For everyone, interested in getting involved with cryptocurrencies or wanting to find out what the hype is all about, you should start by knowing “not all cryptocurrencies are created equal!”. There are thousands of cryptocurrency tokens and coins out there and all of them are suggesting they do something unique or they are the next big thing. The truth is there are less than five cryptocurrencies worth paying attention to.
A lot of projects claim to be doing something better than their prominent centralised counterpart but the truth is, at this stage, blockchains are slow, expensive and take a lot of processing power to run. Anyone who tries to tell you differently is lying to you! As of 2020, the only real use case for crypto is money.
Don’t get me wrong if you are only interested in speculating or get rich quick schemes, follow the hype in this space and get recked on the next big pump and dump token or coin. You’ll find loads and every week they fluctuate up and down in the region of -20% to +20%. For everyone else, these next points will minimize unscrupulous people from taking advantage of your optimistic good nature.
The advice I wish I had when I started investing in cryptocurrencies
I would like to give you three pieces of advice that will save you a lot of time and money whilst you are completing your research and finding the best projects to invest in.
No 1. Tokens have no value
Let’s keep this simple, tokens are built on a crypto platform and have no value for investors trying to invest in sound money. Tokens are the equivalent of investing in a company. This might seem attractive to some investors as short term speculation but ultimately they are an ultra high-risk un-proven asset class. A large majority of the fraudulent and manipulative behaviour in the crypto space is attached to token sales. Currently, this space has little to no regulatory protection for retail or commercial investors.
No 2. Maximum supply is a requirement, not a suggestion
The best way to reduce your research time by a further 99.9% is to only look for projects with a maximum supply of 21 million coins. note: A lot of projects try to trick and confuse users by showing the “current supply” parameter in their documentation, this is not the same as maximum supply. As far as money supply goes there is something very reassuring to know that your coins can’t be debased by endless mining or printing.
If you don’t agree with this point, ask yourself one question “Why do they need so many coins? If adoption is likely to include all 7 billion people on the planet then it might be possible that they need more coins but currently, most of the projects in the top 10 have less than 100 thousand users, so this is not very likely.
Another thing to remember is that each coin can be divided into 100 million separate coins. In my opinion, any project that is attempting to be sound money or a store of value does not need to produce more than 21 million coins.
This single point is the biggest difference between our current monetary system and cryptocurrencies. It’s the main reason most people enter the space in the first place.
If you want to question this point further, ask yourself another question “How many coins do I need to buy to own 1 millionth of the supply and how much will this cost?” This is a good question because the likely hood of a project gaining the adoption of more than a million users over the first 5 year period is extremely low but if it does, this quantity of coins will give you a strong position in the ecosystem.
Example 1: Decred (DCR) price £10 a coin — Max Supply 21 million = 21 coins (current cost £210)
Example 2: Stellar (XLM) price £0.03 a coin — Max Supply 50 Billion = 50,000 coins (current cost £1,500)
Example 3: XRP (XRP) price £0.15 a coin — Max Supply 100 Billion = 100,000 coins (current cost £15,000)
No 3. An open and decentralised ledger
Our current fiat monetary system is a closed platform, that doesn’t allow users to see how the system functions. If you want to gain knowledge about how the system works or the data that is being produced, you either have to wait for the official figures to be produced by central parties or you have to be a system insider. It’s, for this reason, there is a growing distrust. The data is so heavily censored, manipulated, distorted or hidden that it’s almost impossible for the average person to understand what’s going on. It’s also impossible to understand if everyone transacting on the system is acting responsibly.
A decentralised ledger is the cornerstone of the cryptocurrency space and allows for an open and transparent monetary ecosystem that can be viewed by anyone who wishes to read the data. At any given time you can access the most up to date information about every part of the system and how it’s functioning.
Having an open ledger changes the financial infrastructure and makes participates act more responsibly. This is because every transaction is recorded onto the blockchain forever and for everyone to see. Tracking bad actors is infinitely more visible.
When I’m evaluating a cryptocurrency project, one of the first things I do is check the data available on the projects blockchain explorer. If this information is not available, hard to find or limited I stay away from the project.
The last conversation to be had is, what’s stopping Governments or big business from creating their own cryptocurrency and dethroning the ones that already exist. The answer is “Nothing!” and if they follow the “Max supply” and “open ledger” requirements of cryptocurrencies, I’m sure we would see some of the best and largest adopted cryptocurrencies ever made.
However, looking at the current proposal of the “Digital Dollar” and “The Libra Project” it would appear that governments and big business have no intentions of using these simple protocols and as such the evolutionary process started by Satoshi Nakamoto will continue to gain traction by people seeking a fairer more transparent monetary system.
For what its worth, here are the coins that I believe have the most potential in the current cryptocurrency space:
- Decred (DCR) — This is my number one hold.
- Dash (DASH) — The original dark coin and has a lot of development.
- Bitcoin Cash (BCH) — This one is a little controversial but I have a lot of respect for what they are trying to do.
- Bitcoin (BTC) — Has the advantage of having the first-mover but is extremely overpriced.
Final Disclaimer — Please note the above research is not financial advice and you should always do your own due diligence before investing your money. Investments can go down as well as up and cryptocurrencies are typically volatile assets.
The views expressed in this article are that of the author and based on the authors own research and investigation. The author is happy to receive comments, feedback, edits and likes for this channel to help evolve the open nature of the discussion.
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