I decided to grind down further to PERCEPTION rather than technicality for now, since I received comments of not understanding what am I trying to deliver. May be I went too far in episode 1. So, let's get on with some simple business in the first place.

Why trade?

First of all, we are so used to term BUY and SELL, both of them are actually from the same "TRANSACTION", and when the deal initiated between two or more parties agreed to transact, it's called a TRADE.

Why BUY?

Then we will have to understand when there is a "need", and we "buy". In terms of crypto trading, there is "no need", because we're using FIAT in our reality world. So, why do we "need to trade"? It doesn't exist, don't be stupid. It's all created because we "WANT" to trade. Why do we want to trade? That's because we know, if we BUY crypto at low price, later we can SELL crypto at higher price, so we get more FIAT. In order to complete a BUY, you need someone to SELL to you. You can't initiate a TRADE if you can't find the counter party that agree with your term. So far following me?

Why SELL?

That's when we have something valuable in hand, and we know it worth something, we can then SELL it for some other valuable thing that we need(want, wish to have or even must have). Take note, when you NEED to sell, you don't even think of how much you lose or earn from the value holding property. In this case, we're talking about CRYPTO, it's a value holding asset, and we're the one who decide whether to sell it or HODL it. Take this pandemic season as example, when everything goes south, it's the best time to test how crypto worshiper hodl on to their religion. You'll be surprised how much people loss by dumping their BTC they bought at 17k back then and sold it at half price. In order to sell, you need someone to BUY, in order to complete a TRADE. If you can't find anyone to agree with your selling price, you can put up your property for sale forever, like you put up your BTC at USD19k for the past 3 years and still nobody wanna buy it from you, and your transaction will not be complete.

Why need to pair a trade?

In episode 1, we briefly talked about denominator and numerator. Let's put that behind first, because the first thing you need to understand is, every trade initiated has to be a PAIR of numbers, then only you can compare between the value between the two. Buy? What do you want to buy? What do you want to USE to buy? Same goes to sell. For example, let's take British pound because it's one of the larger currency, easy for you to understand how pairing works.

Source from currencyrate24.com on 2/4/2020 23:25GMT+8
With this, it's easy to understand, when you read Australian Dollar as 2.0344, it simply means 1 Great Britain Pound is exchangeable to 2.0344 Australian Dollars.

Understanding STEEM internal market exchange rules

Now, you already have an idea of how the bank works, but you will also have to understand how the crypto market works, because there is no bank here. Crypto world works as it's own community trading, and the market determine it's crypto value all by the trading volume itself.

When you look into your steemitwallet internal market, you will only see the trade numbers. Last pice 0.1816, that does not mean it's USD. This simply means, 1steem only equivalent to 0.1816SBD. So, don't go too carried away looking at your crypto feed and thinking why the price feed different so much.

Coming episode, we will come back to nominator and denominator, why is it important to switch the PAIR upside down instead of left and right.

Source from pinterest