Fibonacci retracements are a fundamental TA tool often used to identify potential support and resistance levels. Derived from the Fibonacci sequence, a mathematical concept where each number is the sum of the two preceding numbers (e.g., 0, 1, 1, 2, 3, 5, 8, 13, etc.), Fibonacci retracements provide insights into potential price reversals or continuations.

 The primary Fibonacci ratios are 23.6%, 38.2%, 50%, 61.8%, 78.6%, and 100%. A Fibonacci retracement level is calculated by dividing the vertical distance between significant highs and lows by these key Fibonacci ratios. Traders often use these levels to anticipate areas where the price may experience a reversal in its current trend. For instance, during an uptrend, traders may look for the price to retrace to one of these levels before resuming its upward movement, potentially offering an opportunity to enter a long position. Conversely, during a downtrend, these levels may act as areas of resistance, providing potential opportunities to enter short positions. 
The 50% retracement level is particularly important as it is not only a Fibonacci ratio but also a psychological level where market participants may perceive value or indecision. Traders often pay close attention to price action around this level as it can provide significant insights into the momentum of the prevailing trend. 
One of the key principles behind Fibonacci retracements is the concept of the "Golden Ratio," which is approximately 61.8%. The 61.8% ratio is considered to have mathematical significance and often acts as a strong area of support or resistance.
Fibonacci retracements can be applied across various timeframes, from daily to monthly charts. The principles remain the same, but the significance of retracement levels may vary depending on the time period. 
Learn more: A Guide to Mastering Fibonacci Retracement.

The Ichimoku Cloud is a collection of TA indicators that help traders determine market momentum, trend direction, and S/R levels. It uses a combination of moving averages to compute a cloud that can help predict potential price fluctuations.
The Ichimoku Cloud consists of 5 lines:
1. The Tenkan-sen, or Conversion Line, is the fastest line in the Ichimoku Cloud. Calculated as the average of the highest high and the lowest low over the past 9 periods, it offers insights into short-term price momentum.
2. The Kijun-sen, or Base Line, represents the mid-term trend. It is calculated similarly to the Tenkan-sen but over 26 periods. A crossover between the Tenkan-sen and the Kijun-sen can signal potential shifts in market sentiment.
3. Senkou Span A, or Leading Span A, is the midpoint between the Tenkan-sen and the Kijun-sen, plotted 26 periods ahead. 
4. Senkou Span B, or Leading Span B, represents the average of the highest high and the lowest low over the past 52 periods, also plotted 26 periods into the future. The area between Senkou Span A and Senkou Span B forms the cloud, providing insights into potential future S/R levels.
5. The Chikou Span, or Lagging Span, is the closing price plotted 26 periods in the past. It can help traders gauge the current momentum and assess potential trend reversals.
The key part of the Ichimoku Cloud indicator is the cloud. It is formed as the area between Senkou Span A and Senkou Span B. When Senkou Span A is above Senkou Span B, the cloud indicates an uptrend and is colored in green. When Senkou Span A is below Senkou Span B, the cloud signals a downtrend and is colored in red (see image below).
Learn more: .

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The Stochastic Oscillator is a momentum indicator used in technical analysis to identify overbought and oversold market conditions. It oscillates between 0 and 100, with readings above 80 indicating overbought conditions and readings below 20 suggesting oversold conditions.
The Stochastic Oscillator is calculated by comparing the current closing price to the range of prices over a specified time period, typically 14 periods, to determine the relative position of the current closing price within that range. The formula for the %K line of the Stochastic Oscillator is: %K = [(Current Close - Lowest Low) / (Highest High - Lowest Low)] * 100. %K is known as the fast stochastic indicator. The "slow" stochastic indicator is known as %D and is a 3-period of %K.
Traders can use the Stochastic Oscillator to generate potential buy and sell signals. When the indicator crosses above 80, it suggests that the market may be overbought and could be due for a correction, signaling a potential sell opportunity. Conversely, when the indicator crosses below 20, it indicates oversold conditions, suggesting that the market may be oversold and could be poised for a reversal to the upside, signaling a potential buy opportunity. 
The Stochastic Oscillator has several variations. One of them is the Full Stochastic Oscillator, which uses the highest high and lowest low over a specified period, in addition to the closing price, to calculate its values. This variation provides a smoother indicator line and can offer more accurate signals compared to the traditional Stochastic Oscillator. 
Another variation is the Slow Stochastic Oscillator, which applies a moving average to the %K line, resulting in a slower and less responsive indicator. This variation is less prone to false signals but may lag behind market movements compared to the traditional Stochastic Oscillator.
Learn more: 5 Essential Indicators Used in Technical Analysis.

Key Takeaways

Appchains are specialized blockchains designed to serve the needs of individual applications.

Appchains can enhance scalability through application-specific resource allocation and offer more flexibility via modular architecture.

Some examples of appchains include Polkadot parachains, Avalanche subnets, and Cosmos zones.

Introduction

Appchains emerged as blockchains designed to meet the demands of individual applications. In this article, we will explore what appchains are, go through some of their benefits, compare them with layer 1 blockchains, and take a look at a few examples of appchains.

What Are Appchains?

Appchains are specialized blockchains designed for a specific function. Unlike general-purpose blockchains that offer a variety of applications, appchains are focused on individual applications. This approach allows for transaction processing, fees, smart contract functionalities, and many other factors tailored to the needs of particular applications.

How Do Appchains Work?

Appchains operate based on the main principles of blockchain technology, but with changes that make them tailored to the needs of individual applications. Each appchain dedicates its resources to a specific task, ensuring that they are not spent on unrelated applications. 

Appchains can implement various consensus mechanisms, such as Proof of Work (PoW) or Proof of Stake (PoS), that are most suitable for individual applications. For instance, an appchain for a financial application might choose to use a different consensus mechanism than one designed for supply chain management. 

In addition, smart contracts on appchains can be specifically designed to meet the demands of individual applications. This allows for more complex contract logic that can enhance the functionality and efficiency of individual applications.

Typically, the architecture of full-fledged appchains is composed of five layers:

1. Network layer. This layer manages the peer-to-peer network functionalities. It enables nodes within the blockchain to communicate, exchange data, and participate in transaction validation processes.

2. Application layer. This layer hosts applications that run on the blockchain. It offers interfaces that developers can utilize to build, deploy, and oversee the operations of decentralized applications (DApps).

3. Data layer. The data layer is responsible for organizing and storing blockchain information. This includes maintaining the blockchain's state, recording transaction details, and handling smart contract data.

4. Consensus layer. This layer implements the consensus algorithm of the appchain. It can incorporate various consensus algorithms, such as Proof of Work (PoW) or Proof of Stake (PoS).

5. Smart contract layer. This layer facilitates the automation, verification, and enforcement of smart contracts.

Benefits of Appchains

Scalability

Appchains allocate resources to focus on a specific task or function. This specialization can result in higher transaction throughput and reduced latency for individual applications. This helps address the scalability challenges of general-purpose blockchains.

Modularity

Appchains are characterized by their modular architecture, distinguishing them from general-purpose blockchains that typically feature a monolithic design. The modular structure provides developers with the flexibility to customize the blockchain's functionalities according to the specific needs of individual DApps.

Interoperability

Appchains are designed to support interoperability, facilitating communication between different DApps. This enables users of one application to easily access the advantages of another.

Appchains vs. Layer 1 Blockchains

Architecture

The architecture of appchains is adaptable and can be aligned with different blockchain layers, allowing them to either be built on top of existing networks or operate independently. In contrast, layer 1 blockchains feature a uniform structure with a set of defined rules that network participants must follow, limiting their ability to adjust to the specific needs of individual DApps.

Consensus algorithm

Appchains can implement consensus mechanisms that are most suitable for their particular use case, which can vary depending on the underlying layer they are built upon or if they operate autonomously. Conversely, layer 1 blockchains are typically bound to their inherent consensus models, such as PoW or PoS, which may not be as adaptable to specific applications but provide a stable and uniform method of reaching consensus.

Scalability

Appchains are designed to prioritize scalability within the context of individual applications, which can result in high transaction throughput and low latency. In contrast, layer 1 blockchains often face scalability issues as they accommodate a wide variety of applications.

Appchains vs. Sidechains

Although both appchains and sidechains communicate with the main chain, sidechains are designed to perform a variety of tasks. So, unlike appchains, sidechains serve multiple purposes and are not tailored to a specific application.

Examples of Appchains

Polkadot parachains

Polkadot's parachains are individual blockchains that run in parallel within the Polkadot ecosystem. They are connected to Polkadot's Relay Chain, benefitting from its security. Parachains are identical to appchains as they can have their own tokenomics, governance models, and functionality, making them tailored to the specific needs of individual applications.

Avalanche subnets

Avalanche subnets represent separate blockchains created within the Avalanche network. They enable the development of application-specific blockchains, with each subnet supported by its unique set of validators that agree on the state of a set of blockchains.

Cosmos zones

Cosmos zones function as independent blockchains linked to the Cosmos Hub, serving as the equivalent of appchains in the Cosmos ecosystem. They use the Inter-Blockchain Communication (IBC) protocol to transfer data across the network.

Closing Thoughts

Appchains are blockchains designed to serve the specific needs of particular applications, providing greater scalability and flexibility compared to general-purpose blockchains. They are customizable, allowing developers to pick the specific parameters that fit their applications. As such, appchains can help enhance the performance and efficiency of individual applications while reducing the load on general-purpose chains.

Further Reading

What Are Decentralized Applications (DApps)?

Blockchain Scalability - Sidechains and Payment Channels

What Is Cross-Chain Interoperability?

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer here for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

Williams %R is a momentum indicator used in technical analysis to identify overbought and oversold conditions in the market. It oscillates between 0 and -100, with readings above -20 indicating overbought conditions and readings below -80 suggesting oversold conditions (see image below).
Williams %R is calculated by determining the highest high and the lowest low over a specified time period, usually 14 periods. The current closing price is then compared to the highest high and the lowest low to calculate the percentage of the range that the price has covered. The formula is: %R = (Highest High - Close)/(Highest High - Lowest Low) * -100. 
Traders can use Williams %R to identify potential buy and sell signals. When the indicator crosses above -20, it suggests an overbought condition, indicating a potential selling opportunity. Conversely, when Williams %R crosses below -80, it suggests an oversold condition, indicating a potential buying opportunity. It’s important to note that Williams %R does not have internal smoothing. As such, it is plotted upside-down, with values closer to -100 indicating a potentially bullish market and values closer to 0 indicating a potentially bearish market.
In addition, Williams %R can be used to determine market sentiment. When Williams %R rises above -50, it signifies that prices are in the upper half of the high-low range for the specified lookback period, suggesting bullish sentiment. In contrast, when Williams %R drops below -50, it indicates that prices are in the lower half of the high-low range for the specified lookback period, signaling bearish sentiment.
Williams %R also has its drawbacks. For example, it can generate false signals in trending markets. Traders may experience whipsaws, where the indicator gives premature signals that do not materialize into significant price movements. As with any TA indicator, it is recommended to use Williams %R in conjunction with other tools, such as RSI or MACD, to mitigate the risk of false signals.
Learn more: 5 Essential Indicators Used in Technical Analysis.

The Bollinger Bands indicator is a TA tool that measures market volatility and helps identify potential overbought or oversold conditions. They consist of three lines: a middle band, which is a simple moving average (SMA) of the closing prices over a set number of periods, typically 20 days, and two outer bands, calculated as the middle band plus minus two standard deviations (see image below).
Bollinger Bands are commonly used to spot potential overbought or oversold conditions. When the price breaks the lower band, it may indicate that the market is oversold and could be poised for a bounce. Conversely, a price surge above the upper band suggests the market may be overbought, signaling a possible correction. 
The ability of Bollinger Bands to identify overbought or oversold conditions is based on the mean reversion theory. This theory states that prices tend to return to their average after deviating from it. In the context of Bollinger Bands, it implies that the price is likely to revert to the middle band after moving away from it.
Bollinger Bands can also be used with trading strategies, like the Bollinger Squeeze. The Bollinger Squeeze occurs when there's a shift from aggressive price movements to price consolidation. This change is indicated by the narrowing distance between the upper and lower bands, signifying reduced volatility (see image below). Following this consolidation phase, the price typically undergoes a significant directional move, which is what many traders aim to catch.
It’s important to note that Bollinger Bands also have limitations. As Bollinger Bands derive from a simple moving average, they assign equal importance to both recent and older prices, underestimating the impact of recent price data. In addition, the settings of a 20-day SMA and two standard deviations may not suit every market scenario. Some traders adjust these parameters often to fit their trading style and objectives. 
Learn more: Bollinger Bands Explained.

Moving Averages (MAs) are technical indicators that smooth out price data by creating a constantly updated average price. They are calculated by adding together a set of prices over a specific time period and then dividing the sum by the number of prices in the set. MAs help identify trends, S/R levels, and potential reversal points in the cryptocurrency market.
Two common MA types are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA). SMA gives equal weight to each price point in the calculation. EMA places more weight on recent prices, making it more adaptive to changing market conditions. 
Moving averages also have different lengths. Shorter period MAs, such as the 5-day or 10-day moving averages, are more sensitive to price fluctuations and may be used as confirmations for short-term trades. Longer period MAs, such as the 50-day or 200-day moving averages, are suitable for general trend identification and long-term market analysis.
MAs can also be used in combination with each other to generate trading signals. For example, a bullish signal may occur when a shorter-term MA crosses above a longer-term MA, indicating a potential uptrend. Conversely, a bearish signal may occur when a shorter-term MA crosses below a longer-term MA, signaling a potential downtrend. 
One major drawback of MAs is their lagging nature. They rely on past price data, which results in delayed signals. This lag may create false signals, such as bull traps, where a false golden cross leads to buying at the local top before a price decline.
Learn more: Moving Averages Explained.

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Key Takeaways

DePIN extends blockchain's decentralization principles to tangible infrastructure like energy grids and supply chains. It leverages blockchain and IoT technologies to create autonomous and transparent systems.

DePIN can offer enhanced security, efficiency, and transparency in physical infrastructure, democratizing access to resources like energy and transportation. It can also empower economic participation through peer-to-peer transactions and token rewards.

Introduction

From finance to art, blockchain has revolutionized various aspects of our lives. But this revolution isn't just limited to the digital world. Blockchain is also being used in a variety of fields in the physical world, which relates to the concept of DePIN – decentralized physical infrastructure networks.

What Are Decentralized Physical Infrastructure Networks?

DePIN refers to the application of blockchain technology to physical infrastructure and systems. It seeks to leverage blockchain and other technologies to create decentralized networks for tangible infrastructure such as energy grids, supply chains, telecommunications, transportation systems, and more.

How DePIN Works

DePIN involves the decentralization of control of a network using blockchain technology. Typically, it relies on a combination of blockchain technology and the Internet of Things (IoT).

Blockchain serves as a secure and transparent ledger that records transactions and data exchanges within the network. It ensures trust and transparency by providing an immutable record of all transactions. Meanwhile, the IoT consists of interconnected devices that collect and exchange data in real time. In a DePIN system, these devices communicate with each other and with the blockchain database, enabling autonomous and responsive interactions within physical infrastructures.

DePINs utilize blockchain to distribute authority across networks, and it can be applied to various fields, including energy, supply chains, telecommunications, data storage, transportation, and real estate.

In energy, for instance, decentralized grids can enable peer-to-peer energy trading, with all interactions recorded transparently on the blockchain. Smart contracts can automate transactions, promoting efficiency and renewable energy use. In some cases, users may also receive cryptocurrency rewards as incentives to encourage participation and growth.

Why DePIN Matters

Security and efficiency

DePIN can enhance the security and efficiency of physical infrastructure by eliminating single points of failure and reducing the risk of tampering or manipulation. With blockchain technology, transactions and data exchanges are secured by cryptography, and the distributed database helps protect against attacks or unauthorized access.

Transparency and traceability

In industries like supply chain management, DePIN can provide greater transparency and traceability. By recording every step of the production and distribution process on a blockchain, companies can ensure the authenticity and integrity of their products. This can help prevent fraud, counterfeiting, and other illicit activities.

Democratization of resources

DePIN has the potential to democratize access to essential resources such as energy and transportation. Instead of relying on centralized providers, individuals and communities can participate directly in the production, distribution, and utilization of these resources. For example, with a decentralized energy grid, homeowners can generate and sell excess electricity to their neighbors, creating a more equitable and sustainable energy ecosystem.

Economic empowerment

By decentralizing control over physical infrastructure, DePIN can empower individuals and communities economically. It can enable peer-to-peer transactions and incentivize participation through token rewards. This can create new opportunities for entrepreneurship and innovation, particularly in underserved or marginalized communities.

Examples of DePIN Projects

Filecoin

Filecoin addresses the need for decentralized storage solutions by leveraging blockchain technology. It allows users to rent out their unused storage space and earn cryptocurrency in return. This decentralized storage network ensures data security, redundancy, and availability through a distributed network of storage providers.

Render

Render is a DePIN project focused on offering decentralized GPU-based rendering solutions. It connects node operators who want to monetize their idle GPU computing power with artists who need to scale intensive 3D rendering work and applications. In addition to the decentralized GPU computing network, Render offers a platform for artists and developers to build services and applications.

The Graph

The Graph is a decentralized protocol for indexing and querying blockchain data. It’s focused on organizing data while making it easily accessible to everyone. Graph Explorer allows developers to search, find, and publish all the public data they need to build decentralized applications (DApps).

Challenges and Future Outlook

While DePIN holds great promise, it also faces several challenges. Regulatory hurdles, technical scalability issues, and interoperability concerns are among the key obstacles to widespread adoption. Additionally, integrating blockchain technology with physical systems requires robust security measures and user-friendly interfaces.

However, despite these challenges, the future of DePIN looks promising. As technology continues to evolve and innovate, DePIN projects will likely overcome these obstacles and unlock new opportunities for decentralized physical infrastructure. By empowering individuals and communities to shape their own infrastructure and resources, DePIN has the potential to transform the way we interact with the physical world.

Closing Thoughts

DePIN, or decentralized physical infrastructure networks, revolutionizes tangible infrastructure by applying blockchain and IoT technologies, ensuring autonomy and transparency. It can offer improved security, efficiency, and transparency while democratizing access to essential resources like energy and transportation.

Further Reading

What Are Real World Assets (RWA) in DeFi and Crypto?

Blockchain Use Cases: Supply Chain

Blockchain Use Cases: The Internet of Things (IoT)


Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer here for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

The Moving Average Convergence Divergence (MACD) is a popular momentum indicator used in technical analysis. It consists of two lines: the MACD line and the signal line, along with a histogram that represents the distance between them. MACD helps identify changes in momentum, trend direction, and potential buy or sell signals in the cryptocurrency market.
The MACD line is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. A nine-day EMA of the MACD line is called the signal line, plotted on top of the MACD line. These lines oscillate above and below the zero line, indicating the relationship between short-term and long-term price trends (see image below).
When the MACD line crosses above the signal line, the indicator is considered bullish. Conversely, when the MACD line crosses below the signal line, the indicator is considered bearish. 
The following crossovers may be helpful, but they are not always reliable. It is also important to check where they occur in the chart to lower the potential risks. For example, if the crossover shows a buy signal, but the MACD line indicator remains below the zero line, the market conditions could still be perceived as bearish. In contrast, if the crossover shows a sell signal, but the MACD line indicator stays above the zero line, the market conditions are still likely to remain bullish. 
The MACD histogram represents the difference between the MACD line and the signal line. It helps traders visualize market momentum. Positive histogram bars indicate that the MACD line is above the signal line and that bullish momentum is increasing. Conversely, negative histogram bars indicate that the MACD line is below the signal line and that bearish momentum is increasing.
Crypto traders often use the MACD indicator to identify trend reversals, with crossovers between the MACD line and the signal line signaling potential shifts in market direction. Additionally, the MACD histogram can help gauge the strength of market momentum, with histogram bars indicating its direction in the current trend. Moreover, divergences between the MACD indicator and price action may indicate potential trend changes.
Learn more: MACD Indicator Explained.

The Relative Strength Index (RSI) is a momentum oscillator widely used in technical analysis. RSI measures the speed and change of price movements, providing crypto traders with valuable insights into potential market fluctuations. It oscillates between 0 and 100, with readings above 70 generally indicating overbought conditions and readings below 30 suggesting oversold conditions.
RSI calculation involves comparing the magnitude of recent gains and losses over a specified time period. This results in a single numerical value, which is usually plotted on a chart and visualized along the asset's price movement (see image below).
Let’s take a look at some reasons why traders use the RSI indicator.
1. Oversold and overbought conditions. One of the primary uses of RSI is to identify overbought and oversold conditions in the market. When RSI readings exceed 70, it suggests that the asset may be overbought, meaning it could be due for a correction. Conversely, RSI readings below 30 indicate oversold conditions, suggesting that the asset may be undervalued and could be poised for a reversal to the upside.
2. Divergences. Traders can also spot bullish and bearish divergences between RSI and price action. Bullish divergences occur when the price forms a lower low while the RSI forms a higher low (see image below). This suggests that despite the downward price movement, momentum is shifting upwards, indicating a potential trend reversal to the upside.
Conversely, bearish divergences occur when the price forms a higher high while the RSI forms a lower high (see image below). This signals potential weakness in the prevailing trend.
Learn more:

Key Takeaways

The Bitcoin STAMPS protocol embeds images into the Bitcoin blockchain, enabling the integrity and immutability of digital art.

Compared to Bitcoin Ordinals, the Bitcoin STAMPS protocol offers a safer approach to data storage and allow for more flexibility.

This article explores what Bitcoin Stamps are, how they work, and some of the ways they differ from Bitcoin Ordinals.

Introduction

Over time, Bitcoin has evolved to support various applications beyond its initial purpose, including embedding additional data within transactions. The Bitcoin STAMPS protocol enables data embedding, building on the capabilities introduced by previous technologies like the Ordinals protocol. In this article, we will explore what Bitcoin Stamps are, how they work, and what makes them different from Bitcoin Ordinals. 

What Are Bitcoin Stamps?

Bitcoin Stamps are digital art generated through the Bitcoin STAMPS protocol. They represent a method for integrating digital art within the Bitcoin blockchain. The protocol encodes data within unspent transaction outputs (UTXOs), ensuring its immutability by permanently including it in the blockchain.

How Bitcoin Stamps Work?

A Bitcoin Stamp is created by turning a piece of digital art into a base64 string. The string is added to a Bitcoin transaction, marked with a "STAMP:" prefix. This data is spread out over several outputs using multi-signature transactions. This approach ensures that digital artwork will be permanently recorded on the Bitcoin blockchain.  

Each Bitcoin Stamp gets a special number that's based on when the transaction happened, making it easier to keep them in order. For a Stamp to be officially recognized, it must meet certain rules, like being part of the first transaction that includes a valid "STAMP:base64" string.

Bitcoin STAMPS Protocol

There are two main protocols used in Bitcoin STAMPS: SRC-20 and SRC-721.

1. SRC-20. The SRC-20 token standard is built on the open Counterparty protocol. It embeds arbitrary data within spendable data transactions – unlike Ordinals, which places data in the witness section.

2. SRC-721. The SRC-721 standard makes it cheaper to create detailed NFTs. It uses the Bitcoin STAMPS protocol to store pictures in layers, cutting down on file size with methods such as indexed color palettes for each layer. The layers can be pulled together into a single NFT, allowing for the creation of high-quality images without incurring high costs.

Bitcoin STAMPS vs. Bitcoin Ordinals

Bitcoin STAMPS and Bitcoin Ordinals are inscription technologies on the Bitcoin blockchain. Both of them allow users to attach additional data to the Bitcoin network, but their approaches have distinct differences.

Data pruning 

Bitcoin Ordinals store information as witness data in a separate part of a block of transactions. Witness data can be modified by a blockchain node through a process known as data pruning. In contrast, the Bitcoin STAMPS protocol embeds image data in unspent transaction outputs (UTXOs). Therefore, digital artwork minted with Bitcoin STAMPS cannot be pruned, preserving its immutability.

Data size and cost

The Bitcoin STAMPS protocol offers flexible data storage, allowing creators to use images with a resolution of 24x24 pixels or higher. However, choosing larger images increases the data size, potentially leading to increased transaction costs for the Stamp. In contrast, Bitcoin Ordinals limit the size of the embedded data to the Bitcoin block size. This constraint on image resolution maintains consistent transaction fees but limits flexibility.

Signature type

Bitcoin Stamps are inherently designed with a multi-signature framework, which enhances data security. Conversely, Bitcoin Ordinals utilize a system that operates on a single signature basis.

Closing Thoughts

The Bitcoin STAMPS protocol provides a method of embedding digital artwork into the Bitcoin blockchain, ensuring its integrity and immutability. Unlike Bitcoin Ordinals, which are limited by block size and single-signature transactions, Bitcoin Stamps offer greater flexibility in data size and security through a multi-signature framework.

Further Reading

What Are Ordinals? An Overview of Bitcoin NFTs

A Step-By-Step Guide on How to Create Your Own Ordinal Inscriptions

What Are BRC-20 Tokens?

What Is the Binance Inscriptions Marketplace?

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer here for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

The Dow Theory is a foundational principle in technical analysis that is used by traders to identify the overall trend of the market. It emphasizes three main trends: primary, secondary, and minor. Confirmation, volume analysis, and S/R levels are the key components of the Dow Theory that allow traders to validate trends and identify potential entry and exit points.
Let’s take a look at the six tenets of the Dow Theory. 
1. The market discounts everything. This principle suggests that all information, including past, present, and future events, is already reflected in the price. Therefore, studying price action alone is considered enough to get insights into market trends and potential future price fluctuations.
2. The market has three movements. According to the Dow Theory, the market consists of three primary movements: the main movement, medium swing, and short swing. The main movement can last from less than a year to several years and is either bullish or bearish. The medium swing typically lasts from ten days to three months and retraces from 33% to 66% of the price change since the previous medium swing or the start of the main movement. The short swing may last from hours to a month or more, often occurring simultaneously with the other two movements.
3. Market trends have three phases. The following tenet suggests that market trends consist of three phases: accumulation, public participation, and distribution. During the accumulation phase, informed traders buy or sell assets against the prevailing market sentiment. As other traders catch on, a rapid price change occurs in the public participation phase. It continues until speculation reaches a peak, leading to the distribution of holdings by the informed market participants in the last phase.
4. The trend is confirmed by volume. Volume is crucial in confirming the validity of a trend. In an uptrend, increasing volume indicates strong buying interest, confirming the bullish trend. Conversely, increasing volume during downward price movements suggests a bearish trend.
5. The averages must confirm each other. This tenet highlights the importance of using multiple indices or averages to confirm the direction of the market. For example, if the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) both reach new highs or lows simultaneously, it strengthens the signal of a prevailing trend.
6. Trends continue until a clear reversal occurs. The Dow Theory suggests that trends persist until there are clear reversal signals.
Learn more: An Introduction to The Dow Theory.

🔥 Binance Highlights
Binance CEO visits the Taiwan High Prosecutor’s Office to discuss cooperation in combatting crime.Binance Labs invests in StakeStone to support the omnichain liquidity distribution.Binance Academy partners with BNB Chain to launch a new BNB Chain Developer Specialization program.Binance joins the Global Travel Rule Alliance to advance interoperable compliance.Binance launches the Golden Egg Giveaway with the main prize of 1 BTC and $200,000 to be won.

🗞️In The News
Sam Bankman-Fried is sentenced to 25 years in prison for his role in the FTX fraud.The EU Parliament’s lead committees approve a ban on anonymous cryptocurrency transactions.A $7.5B AI crypto token merger is scheduled for a community vote on April 2, 2024.The UK FCA cracks down on social media influencers and crypto memes.The US and the UK review $20B USDT transactions linked to Russia’s Garantex.

📖Binance Academy Knowledge
What Is Cross-Chain Interoperability?What Is Liquid Staking?What Is BNB Chain?Your Guide to Binance Launchpad and LaunchpoolWhat Is the Binance Inscriptions Marketplace?

Leading indicators are tools that help crypto traders predict future market shifts. Unlike lagging indicators, which follow price action and provide trend confirmation, leading indicators can help forecast price movements before they occur.
Let’s take a look at several leading indicators and what they may signal.
1. Relative Strength Index (RSI). The RSI is a momentum oscillator that measures the speed and change of price movements. It oscillates between 0 and 100 and is typically used to identify overbought or oversold conditions in the cryptocurrency market. Traders can use the RSI to anticipate potential trend reversals when it reaches extreme levels.
2. Stochastic Oscillator. The Stochastic Oscillator is a momentum indicator that compares the closing prices to their price range over a specified time period. It oscillates between 0 and 100 and is often used to identify overbought or oversold conditions in the cryptocurrency market. Traders typically use the 80 and 20 levels. A sell signal occurs when the oscillator rises above the 80 level and then falls back below it. Conversely, a buy signal is triggered when the oscillator drops below the 20 level and then rises back above it.
3. Williams %R. Williams %R (also known as Williams Percent Range) is a bounded oscillator ranging from 0 to -100, with -50 serving as the midpoint. When Williams %R surpasses -50, it indicates that prices are trading in the upper half of the high-low range for the designated lookback period, suggesting bullish sentiment. Conversely, when Williams %R falls below -50, it suggests that prices are trading in the lower half of the high-low range for the designated lookback period, indicating bearish sentiment.
4. Ichimoku Cloud. The Ichimoku Cloud is a leading indicator used by crypto traders to gauge momentum and future S/R levels. It consists of five main components: the Tenkan-sen (Conversion Line), the Kijun-sen (Base Line), Senkou Span A (Leading Span A), Senkou Span B (Leading Span B), and the Chikou Span (Lagging Span). By analyzing the relationships between these components and the cloud formed between Senkou Span A and Senkou Span B, traders can anticipate potential future price movements.
Learn more: Leading and Lagging Indicators Explained.

Lagging indicators are TA tools that provide signals after a trend has already started. While they do not predict future price movements, they can offer insights into ongoing market trends and momentum. Traders often use lagging indicators to confirm the strength and direction of existing trends.
Here are a few examples of lagging indicators used by crypto traders:
1. Moving averages (MAs). Moving averages smooth out price data to create trend-following indicators that highlight the direction of a trend. They help traders identify support and resistance levels, as well as potential entry and exit points. By analyzing the relationship between different MAs, traders can generally measure the strength of a trend and anticipate potential trend reversals.
2. Moving average convergence divergence (MACD). The MACD is a trend-following momentum indicator that consists of two lines – the MACD line and the signal line. Traders can use the MACD to identify bullish and bearish crossovers, which signal potential changes in trend direction. Additionally, divergence between the MACD line and price action can indicate the potential strength of a trend or a possible trend reversal.
3. Parabolic SAR. The Parabolic SAR is a lagging indicator designed to identify potential reversal points in price trends. It appears as a series of dots above or below price bars, depending on the direction of the trend (see image below). When the dots are below price bars, it suggests an uptrend, while dots above price bars indicate a downtrend. Traders can use the Parabolic SAR to confirm trend direction, determine potential entry and exit points, and manage stop-loss levels.
4. Bollinger Bands (BB). are a lagging indicator that consists of a simple moving average (SMA) and two standard deviation bands plotted above and below it. They dynamically adjust to market volatility, expanding during periods of high volatility and contracting during low market volatility. Traders can use Bollinger Bands to identify overbought and oversold conditions, as well as potential trend continuation or reversal points.
Learn more: Leading and Lagging Indicators Explained.

Key Takeaways

Liquid staking tokenizes staked assets, providing enhanced utility and liquidity compared to traditional staking methods.

It addresses the liquidity issue associated with traditional staking, offering greater flexibility for users to utilize their staked assets in various DeFi applications.

Liquid staking can enhance token utility and value, fostering the development of new applications and encouraging crypto adoption.

Introduction

Liquid staking is an innovative concept that allows users to enhance the utility of the digital assets they stake. This quick guide explores the fundamentals of liquid staking, how it works, why it matters, its pros and cons, and how it differs from other forms of staking.

What Is Liquid Staking and How Does It Work?

In short, liquid staking is the tokenization of staked assets. We can think of it as an evolved version of traditional staking.

Conventional staking involves locking assets on a Proof of Stake (PoS) blockchain for a chance to receive rewards while contributing to the network’s security. However, this process often comes with a trade-off, as staked assets are typically illiquid (locked) during the staking period.

Liquid staking addresses this issue by introducing a mechanism where users can stake their assets without compromising liquidity. There are different ways of building such a mechanism, but as long as it offers liquidity to staked assets, we can call it liquid staking.

In some cases, users receive liquid staking tokens (LSTs) in exchange for their staked assets. For example, if you stake ETH on a platform like Lido, you will receive stETH tokens in return. This model is also known as liquid staking derivatives.

In other cases, the assets can be staked directly without using LSTs. For example, when staking ADA on the Cardano blockchain. This model is also known as native liquid staking.

Liquid staking gives staked tokens more flexibility and utility, as users can benefit from staking rewards without compromising liquidity.

Why Does Liquid Staking Matter?

Liquid staking addresses the liquidity issue associated with traditional staking, providing users with greater flexibility and accessibility to their staked assets.

Platforms like Lido and Cardano can offer users the opportunity to earn staking rewards while still being able to trade and use their staked assets in decentralized finance (DeFi) applications.

In addition, liquid staking contributes to the overall growth and adoption of blockchain networks by encouraging more active participation from users who may have been hesitant to lock up their assets for extended periods.

Pros and Cons of Liquid Staking

Pros

1. Enhanced utility: Users can put their staked assets to use in different DeFi applications without giving up on staking rewards.

2. Reduced opportunity cost: Liquid staking allows users to take advantage of potential trading and investing opportunities using liquidity that would be unavailable in traditional staking methods.

3. Cryptocurrency adoption: Liquid staking can enhance token utility and value, fostering the development of new applications and encouraging crypto adoption.

Cons

1. Slashing risk: Dishonest validators can be removed from the network and have a portion of their staked tokens “slashed” (taken away). Users may also be exposed to slashing risk if their chosen validators get penalized.

2. Centralization concerns: Decentralization may be harmed if the majority of tokens are staked in a single protocol with its own set of validators. A diverse network of liquid staking protocols is preferable to mitigate centralization risks.

3. Regulatory uncertainty: Blockchain and cryptocurrency regulation is changing constantly and may vary significantly from one place to another. It’s important to check local laws before getting involved with liquid staking and DeFi platforms.

Liquid Staking vs. Liquid Restaking

As we’ve learned, liquid staking involves the tokenization of staked assets, enabling liquidity and flexibility without waiting for the staking period to end. Liquid restaking, introduced by EigenLayer, takes the concept further. 

While liquid staking relates to staked assets that help secure a PoS blockchain, liquid restaking can expand security to oracles, rollups, and other “external” modules and systems. Examples of liquid staking projects include Lido (stETH), Cardano (ADA), Binance ETH (BETH), and Rocket Pool (RETH). Examples of liquid restaking projects include ether.fi, Puffer, and Kelp DAO.

Closing Thoughts

Liquid staking offers users a more dynamic and flexible approach to participating in staking ecosystems. By tokenizing staked assets and providing enhanced liquidity, liquid staking unlocks new possibilities for digital assets.

Further Reading

What Is Crypto Staking and How Does It Work?

What Is Proof of Stake (PoS)?

What Is EigenLayer?

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In the cryptocurrency space, a trading plan is an approach to identifying and trading cryptocurrencies based on factors, such as objectives, risks, and time. It contains the methods for discovering trades, determining the buying and selling conditions, setting position sizes, managing open positions, and exiting the market. Essentially, a trading plan outlines the rules for trading.
Deviations from a trading plan can lead to significant consequences for crypto traders. They may start making irrational trades based on emotions, such as FOMO or greed. In addition, it can undermine consistency, making it more difficult to achieve long-term success.
Let’s take a look at several benefits that traders get from sticking to their trading plans.
1. Clear objectives. By outlining specific targets for profits, risk tolerance, and performance metrics, trading plans help define clear trading goals. This allows traders to avoid emotional biases and generally increase their chances of success.
2. Risk management. Trading plans enable traders to establish predefined risk parameters, including stop-loss levels and position sizing rules, to protect their capital from significant losses. With an effective risk management strategy, traders can mitigate potential risks and preserve their funds.
3. Consistency. Trading plans promote consistency in trading decisions. By following a set of predefined rules, traders can avoid impulsive trades that often lead to poor outcomes.
Learn more: What Is a Trading Journal and How to Use One.