back to their home countries.
3. **Microfinance:** The Stellar protocol can be used to provide microfinance services, which are small loans to individuals or small businesses. This can help to promote financial inclusion and support economic development in underbanked communities.
4. **Mobile money:** The Stellar protocol can be used to facilitate mobile money transactions, which allow individuals to store, send, and receive money using their mobile phones. This can be particularly useful in countries where many people do not have access to traditional banking services.
5. **Digital identity:** The Stellar protocol can be used to create and manage digital identities, which can be used for a variety of purposes, including voting, financial transactions, and accessing government services.
6. **Tokenization:** The Stellar protocol can be used to create, issue, and trade tokens or assets, which can represent a variety of things like loyalty points, rewards, or even stocks.
7. **Decentralized Exchange:** The Stellar protocol can be used to create decentralized exchanges (DEX) that enable users to trade assets in a trustless and decentralized environment.

## The Future of stellar

In the future, Stellar hopes to expand the use of its network beyond just financial services and to be used in other industries such as supply chains, voting systems, and more. With its fast and efficient transaction processing, low fees, and support for a wide range of digital assets, the Stellar network is well-positioned to become a key player in the blockchain and cryptocurrency space.

[Bitpowr recently announced the integration of Stellar Trustline Asset into our platform](https://bitpowr.com/blog/enable-more-stellar-trustline-support-assets-on-bitpowr). unlike any other blockchain, Stellar’s uniqueness is becoming more noticeable. On Bitpowr, you can now enable and transact with Stellar Trustline Asset for more security and as a better option for your customers.   [Reach out](https://contact@bitpowr.com/contact-sales) if you need help getting started using Stellar for your business, we are happy to help.

Learn about the Stellar Network, it's use cases and benefits.

BA16_7.jpg

What is Stellar

API is the acronym for ***Application Programming Interface.*** The world is rapidly becoming an "API-powered economy" worth trillions of dollars. APIs allow software programs to communicate with one another by retrieving and interpreting data based on the user's needs, which simplifies a lot of development work. 

**A brief History**: APIs first appeared in computing history, long before the personal computer. An API was typically used as a library for operating systems at the time. Although it occasionally passed messages between mainframes, the API was almost always local to the systems on which it operated. APIs emerged from their confines after nearly 30 years. They started becoming an important technology for remote data integration by the early 2000s.

### **Here is how APIs work.**

When you use a mobile phone application, it connects to the Internet and sends data to a server. The server then retrieves that data, interprets it, takes the appropriate actions, and sends it back to your phone. The application then interprets that data and displays the information you requested in a readable format. In simple terms that is how APIs work.

There are four different ways that APIs can work depending on when and why they were created.

**REST APIs:** These are the most popular and flexible APIs found on the web today. REST stands for Representational State Transfer. REST defines a set of functions like GET, PUT, DELETE, etc. that clients can use to access server data. The client sends requests to the server as data. The server uses this client input to start internal functions and returns output data back to the client.

**Websocket APIs:** [Websocket API](https://docs.aws.amazon.com/apigateway/latest/developerguide/apigateway-websocket-api-overview?pg=wianapi&cta=websocketapi) is another modern web API development that uses JSON objects to pass data. A WebSocket API supports two-way communication between client apps and the server. The server can send callback messages to connected clients, making it more efficient than REST API.

**SOAP APIs:** These APIs make use of SOAP (Simple Object Access Protocols), and it works with XML(***extensible markup language***) only. It is used by both the client and the server to exchange messages. This is a less flexible API that was once popular, we now have better ones.

**RPC APIs:** These APIs are referred to as Remote Procedure Calls. The client performs a function (or procedure) on the server, and the server returns the result to the client.

### **What are the different types of APIs?**

APIs are classified based on their architecture and intended use. We've already discussed the various types of API architectures, so let's take a look at the types of APIs: open APIs, partner APIs, internal APIs, and composite APIs.

1. **Public/Open APIs**

These are open to the public and may be used by anyone. There may or not be some authorization and cost associated with these types of APIs. Making APIs public has several benefits, the most important of which is the ability to freely share data. This encourages any external business or developer to integrate with the app that owns the API, increasing the value of both the third-party software and the API. Third parties benefit from the open API's lack of restrictions and ease of implementation.

1. **Partner APIs**

With this access is restricted to authorized clients with official licenses, so **[security measures](https://blog.hubspot.com/website/api-security)** with partner APIs tend to be stronger than with public APIs. Some companies prefer partner APIs because they want more control over who can access their resources and more say over how those resources are used. Pinterest, for example, took a submission-based approach to granting partners access to new data services via its API, requiring partners to submit a request detailing how they intend to use the API before being granted access.

1. **Internal APIs**

Internal APIs (also known as private APIs) are not intended for use by third parties, unlike open APIs and partner APIs. Internal APIs are only available for use within a company and are designed to streamline data transfers between teams and systems. These APIs are available to internal company developers, but not to external developers.

Internal APIs are frequently completely hidden from the public because they are not documented in a publicly released software development kit (or at all in some cases). However, many businesses eventually make their internal APIs public.

Using APIs for internal data transfers is thought to be more efficient, secure, and traceable. It is also a scalable solution, as when a company introduces a new internal system, this system can communicate with existing systems.

1. **Composite APIs**

Composite APIs combine multiple APIs, allowing developers to group calls or requests and receive a single unified response from multiple servers. A composite API would be used if you needed data from multiple applications or data sources. Alternatively, you can use a composite API to initiate a chain of calls and responses without your intervention.
Composite APIs, by reducing the total number of API calls, can result in less server load and overall faster systems, as well as reduced system complexity. They're frequently used in **[microservices](https://blog.hubspot.com/website/microservices-vs-api)**, where one job may require data from multiple internal APIs to complete.
Consider the following Stoplight example: Assume you want to place an order using a shopping cart API. You might believe that all it takes is one request. However, several requests must be made. You must first create a customer profile. Then you must create the order, add an item, add another, and change the order's status. Instead of making five separate API calls in quick succession, a composite API allows you to make just one.

**What is an API gateway?**

An API Gateway is an API management tool for enterprise clients that use a broad range of back-end services. API gateways typically handle common tasks like user authentication, statistics, and rate management that are applicable across all API calls.

**What is GraphQL?**

GraphQL is a query language designed specifically for APIs. It prioritizes providing clients with only the information they require. It is intended to make APIs more responsive, flexible, and developer-friendly. GraphQL, as an alternative to REST, allows front-end developers to query multiple databases, microservices, and APIs using a single GraphQL endpoint. Organizations choose GraphQL to build APIs because it allows them to develop applications more quickly. [Read more about GraphQL here](https://aws.amazon.com/graphql/).

**APIs vs webhooks**

A webhook is a lightweight, event-driven communication channel between two APIs. Webhooks are commonly used by web apps to receive small amounts of data from other apps, but they can also be used to trigger automation workflows in GitOps environments.

Because they place the responsibility of communication on the server rather than the client, webhooks are also known as reverse APIs or push APIs. Instead of the client sending HTTP requests—asking for data until the server responds—the server sends a single HTTP POST request to the client as soon as the data is available. Webhooks, despite their moniker, are not APIs; they collaborate. In order to use a webhook, an application must have an API.

### **The Future**

There are several trends that are likely to shape the future of APIs which are:

**Increased use of microservices:** Microservices is a software architectural style that involves building a single application as a suite of small, independent services. APIs play a key role in the communication between these services, and the use of microservices is likely to continue to grow in the future as it allows for more flexible and scalable systems.

**Increased use of cloud-based APIs:** Many organizations are moving their systems to the cloud, and APIs will play a key role in allowing these systems to communicate with each other and with on-premises systems. Cloud-based APIs are likely to become more common as organizations seek to take advantage of the scalability and flexibility of the cloud.

**Increased focus on security:** As more and more sensitive data is shared through APIs, there will be a greater focus on securing these interfaces to protect against unauthorized access and data breaches. This will likely involve the use of stronger authentication and authorization measures, as well as increased use of encryption to protect data in transit.

**The continued evolution of API standards:** There are a number of different standards for building and consuming APIs, and these standards are likely to continue to evolve as the needs of developers and organizations change. This could involve the development of new standards or the adoption of existing standards by a wider community of users.

### **Conclusion**

Overall, APIs will continue to be a key part of the technology landscape, and their importance is likely to grow as more organizations adopt cloud-based systems and build complex software systems using microservices.

Bitpowr also provides a  simplified [API](https://docs.bitpowr.com/reference/api-overview) service to make it easier for developers to integrate with crypto. We also offer a comprehensive institutional wallet and digital asset management solution for exchanges, payment gateways, Neobanks, and other financial institutions. [Reach out for](https://bitpowr.com/contact-sales) more information on these services.

An overview of API, what they are, the different types and their overall usefulness. 

BArticle2_8.jpg

What are APIs

Proof of Reserve is a cryptographic technique that allows a person or organization to prove that they have a certain amount of a particular asset without revealing their exact holdings. This can be useful for exchanges, banks, and other institutions that want to demonstrate their solvency or financial strength without revealing sensitive information about their holdings.

### **How does it work?**

Proof of reserve can be demonstrated in a number of different ways, depending on the type of asset being held. For example, a person or organization holding Bitcoin can use a technique called "Merkle trees" to prove that they have a certain amount of Bitcoin without revealing their exact holdings. 

This involves creating a tree-like structure with a series of hashes, with each hash representing a small amount of Bitcoin. By revealing only a few of the hashes in the tree, the person or organization can prove that they have a certain amount of Bitcoin without revealing their exact holdings.

Another way to demonstrate proof of reserve is through the use of cryptographic signatures. In this case, the person or organization holding the assets creates a digital signature for each small amount of the asset and then reveals a selection of these signatures to prove that they have a certain amount of the asset without revealing their exact holdings.

Overall, proof of reserve is an important tool for demonstrating solvency and financial strength in the cryptocurrency industry. By allowing exchanges and other institutions to prove that they have sufficient reserves without revealing sensitive information, proof of reserve helps to maintain trust and confidence in the industry.

### **Why Proof of Reserve (PoR)?**

Proof of Reserve is particularly important in the cryptocurrency industry, where many exchanges and other institutions hold large amounts of digital assets on behalf of their customers. In the past, there have been instances of exchanges failing to maintain adequate reserves, leading to financial losses for customers and damaging the reputation of the industry as a whole.

The recent collapse of FTX, a cryptocurrency exchange, has highlighted the importance of implementing "proof of reserves" (PoR) to prove that exchanges and other institutions actually hold the assets they claim to hold. PoR is a cryptographic technique that allows institutions to demonstrate that they have a certain amount of assets without revealing their exact holdings. This can help restore trust in the industry and prevent incidents like the FTX collapse. 

Several exchanges and other institutions, including Kraken, BitMex, and CakeDeFi, have recently conducted PoR attestations, and others, including Binance and Huobi, have announced plans to do so in the near future. However, broader adoption of PoR is still needed to gradually expand the level of trust in the industry.

### **How important is Proof of Reserve?**

One recent example of the importance of Proof of Reserve came to light during the FTX saga, which involved allegations of insider trading and manipulation of cryptocurrency prices on the FTX exchange. In this case, the lack of transparency around the exchange's holdings raised concerns about the integrity of its operations and the security of its customer's funds.

The concept of Proof of Reserve is closely related to that of liquidity, which refers to the ability of a company to buy or sell assets quickly and at a fair price. In the case of a cryptocurrency exchange, liquidity is important because it allows customers to buy and sell cryptocurrencies without having to worry about the exchange running out of funds or experiencing delays in processing their trades.

One way that exchanges can demonstrate Proof of Reserve is by publishing regular audits of their holdings, which can provide transparency and reassurance to customers. This practice is not without its challenges, however, as audits can be costly and time-consuming to conduct, and there may be concerns about the potential for audits to be manipulated or falsified.

### **Conclusion**

Despite these challenges, Proof of Reserve is an important concept in the cryptocurrency industry, as it helps to build trust and confidence in the operations of exchanges and other companies that hold large amounts of digital assets. 

In the wake of the FTX saga and other instances of alleged misconduct in the industry, it is more important than ever for exchanges and other companies to be transparent about their holdings and to demonstrate that they have the resources to meet their obligations to customers.

There has been more emphasis on proof of reserve recently, here's what the concept actually means.

BArticle7_8.jpg

Understanding Proof of Reserve and its Importance

There’s no question that the world is seeing the gradual emergence of a redefined financial system. This financial system is driven by exciting emerging technologies like blockchain-powered cryptocurrencies such as Bitcoin, which is the most popular option. 

Anyone who even remotely understands Bitcoin can spot how different it is from fiat currencies. It isn’t issued by governments, it’s digital and operates on an open network without any centralized controlling body. 

So how is something that’s so flexible vying to be as valuable as fiat currency? Simple, some of its traits mirror those of fiat currency, and most of the ones that don’t, also add to its value. Let’s take a look at these traits that have infused bitcoin with incontestable value.

## **Factors that Make Bitcoin Valuable**

### **1. Scarcity**

Scarcity is one of the key factors that gives Bitcoin its value. Bitcoin has a hard cap of 21 million coins, which means that there will only ever be 21 million bitcoins in existence. This scarcity is built into the Bitcoin protocol and cannot be changed.

The limited supply of bitcoins ensures that it is scarce and cannot be inflated like fiat currency. Governments and central banks can print more money at will, which can lead to inflation and devaluation of the currency. This is not the case with Bitcoin, as the limited supply ensures that its value cannot be diluted.

Due to this scarcity, Bitcoin can act as a store of value, similar to gold. It allows individuals to protect their wealth from inflation and currency devaluation. The limited supply means that the value of Bitcoin is more likely to increase over time, rather than decrease.

Scarcity also makes Bitcoin more attractive to investors, as it is perceived as a hedge against inflation and a potential store of value.

### **2. Decentralization**

Bitcoin is a decentralized digital currency, meaning that it is not controlled by any single institution or organization. Instead, it is based on a distributed ledger technology called blockchain, which records and verifies all transactions on a public ledger. This public ledger is maintained and secured by a distributed network of users called "nodes".

By running on a decentralized system, Bitcoin presents users with a number of benefits:

**Transparency:** Since bitcoin transactions are recorded on a blockchain ledger which is open and accessible to anyone, such transactions are transparent and verifiable. This ensures that the system is fair and that no single entity can manipulate the system for their own benefit. It also leaves room for accountability as all transactions can be viewed by anyone.

**Security:** The decentralized nature of Bitcoin makes it more resistant to hacking and fraud. Since the system is not controlled by a single entity, there is no central point of failure that can be targeted by hackers. It is much more difficult for hackers to attack the network and steal bitcoins. This makes it a more secure option for storing and transferring value.

**Censorship-resistance:** Decentralization also makes it difficult for any one entity to block, censor transactions or freeze accounts. This ensures that the system is open to everyone, regardless of their location or circumstances.

**Control:** Decentralization gives individuals more control over their own money, as they are not beholden to a centralized institution. This allows them to make transactions faster, cheaper, and more securely than traditional financial systems.

**No intermediaries:** Bitcoin allows for peer-to-peer transactions without the need for a third party intermediary such as a bank. This reduces the cost and time required for transactions, making it more efficient than traditional financial systems.

### **3. Utility as a Medium of Exchange**

Bitcoin has utility as a medium of exchange, just like fiat currency, allowing individuals and businesses to buy and sell goods and services. It can be used to purchase goods and services online or in physical stores that accept it as a form of payment. As more merchants and businesses start accepting Bitcoin, its utility as a medium of exchange increases.

When you make a purchase with Bitcoin, you are essentially transferring ownership of the coins to the seller in exchange for the goods or services you are purchasing. The transaction is recorded on the blockchain, which is a public ledger that contains all Bitcoin transactions.

One of the key benefits of using Bitcoin as a medium of exchange is that it allows for fast and secure transactions. Bitcoin transactions are processed by a decentralized network of nodes and are typically confirmed within minutes, whereas traditional bank transfers can take several days to clear. Additionally, Bitcoin transactions are secured by blockchain technology, which makes them more resistant to fraud and hacking than traditional electronic transactions.

Another benefit of using Bitcoin as a medium of exchange is that it allows for greater financial freedom and autonomy. With Bitcoin, individuals are not beholden to centralized institutions such as banks, which can impose fees and restrictions on transactions. This makes it a useful option for individuals in countries with unstable currencies or restrictive financial systems.

Bitcoin's utility as a medium of exchange also allows for borderless transactions without the need for intermediaries such as banks, which can make cross-border payments quicker, cheaper and more efficient.

It's important to note, that while Bitcoin's utility as a medium of exchange has been increasing over the years, it is still not widely accepted as a form of payment and its volatility can make it difficult for merchants to price their goods and services. 

However, with more merchants and businesses starting to accept Bitcoin, and new technologies like stablecoins and payment processors, the utility of Bitcoin as a medium of exchange is expected to continue to grow in the future.

### **4. Portability and Divisibility**

Bitcoin's portability and divisibility are two key benefits that make it a valuable and convenient option for storing and transferring value.

Portability refers to the ease with which Bitcoin can be transferred and stored. Because it is a digital currency, it can be stored in digital wallets, which are software programs that allow individuals to store, send and receive bitcoins. Digital wallets can be accessed from any device with an internet connection, which makes it easy for individuals to access and transfer their bitcoins from anywhere in the world.

Divisibility refers to the ability of Bitcoin to be divided into smaller units. Each bitcoin can be divided into 100 million units called satoshis. This allows for the flexibility to make transactions of any size, whether it is a small purchase or a large transfer. This also means that Bitcoin can be used for microtransactions, which are small transactions that are not possible or practical with traditional fiat currencies due to high transaction fees.

Combined, these two benefits make Bitcoin a very convenient and versatile option for storing and transferring value. In comparison to other currencies such as gold, Bitcoin has the advantage of being more portable, divisible, and easily transferable. Individuals easily store and transfer bitcoins from anywhere in the world, and make transactions of any size. 

It also allows for use cases that were not practical with traditional fiat currencies such as micropayments and borderless transactions.

### **5. Potential to Drive Innovation**

Bitcoin's ability to drive innovation makes it valuable by providing the foundation for new technologies and use cases. The decentralized and secure nature of blockchain technology, which underpins Bitcoin, enables the creation of new products and services that were previously not possible with traditional technologies.

One of the most significant ways in which Bitcoin is driving innovation is through the development of decentralized finance (DeFi) applications. These are financial applications built on top of blockchain technology that allow for the creation of decentralized and autonomous financial systems. 

DeFi has the potential to provide an alternative to traditional financial systems, which can be more secure, transparent, and efficient. This is making Bitcoin and other cryptocurrencies attractive to individuals and businesses looking to take advantage of the benefits of DeFi.

Another area where Bitcoin is driving innovation is micropayments and micromoney, by allowing small transactions with low fees, it opens up new use cases such as micropayments for content, micromoney transfers and more. This allows for new business models to emerge, providing new opportunities for entrepreneurs and businesses.

Bitcoin is also driving innovation in various other industries such as logistics, gaming, and more. This makes it an attractive option for individuals and businesses looking to take advantage of the benefits of blockchain technology and be part of the new opportunities and possibilities it brings.

Bitcoin is based on blockchain technology, which has the potential to revolutionize various industries. As more businesses and individuals begin to see the benefits of this technology, the demand for Bitcoin is likely to increase.

## **How is the Value of Bitcoin and Other Cryptocurrencies Determined?**

The value of Bitcoin and other cryptocurrencies is determined by supply and demand in the market. The price of Bitcoin, like any other asset, is the result of the interaction between buyers and sellers in the market.

When demand for Bitcoin is high, the price will rise as more people are willing to pay more to buy it. On the other hand, when demand is low, the price will fall as fewer people are willing to buy it. This is similar to how the value of stocks, real estate, and other assets is determined by supply and demand.

Several factors can influence demand for Bitcoin and other cryptocurrencies, including:

**a. Adoption:** As more individuals and businesses adopt Bitcoin and other cryptocurrencies, demand for them increases, driving up the price.

**b. Media coverage:** Positive media coverage can increase awareness of Bitcoin and other cryptocurrencies, leading to increased demand and higher prices. Negative media coverage can have the opposite effect.

**c. Economic and political factors:** Economic or political instability in a country can lead to increased demand for Bitcoin and other cryptocurrencies as a store of value and a hedge against inflation.

**d. Innovation and new use cases:** The development of new technologies and use cases for Bitcoin and other cryptocurrencies can increase demand for them and drive up the price.

It's important to note that the value of Bitcoin and other cryptocurrencies can be highly volatile, and that the market is still relatively small and young, which means that the value of these assets can be subject to large fluctuations in a short period of time. This volatility can be caused by various factors such as lack of regulation, speculation, and market manipulation.

## **Don’t Be Left Behind**

As the digital economy continues to evolve, it’s evident that Bitcoin and other cryptocurrencies have a role to play given their unique characteristics. Future-proofing your business means exploring the new decentralized financial system that includes key components like Bitcoin and identifying how you can embed that in your operations. 

To successfully do this, you’d need reliable blockchain infrastructure for seamless access, and that’s what Bitpowr provides. And if you already run a DeFi-based business or are looking to kickstart one, we also have all you need to run and scale your digital asset business easily, quickly and cost-effectively. [Let’s chat here](https://bitpowr.com/contact-sales).

A deep dive into the factors that have made Bitcoin an attractive investment vehicle and a highly sought after digital currency.

Why is bitcoin valuable.jpg

Why is Bitcoin Valuable?

Ethereum rollups are a type of layer 2 scaling solution for the Ethereum blockchain. Rollups allow for increased transaction throughput on the Ethereum network by taking transactions off the main chain and bundling them into a compact form on a separate layer. This allows for faster and cheaper transactions, which is especially important for decentralized finance (DeFi) applications and other high-volume use cases.

### **How do Ethereum Rollups work?**

Rollups work by taking a batch of transactions and combining them into a single "rollup" transaction, which is then recorded on the Ethereum blockchain. This reduces the number of transactions that need to be processed by the Ethereum network, allowing for faster and cheaper transactions.

Ethereum rollups come in two main varieties: optimistic rollups and zero-knowledge rollups (zk-rollups).

Optimistic rollups assume that the data in a rollup is valid, and they use dispute resolution to guard against fraudulent transactions. If someone tries to submit a fraudulent transaction within a rollup, it is submitted directly to the Ethereum network for validation. Both parties involved in the transaction are required to have staked ETH, and they stand to lose money if the transaction is found to be fraudulent or if they try to deceive the network.

Zk-rollups, on the other hand, use a cryptographic technique called zero-knowledge proof to verify the validity of transactions within a rollup. This method allows someone to mathematically prove that a statement is true without revealing any additional information about the statement. In the context of Ethereum rollups, this means that only valid transactions can be included in a zk-rollup. This eliminates the need for a dispute-resolution system, as is used in optimistic rollups.

### **Advantages of Ethereum Rollups**

1. One of the main benefits of rollups is that they allow for significantly higher transaction throughput on the Ethereum network. This can be especially beneficial for decentralized applications (dApps) that require a high volume of transactions, such as games or exchanges.

2. Rollups also offer improved security compared to other scaling solutions, such as off-chain payment channels. Because rollups use the Ethereum blockchain to secure transactions, they are less vulnerable to hacks and other attacks that could compromise the integrity of the network.

3. Another advantage of rollups is that they are compatible with existing Ethereum infrastructure and tools. This means that developers can use their existing knowledge and resources to build on top of rollups, making it easier for them to incorporate this technology into their dApps.

### **Conclusion**

There are currently several different implementations of rollups on the Ethereum network, each with its own unique features and benefits. Some of the most popular rollups include Optimistic Rollup, ZK-Rollup, and Validium.

Overall, Ethereum rollups offer a promising solution for scaling the Ethereum network and improving its capabilities. By allowing for faster and cheaper transactions, rollups can help make the Ethereum network more accessible and user-friendly, and pave the way for more widespread adoption of decentralized technologies.

Bitpowr supports Ethereum-based assets making it easy for you to easily build DApps , DeFi platforms & exchanges, [reach out to find out how](https://bitpowr.com/contact-us) we can help your business launch and scale quickly.

An overview of Ethereum rollups and how they facilitate faster and cheaper transactions on the Ethereum network.

BArticle6_8.jpg

What Are Ethereum Rollups?

The blockchain’s capacity to support diverse decentralized finance (DeFi) services and apps is both exciting and overwhelming. On the one hand, the abundance of options means users have more freedom but on the other hand, it implies they have a lot of learning to do to make informed decisions. A good case in point is the availability of centralized and decentralized exchanges.

While centralized exchanges are largely more popular, their decentralized counterparts aren’t any less valuable. But what are decentralized exchanges, and how do they work? Let’s find out.

### **What is a Decentralized Exchange?**

A decentralized cryptocurrency exchange is a platform that allows users to buy and sell cryptocurrencies without the need for a third-party intermediary. Instead of using a central server to match buyers and sellers and hold their funds, decentralized exchanges use blockchain technology to enable peer-to-peer trading. This means that users can trade directly with each other, without the need for a trusted third party to oversee the transactions. 

Decentralized exchanges are often considered to be more secure and private than traditional centralized exchanges, as they are less vulnerable to hacking and do not require users to provide sensitive personal information.

### **How Do Decentralized Exchanges Work?**

When a user wants to make a trade on a DEX, they create a trade order and broadcast it to the network. Other users who are interested in the trade can then respond with their own offers. The DEX's software then matches the trade orders and executes the trade automatically, without the need for a central authority to oversee the transaction.

DEXs can be built on various blockchain networks, such as Ethereum, EOS, and TRON. The most common type of DEX is built on the Ethereum network and uses smart contracts to facilitate trades. 

A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. This code is stored on the blockchain, where it is transparent and unchangeable. When a trade is made on a DEX that uses smart contracts, the terms of the trade are automatically enforced by the code in the smart contract, without the need for a third party to mediate the transaction.

In summary, decentralized exchanges allow users to trade cryptocurrencies directly with each other, using blockchain technology to facilitate the transactions and ensure their security and transparency.

### **Types of Decentralized Exchanges**

There are several different types of decentralized exchanges, each with its own unique characteristics and trade-offs. The most common types of DEXs are:

**1. Automated Market Maker (AMM) DEXs**

These DEXs use a mathematical algorithm, called an Automated Market Maker, to set the price of assets and match buyers and sellers. The most popular example of this type of DEX is Uniswap, which uses a liquidity pool and the constant product formula to determine the price of assets. AMM DEXs are known for their ease of use and fast trade execution times.

**2. Order Book DEXs**

Order Book DEXs use an order book, similar to centralized exchanges, to match buyers and sellers. Orders are stored on the blockchain and are matched when there is a suitable counterparty. The most popular example of this type of DEX is 0x protocol, which allows for the creation of decentralized exchanges on the Ethereum blockchain. Order book DEXs are known for their increased liquidity and lower trading fees.

### **Benefits of Decentralized Exchanges**

There are several potential benefits to using decentralized cryptocurrency exchanges, including:

**1. Greater Security**

One of the main benefits of DEXs is their increased security compared to centralized exchanges. Since users are in control of their own funds, there is no central point of failure that can be targeted by hackers. 

Additionally, DEXs are often non-custodial, meaning that the exchange does not hold users' funds, further reducing the risk of funds being stolen. This means that users' funds are generally safer on a decentralized exchange than on a centralized one.

**2. More Control**

On a decentralized exchange, users have complete control over their funds. This means that they can make transactions and manage their funds without needing to seek approval from a third party.

**3. Greater Resistance to Censorship**

Because decentralized exchanges are not controlled by a single entity, they are less vulnerable to censorship. This means that users can trade freely, without worrying about their transactions being blocked or their funds being seized by a central authority.

**4. Access to a Wider Range of Assets**

Decentralized exchanges often allow users to access a wider range of assets than centralized exchanges, as they are not limited by the assets that the exchange itself supports. This can give users more flexibility and options when it comes to trading cryptocurrencies.

### **Disadvantages of Decentralized Exchanges (DEXs)**

Decentralized exchanges (DEXs) have several potential disadvantages, including:

**1. Lower Liquidity**

DEXs are not as widely used as centralized exchanges, so they often have lower liquidity, which can make it difficult to find buyers or sellers for some assets, especially those that are less popular or widely traded.

**2. Higher Fees**

DEXs typically charge higher fees than centralized exchanges for a number of reasons. For one, they typically have lower trading volumes compared to centralized exchanges. As such, the total revenue generated from trading fees is lower, which means that the trading fees need to be higher in order to cover the costs of running the exchange. This can make trading on DEXs more expensive, especially for large or frequent trades.

**3. Less User-friendly**

DEXs can be more difficult to use than centralized exchanges, especially for users who are not familiar with blockchain technology or digital wallets. This can make DEXs less appealing to casual or new users.

**5. Peculiar Security Concerns**

While DEXs are generally considered to be more secure than centralized exchanges, they are still vulnerable to security breaches and other risks. For example, if a user's wallet is hacked or their private keys are stolen, their funds could be lost. This can make DEXs less secure than other options, such as holding cryptocurrencies in a hardware wallet.

### **How Do Decentralized Exchanges (DEXs) Make Money?**

Decentralized Exchanges typically generate revenue through a combination of some or all of these channels:

**1. Trading Fees**

DEXs typically charge a small fee for each trade that is executed on the platform. These fees are usually a percentage of the total trade value and are used to cover the costs of running the exchange and to generate revenue. 

The fees can be applied on the maker or taker side, or both. The fees are usually paid in the native token of the DEX or in the token being traded. Some DEXs also offer different fee schedules for different token pairs or for different trading volumes.

**2. Staking**

Some DEXs have staking mechanisms in place, where users can stake their tokens to help secure the network and earn rewards in return. This allows DEXs to generate revenue through the collection of staking fees, which are typically a percentage of the total value staked.

**3. Token Sale**

It’s also common to see DEXs conduct token sales to raise funds for development and operations. These tokens can be used to pay for trading fees on the platform, or they can be traded on other exchanges. The token sale is a way for the DEX to raise funds and generate revenue.

**4. Listing Fees**
 
Some DEXs charge a fee for projects that wish to list their tokens on the platform, which can be a significant source of revenue for the DEX. This allows DEXs to generate revenue through the collection of listing fees, which can be a flat fee or a percentage of the total value of the token being listed.

It's worth noting that the revenue streams of DEXs may vary depending on the specific platform and the features it offers. 

### **Some Top Decentralized Exchanges and their Offerings**

**1. Uniswap**

Uniswap is one of the most popular decentralized exchanges, it uses an Automated Market Maker (AMM) algorithm to set the price of assets and match buyers and sellers. Uniswap is known for its ease of use and fast trade execution times, it also offers a wide range of ERC-20 tokens to trade.

**2. dYdX**

dYdX is a decentralized exchange (DEX) that allows for the trading of margin positions and derivatives on the Ethereum blockchain. It allows users to trade with leverage, access advanced trading features such as short selling and derivatives, and also allows for the creation and trading of custom tokens, called "vaults" which represent a specific position on an underlying asset. 

dYdX also offers a decentralized lending and borrowing platform, where users can lend and borrow assets and earn interest on their deposited assets.

**3. 0x Protocol**

0x protocol is a decentralized exchange protocol that allows for the creation of decentralized exchanges on the Ethereum blockchain. It uses an order book to match buyers and sellers, and it's known for its increased liquidity and lower trading fees.
0x protocol uses smart contracts to handle all trades, ensuring transparency and security. 

Additionally, it allows for the creation of custom trading pairs and the trading of any ERC-20 token. 0x is designed to be a versatile protocol that can be used to create a wide range of decentralized trading applications.

**4. Kine Protocol**

This DEX is designed to provide a decentralized, trustless, and non-custodial platform for trading digital assets. It uses smart contracts to handle all trades, ensuring transparency and security. Additionally, Kine Protocol is built with a focus on providing liquidity to DeFi assets, which are often illiquid and difficult to trade on other exchanges. 

One of the unique selling points of Kine Protocol is its liquidity sharing mechanism, which allows users to earn a share of the trading fees by providing liquidity to the exchange.

**5. Kyber Network**

Kyber Network is a hybrid decentralized exchange that combines features of both AMM and order book DEXs. It uses an order book to match buyers and sellers, but also uses an AMM algorithm to set the price of assets. Kyber Network is known for its fast trade execution times and wide range of supported assets.

**6. Curve**

Curve is a decentralized exchange that focuses on stablecoin trading. It uses a liquidity pool and an Automated Market Maker (AMM) algorithm to set the price of assets and match buyers and sellers. Curve is known for its low trading fees, high liquidity and fast trade execution times.

### **Wrap-up**

Using a decentralized exchange can be somewhat more complicated than using a centralized one, as you will need to manage your own wallet and be responsible for the security of your funds. However, the added security and privacy benefits of DEXs can make them a good choice for many cryptocurrency traders. 

It's also important to keep in mind that DEXs are still a relatively new technology and are continuing to evolve, new features and functionalities may emerge in the future.

An overview of decentralized exchanges, their benefits, limitations, and more.

Understanding Decentralized Exchanges.jpg

Understanding Decentralized Exchanges

Bitcoin Improvement Proposals (BIPs) are documents that describe standards for Bitcoin and how it should be improved. They are the primary way that new features and improvements are proposed and discussed within the Bitcoin community.

Anybody can create a BIP, but only a few will be accepted and implemented. For a BIP to be accepted, it must first go through a rigorous review process by other community members. This is necessary to ensure that all BIPs are well-thought-out and have a chance of actually improving Bitcoin.

If you have an idea of how Bitcoin could be improved, then you should consider creating a BIP! This guide will walk you through the process of creating a BIP, from start to finish.

### **How does BIP work?**
BIPs are submitted as pull requests to the Bitcoin GitHub repository and must adhere to specific guidelines. If accepted, they are published on the Bitcoin development mailing list. The process of creating a BIP can be divided into four distinct stages:

1. **Idea generation:** Idea generation is the first stage of creating a BIP. In this stage, you will come up with an idea for improving the Bitcoin protocol. This can be anything from a new feature to a change in behavior or format. Once you have an idea, the next step is to draft a BIP proposal.

2. **Drafting, review:** Drafting a BIP proposal is not difficult, but there are some important elements that must be included. The proposal should include:
- A title and abstract that describes the proposed change;
- A Motivation section that explains why the change is needed;
- An Overview section that provides a high-level description of the proposed change;
- A Detailed Specification section that outlines how the proposed change will work; and
One or more Test Cases sections that provide examples of how the proposed change will work.
After you have drafted your proposal, it is time for review. Reviewers will look at your proposal and provide feedback on whether they think it should be accepted or rejected. Feedback may also be given on how the proposal could be improved.

3. **Publication:** Once your proposal has been reviewed and accepted, it will be published on the Bitcoin Improvement Proposal repository on GitHub. From there, it is up to the Bitcoin community to decide whether to implement the proposed change.

### **Types of BIPs**

Some BIPs, also known as forks, suggest altering the consensus guidelines for Bitcoin. Others make community standards, which are recommendations aimed at promoting compatibility between various Bitcoin-related programs. Lastly, a few BIPs suggest instituting process guidelines. Every BIP type receives a unique approach

1. **Standard BIPs:**

A Standard BIP is a proposal for a new feature or an improvement to an existing [network](https://en.bitcoinwiki.org/wiki/Network) protocol, [block](https://en.bitcoinwiki.org/wiki/Block), or [transaction](https://en.bitcoinwiki.org/wiki/Transaction) validation method. It must be accompanied by a reference implementation, and it must have been reviewed and agreed upon by the community. Once a Standard BIP has been accepted, it becomes part of the official Bitcoin protocol. An example of this is BIP 91

2. **Informational BIPs**

An Informational BIP lays more emphasis on design issues, broad principles, and supporting data. As the name implies, informational BIPs are provided purely for information purposes. Informational BIPs are intended to gather feedback from the community and reach a consensus before being implemented. This is exemplified by [BIP 32.](http://bip32.org/)

3. **Process BIPs** 

These BIPs describe or propose a process change. They are similar to Standards Track BIPs in that they require community consensus. They cannot be ignored, but unlike Standards Track BIPs, they intend to be used outside of the [Bitcoin](https://en.bitcoinwiki.org/wiki/Bitcoin) protocol. 

The first proposal, [BIP 001](https://en.bitcoin.it/wiki/BIP_0001), was submitted in September 2011 by Indian-British programmer Amir Taaki, and it defined what a Bitcoin Improvement Proposal is. The BIP-002 then revised the BIP guidelines and replaced the BIP-001. Both are Process BIPs. Check [here](https://en.wikipedia.org/wiki/Bitcoin_Improvement_Proposals) for the full list of proposals.

4. **Taproot**

Taproot, the largest recent upgrade in the Bitcoin blockchain, was a combination of three BIPs ([BIP 340](https://github.com/bitcoin/bips/blob/master/bip-0340.mediawiki), [BIP 341](https://github.com/bitcoin/bips/blob/master/bip-0341.mediawiki), and [BIP 342](https://github.com/bitcoin/bips/blob/master/bip-0342.mediawiki)). It stemmed from a [proposal](https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2018-January/015614.html) by software developer Greg Maxwell in January 2018. Following that, three Bitcoin developers, Pieter Wuille, Tim Ruffing, A.J. Townes, and Jonas Nick, codified the upgrade.

The upgrade [went live](https://www.coindesk.com/tech/2021/11/13/taproot-bitcoins-long-anticipated-upgrade-activates-this-weekend/) in November 2021 almost four years after the initial proposal and gave Bitcoin developers an [expanded toolbox](https://www.coindesk.com/tech/2021/02/03/how-bitcoins-taproot-upgrade-will-improve-technology-across-bitcoins-software-stack/) to work with to build on the blockchain.

### **Conclusion**

The Bitcoin Improvement Proposal is a classic way of introducing decentralization by giving people the freedom to suggest and propose improvements to an existing decentralized finance project for the benefit of the community as a whole. The required consensus is an example of how the Bitcoin community works when ideas are generated from the ground up. Anyone can earn the right to be heard, supported, and accepted with a brilliant proposal.

At Bitpowr we currently support 11 public blockchains among which are Bitcoin, Bitcoin Cash, and Bitcoin Segwit addresses. This is to serve as a commitment to providing you with better solutions and features to help reduce business overhead costs and increase profit.

Check out [our documentation](https://docs.bitpowr.com/docs) to learn more about our wallet services and other related products.  [Contact sales](https://www.bitpowr.com/contact#contact) or send an email to [sales@bitpowr.com](mailto:sales@bitpowr.com) to get started!

Bitcoin Improvement Proposal is the formal process used to  suggest ideas, changes & make improvements to Bitcoin

BArticle1_8.jpg

What is BIP?



DeFi is short for Decentralized Finance, which is an umbrella term for a new financial system built on open networks. This financial system allows direct interaction between parties without any intermediaries—which means you pay someone without going through middlemen like banks.  Bitcoin in many ways was the first DeFi application. 

## Why does DeFi matter?

DeFi is an attractive alternative to conventional finance because of three key characteristics: It is open, decentralized, and enables the development of other decentralized apps.

**1. DeFi is a Decentralized Financial System**

DeFi is a decentralized financial system that allows people to connect directly with each other. The idea behind DeFi is that there are no intermediaries between you and whoever you're trying to interact with (like an exchange). You can use this technology anywhere in the world and still have access to funds from all over the world without having any bank accounts or other forms of identification required. This makes DeFi incredibly useful for hedging risk by allowing users who want more exposure in certain markets but don't want their funds stuck on centralized exchanges. 

**2. DeFi has Open Networks**

Openness means that anyone can participate in DeFi without requiring permission from anyone else, meaning no centralized services required! It uses open source software and protocols. This makes it easy for developers to create their own applications on top of the base infrastructure like Ethereum, Bitcoin etc. Although building such applications can be difficult and time consuming, Blockchain infrastructure providers like Bitpowr help you simplify the process [find out more here](https://bitpowr.com/contact-sales).

**3. DeFi Builds on Existing Blockchain Infrastructure**

DeFi is built on existing blockchain infrastructure. The most important part of a blockchain is its ability to maintain consensus across all users, which means that everyone agrees as soon as they join the network. This makes it possible for any user to submit data or make an action without needing permission from others—and it also means that when you're using the system, you don't have "ownership" of your assets (like cryptocurrency) because other people are also using them at the same time!

Lastly, we build on top of existing technologies like Ethereum so that as our ecosystem grows, we don't introduce security risks such as hacks or downtimes which could otherwise happen if everything was built anew from scratch each time.

## Major DeFi Use cases

**1. Tokenization**

Tokenized assets are typically tokens that represent real-world assets such as stocks or bonds. For example, a company might issue its own cryptocurrency in order to raise funds for a new venture. These cryptocurrencies can be traded like any other asset—they're just based on something else! One of the benefits of using this method is that it allows companies to issue their own digital currencies without having to go through intermediaries like banks or brokers (which means there's less risk). This makes it easier for them to get funding from investors who might otherwise have trouble accessing traditional financing options because they don't have any experience dealing with these types of investments before."

**2. Asset Management**

With DeFi protocols, you are the custodian of your own crypto funds. Crypto wallets  and institutional-grade custody providers like [Bitpowr](https://bitpowr.com/features/assets-management) help you easily and securely interact with decentralized applications to do everything from managing, buying, selling, and transferring crypto to earning interest on your digital assets. 

**3. Data and Analytics**

DeFi protocols provide distinct advantages for data discovery, analysis, and decision-making around financial opportunities and risk management due to their extraordinary transparency. DeFi Pulse, for instance, is one of such tools, it helps users to monitor the value locked in DeFi protocols, evaluate platform risk, and contrast yield and liquidity. This growth in new DeFi apps has been incredibly rapid.

**4. Compliance and KYT**

In traditional finance, anti-money laundering (AML) is based on know-your-customer (KYC) guidelines. In the DeFi space, compliance is based on participant behavior rather than participant identity. These know-your-transaction (KYT) services, such as [Bitpowr's,](https://bitpowr.com/features/aml-and-kyt) help in real-time risk assessment and protect against fraud and financial crimes.

**5. DAOs**

A DAO is a decentralized autonomous organization that operates according to transparent rules encoded on the Ethereum blockchain, [eliminating the need for a centralized, administrative entity](https://consensys.net/codefi/activate/). Several popular protocols in the DeFi space, such [Maker](https://makerdao.com/) and [Compound](https://compound.finance/), have launched DAOs to fundraise, manage financial operations, and decentralize governance to the community.

**6. Margin Trading**

DeFi margin trading is supported by decentralized, non-custodial lending protocols like Compound and dYdX, as opposed to traditional finance, where margin traders can leverage their trades by borrowing money from a broker (which subsequently serves as collateral for a loan). Some have started talking about the advent of "autonomous money markets" in the DeFi ecosystem since smart contracts automate traditional brokerage activity.

**7. Derivatives**

Ethereum-based smart contracts enable the creation of tokenized derivatives whose value is derived from the performance of an underlying asset and in which counterparty agreements are hardwired in code. DeFi derivatives can represent real-world assets such as fiat currencies, bonds, and commodities, as well as cryptocurrencies.

**8. Infrastructure for Building on the Blockchain**

The ability for various parts of a system to connect and work together, is one of the fundamental architectural tenets of DeFi protocols. This has produced a potent network effect that allows the developer community to continue building upon what others have developed, as can be seen from the large variety of integrated DeFi apps some of which leverage on [Bitpowr API suit](https://docs.bitpowr.com/reference/api-overview)  to build and launch in days.

**9. Insurance DeFi**

There are several insurance policies built on the blockchain that cover real-world events like farming, disasters, and more. A parametric insurance model is used by several blockchain-based insurance policies, in which claims are paid to the interested party as long as certain conditions are satisfied. To determine when distributions should take place, these parametric insurance policies frequently use hardware and software oracles. With the help of smart contract technology, payments are made automatically rather than waiting for a central authority to do so.

**10. DEXs**

One of the core features of DeFi is Decentralized Exchanges (DEX). With the help of DEXs, users can swap or exchange tokens for other assets and intermediaries are not required. Similar alternatives are available on traditional exchanges (centralized exchanges), but the investments offered are dictated by the exchange's policies and expenses.

## Conclusion

There is a reason why DeFi has captured our attention, the total value locked in DeFi protocols alone has surpassed $100 billion. 

Also, DeFi has significantly reduced the cost of producing and distributing various assets, much like the internet did for publishing and advertising. One reason for the lower costs is DeFi's peer-to-peer lending mechanism, which eliminates the need for a third-party intermediary. This means that an institution seeking credit does not have to pay a fee to a bank or another financial institution to obtain it.  

[Bitpowr's infrastructure](https://bitpowr.com/contact-sales) is also playing a significant role in advancing the DeFi course by providing DApps wide access across EVM-compatible protocols without compromising institution-required security, operational efficiency, or compliance requirements.

An explainer on decentralized finance and its use cases.

BA7_11A.jpg

What is DeFi?

The face of banking is changing globally with the rise of non-traditional banking platforms that are taking a digital-first approach. These platforms called digital banks or neobanks are marked by their flexibility and ability to deliver financial services faster and at more affordable costs, reach more people easily and lower typical barriers to accessing financial services. In essence, neobanks seek to do what traditional banks do better, faster and for more people.

So far, neobanks have been able to introduce top solutions driving financial inclusion across the world mainly because of their courage to innovate and take advantage of the latest technology. To stay true to these values, these new-age financial institutions need to consider integrating stablecoins into their operations.

If you’re wondering what stablecoins are and the benefits they offer to neobanks, you’ve come to the right place for answers.

### **What are Stablecoins?**

Stablecoins are cryptocurrencies that are designed to maintain a stable value, often by being pegged to a stable asset or a group of assets. The goal of a stablecoin is to provide the benefits of a cryptocurrency, such as decentralization and fast transaction times, while avoiding the volatility that is often associated with cryptocurrencies. This can make stablecoins useful for a variety of purposes, including making transactions, storing value, and providing a stable means of exchange.

### **Types of Stablecoins**

There are several types of stablecoins, each with its own unique characteristics. Some common types of stablecoins include:

**1. Fiat-collateralized stablecoins:** which are backed by a reserve of fiat currency, such as the US dollar. Examples of fiat-collateralized stablecoins include Tether (USDT) and USDC.

**2. Cryptocurrency-collateralized stablecoins:**, which are backed by a reserve of another cryptocurrency, such as Bitcoin or Ethereum.

**3. Non-collateralized stablecoins:** which are not backed by any specific asset but instead maintain their value through a variety of mechanisms, such as algorithmically adjusting their supply. Examples of non-collateralized stablecoins include Ampleforth (AMPL) and Synthetix Network Token (SNX).

**4. Algorithmic stablecoins:** which are a type of non-collateralized stablecoin that use algorithms to manage their supply and maintain their value.

It's important to note that the viability and stability of different stablecoins can vary, and it's always a good idea to thoroughly research any stablecoin before using it.

### **Advantages of Stablecoins to Neobanks**

Neobanks, or digital-only banks, may find stablecoins to be useful for a variety of reasons. Some potential benefits of using stablecoins for neobanks include:

**1. Faster and cheaper transactions**

Since stablecoins are built on blockchain technology, they can enable faster and cheaper transactions than traditional bank transfers. This can be especially useful for neobanks, which may not have the same access to existing payment infrastructure as traditional banks. This can be especially useful for cross-border payments, which can take several days to process using traditional methods.

**2. Enhanced liquidity** 

Stablecoins can provide an additional source of liquidity for neobanks, especially in times of market volatility or economic uncertainty. This can help neobanks to maintain stability and continue providing financial services to their customers.

**3. Increased accessibility** 

Neobanks that use stablecoins can potentially reach a wider audience, as stablecoins can be used by anyone with an internet connection. This can be particularly useful for neobanks that operate in regions where traditional financial infrastructure is limited or unreliable.

**4. Reduced volatility** 

One of the main advantages of stablecoins is that they are designed to maintain a stable value, often pegged to a specific fiat currency like the US dollar. This can help reduce volatility in the value of a neobank’s assets, as the value of stablecoin will remain relatively stable.

**5. Greater security** 

Stablecoins can also provide enhanced security and fraud prevention compared to traditional banking systems. This can help to protect both neobanks and their customers from financial fraud and other security threats.

### **Final Thoughts**

Consumers are demanding faster and more affordable transactions and banking services and neobanks’ agility and openness to adopting the latest technology perfectly place them to meet these needs. Stablecoins are an example of such technology that every financial institution looking to future-proof its operations should consider experimenting with.

At Bitpowr, we provide all financial institutions, including neobanks with access to blockchain infrastructure that enables them to securely explore cryptocurrencies and stablecoins with ease and speed. Are you building a financial services firm of the future? [Come talk to us!](https://bitpowr.com/contact-sales)


A quick look at some of the benefits neobanks can derive from adopting stablecoins.

Why Neobanks Should Use Stablecoins.jpg

Why Neobanks Should Consider Adopting Stablecoins

Bitcoin (BTC) is a cryptocurrency, a virtual currency designed to act as money and a form of payment outside the control of any one person, group, or entity. It provides an alternative payment system to fiat currencies issued and controlled by central banks. Bitcoin is not managed and maintained by any one central entity but by a network of users and miners who verify transactions on the blockchain through cryptographic techniques.

## How does Bitcoin work?

It is critical to understand that Bitcoin is made up of three distinct components that work together to form a decentralized payment system:

1. The Bitcoin network - which operates as a peer-to-peer system where users exchange bitcoin with others on the network without the assistance of middlemen to carry out and validate transactions. 
2. The native cryptocurrency of the Bitcoin network, called bitcoin (BTC) which could be likened to money but unlike government-issued currencies such as the dollar or euro, Bitcoin allows online transfers without a middleman such as a bank or payment processor. It is also a a store of value similar to gold. 
- The Bitcoin blockchain is much more than just a form of cryptocurrency: It is the foundation upon which the majority of cryptocurrencies, including Bitcoin, are created. Because it guarantees the accuracy of every transaction, the Bitcoin blockchain is exceptional. Nothing is missed from the network because everything that happens on the blockchain is recorded. The entire record of an action is accessible to anyone in the system once it has been time-stamped, recorded, and stored in one of the information blocks to data that is kept in "blocks" of information and then permanently connected as a "chain" by other "blocks" of information.

No matter how many transactions are awaiting confirmation, Bitcoin is set up to allow new blocks to be added to the blockchain about every ten minutes.

The blockchain's openness allows all network users to view and analyze bitcoin transactions in real time. The likelihood of double spending, a problem with online payments, is decreased by this technology. When a person tries to spend the same cryptocurrency twice, this is known as double spending.

### Bitcoin Innovations

**Lightning Network**

 Bitcoin was never intended to be scalable. It was intended to be a decentralized payment system that users could use anonymously and from anywhere. However, one of its drawbacks was its popularity: transactions became much slower and more expensive than intended. As a result, developers created cryptocurrency layers, the first of which was the primary blockchain. Each layer beneath that was a secondary, tertiary, and so on.

Each layer complements and adds functionality to the layer above it. In that light the Lightning Network is a second layer for Bitcoin that uses micropayment channels to increase the capacity of the blockchain to conduct transactions more efficiently- In simple terms, the Lightning Network (LN) allows participants to use their digital wallets to send BTC to one another for free. [Read more](https://decrypt.co/resources/bitcoin-lightning-network)

**SegWit**

Before now, Legacy addresses were the original BTC addresses, now SegWit addresses are the newer address format with lower fees.

SegWit stands for Segregated Witness, where Segregated means to separate and Witness refers to the transaction signatures involved with a specific transaction. In a nutshell, it is an improvement over the current bitcoin blockchain in that it increases the block size limit of a blockchain by removing signature data from Bitcoin transactions. This creates more space to add more transactions to the chain when portions of a transaction are withdrawn. [Read more](https://bitpowr.com/blog/bitpowr-wallet-now-supports-bitcoin-seg-wit-addresses) 

**Taproot**

The Taproot upgrade was suggested by Bitcoin Core developer Greg Maxwell in January 2018. Three years later, on June 12, 2021, the 90% mark for blocks mined with miner support was reached. It means that some encoded data was left in 1,815 of the 2,016 blocks that were mined during the course of the two-week period by miners to show support for the upgrade.

The Taproot upgrade simply groups several signatures and transactions together.
On the Bitcoin network, digital signatures are necessary to validate transactions. They are produced with the aid of private keys and checked against those of others.

Before the introduction of Taproot, the network of Bitcoin required each digital signature to be verified against a public key, which made transaction verification time-consuming. The time needed for sophisticated multi-sig transactions that require numerous inputs and signatures was doubled by this technique. [Read more](https://cointelegraph.com/bitcoin-for-beginners/a-beginners-guide-to-the-bitcoin-taproot-upgrade) 

**Conclusion** 

Bitcoin has gained widespread acceptance and popularity over the years, with more and more people choosing to use it as a payment method and store of value. Though Bitcoin isn't yet optimized to handle the kinds of transaction volumes that the digital currency is capable of producing, ideas behind products like Lightning Network is changing this and making Bitcoin more attractive for everyday use.

In addition, the introduction of SegWit is a significant step toward resolving it’s scalability issues and enable it to process more transactions more quickly and cheaply 

Bitpowr supports Segwit addresses to also serve as a commitment to providing better solutions and features to help reduce business overhead cost.

Check out [our documentation](https://docs.bitpowr.com/docs) to learn more about our wallet services and other related products.  [Contact sales](https://www.bitpowr.com/contact#contact) or send an email to [sales@bitpowr.com](mailto:sales@bitpowr.com) to get started!

Bitcoin (BTC) is a virtual currency designed to act as money

BA7_11C.jpg

What is Bitcoin

Innovations surrounding money transfer have progressively simplified the process over the years. However, the cross-border payments sector hasn't seen enough disruption to eradicate some of its most pressing problems. This is where blockchain technology comes in.

The introduction of blockchain has impacted the financial sector the most. From the eruption of cryptocurrencies to the development of decentralized financial services, blockchain is pushing to revolutionize financial systems. 

The same qualities that make the blockchain fit for developing a new form of money and a viable channel for delivering financial services such as lending can also immensely benefit the cross-border payments sector. Let's see how this is possible.

### **Overview of the cross-border payments sector and why it matters**

Cross-border payments refer to transactions between individuals, businesses, banks, and other institutions in at least two countries. 

International transfers power commerce, making it possible for individuals, companies, and countries to trade across borders. 

In addition to being one of the chief drivers of global trade, cross-border payments also include remittances, another critical pillar of the modern economic system. Remittances are typically non-commercial money transfers from individuals in the diaspora to their families and friends, usually located in their home country.

The role of remittances in sustaining economies cannot be overstated. For instance, they account for nearly [4% of the GDP of low-income countries](https://www.imf.org/external/Pubs/FT/fandd/basics/76-remittances.htm). Also, even during some of the most economically dire times, remittance inflow into low and middle-income countries showed resilience, another testament to their status as a staple of economic sustenance.

Case in point: despite the biting effects of the covid 19 pandemic, remittances into low and middle-income countries in 2020 hardly declined, dropping to [$540 billion from the $548 billion](https://www.worldbank.org/en/news/press-release/2021/05/12/defying-predictions-remittance-flows-remain-strong-during-covid-19-crisis%C2%A0) recorded in 2019 — a 1.6% decrease, which was much lower than the predicted decline. But even with the slight drop, LMIC remittances in 2020 dwarfed the sum of foreign direct investment ($259 billion) and overseas development aid ($179 billion) to those same countries. 

And by 2021, it resumed its upward climb, reaching [$589 billion in 2021](https://www.worldbank.org/en/news/press-release/2021/11/17/remittance-flows-register-robust-7-3-percent-growth-in-2021%C2%A0), a 7.3% increase over 2020. 

While the role of cross-border payments and remittances in building financially resilient and prosperous economies cannot be downplayed, the sector is plagued by several problems threatening to undermine its transformative potential.


### **Challenges of cross-border payments and remittances**

Sending money across borders is a painfully complex process involving several intermediaries, even though they aren't all apparent to the sender and recipient. The presence of multiple correspondent banks required to successfully execute international settlement is, in fact, the root cause of the problems facing global cross-border payments.

First, the lengthy chain of intermediaries drives up the transaction costs of cross-border transfers. According to the [World Bank](https://blogs.worldbank.org/peoplemove/global-remittance-flows-2021-year-recovery-and-surprises), the average global cost of international transfers as of Q1 of 2021 was 6.4%, more than double the Sustainable Development Goal (SDG) targeted mark of 3%. 

In the same period, the average cost of sending money to Sub-Saharan Africa stood at 8%, the highest of all the studied regions.

Additionally, several middlemen create multiple potential points of failure, extended settlement time, and security risks, all reducing the reliability of traditional international payment channels.

Cross-border payment innovations can change the game by introducing faster, cheaper, and more secure payments. Interestingly, Blockchain Technology ticks all these boxes.


### **The Benefits of Blockchain Technology to Cross-border Payments**

**1. Cost-effectiveness**

According to a study by [Deloitte](https://www2.deloitte.com/content/dam/Deloitte/global/Documents/grid/cross-border-payments.pdf), blockchain-powered B2B and P2P transactions result in a 60-80% reduction in transaction costs compared to nominal payment channels. This isn't surprising, as transacting parties would not need to pay fees to multiple intermediaries when using blockchain. 

**2. Speed**

Blockchain transactions can be confirmed almost immediately, with the earlier referenced Deloitte study also stating that transactions on the blockchain are finalized in an average of four to six seconds as opposed to the two to three days seen in traditional payment systems. This means individuals and businesses can conduct transactions faster and access and deploy funds quickly.

**3. Security**

Centralized transaction data storage, common with traditional payment systems, leaves room for several security issues. Data loss is a genuine risk, and security breaches are real threats that could compromise the system and pave the way for fraud and other malicious activities.

Blockchain deals with the security risks facing standard money transfer systems using its distributed ledger technology. That way, transaction and customer data is secured on a distributed ledger with no central controller, making data manipulation almost impossible.

**4. Transparency**

Further, the blockhain's structure means that records are immutable and entries are confirmed by consensus, ensuring better transparency. The transaction ledger is always available to all authorized parties who can see updates in real-time, thus removing data silos, enabling faster access to accurate information, and fostering more seamless collaboration.

### **The Future of Cross-border Payments**

Although the benefits of using blockchain technology to facilitate cross-border payments are undeniable, it has not yet seen widespread adoption for several reasons. For instance, the regulatory landscape is still largely hostile; many people are still unfamiliar with the workings of the blockchain, and elements of the system, such as cryptocurrencies, are volatile.

However, the stated problems are not unsolvable. As such, it's reasonable to predict that, with time, more stakeholders will recognize that the benefits of blockchain to international transfers surpass its downsides and will push for its adoption.

At Bitpowr, we are building the requisite infrastructure for financial institutions to facilitate blockchain-powered cross-border payments. So if you're looking to build blockchain infrastructure to enable cross-border settlement at scale, you should be speaking to us. [Get in touch with us today](https://bitpowr.com/contact-sales). 


Discover the benefits of facilitating cross-border payments with blockchain technology.

Simplifying cross-border payments.jpg

Simplifying Cross-Border Payments with Blockchain Technology

The crypto world has exploded in recent years, with an increasing number of cryptocurrencies being created and traded every day. As a result, there's been a growing need for APIs that allow developers to integrate crypto functionality into their applications.

In this article, we'll go over what crypto APIs are, how they work, and why they're useful for developers. We'll also discuss some of the most popular crypto APIs currently available.

## What are Crypto APIs?

Crypto APIs (Application Programming Interfaces) are a set of protocols and tools that allow developers to interact with cryptocurrency services and build applications that use crypto functionality. They provide an easy-to-use interface for accessing crypto data and performing crypto-related tasks such as exchanging currencies, tracking prices, and managing transactions.

### How do Crypto APIs Work?

Crypto APIs use REST (Representational State Transfer) or web sockets to communicate with crypto services and retrieve information such as current prices, trading volumes, and historical data. The APIs are typically secured with an API key or token, which developers use to access the data and perform actions.

For example, a Developer might use a crypto API to retrieve the current price of Bitcoin and display it in their application. The developer would send a request to the API with the appropriate parameters, such as the currency they want to retrieve data for and the date range they're interested in. The API would then send back a response with the requested information.

### Why are Crypto APIs Useful for Developers?

Crypto APIs make it easier for developers to build applications that use crypto functionality. They provide a convenient way to access crypto data and perform crypto-related tasks without having to build and maintain their own infrastructure.

### Popular Crypto APIs

There are many crypto APIs available, ranging from simple data retrieval APIs to more complex APIs that provide advanced functionality. Here are some of the most popular crypto APIs:

- **Bitquery APIs:** [Bitquery](https://bitquery.io/) offers blockchain data APIs for over 40 different blockchains. These APIs are created with GraphQL technology. As a result, you can access data from multiple blockchains using a single GraphQL endpoint. You can also write GraphQL queries to get specific data based on your needs.
- **Binance API:** [Binance](https://binance-docs.github.io/apidocs/spot/en/#change-log) is one of the largest cryptocurrency exchanges, and its API provides access to real-time market data and trading functionality.
- **CoinAPI:**  [CoinAPI](https://www.coinapi.io/) is a service provider that specializes in providing price and market data. CoinAPI has a solid reputation in the market for high-quality crypto data, with over 20TB of raw market data in its database.
- **NOWNodes API:**  It provides full nodes and blockchain explorers for quick and easy access to popular blockchains. It is a blockchain-as-a-service solution that offers high-quality connectivity through an API.
- **Wyre API:** ****[Wyre](https://www.sendwyre.com/)** is a simple integrated payment solution for crypto startups looking to implement crypto as a payment method rather than traditional payment methods- fiat-to-crypto on-ramp.
- **Bitpowr API:** [Bitpowr](https://docs.bitpowr.com/reference/api-reference) Wallet Infrastructure API is a flexible and secure tool. It supports Multiple Blockchains like Bitcoin, Bitcoin Cash, Litecoin, Polygon, Solana, Tron, Stellar, and Ethereum, on its platform etc. Exchanges, crypto Wallets, Fintech, Hedge funds, and payment gateways can send, receive and manage cryptocurrencies fast and securely with the sub-accounts feature that is given to these organizations.

### Why use Crypto APIs in the first place?

- **It is time-saving:** Crypto APIs allow developers to save time by providing access to ready-made functionality, so they don't have to build it from scratch.
- **Cost-effective:** By using a crypto API, developers can reduce their costs as they don't have to build and maintain their own infrastructure.
- **Access to real-time data:** Many crypto APIs provide real-time data, allowing developers to build applications that display up-to-the-minute information on crypto prices and trading volumes.
- **Security:** Crypto APIs are typically secure and use encryption to protect sensitive information.

### Conclusion

Crypto APIs are an essential tool for developers who want to build applications that use crypto functionality. They provide a convenient way to access crypto data and perform crypto-related tasks, and they can help developers save time and reduce costs. With APIs like Bitpowr’s, it has never been easier for developers to integrate crypto into their applications. 

[Let us](https://bitpowr.com/contact-sales) hear from you and see how we can help you use [Bitpowr](https://docs.bitpowr.com/reference/api-reference) Wallet Infrastructure APIs to build your DApps in no time.

Our blog

Resources and insights

Crypto APIs for Developers

Custodial and Non-Custodial Wallets: Which is best for your Business?

What is Stellar

What are APIs

Understanding Proof of Reserve and its Importance

Why is Bitcoin Valuable?

What Are Ethereum Rollups?

Understanding Decentralized Exchanges

What is BIP?

What is DeFi?

Why Neobanks Should Consider Adopting Stablecoins

What is Bitcoin

Simplifying Cross-Border Payments with Blockchain Technology

Crypto APIs for Developers

Custodial and Non-Custodial Wallets: Which is best for your Business?

What is Stellar

What are APIs

Understanding Proof of Reserve and its Importance

Why is Bitcoin Valuable?

What Are Ethereum Rollups?

Understanding Decentralized Exchanges

What is BIP?

What is DeFi?

Why Neobanks Should Consider Adopting Stablecoins

What is Bitcoin

Simplifying Cross-Border Payments with Blockchain Technology

NEWSLETTER

STAY UP TO DATE