A Beginner’s Guide To Cryptocurrency and APIs

Before the Internet, the financial world looked very different. Buying stocks meant calling your broker and trusting them to make the purchase. Now, the buying and selling of financial securities is all done online, all because of the use of new technology. One of the ways that technology has advanced the financial world is with cryptocurrency and the use of APIs.

APIs

API stands for application programming interface. An API is a program that allows one program to talk to a different program. In other terms, an API is a messenger that sends your requests to a system and then sends the system’s response back to you. An example of this process would be buying a plane ticket on a flight comparison website. You input where you want to go and when, then the website will bring back your flight options by pulling from airline databases. This process is done using APIs from each airline. This is just a basic example of how APIs work.

Additionally, a trading API is an API designed to work within the financial trading system, allowing you to directly make exchanges or sales. Trading APIs are especially popular among hedge funds and trading firms because of the use of algorithm based trading programs. However, you do not need to be part of a financial business to make use of trading APIs, like if you are dealing with a cryptocurrency.

Cryptocurrencies

Almost everyone has used PayPal, but not everyone has heard of or used Bitcoin. However, looking at GitHub alone tells a different story. According to BBVA, there are over 3,000 repositories connected to PayPal, while there are more than 8,000 repositories connected to Bitcoin. So cryptocurrencies are the newest financial trend, but how do cryptocurrencies work?

Cryptocurrencies are a method of payment that are completely digital and untraceable. Cryptocurrencies use cryptography to secure monetary transactions and transfer assets. This process is decentralized as opposed to a central banking authority. Cryptocurrencies are, at the very basic level, an alternative way to pay for things online. However, there is a lot more to cryptocurrencies.

To begin with, the very base of cryptocurrencies, such as Bitcoin, is blockchain. This is built upon APIs. Because of the link between Bitcoin, blockchain, and APIs, there is a massive database across many servers around the world that collects every transaction made in Bitcoin. Every transaction is encrypted and authenticated and then added to the blockchain.

Each transaction is public and is verified before it is added to the blockchain. A transaction is verified by consensus and the proof of work is what determines the transaction authenticity. A series of nodes are responsible for ensuring the transaction is authentic; this normally takes about 10 minutes. Because every transaction is checked before it is added to the blockchain, cryptocurrencies are secure and this allows the entire system to function with no central authority guaranteeing each transaction. This whole process is all possible due to APIs. 

How They Work Together

APIs encompass a wide variety of functions, everything from tracking wallet amounts, to sending and receiving transactions, APIs handle it all. One of the most basic APIs for Bitcoin is Receive Payments API; this program is a simple way for a company to take in automated payments in Bitcoin. It is based on HTTP GET requests and creates an address for each user for each invoice for each transaction.

There are a number of different APIs that exist to make using Bitcoin easier. One of the most recognizable is Coinbase. Coinbase is one of the largest and highest regarded wallet systems available, but it is also one of the most popular transaction processing platforms. Coinbase works with Bitcoin, but also supports Bitcoin Cash, Ethereum, and Litecoin. On top of all of that, Coinbase is also free to use with no paid option, but there is a rate limit of 10,000 requests an hour.

Without APIs, there would be no blockchain and there would be no cryptocurrencies. All of these tools work together to create a new and exciting financial system. Technology and innovation has brought us to this point and it will be interesting to see what comes next.

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