How to trade bitcoins on QuadrigaCX

Now that you’ve opened and verified and also funded your QuadrigaCX account, you are ready to trade some Canadian dollars and US dollars for bitcoins and ethereum. This post will explain how to make a trade on cryptocurrency exchange QuadrigaCX.

After logging into your QuadrigaCX account, choose the “Trade” tab from the main menu. When on the “Trade” menu, you will see the current order book displayed for the default market (btc/cad) with the bids displayed on the left side of the page and the offers displayed on the right side. Stacked on top of the order book are order entry modules that you can use to place your order.

If you are unfamiliar with how a market works and/or how prices are formed, the first thing you do is examine the current bids and offers. The bids and offers listed are orders from other users who have placed orders to either buy or sell at certain prices. For example, if you see a bid price of $4,000 CAD for 2 BTC, this means that someone (or a number of users) has placed an order to buy 2 bitcoins at a price of $4,000 CAD.  Oppositely, if you see an offer for 2 BTC at $4,010 CAD, this means that someone (or a number of users) has placed an order to sell 2 bitcoins at a price of $4,010 CAD.

The “price” of bitcoins is simply the last time that a bid or an offer was matched. If you want to buy bitcoins with Canadian dollars, then examine the offers. Using the example above, the lowest price offered is $4,010 CAD for 2 BTC. This means that you can buy up to 2 BTC at a price of $4,010 CAD. If you want to buy 0.10 BTC, and this price meets your objective, then go ahead and enter your order to make a transaction. Using the BUY side order entry module on the left side of the order book, enter a price of $4,010 and quantity of 0.10 BTC. As you enter your order details, you will see that the order entry module dynamically updates to reflect your inputs. This helps you confirm the price and amount you wish to enter.

Once you have input your desired price and quantity, and reviewed your order, simply press the “buy” button located within the order entry module, and your order will be sent to the market. If the current offer was $4,010 and you enter an order to buy at this price, your order will be matched and filled. This will mean you purchase bitcoins at this price.

Conversely, if you’d like to sell bitcoins, the same mechanics are used to sell, but instead of trying to pay the lowest price, you are trying to sell at the highest.

Maybe you’d like to buy bitcoins, but only if they reach a certain lower level. Maybe you’ve determined that a price of $3,500 is the highest price you are willing to pay. You can enter these details in the order entry module, and your order will be sent to the order book where it waits until the market falls to this price, or you cancel your order. This is called a “limit” order. From what I can tell, there is no time limit to how long orders can sit.

QuadrigaCX is the best place for Canadians to buy and sell bitcoins with the most liquid order book and the most stable deposit/withdrawal methods. Please use this link to open an account as it will mean some referral revenue for me 🙂

Bitcoin Blockchain Slowing, Fees Rising

During its early days, one of purported benefits of bitcoins were cheap transactions. Transfers between bitcoin users could be made peer to peer in a trustless system without transaction fees. The design of the bitcoin blockchain rewards miners who update the blockchain by giving them newly created bitcoins at a pre-determined rate. The idea of mining rewards supporting the blockchain assumed the newly minted bitcoins would provide enough incentive to miners who would contribute enough computing power to keep the blockchain live. However, as bitcoin has grown, and the volume of transactions has increased, transaction fees are having an increasing influence on processing bitcoin transactions.

4 days ago, I initiated a transfer of 0.50 bitcoins from one address to another. This used to be a quick and painless transaction. A few years ago, I didn’t even need to attach a fee to my transaction, and it would get processed in a timely manner. But this time, I chose a low fee and my transaction sat in digital purgatory for several days. Not only did the transaction sit on the blockchain unprocessed, but of course, I could call the address on a blockchain explorer and see the transaction sitting there. In many other payment networks, there is a standard lag of time between transaction initiation and final processing, so there is a window of time where a transaction could be initiated and then cancelled. If you write a paper cheque and give it to a service provider, if something goes wrong in the time the cheque is being delivered and processed by the payment network, you can instruct your back to “stop payment”. There is currently no easy to use “stop payment” mechanism with bitcoins. So for 4 days, I watched my transaction sit on the bitcoin blockchain without any confirmations, hoping, wishing, waiting.

The whole experience brings up questions about the changing role of transaction fees to newly minted coins as the miner reward for blockchain updating. How has the role of transaction fees changed over time, and what can we expect to change in the future?

One of the challenges with the way bitcoin was designed is the hard coded cap on block size. Bitcoin actually has a limit of 1MB block size. Miners can mine blocks up to the 1MB fixed limit, but any block larger than 1MB is invalid. This feature of bitcoin has become more important as volume has grown. The transaction processing lineup has got so big, that participants need to assign a large(er) reward to their transaction in order to incentivise miners to process their transaction in a timely manner. The limited bitcoin block size fuels calls for forks such as Bitcoin Unlimited and provides incentives for the creation of competing coins.

We can measure the transaction fee rate, and compare changes over time to understand how transaction fees are changing, how it is impacting volumes, and how this might change in the future. There are online services that provides us with information we can use to set fees.

Here is a page called Estimate Fee that estimates the fee required to process a bitcoin transaction within a number of blocks.

If you are running the bitcoin client, you can see the command used to call this data. According to this page, in order for your transaction to be processed in 25 blocks, you will need to assign a reward (fee) of 0.00198749 bitcoins. At the time of writing, with bitcoins worth $2,500 USD, that fee is worth $4.96. If there are 135 blocks per day being processed at the time of writing, a 25 block transaction can expect to be processed in about 4.5 hours.

I don’t necessarily think that the limited block size will mean the death of bitcoin. Making something expensive to move might mean bitcoin becomes (or has already become) impractical to use as a means of retail payment. But a high transaction fee might have some other benefits. The network and first mover advantages of bitcoins might mean they will increasingly be used as a clearing currency, and since each transaction is just a number (each transaction “number”, whether a large value one or a small value one) it might make sense to only process large value transactions in bitcoins, not retail transactions.

The blockchain is only updated once a transaction moves value from one address to another. If payments are being made within a network, no transaction fee needs to be applied. If you deposit bitcoins on an exchange, you send your bitcoins from their current address, to an address at the exchange. Once on the exchange address, the exchange operator can hold the bitcoins for you, and you can transfer the bitcoins within the exchange without interacting with the blockchain, between other exchange participants, until the money needs to leave the exchange again (in order to process a withdrawal perhaps).

At the outset, many bitcoin enthusiasts thought bitcoin would provide an alternative payment network, and it does, but this doesn’t mean payment networks won’t exist within the bitcoin blockchain. I believe that with the rise of bitcoin transaction fees, there will be a greater incentive for payment processors to emerge within the bitcoin blockchain in order to clear transactions quicker and cheaper without having to interact with the blockchain itself, thereby avoiding the associated fees. Such a system still supports the development of bitcoins, because the bitcoin blockchain will still fulfill a function of money as a unit of account since payment network (unless they are fraudulent themselves) will still need to net off balances.


Ethereum Hardfork Price Impacts

Ethereum will hardfork in the near future. Traders are wondering how this will impact the price for ETH and ETC? While the price for BTC has maintained its longterm upward trend, Ethereum has stumbled recently. Since Oct 4th, the price for ETH/BTC has gone from 0.022 all the way down to 0.0186 today. This represents a 15.5% decline in the price of ETH over the past few weeks. The lending market has also experienced price declines. The price to lend/borrow ETH on Bitfinex has declined to 0.292% (less than 1% annualized simple interest), while its offered at 3.87% annualized on Poloniex.

The low price to lend/borrow ETH on both Bitfinex and Poloniex represents the market’s perception that the price for ETH and ETC have reached a near term low. Traders are less willing to borrow a currency they perceive will rise. I believe this relationship between the lending/borrowing rate and the price of the underlying is showing up more consistently. The lower the price to lend/borrow means the more likely markets think the price will rise. This makes intuitive sense since if I expect that value of an asset to decrease in the future, I’m more likely to demand a higher rate of income in the meantime. Consider two pieces of real property, one in a high growth location, and another in a low growth location. I would expect to accept a lower rate of interest in the high growth location and a higher rate of interest in the low growth location. This makes the choice between the two locations closer to neutral, and brings other investment criteria into play. The consistently high rate to lend/borrow USD on Bitfinex represents the market’s inherent bullish bias for bitcoins.

Ethereum to Hardfork – CryptoCoinsNews

Ethereum’s community has reached a general understanding that the best way to move forward and address the month long dos of the network is a quick hardfork. A matter of urgency has been added following a recent backlog of more than 12,000 transactions and some miners opting in for zero transaction blocks.

Price Fallout of DAO Theft

It has been another exciting day in digital currency markets.  Today, a hacker attacked a vulnerability to the DAO, which is a decentralized autonomous organization that was initiated on the Ethereum blockchain. The DAO was worth about $150 million USD of Ethereum before today’s hack. The hack itself looks set to drain the DAO of Ethereum.  The market knows the address of the stolen ether, but nobody seems able to stop the attack.

The reaction of markets to this news has been a dramatic fall in the price of DAO shares.  DAO traded on Poloniex are down by almost 50% today.  Poloniex itself even crashed at one point today because of increased traffic.

It seems like at this time, Ethereum itself is intact, but DAO has been fatally wounded. The Ethereum community is debating weather to hard fork the Ethereum that been stolen so that it cannot be moved, or do nothing and plan on hunting down the entity that stole the Ethereum.

The funding rate of Ether on Bitfinex was fairly steady at just below 7.5% APR in the days leading up to this hack, but then spiked up 86% a few hours ago. I’m currently putting out Ether loans at 0.06%/22% APR.

Thoughts on The DAO Hack

We just lived through the nightmare scenario we were worried about as we called for a moratorium on The DAO: someone exploited a weakness in the code of The DAO to empty out more than 2M ($40M USD) ether. The exploit seems to have targeted the ‘unchecked-send’ problem in the ‘splitDAO’ function.

Will Ethereum Hard Fork? – CoinDesk

Key stakeholders behind the alternative blockchain platform ethereum are debating changes to the platform’s code after millions of dollars in ether were diverted from a major project by an alleged attacker.