When considering Binance vs. Coinbase, it’s essential to recognize that Binance operates a separate platform for U.S. investors called Binance.US, offering a more limited selection of coins and functionality compared to the main exchange.
Coinbase’s basic platform is tailored for new investors but imposes higher trading fees than its Advanced Trade platform, designed for more seasoned investors. This comparison will explore fees, security, available cryptos, and other aspects, highlighting any significant differences within each crypto exchange.
The fees associated with crypto exchanges can accumulate, particularly when considering deposit and withdrawal costs. In this regard, both Binance and Binance.US have a fee advantage over Coinbase.
Binance and Binance.US
Transferring most fiat currencies (e.g., U.S. dollars) to Binance and Binance.US is free, but using a debit card incurs a 4.5% fee on Binance.US and 1.8% on the main exchange. Binance’s basic maker-taker trading fee is 0.1%, competitive with other exchanges. Trading fees are consistent for both U.S. and international customers, with discounts available for using Binance Coin (BNB) and for high-volume traders. Binance.US charges a 0.5% fee for its basic “Buy Crypto” function and varying fees for certain cryptos.
Coinbase and Coinbase Advanced Trade
Coinbase’s fees can be high and somewhat opaque. Buying crypto with a debit card costs 3.99%, less than Binance.US, but trading fees are higher. Learning to use Advanced Trade can lead to significantly lower fees, though they can be challenging to calculate upfront.
Binance vs. Coinbase: Cryptos Available
Both Binance.US and Coinbase offer a decent selection of coins, with the main Binance platform offering an even more extensive range. However, this advantage may not be relevant for U.S. residents.
Exchange
Number of cryptos
Binance
Over 500
Binance.US
Over 100
Coinbase
Over 200
Binance vs. Coinbase: Wallets
Coinbase and Binance each provide standalone crypto wallet apps, known as hot crypto wallets. Moving assets to an external wallet offers several benefits, including increased security. While Coinbase Wallet is highly intuitive, Binance’s Trust Wallet is less straightforward but offers lower transaction fees.
Binance vs. Coinbase: Security
Strong security precautions are used by both Coinbase and Binance, including cold storage and additional anti-hacking techniques. Binance maintains a “Secure Asset Fund for Users,” whereas Coinbase has third-party insurance through Lloyds. Both platforms place a strong emphasis on user-level security and offer copious resources for self-defense.
While facing regulatory difficulties, Binance keeps innovating and provides special benefits. In contrast, Coinbase has typically been able to maintain strong relations with regulators, even dropping some products in response to regulatory pressure.
Final Thoughts
Depending on the investor’s profile and region, they may choose between Binance and Coinbase. With the exception of Hawaii, most U.S. states have access to Coinbase, which offers accessibility, especially for beginners. Although it takes more work to grasp, Binance offers a wider environment for developing and investing in cryptocurrencies and has lower costs and greater features.
In the United States, Binance is only available in some states, including as Vermont, New York, Texas, and Hawaii. This platform offers more than simply trading; it also acts as a centre for early-stage investment opportunities and cryptocurrency innovators.
Kraken and Coinbase, both ranking among the top 10 crypto exchanges by trading volume, offer a broad spectrum of features catering to the needs of cryptocurrency investors.
This comparison will examine security, fees, available cryptos, and more to help you determine which of these two popular exchanges is the best fit for your needs.
Kraken has a slight advantage over Coinbase in terms of fees, although they are quite similar. This is partly due to Kraken’s lower trading fees and transparent fee structure. For those new to crypto investing, adapting to the advanced platforms quickly can result in lower crypto trading fees. Using the pro platforms (Kraken Pro and Advanced Trade) can be more cost-effective, especially with fee-free deposits. Both pro and basic options are compared here for a fair assessment.
Kraken Instant Buy vs. Coinbase
Kraken’s Instant Buy feature shares many similarities with Coinbase’s entry-level exchange. Both platforms simplify the buying or selling of crypto, especially for newcomers. The fees for buying Bitcoin (BTC) worth $100 are at least $1.50 on either platform, though slightly more on Coinbase.
Kraken charges 1.5% for buying or selling crypto, and 0.9% for stablecoins, with potential additional fees depending on the payment method.
Coinbase’s charges range from $0.99 to $2.99 on purchases or sales below $205, plus a variable spread, and 1.5% plus the spread on larger transactions. Additional fees may apply for certain payment methods.
Kraken Pro vs. Coinbase Advanced Trade
Both advanced platforms employ a tiered maker/taker fee that decreases for investors with higher trading volumes.
Kraken Pro’s highest maker/taker fees are 0.26% / 0.16% for low volume traders, reducing to 0.00% / 0.10% for those trading over $10 million a month.
Coinbase Advanced Trade’s highest fees are 0.60% / 0.40% for low volume traders, reducing to 0.05% / 0.00% for top-level investors trading $500 million a month.
When evaluating fees on cryptocurrency exchanges, consider how you intend to use the platform, including deposit methods, trading frequency, and withdrawal methods. Both platforms offer free ways to deposit money, and in most countries, bank transfers to both Kraken and Coinbase are free. However, debit card usage can incur additional costs.
Kraken vs. Coinbase: Cryptos Available
Both Kraken and Coinbase offer major cryptos like Bitcoin, Ethereum (ETH), or Cardano (ADA), along with many smaller coins and tokens. In terms of numbers, Coinbase has a slight edge with over 210 cryptos, while Kraken lists almost 200. Some restrictions apply based on location.
Kraken vs. Coinbase: Wallets
Crypto wallets are vital for those who want to securely store their assets. Kraken and Coinbase have different approaches to external wallets:
Kraken encourages the use of third-party wallet providers but doesn’t offer its own wallet.
Coinbase provides its own hot wallet and collaborates with other wallet providers.
Kraken vs. Coinbase: Security
Security is paramount for every crypto trader. Both Coinbase and Kraken prioritize security through measures like cold storage, bug bounty programs, user-level protection, and more. However, they differ in insurance, with Kraken not offering third-party insurance, while Coinbase attempts to replace losses from covered events.
Final Thoughts
Kraken and Coinbase are both reputable digital currency trading platforms with similar fee structures, educational resources, and available cryptocurrencies. The choice between them depends on individual preferences and needs.
Kraken has a slight edge in fees and offers more coins for staking at higher rates. However, it doesn’t promote keeping assets on the exchange and lacks its own wallet capabilities.
Coinbase is known for its user-friendly interface and is a preferred choice for new crypto investors. It offers more available cryptos and deposit methods, along with wallet functionality.
KuCoin and Coinbase stand as two prominent cryptocurrency exchanges, each with unique offerings. This comparison will delve into their differences in fees, security, available cryptocurrencies, and other essential factors.
For potential U.S. KuCoin customers, the legal status is ambiguous. KuCoin’s optional know your customer (KYC) process cannot be completed by U.S. users due to geographic restrictions. Some U.S. customers use the site without KYC verification, limiting their access to full services, such as depositing or withdrawing fiat currencies. This situation poses a risk as authorities tighten crypto enforcement.
KuCoin vs. Coinbase: Fees
Cryptocurrency purchases involve three main types of fees:
Deposit fees
Trading fees
Withdrawal fees
These fees vary across platforms, so understanding them is crucial.
KuCoin
Depositing cryptocurrency on KuCoin is free and doesn’t require KYC approval. U.S. users can buy crypto with fiat money via third-party transfers. Trading fees on KuCoin are lower than many exchanges, including Coinbase. KuCoin employs a maker-taker system with discounts for using its native token, KCS.
Coinbase
Coinbase offers two platforms: one for beginners and Coinbase Advanced Trade for experienced traders. The latter has much lower trading fees. Coinbase’s fee structure depends on the payment method and transaction amount, making it somewhat complex.
Coinbase Advanced Trade
This platform offers more transparent and lower fees than the main Coinbase platform, with free bank transfer deposits and a maker-taker fee system.
For fiat money purchases, Coinbase Advanced Trade generally offers better fee terms.
KuCoin vs. Coinbase: Available Cryptos
KuCoin is known for its extensive selection of smaller tokens, with over 650 cryptocurrencies listed. In contrast, Coinbase’s range is more limited due to U.S. licensing, offering about 90 tokens for U.S. customers.
KuCoin vs. Coinbase: Wallets
Both exchanges operate custodial wallets, with Coinbase also offering a separate, standalone wallet. KuCoin does not have a separate wallet feature.
KuCoin vs. Coinbase: Security
Security is paramount in crypto exchanges. Both platforms employ robust measures:
Coinbase: Utilizes 98% cold storage and third-party insurance, along with other security features.
KuCoin: Partners with Onchain Custodian for asset safekeeping and also has third-party insurance.
Final Thoughts
KuCoin and Coinbase cater to different investor types.
Coinbase is suitable for new crypto traders, offering accessibility and educational resources. It is a reliable exchange available in every U.S. state except Hawaii.
KuCoin offers a wider range of tokens and advanced trading tools. Its low trading fees are appealing, but the high cost of using fiat currency to buy crypto may deter some users. U.S. residents should exercise caution due to the unlicensed status of the platform.
In terms of fees, frequent traders with cryptocurrencies ready to trade might find KuCoin more economical, while those making regular dollar deposits may prefer Coinbase Advanced Trade.
Discover EOS Coin, an open-source platform developed to address issues associated with Ethereum, EOS is one of the cryptocurrencies that has been standing out lately and has a market capitalization of over US$ 4 billion.
EOS is often viewed as a major rival to Ethereum because it provides similar solutions. With its speed, scalability, and low fees, EOS holds advantages over Ethereum in areas that the latter still needs to enhance.
EOS analysis
EOS is a blockchain-based platform with the main objective of ensuring the development, deployment, and execution of various decentralized applications on a commercial scale.
With reliable access and secure operation of dApps, EOS has attracted various developers. This is because the project presents uncomplicated use and makes the network easier to use than its competitors.
When compared to Ethereum’s blockchain, its features stand out even more, as EOS is capable of processing cryptocurrency transactions much faster.
In addition, it also seeks to improve the experience of both the user and companies, generating greater security for the former and acting more flexibly for the latter.
Who are the Founders of EOS?
Daniel Larimer and Brendan Blumer co-founded Block.one in 2018, the company responsible for EOS. Larimer, one of its co-creators, has a notable presence in the crypto world. Before EOS, he contributed to the founding of Bitshares and Steemit.
Additionally, he played a pivotal role in developing the DPoS (Delegated Proof of Stake) consensus mechanism, which we’ll delve into shortly.
How does EOS work?
Operating on the DPoS consensus, EOS requires just 21 individuals to validate the platform’s transactions.
The community elects these 21 validators, who rotate daily, enhancing the system’s security for all users.
Understand more about how EOS works below.
EOS Flexibility
EOS is a very democratic and much more flexible network than others. This happens mainly because of its ability to freeze a problematic dApp, without affecting the rest of the network.
This is one of the points that stand out most in front of Ethereum, since the competitor had to stop its operations when it suffered a hacker attack in 2016 and that resulted in its hard fork at the time.
Because of this flexibility provided by the DPoS system, the community that operates on EOS can, actively, upgrade, downgrade and correct the bugs that eventually arise. And all in a safe and democratic way.
Development and community
Officially launched in April 2018, EOS has always had a very active and participatory community in Facebook, Telegram, and Twitter groups.
During the development of its blockchain, the community contributed many features, including resource tracking and inter-blockchain communication.
Currently, the network operates as planned and already has more than 100 dApps in its system.
EOS Token
Its native token is homonymous to its network (EOS) and is fundamental to keep its operation in an adequate way.
Its existence serves to reward transaction validators, as well as for dApp developers to generate their own EOS tokens and remunerate users.
Another very pertinent functionality for those who are holders of EOS cryptos is the power to participate in the voting of block validators. Whoever has the largest number of tokens also has the greatest power of influence within the network.
The advantages of EOS
EOS boasts two primary strengths:
Absence of transaction fees: due to the use of an ownership model, you can use the network resources that are equivalent to your participation, which allows you not to pay for all your transactions made.
Scaling: the operational power of EOS allows millions of transactions to be made per second, a great differential compared to other blockchain projects.
Decentralized operating system: with this type of system, EOS token holders can be part of the network in proportion to the coins they own, that is, they do not need to pay a transaction fee that is required by other networks;
More popular DApps: the dApps built within EOS are more popular than those located on other networks, and can be built more easily;
Smart contracts: it is possible to execute smart contracts within EOS, which further expands its functionalities;
Facilitated validations: due to the DPoS consensus, transactions carried out within the protocol are more agile;
Internal structure: because its network is more flexible, a hard fork is not necessary when some kind of hack happens.
How is the EOS network Secured?
The most known transaction validation processes in the cryptocurrency market are Proof of Work (PoW), used by Bitcoin and Litecoin, and Proof of Stake (PoS), used by Chainlink and Cardano. However, the consensus used on the EOS network is a little different.
In the Delegated Proof of Stake (DPoS) system used by EOS, 21 daily representatives validate transactions. These representatives actively participate in the process. Notably, these 21 individuals change regularly, enhancing the network’s security for all users.
How much is 1 EOS worth?
The EOS ICO (Initial Coin Offering) was US$ 4 billion, which allowed the supply of a total of 1.02 billion tokens.
Currently, there are approximately 1 billion EOS coins in circulation and each one is worth US$0.7459
How and where to buy EOS?
While EOS currency initially existed solely to support the network’s operations, it evolved into a crypto asset and started trading as a valuable commodity.
To buy EOS is very easy: you need to have an account on some exchange that works with crypto, as this is the safest way to invest in it.
Final Thoughts
To make a sound decision for your next cryptocurrency investment, we invite you to explore our education page, where you can learn more and find a crypto coin that aligns with your investment goals.
The payment platform known as Ripple was developed by Ripple Labs, and its native cryptocurrency is XRP. It’s critical to comprehend the fundamentals of Ripple as the use of digital currencies increases.
Ripple Labs is a venture capital company with headquarters in San Francisco, California, that creates international payment solutions for financial institutions.
Ripple analysis
A platform for making payments between people and financial institutions that are quick, safe, and affordable. With XRP serving as its native cryptocurrency, Ripple integrates interbank systems with blockchain technologies. It is distributed and managed by Ripple Labs.
An open-source distributed payment mechanism is ripple. Its mechanism, the Ripple Transaction Protocol (RTXP), sometimes referred to as XRP, is what sets it apart most from other blockchains.
Ripple is a network for remittances, foreign exchange, and real-time gross settlement. It is, in other words, an idea that goes beyond a typical cryptocurrency.
What is the future of XRP?
XRP could reach an average price of US$0,54 by 2025 (with a minimum of US$0,52 and a maximum of US$0,58), according to market analysts’ projections. For the second half of 2023, the forecast is for the price to hit US$0,16. Projections may differ if the market experiences a decline.
Like other cryptocurrencies and fixed and variable income investments, the return is expected in the long term. The price of XRP could rise to US$1,33 over the next 10 years.
When does the Ripple lawsuit end?
The Ripple lawsuit should end in 2023. The Securities and Exchange Commission (SEC) accuses Ripple Labs of selling XRP as an unregistered security. The legal dispute began in December 2022, in the United States.
The SEC is an independent U.S. federal agency that regulates and controls the financial market.
In the lawsuit, the Securities Exchange Commission alleged that Ripple offered investment from its token, with a forecast of future gains. Ripple reportedly raised US$1.3 billion through XRP trading.
Why is Ripple’s currency rising?
The anticipated legal victory over the SEC in 2023 fuels optimism among investors, causing XRP’s value to rise by 9.4% recently. The more large financial organizations adopt the Ripple project, the higher the likelihood of XRP appreciating.
How did Ripple Labs come about?
Developer Ryan Fugger initially created RipplePay, a peer-to-peer payment network, in 2004. Jed McCaleb, Chris Larson, and Arthur Britto later developed the current Ripple protocol based on Fugger’s ideas.
Jed McCaleb, a digital currency expert, previously worked with Mt. Gox, a major Bitcoin trading platform. Chris Larsen co-founded and led the digital financial company E-LOAN, while Arthur Britto serves as the president and board member of fintech company PolySign.
How to use Ripple?
You can use Ripple for instant, secure, and nearly free payments. To buy XRP, you’ll need to register on exchangers—platforms that facilitate cryptocurrency trading.
XRP enables tokens that represent a variety of forms of money, including fiat money, gold, and other cryptocurrencies.. Since February 2018, Remessa Online, the first in Brazil, has utilized Ripple’s blockchain network for quick, low-cost international remittances.
Even while its centralization has drawn criticism, Ripple continues to draw in investors and businesses looking for effective transnational money transfer solutions.
Be sure to do your own study and thoroughly balance the pros and cons before deciding to adopt Ripple and XRP.
Final Thoughts
To make a sound decision for your next cryptocurrency investment, we invite you to explore our education page, where you can learn more and find a crypto coin that aligns with your investment goals.
Ethereum, like Bitcoin, is a blockchain that allows the transfer of cryptocurrencies between individuals without the need for a third party – such as a bank or international remittance company – to secure the transaction.
Moreover, it is also a programmable platform where developers can create decentralized applications (dApps) from various sectors, such as finance, media, and games.
This is possible because the network operates through smart contracts, a technology that is revolutionizing the market.
In practice, these contracts are computer programs that execute pre-established rules in an automated way. An example is a loan. A person could lend values to another without the need to resort to an entity to guarantee the transaction – all terms and conditions could be programmed.
Ethereum kick-started the emergence of a new digital economy, with new crypto assets, Decentralized Finance (DeFi), Initial Coin Offerings (ICOs), Non-fungible Tokens (NFTs), and metaverse games, such as Decentraland (MANA) and The Sandbox (SAND).
How and when it emerged
Ethereum was conceived by Russian-Canadian programmer Vitalik Buterin in 2013. Buterin’s relationship with cryptocurrencies, however, began a few years earlier.
He came across Bitcoin in 2011, while he was “looking for meaning in life,” he wrote on his blog. Initially, despite understanding programming (his mother is a computer scientist), he couldn’t see much value in Satoshi Nakamoto’s idea, the pseudonym of BTC’s creator.
After a while, however, he was hooked by the technology and began to get involved in market projects. In 2012, he co-founded Bitcoin Magazine, a site specialized in BTC coverage. That same year, he enrolled in the computer science course at the University of Waterloo, Canada.
In 2013, Buterin left his degree and traveled the world to meet people who were working with cryptocurrency. It was in these meetings with industry experts that he realized it would be possible to use Bitcoin’s blockchain not only to transfer money over the internet without the intermediation of third parties but also to decentralize other segments.
In November of that year, using BTC’s code as a basis, he published the initial white paper of the project. Several people became interested and offered to collaborate, including computer scientist Gavin Wood, who co-created the project alongside him. In July 2014, to raise money and effectively kick-start Ethereum, the platform launched an ICO, managing to raise $18.5 million in just over a month. However, it wasn’t until July 2015 that the blockchain came to life.
Differences between Ether and Ethereum
Ethereum is the blockchain that allows the creation of apps and the transfer of digital assets. Ether, on the other hand, is the native cryptocurrency of this network and the “fuel” of the entire system.
If a programmer generates an application, they need to pay the network usage fees – called gas – with Ether. Similarly, if a user wants to send a cryptocurrency to another, they must also bear this fee, which is not fixed.
Just like in Bitcoin, it is the miners who keep the system standing, validating the transactions. In return, they receive rewards in Ether.
ETC and ETH
In June 2016, a hacker managed to steal $50 million in Ether from a decentralized application built on the Ethereum network. After the virtual theft, the blockchain’s developers gathered, debated, and decided to restore the network to recover the lost ETH. Not everyone, however, was in favor of the idea, and the platform was split in two.
The blockchain updated to the version prior to the theft kept the name Ethereum (ETH). The “original” blockchain, with the record of the million-dollar embezzlement, was renamed Ethereum Classic (ETC).
Forks due to disagreement among participants are common and constant in the cryptocurrency universe. The jargon used for this is “hard fork”. BTC itself has gone through some, giving rise to new digital assets, such as Bitcoin Cash (BCH) and Litecoin (LTC).
Ethereum 2.0
Ethereum 2.0 is an update to the project’s blockchain. The goal of this change is to increase the scalability, speed, and efficiency of the network, which often gets congested and has expensive fees. The change is being made in stages, and the main change will occur in the system’s mining mechanism (the process of validating and creating new cryptocurrencies).
Today, Ethereum uses the Proof of Work (PoW) protocol, the same one used by Bitcoin. This algorithm requires miners to put computers to solve mathematical problems and validate transactions. The one who finds the solution first wins cryptocurrencies as a reward. This format is criticized because it generates high energy consumption.
During the update, Ethereum will replace PoW with a mechanism called Proof of Stake (PoS), which dispenses with miners. According to the rules of this new protocol, any network user with 32 ETH deposited in a specific smart contract can help validate transactions on the blockchain. On December 22, 2020, this amount was around $128,000.
The first phase of Ethereum 2.0 was implemented on December 1, 2020. In summary, the developers created a blockchain called “Beacon Chain”, which already has the PoS mechanism in its code, and put it to “run” parallel to Ethereum’s main network.
To force current miners to adopt the new format, Ethereum had the idea of implementing a mechanism called “difficulty bomb” in the code of its main network, still in 2022. In practice, this bomb requires greater computational power to mine ETH, reducing the profitability of the business.
Finally, the last stage of the update is the creation of “Shared Chains”. In this phase, the programmers subdivide Ethereum’s main network into 64 chains. The goal, according to Ethereum.org, is to reduce the protocol’s congestion and increase the number of transactions.
How to mine Ethereum
Mining is the name given to the process of validating and including new transactions in the blockchain. Those who carry out this activity, done through computers, are the miners. As a reward, they receive new cryptocurrencies. To participate in the process, it is necessary to acquire PCs with powerful video cards. As mining involves solving mathematical calculations, the greater the computational power, the greater the chances of being able to validate transactions and get cryptocurrencies.
After buying the equipment, it is necessary to connect to a mining software. In summary, it is a program installed on the computer that controls the entire process of validation and manufacturing of new coins. Some examples are the following: EasyMiner, CGMiner, and BFGMiner.
Finally, it is also essential to have a cryptocurrency wallet. Wallets are software or physical devices that give users access to these digital assets stored in the blockchain. In addition, they also allow the sending of digital currencies without the need for intermediaries.
It is important to reinforce, however, that after the update to Ethereum 2.0, the way to mine Ether changes, and PoS becomes valid. After the network’s “upgrade”, only the user who deposits 32 ETH in a specific contract can receive rewards in cryptocurrencies.
Diferenças entre Ethereum e Bitcoin
The world’s two leading blockchain platforms differ in several ways.
Issuance
According to Bitcoin’s protocol, only 21 million units of the cryptocurrency can be mined. As of July 26, 2023, according to CoinMarketCap, 19.4 million BTC were in circulation. Ethereum, on the other hand, has no issuance limit. On the same date, 120.4 million ETH were available on the market. Therefore, unlike BTC, Ether is not scarce.
Smart Contracts
Bitcoin is a system that allows the transfer of value over the internet without intermediaries, such as banks or international remittance companies. Ethereum is also a decentralized tool for transferring value. However, it took a technological leap by also allowing the creation of smart contracts and decentralized applications on its network.
Consensus Mechanism
Both projects use PoW as a consensus mechanism, criticized for generating high energy consumption. However, Ethereum is in the midst of a transition to PoS, a more environmentally responsible protocol type.
Speed
A transaction on the BTC network usually takes 10 minutes to be verified and confirmed by miners. On Ethereum, on the other hand, this happens in less than 20 seconds.
Security
In a peer-to-peer network, as is the case with a blockchain, the larger the number of participants (called nodes), the more secure the system is. BTC, having more users, is therefore more protected than ETH. The first cryptocurrency on the market has also been in circulation since late 2008 and has never been hacked, a fact that demonstrates the robustness of the project.
Where to invest in Ethereum
You can invest in Ether through exchanges, investment funds, ETFs (Exchange Traded Funds), or P2P.
Exchanges
These are digital platforms where you can buy, sell, exchange, and store cryptocurrencies. These platforms usually charge fees for withdrawals and transactions.
Cryptocurrency Funds
These are financial products that pool resources from various investors to invest in certain crypto assets and usually charge administration and performance fees.
ETFs
Cryptocurrency ETFs are investment funds that can be traded on the stock exchange. Managers usually charge administration fees ranging from 0.7% to 1.3% per year. As these products are traded on the exchange, you also need to cover brokerage and custody fees, as well as B3 emoluments.
Peer-to-peer (P2P)
Another way to invest in Ether is by buying the cryptocurrency directly from sellers. There are fees involved, but they are generally lower than those charged by brokers. It’s worth noting, however, that this type of business is usually riskier than the previous ones, as in many cases there is no third party guaranteeing the transaction, which opens up the possibility for scams.
Risks and Advantages
Like any investment, Ethereum presents both risks and advantages.
Advantages
Heated Market – The digital economy, driven by DeFi, NFTs, metaverse, and other technologies, is in full swing, and new projects are launched every day. As many of them are based on the Ethereum network, the platform has a lot of room to grow, and its cryptocurrency can appreciate.
Liquidity – Like BTC, Ether has high liquidity. That is, it can be quickly converted into cash.
Environmentally Responsible – Ethereum is in the midst of an update that will make the project more eco-friendly by using less energy in the mining process. As the environmental flag is flying high, this change could be beneficial.
Speed – Ethereum is often congested, has scalability issues, and tends to charge high fees during periods of heavy traffic. However, Ethereum 2.0 aims to solve these problems, which could further appreciate Ether.
Risks
Volatility – The cryptocurrency market is relatively new and still immature. Therefore, it’s common for cryptocurrency prices to plummet by double digits in a single day, and this also applies to Ether.
Competition – Ethereum is not the only platform that allows the creation of smart contracts and the development of decentralized applications. Projects like Cardano (ADA), Terra (LUNA), Avalanche (AVAX), and Solana (SOL) also have these functionalities. If any competitor stands out, its cryptocurrency could depreciate.
Regulation – The cryptocurrency market has not yet been regulated in some countries. Legislation, depending on the text and taxes created, could affect Ether and the sector as a whole.
Attacks – The Ethereum network, like Bitcoin’s, is secure, but it’s not infallible. The blockchain is susceptible to 51% attacks, which occur when groups manage to gain more than half of the network’s power. Experts say that this type of virtual onslaught would not be financially worthwhile. However, it’s not impossible.
Final Thoughts
To make a sound decision for your next cryptocurrency investment, we invite you to explore our education page, where you can learn more and find a crypto coin that aligns with your investment goals.
Bitcoin is a form of peer-to-peer electronic money that can be transferred without the intermediation of financial institutions.
In practice, this means that two individuals, even living in different countries, can send BTC to each other without needing a bank or an international remittance company.
Transactions are confirmed on the blockchain, a huge database that records all user trades. This technology was born with Bitcoin, and it works in such a way that the participants themselves are the auditors of the network.
As there is no third party involved, sending Bitcoin from one country to another is usually cheaper and faster than transferring fiat currencies.
BTC is digital, decentralized, and is not controlled by governments, companies, or individuals. Therefore, no Mint needs to print it and no Central Bank has the power to control its price. Its value depends mainly on the law of supply and demand.
When did Bitcoin appear?
Bitcoin emerged on October 31, 2008. On that day, the creator (or creators) of the cryptocurrency, who hides under the pseudonym Satoshi Nakamoto, sent an email to a list of people interested in cryptography. In the body of the message, he wrote that he had been working “on a new fully peer-to-peer electronic money system, without trusted third parties”.
He also inserted a link with the cryptocurrency’s white paper (manual), in English. In the document, with nine pages, Nakamoto briefly described the fundamentals of Bitcoin, based on four main points:
It is a peer-to-peer network to avoid double spending (possibility of sending the same coins more than once); without intermediaries, like banks; allows the anonymity of participants; and uses Proof of Work (a type of algorithm) to generate Bitcoin (process that was named mining) and prevent such double spending.
In the manual, Nakamoto also stipulated that BTC has a finite supply. In total, only 21 million units can be mined (created) until 2140, which makes it scarce. By the end of October 2021, according to the aggregator Coingecko, 18.8 million Bitcoin had already been issued.
Despite Bitcoin being launched at the end of 2008, the first block (name of the file with information about transactions) of the cryptocurrency’s blockchain was only mined on January 3, 2009.
Who created Bitcoin?
The creator of Bitcoin hides behind the pseudonym Satoshi Nakamoto. Who he is, however, still remains a mystery. Some people have come forward claiming to be the character, but no one has actually been able to prove anything.
What is known so far comes from traces of his online life. In November 2009, for example, he launched BitcoinTalk – a discussion forum about cryptocurrency. Nakamoto was very active in the space and, over almost a year, posted about 600 messages. None, however, give concrete clues about his true identity.
His last movement in the forum occurred on December 12, 2010. In the post, he gave some indications about the security of the network. After that, he no longer posted anything on BitcoinTalk. That same year, he also passed the repository with the Bitcoin code to Gavin Andresen, a software developer who was involved in the cryptocurrency project.
At the end of April 2011, in what was his last ‘online appearance’, he sent a farewell email to his close developers. In the message, Nakamoto “passed the ball” of Bitcoin to other developers:
“I’ve moved on to other things. This (Bitcoin project) is in good hands with Gavin and everyone.”
Candidates for Satoshi Nakamoto
No one knows yet who created Bitcoin. However, there are some suspects. On the list are people who collaborated with the project, were close to the creator of BTC – at least in online life or were cited by him. There are also wealthy people capable of influencing the market with just one tweet. Here are some of the candidates:
Gavin Andresen, for having taken control of the cryptocurrency code and having exchanged messages with Nakamoto, is one of them.
Another supposed creator of BTC is Hal Finney, who was the first person to receive a Bitcoin transfer from Nakamoto – that was on January 11, 2009. Finney, however, died in August 2014 at the age of 58, a victim of a degenerative disease. At his own request, his body was frozen to be revived in the future – that is if some technology capable of overcoming death arises.
Computer scientists Nick Szabo and Adam Back, both cited in the Bitcoin white paper, also appear on the list. Craig Steven Wright, a computer scientist and businessman who in 2016 told journalists he was the real Nakamoto (without presenting convincing evidence), is another suspect.
Finally, Tesla and SpaceX CEO Elon Musk is also in the running. The theory about Musk arose after a billionaire employee, known for influencing the cryptocurrency market with his tweets, said he could have created BTC. The businessman denies.
Difference between Bitcoin and digital currencies
The main difference between Bitcoin, other cryptocurrencies, and Central Bank Digital Currencies is the form of issuance and distribution.
BTC and altcoins are decentralized. That is, there is no government or country in control. The rules, therefore, are dictated by those involved in the projects, as well as by the users.
Central bank digital currencies, on the other hand, are issued and distributed by government bodies. “CBDCs are digital representations of countries’ fiat currencies being controlled by central banks,” explained Ricardo Dantas, CO-CEO of the cryptocurrency broker Foxbit.
In practice, therefore, a digital currency issued by a Central Bank is a virtual copy of the country’s current money. Its value, therefore, is determined by a monetary authority. It is different from decentralized cryptocurrencies, whose prices vary according to the law of supply and demand.
How to Buy Bitcoin
How to Buy Bitcoin There are various ways to buy Bitcoin and other cryptocurrencies. Some of the options include cryptocurrency exchanges, cryptocurrency ETFs, and investment funds.
In the case of a cryptocurrency exchange, you need to choose one and open an account. Typically, they ask for your date of birth, ID, social security number (or equivalent), and address during the online registration process. Some also request a selfie to confirm your identity. There are withdrawal and transfer fees. The minimum Bitcoin purchase investment depends on each exchange. On some, the minimum starts at around $5; others require about $10.
Cryptocurrency ETFs can be traded directly on the stock exchange like a regular stock. Therefore, you need to open an account with one of the many brokerage firms available. The registration also involves submitting personal documents.
It’s important to remember that when buying, you need to pay brokerage and custody fees to the brokers, in addition to the charges from the stock exchange. There’s also a management fee.
Finally, you can also buy Bitcoin through investment funds that allocate resources to the cryptocurrency.
These products can be purchased through brokers or directly from fund managers. There are funds for retail investors, professional investors, and qualified investors – the registration will depend on the option and classification. The minimum shares vary according to the fund and the target audience – in some, it is possible to invest from about $100. As with ETFs, there are some fees, such as the administration fee.
Is Bitcoin safe?
Yes, Bitcoin is safe. Proof of this is that the blockchain, the technology behind the cryptocurrency, has never been hacked over these years of history. And this is mainly due to the mechanism created by Nakamoto, especially two features: consensus and immutability.
“Consensus refers to the ability of nodes, computers or devices connected to the Bitcoin interface, within a distributed blockchain network, to agree with the true state of the network and the validity of transactions. Immutability, on the other hand, refers to the ability of the blockchain to prevent the alteration of transactions that have already been confirmed.
In practice, these two features allow transactions between unknown people to be carried out without the need for a third party – such as a bank or an international remittance company – to guarantee the transfer.
What is Bitcoin Mining?
Think of Bitcoin mining like a big, global competition where everyone’s using their computers to solve complex puzzles. It’s like a race where the first one to cross the finish line gets a prize. This race is happening all the time in the world of cryptocurrencies, and it’s crucial for keeping things running smoothly.
Just like a gold miner needs a pickaxe, a Bitcoin miner needs two things: a computer and electricity. These miners are people who lend their computers’ power to the Bitcoin network. The first one to solve the puzzle gets a reward in Bitcoin. This reward is called a block reward.
Here’s how it works: Miners’ computers are always gathering recent Bitcoin transactions, bundling them into blocks. They then race to solve a tricky puzzle, and the first one to crack it gets to add the new block to the blockchain, the public ledger of all Bitcoin transactions.
Everyone in the network wants to be the first to solve the puzzle because the prize is a certain amount of new bitcoins. Once a miner finds the solution, they tell everyone else in the network. If the solution checks out, the new block gets added to the blockchain.
This whole process is a big incentive for people to participate in the network and keep it running smoothly. But as more bitcoins get mined, the puzzles get harder. This means miners need more powerful computers to keep earning the same amount of Bitcoin.
The puzzle-solving is also a security measure. If someone wanted to mess with the Bitcoin network, they’d need control over more than half of the network’s computing power, which would be incredibly expensive and difficult.
How to mine Bitcoin
Shortly after the creation of Bitcoin, anyone could easily mine the cryptocurrency at home. All it took was to connect a computer (with a reasonable video card) to the BTC network and keep it on to solve complex mathematical problems.
Currently, however, it is practically impossible to “extract” Bitcoin through a common PC. This is because specific equipment is needed for the function.
But it’s not enough to have just one, two, or three hardware. To solve the calculations and take the rewards, you need to have a huge computational power. Today, there are mining farms with thousands of equipment dedicated exclusively to Bitcoin mining.
Given the complexity of the task and the high investment in the business, these mining farms usually organize themselves into pools (sets) of miners who work together to compete for the validation of transactions.
Final Thoughts
To make a sound decision for your next cryptocurrency investment, we invite you to explore our education page, where you can learn more and find a crypto coin that aligns with your investment goals.
While some have seen astonishing profits from their investments in digital currency, it’s important to note that this area also carries its own set of risks.
Cryptocurrency investment can potentially lead to substantial wealth accumulation, but it’s equally possible to lose your entire investment. The risk associated with crypto assets is high, but when done correctly and as part of a varied portfolio, it can be a profitable venture.
Cryptocurrency can be a beneficial investment for those seeking direct exposure to the growing demand for digital currency. An alternative, which might be less profitable but safer, is to invest in the stocks of companies that have ties to cryptocurrency.
How secure is cryptocurrency?
There are several indicators that suggest cryptocurrency isn’t always a secure investment. However, there are also emerging signs that suggest cryptocurrency is here to stay.
Investment risks in cryptocurrency
Cryptocurrency exchanges are more susceptible to hacks and other criminal activities than traditional stock exchanges. Security breaches have resulted in significant losses for investors who have had their digital currencies stolen. This has led many exchanges and third-party insurers to offer protection against such incidents.
Safely storing cryptocurrencies is more challenging than owning stocks or bonds. While cryptocurrency exchanges like Coinbase make it relatively easy to buy and sell crypto assets like Bitcoin and Ethereum, many people are hesitant to keep their digital assets on exchanges due to the risks associated with entrusting any company with access to their assets.
Keeping cryptocurrency on a centralized exchange means you don’t have complete control over your assets. An exchange could freeze your assets at the request of a government, or the exchange could go bankrupt, leaving you with no way to recover your money.
Some cryptocurrency owners prefer offline “cold storage” options like hardware wallets, but cold storage has its own set of challenges. The most significant risk is losing your private key; without a key, you cannot access your cryptocurrency.
There’s also no guarantee that a crypto project you invest in will be successful. The competition is intense among thousands of blockchain projects, and many projects are nothing more than scams. Only a small percentage of cryptocurrency projects will ultimately succeed.
Regulators may also clamp down on the entire crypto industry, especially if governments perceive cryptocurrencies as a threat rather than an innovative technology.
The advanced technology aspects of cryptocurrency also increase the risks for investors. Much of the technology is still under development and has not been extensively tested in real-world scenarios.
Cryptocurrency adoption
Despite the inherent risks, the strength of cryptocurrencies and the blockchain industry is on the rise. Key financial infrastructure is being developed, and access to institutional-level custody services is becoming more common for investors. Both professional and individual investors are slowly gaining the necessary tools to manage and protect their crypto assets.
The establishment of crypto futures markets is underway, and numerous companies are gaining direct exposure to the cryptocurrency sector. Major financial entities like PayPal are simplifying the process of buying and selling cryptocurrency on their widely-used platforms. Other companies, such as Block, have made substantial investments in Bitcoin and other digital assets. For example, Tesla made a purchase of Bitcoin worth $1.5 billion in early 2021. By February 2022, the electric car manufacturer reported holding nearly $2 billion of the cryptocurrency.
While other factors continue to contribute to the risk associated with cryptocurrency, the growing rate of adoption indicates a maturing industry. Both individual investors and companies are looking to gain direct exposure to cryptocurrency, deeming it safe enough for large-scale investments.
Long-term Investment in Crypto
Cryptocurrencies like Bitcoin and Ethereum debut with ambitious visions that might take time to achieve. Although there’s no certainty in any cryptocurrency project’s success, early backers can see significant long-term gains if the project meets its goals.
However, for any cryptocurrency project, achieving widespread adoption is a prerequisite for long-term success.
Bitcoin as a long-term investment
Bitcoin, the most well-known cryptocurrency, benefits from the network effect, meaning its value increases as more people own it. Many investors currently view Bitcoin as “digital gold,” but it also has the potential to be used as a digital form of cash.
Bitcoin investors anticipate long-term value growth for the cryptocurrency due to its fixed supply, which contrasts with the flexible supplies of fiat currencies like the U.S. dollar or the Japanese yen. Bitcoin’s supply is limited to just under 21 million coins, while most currencies can be printed at the discretion of central banks. Many investors predict Bitcoin will appreciate as fiat currencies lose value.
Those who are optimistic about Bitcoin’s extensive use as digital cash believe it has the potential to become the first truly global currency.
Ethereum as a long-term investment
Investors can buy Ether, the primary coin of the Ethereum platform, to diversify their portfolios with Ethereum exposure. While people often see Bitcoin as a digital gold, Ethereum acts as a global computing foundation, hosting numerous other cryptocurrencies and a vast network of decentralized applications (“dApps”).
The large number of cryptocurrencies built on the Ethereum platform, plus the open-source nature of dApps, creates opportunities for Ethereum to also benefit from the network effect and to create sustainable, long-term value. The Ethereum platform enables the use of “smart contracts,” which execute automatically based on terms written directly into the contract code.
The Ethereum network collects Ether from users in exchange for executing smart contracts. Smart contract technology has significant potential to disrupt massive industries such as real estate and banking and also to create entirely new markets.
As the Ethereum platform becomes increasingly used worldwide, the Ether token increases in utility and value. Investors bullish on the long-term potential of the Ethereum platform can profit directly by owning Ether.
That’s not to say Ethereum doesn’t have competition. A number of “Ethereum Killers,” including Solana, Polygon, and Avalanche, are all built to handle smart contracts and use a blockchain system capable of processing more transactions per second. The speed has the added advantage of being less expensive for users as well. But Ethereum is the most broadly adopted platform for using smart contracts.
Should you invest in cryptocurrency?
Owning some cryptocurrency can increase your portfolio’s diversification since cryptocurrencies such as Bitcoin have historically shown few price correlations with the U.S. stock market. If you believe that cryptocurrency usage will become increasingly widespread over time, then it probably makes sense for you to buy some crypto directly as part of a diversified portfolio. For every cryptocurrency that you invest in, be sure to have an investment thesis as to why that currency will stand the test of time. If you do your research and learn as much as possible about how to invest in cryptocurrency, you should be able to manage the investment risk as part of your overall portfolio.
Discover where to buy the top cryptocurrencies by exploring a detailed overview of those that are currently on the market.
Bitcoin (BTC) has been a ground-breaking digital currency since its launch in 2009. The ability to facilitate peer-to-peer transactions without the use of a middleman, like a bank, is one of its distinctive features, which has prompted a boom in the development of additional cryptocurrencies and digital assets that make use of blockchain technology.
A blockchain essentially acts as a digital public ledger, appending each transaction with a unique “hash” or identity to the end of the ledger.
Blockchain technology has gained attention thanks to the success of Bitcoin and opened doors for its potential to decentralise and improve the digital economy, defying established standards in the process.
Before delving into the world of cryptocurrencies, it’s crucial to distinguish between a coin and a token. In cryptocurrency discussions, people often use these terms interchangeably, even though they have distinct meanings.
A digital coin operates on its own blockchain and functions similarly to conventional money. It serves as a store of value and a medium of exchange between two parties engaged in a transaction. Bitcoin and Litecoin (LTC) are examples of coins.
Tokens, however, have a broader range of applications beyond serving as digital money. Developers build these on existing blockchains and use them in software applications to do things like provide app access, verify identity, or track products in a supply chain.They can represent digital art (as seen with NFTs, or “non-fungible tokens” that authenticate something as unique).
There has also been exploration into using NFTs with tangible assets, such as physical art and real estate. Ether is an example of a token, which is used for transactions on the Ethereum (ETH) network.
Why is there a plethora of cryptocurrencies?
Blockchain technology is open source, which means any software developer can leverage the original source code to innovate and create something new. Developers have done exactly that. Estimates currently suggest that over 10,000 different cryptocurrencies circulate, and this number keeps growing. Just four years ago, the number of cryptocurrencies exceeded 1,000.
The ease of developing new cryptocurrencies contributes to the surge. You can use one’s source code to construct another. For example, you can use the Ethereum network to create your own digital coins.
Occasionally, there are “forks” in the software code that alter the governance rules of a cryptocurrency, leading to the creation of a new one. Bitcoin Cash (BCH) was established in 2017 as a result of a Bitcoin fork that allowed more transactions to be recorded on a single block of the blockchain.
The rising prices of cryptocurrencies
The rising prices of cryptocurrencies have enticed many developers to try and get a piece of the pie. Furthermore, blockchain technology has applications beyond just digital currencies. Therefore, while some cryptocurrencies may be a bubble waiting to burst, the decentralized nature of the technology and the wide range of its potential applications in the software industry are two reasons for the abundance of cryptocurrencies.
Key Categories of Cryptocurrency
Bitcoin, the pioneer of cryptocurrencies, has paved the way for a multitude of “altcoins” (a term derived from “alternative coin”). Identifying the best cryptocurrencies is a challenging task, but Bitcoin and some of the largest altcoins stand out due to their scalability, privacy, and the range of functionalities they offer.
Each cryptocurrency has unique features, designed according to the developer’s intent. Therefore, it’s hard to pinpoint a single “best” cryptocurrency. Here’s a snapshot of some of the most prominent digital coins and their uses.
Coin
Total Market Value
Bitcoin
$567,479,946,096
Ethereum
$223,175,662,203
Tether
$83,814,627,450
Binance Coin
$36,614,877,914
USD Coin
$26,689,464,122
XRP
$36,346,878,365
Terra
$480,154,738
Solana
$9,395,492,157
Cardano
$10,680,543,992
Avalanche
$4,580,676,824
Up to date 07/25/2023
Bitcoin
Utilizing blockchain technology, Bitcoin enables payments and digital transactions as the first decentralized cryptocurrency. Unlike traditional systems where a central bank controls the money supply (like the Federal Reserve in collaboration with the U.S. Department of the Treasury) or third parties validate transactions (such as your local bank, credit card issuer, and the merchant’s bank), Bitcoin’s blockchain serves as a public ledger of all Bitcoin transactions.
This ledger enables a user to demonstrate ownership of the Bitcoin they’re attempting to use and can help deter fraud and unauthorized manipulation of the currency.
A decentralized currency can expedite peer-to-peer money transfers (like those between parties in two different countries), making them faster and cheaper than traditional currency exchanges involving a third-party institution.
Ether (Ethereum)
Ether serves as the transactional token on the Ethereum network. Using blockchain technology, Ethereum facilitates the creation of smart contracts and other decentralized applications. This means you don’t have to distribute the software on app exchanges like Apple’s App Store or Google Play Store, where you might lose 30% of your revenue to tech giants.
Ethereum acts both as a cryptocurrency, denominated in units called Ether, and as a software development platform.
Tether
Tether is a stablecoin, or a currency linked to a fiat currency — in this case, the U.S. dollar. The concept behind Tether is to amalgamate the advantages of a cryptocurrency (such as eliminating the need for financial intermediaries) with the stability of a currency issued by a sovereign government (as opposed to the extreme price volatility associated with many cryptocurrencies).
Binance Coin
Binance Coin is accessible on the Binance cryptocurrency exchange platform, along with other digital coins available for trading, not only acts as a currency but also supports tokens that pay fees on the Binance exchange and power Binance’s DEX for app development.
USD Coin
USD Coin is another stablecoin, and, like Tether, it is tied to the U.S. dollar. Also similar to Tether, USD Coin is hosted on the Ethereum blockchain. The objective behind USD Coin was to create a “fully digital” dollar, one that possesses the stability of U.S. fiat currency but doesn’t necessitate a bank account or residency in a specific country. Rather than an investment, USD Coin is envisioned as everyday money that can be spent with online merchants.
Is there a variety in cryptocurrency trading methods?
Investing in cryptocurrencies differs from investing in company stocks. While stocks signify ownership in a business and entitlement to the profits it generates, buying cryptocurrency coins is essentially a speculative gamble on the price movement of that digital currency.
Supply and demand govern the high unpredictability of digital currency, which is not a dynamic asset by itself.
You can trade cryptocurrencies for other digital currencies or fiat currencies like the U.S. dollar using a digital wallet on a trading app.
But you don’t have to rely solely on trading to make a profit. You can “stake” certain cryptocurrencies to earn rewards. After purchasing a crypto, you can hold it in an account and use it to validate transactions on the blockchain network.
This approach to powering a blockchain network is termed “proof of stake,” and the crypto owner can earn a sort of dividend by staking their holdings, typically paid in additional coins or tokens.
Where to purchase a variety of cryptocurrencies
Given the multitude of cryptocurrencies currently available, there isn’t a single platform that provides access to all of them. However, Coinbase is one of the largest trading platforms and currently supports over 100 cryptocurrencies (including most of the top 10 largest cryptos by market cap). Binance is another leading trading platform where Binance Coin and tokens can be traded.
If you’re interested in purchasing both company stocks and cryptocurrency from a single platform, consider the following apps:
Kraken
Kucoin
Gemini
And others…
While these trading apps may not support all account types like a comprehensive stock broker, they offer a wide range of functionalities that merge basic crypto and stock trading with digital banking capabilities.
This is merely a glimpse into the vast world of cryptocurrency. Within the digital economy, people are using thousands of different digital currencies, all leveraging blockchain technology, for an incredibly diverse array of applications.
Bitcoin remains the most popular crypto due to its traction among a younger generation of consumers, but developers are constantly innovating new blockchain technologies and uses for them. These advancements add significant value to platforms like Ethereum, which are used to develop new software.
For investors looking to the future, this could be highly attractive as decentralized blockchain could eliminate third parties from business transactions and streamline global payments.
Altcoins: An Overview Altcoins, short for alternative coins, refer to all cryptocurrencies that are not Bitcoin (BTC). They get their name because they provide options beyond Bitcoin and regular fiat currencies.
Altcoins first appeared in 2011, and today, their number has grown into the thousands. Early altcoins aimed to enhance certain aspects of Bitcoin, such as transaction speeds or energy efficiency. More recent altcoins have various purposes, depending on the objectives of their creators.
Given the significant role altcoins play in the market, it’s crucial for crypto investors to understand their workings. This guide will delve into the uses of altcoins, their advantages and disadvantages, and much more.
Altcoins come in several forms, including stablecoins, mining-based coins, staking-based coins, and governance tokens. The classification of an altcoin depends on its functionality and purpose. Here’s a brief overview of the main types of cryptocurrencies you’ll encounter when exploring altcoins.
Stablecoins
Stablecoins are cryptocurrencies engineered to track the price of another asset. Most major stablecoins are pegged to the U.S. dollar and strive to mirror its value. If the price deviates, the coin’s issuer will take corrective measures.
People usually don’t pick stablecoins for cryptocurrency investments because of their consistent value. They’re more commonly used for savings or transferring money. It’s also possible to earn interest on stablecoins through lending or specific savings protocols.
Mining-based Coins
These cryptocurrencies use a process known as mining to validate transactions and increase the coin supply. Miners use devices to solve mathematical problems. The first miner to solve the problem gets to validate a block of transactions and receive crypto rewards.
Bitcoin, a mining-based cryptocurrency, pioneered this method for processing crypto transactions. However, mining requires substantial energy, which is a notable drawback.
Staking-based Coins
These cryptocurrencies use a process called staking to validate transactions and increase the coin supply. Holders of staking-based cryptocurrencies can stake their coins, pledging them for transaction processing. The blockchain protocol of the cryptocurrency selects a participant to validate a block of transactions, who then receives crypto rewards.
Peercoin, an early altcoin, first introduced the concept of staking. Despite Peercoin’s lack of mainstream recognition, staking has gained popularity due to its higher energy efficiency compared to mining.
Governance Tokens
Governance tokens are cryptocurrencies that grant holders voting rights to influence the project’s future. These tokens often let you draft and vote on cryptocurrency-related proposals, enhancing the cryptocurrency’s decentralization. Every holder gets a voice, preventing decisions from being centralized.
Pros and Cons of Altcoins
Pros:
NFTs act as digital proof of ownership, existing on the blockchain network
The creation of an NFT, known as minting, involves its publication on the blockchain, facilitating its purchase or sale
While 2021 witnessed a significant expansion in the NFT market, it experienced a contraction in the following year.
Cons:
Since the majority of NFTs represent static assets that don’t produce any standalone income, their worth is mainly dictated by subjective elements like the demand from buyers.As a result, the current high prices may not be sustainable, and NFTs could experience a significant drop in value
The creation and sale of NFTs are not free, and the associated fees can exceed the value attributed to an NFT by other users on a marketplace
NFTs and the underlying blockchain technology have an environmental footprint, as they consume a substantial amount of energy to create and validate transactions
Some NFT projects may not provide the rights to the digital asset itself, so it’s important to do your due diligence to determine the location of the digital asset (at a web address, in centralized cloud storage, etc.) and whether you have the ability to move the asset to a different location
Comparison of Altcoins and Bitcoin
There are several key differences between altcoins and Bitcoin:
Bitcoin debuted in 2009, while the first altcoins emerged in 2011. Since then, new altcoins continue to surface frequently.
When it comes to investing in cryptocurrency, altcoins, with the exception of stablecoins, generally present a higher risk and reward. While Bitcoin is known for its volatility, it has already established itself as the market leader and has accrued significant value. Altcoins, on the other hand, have a greater potential for growth but also a higher risk of failure.
Altcoins, introduced after Bitcoin, boast technological advancements that often enhance transaction speeds and reduce costs, outpacing Bitcoin in these areas.
Examples of Altcoins
The cryptocurrency market is home to thousands of altcoins. Here are a few notable ones:
Namecoin: Launched in April 2011, Namecoin was the first significant altcoin. It shares similarities with Bitcoin, including being based on Bitcoin’s code and having the same maximum supply of 21 million coins. Namecoin is recognized for introducing .bit web domains, which provide anonymity and are resistant to censorship.
Ethereum: Launched in July 2015, Ethereum was the pioneer in offering a programmable blockchain for developers. It quickly rose to become the second-largest cryptocurrency, trailing only Bitcoin.
USD Coin: Launched in September 2018, USD Coin is a stablecoin pegged to the U.S. dollar. Centre, a consortium featuring Coinbase Global, Inc., oversees its governance.
Is It Wise to Put Your Money in Altcoins?
If you’re contemplating diversifying your portfolio with cryptocurrencies and are ready to put in the effort for thorough research, altcoins might be worth considering. Certain altcoins offer projects with wider applications compared to Bitcoin, which primarily serves as a value reserve. As altcoins are not as widely recognized, they could see substantial price surges if they become popular.
However, investing in altcoins comes with considerable challenges. With the sheer volume of altcoins available, pinpointing the most promising ones for investment can be daunting. Altcoins pose a higher risk, and a significant number of the lesser-known ones are dubious investments or even outright frauds.
To sum up, altcoins might be an interesting venture for diligent cryptocurrency investors willing to conduct extensive research. If you’re looking for an investment that’s less risky or less demanding in terms of time, you might want to consider cryptocurrency stocks. It’s crucial to avoid taking on too much risk, so if you choose to invest in altcoins, they should only make up a minor part of your portfolio.
