Hello Zoe is here I will be discussing on understanding crypto-market
What does coin market cap do??
Coin Market Cap: shows the number of crypto-currency available in the market and it ranks them according to their market capitalization so the higher the market capitalization the higher the ranking, the lower the market capitalization the lower the ranking.
What does blocktivity.info do??
Blocktivity.info : shows the amount of transactions each blockchain is doing.
But right now some people might have difficulty in knowing the difference between what is on coin market cap and what is on blocktivity because they are seeing BITCOIN, STEEM, ETHEREUM on blocktivity.info but they are not seeing other coins and they are also seeing STEEM, BITCOIN on the coin market cap.
Does that mean every coin on coin market cap has its own blockchain?
No.., and that is what we are going to be discussing today, what type of crypto-currency do we have and why does most crypto-currency don't have their own blockchain.
That's why in coin market cap we have tokens and coins, so also today we are going to be finding out the difference between token and coin. The understanding of this topic we let you know why we have fewer of blockchain listed on blocktiviy.info.
So what is a coin, is a very simple definition because I'm assuming that whosoever is reading this is new into crypto-currency as a whole.
A "coin": is the share of an asset from a blockchain.
So if you have a blockchain let's say you named it XYZ, if your blockchain can be used to build other crypto-currency, those other crypto-currency that will be built on your XYZ blockchain would be called tokens, while the crypto-currency on your own blockchain is called a coin.
So if a crypto-currency has or is built on is own blockchain it is called a "coin" but if it's built on another crypto-currencies blockchain it is called a "token".
In other wordsTokens : are crypto-currencies built on other blockchain. Tokens don't have their own blockchain, so that's the major difference.
I believe with this you are able to know between a token and a coin, in case you go to the market cap, let's do a quick recap;
Tokens are built on other crypto-currency blockchain while coins has their own blockchain.
Most people don't know how the prices comes about and how did the price of BITCOIN went up to $20,000, why is the price of STEEM $1.35, why is ETHEREUM having that price and what determines the price of a crypto-currency so that is what we are going to be talking about today also.
Here we are going to be talking about the price as I said before, so how is the price of a crypto-currency gotten?
The price of a crypto-currency is gotten by dividing the market capitalization by the total or circulative supply, that is how the price of a coin is gotten.
Let's do a quick experiment the market capitalization of BITCOIN is $111,013,335,512 and the total circulative supply is 17,096,650 BTC , you've seen the price but before we dive more into this and before you check the prices of other crypto-currencies let's see if this formula is correct,
Now the question is, what is circulative supply and what is total supply?
Total supply: is the total number of that crypto-currency that will ever be produced, let's use BITCOIN as an example; BITCOIN has a total supply of 21million, that means there will be only 21million of BITCOINS that will be ever produced in the history of BITCOIN, we cannot have 21.1million or 21.2million there will only be 21million BITCOINS so that is the "total supply" or "max supply".
Circulative supply: is the total amount of BITCOIN or that crypto-currency available currently in the market.
Currently we don't have up to 21million BITCOINS but the total number that will ever be produced is 21million. Now the circulative supply is the total amount available in the market right now.
EOS is another example, and it has a total supply of 1billion of course which will be increased by 5% inflation currently it has a circulative supply that is not up to 1billion.
So what determines the price of a coin, is it the circulative supply or the total supply?
It's actually the "circulative supply", so if you take the market capitalization of any coin and divide it by the total supply you will get the price, we've already done all the example with BITCOIN.
How does the price increase or decrease? It's through the volume, the more the volume in a coin increases and the circulative supply remains constant the more the price goes up. If the price goes up and the circulative supply goes up same time and with same proportion, the price remains stable an example is TETHER, it is used as a stable coin but later we are to talk about stable coin.
So if the circulative supply of a crypto-currency remains constant and the volume increases, it will cause the price to increase, if the circulative supply of a coin remains constant and then the volume decreases or market capitalization decreases, the price will decrease.
For any crypto-currency, the higher the market capitalization with a constant price the more the price will increase, in summary market capitalization divided by the circulative supply is equal to the price.