Like so many of us, you’ve probably caught on to the crypto game relatively recently. With all the hype around Bitcoin prices, it might have left you feeling as though you’re too late to the party.
We’ve seen Bitcoin’s price rising to highs above $60k and predictions that Bitcoin will hit the $100k mark, so you’re not alone in feeling as though that ship may have sailed! But we want to let you in on a secret….
The crypto market is just in its infancy!
Yes, that’s right! It’s only beginning and getting in now is actually great timing.
Most of the noise related to crypto is focused on Bitcoin, but in this article, we want to introduce you to a whole new eco system which has grown from the success of Bitcoin.
It’s generally safe to say that the crypto space is not a phase, nor a bubble as some traditional experts claim. There is a bourgeoning community of smart and innovative people who are identifying the issues that millions of people and companies across the globe face when it comes to traditional finance and they’re building digital solutions to solve for them. Whether its problems accessing traditional bank accounts in developing countries, moving money globally at low cost, or ensuring legal ownership for transactions processed fully online. The crypto industry has created a new eco system which is building solutions in what many are calling the 4th industrial revolution. It’s in this eco system that we see opportunities for early investment.
In this article we want to help you think differently about crypto investment by breaking down the landscape, some of the key players by market capitalization, and promising crypto projects offering practical utility. With this introduction, you can turn down the noise and hype and start thinking about the types of projects which motivate you to invest - where you see the best opportunities for future investment and growth.
Disclaimer: this article is based on opinion and personal experience; it is not investment advice.
Decentralizing currency
Digital currencies have changed the game in terms of the ability to access and transfer cash easily and across borders without the restrictions of traditional banking.
Crypto currencies are digital assets with a main purpose of operating as a medium of exchange. They allow people to trade units of the currency for goods and services, easily transferable from one location to another. What distinguishes them from most modern currencies is that they are decentralized, meaning that they are not backed by a government or central bank, and they rely on a ‘blockchain’ network, a list of timestamped records, validated by other users and linked by cryptography (the ‘crypto’ in cryptocurrency).
Bitcoin (BTC), the original cryptocurrency is by far the world’s most dominant, allowing secure and seamless peer-to-peer transactions over the internet anywhere in the world. Due to its meteoric rise, it is now widely accepted as store of value and often referred to as “digital gold”. So, for many people, buying and holding their Bitcoin while watching its value increase over time is more attractive than using Bitcoin to buy and sell everyday goods or services.
An alternative form of digital currency are Stable Coins. They are designed to mirror the value of a national currency or a commodity, for example the U.S. dollar, or physical gold and maintain a stable value. So, for example 1 stable coin is designed to be of equivalent value to 1 U.S. dollar. Stable coins allow you to convert your cash into digital currency keeping its original value, without the huge price fluctuations of other crypto currencies. Stablecoins can be easily utilized in the digital ecosystem.
Examples: USD Coin (USDC), MakerDAO (DAI)
Computer Networks driving the Developer economy
Crypto currencies and other digital applications are built on decentralized computing networks, based on blockchain technology – a means of recording transactions as they happen with an embedded payment mechanism. On top of these platforms, software developers build different decentralized applications, products and services. You can also code into these networks smart contracts which validate ownership of a digital item. Decentralized computing networks are the infrastructure facilitating a boom in crypto innovations which are disrupting industries Ike finance, art, music and more.
Similar to the 19th century industrialists, the greatest wealth at that time wasn’t generated by those building the trains, but by those building the railroads. So following that logic, it would be smart to keep track of the decentralized computer networks which developers are relying most heavily on to build the digital products of the future.
By far the most well-known and well established blockchain platform in the crypto landscape is Ethereum. It has produced a multi-billion-dollar developer economy allowing innovative developers to build and run a huge variety of applications. This includes everything from gaming platforms, decentralized finance applications (DeFi) smart contracts and advanced databases.
Ethereum is the name of the network, Ether (ETH) is the native cryptocurrency token used by the Ethereum network. Users pay fees in ETH to execute smart contracts.
While Ethereum is the most established and well-known of the decentralized networks and associated tokens, platforms like Cardano and newer players such as Solana and Polkadot are disrupting the space and expanding the ecosystem of innovative crypto products and services.
Cardano is a blockchain platform similar to Ethereum, but is considered a more environmentally friendly blockchain, because it uses the proof of stake method of validation vs. proof of work validation which requires significant computer power by consuming large quantities of electricity. Created by one of the original co-founders of Ethereum, Cardano is uniquely built on peer-reviewed papers, so before Cardano implements anything, it gets experts from around the globe to review and help improve the papers and reach a consensus to move forward.
While crypto’s environmental footprint is front of mind, speed of use and cost are also critical factors for any decentralized computer network seeking to become a dominant player and this is where platforms such as Solana and Polkadot shine. Solana uses a variation of the proof of stake method called proof of history. This method significantly reduces the time required for validation of transactions and makes Solana one of the fastest blockchains, processing an average of 60,000 transactions per second.
Polkadot, a decentralized network seeking to change the game by uniting independent blockchains so that they can communicate together through a concept called interoperability, supports an average of 1,000 transactions per second; both significantly improve on the 15 transactions per second offered by Ethereum and 7 transactions on the Bitcoin blockchain. So with speed and lower transaction fees in their favor there is a strong growth in adoption by developers.
As with ETH, Cardano, Solana and Polkadot each have their own native cryptocurrency token, Cardano (ADA), Solana (SOL) and Polkadot (DOT) which all saw spikes in price value at various points during 2021.
Thanks to these decentralized computing networks a whole wave of innovation has emerged in the form of Decentralized Exchange Networks (DEX): anonymous, low-fee networks that allow user to swap crypto between each other, Lending and Staking platforms: which allow crypto investors to earn passive income on their crypto by lending it, locking up their crypto for a period of time, or using it as collateral to borrow, NFT’s: digital art being the most widely adopted use to date, and so much more.
In Part 2 of this article, we are going to look at some of the innovations that are driving the growth in the crypto space. Innovation in crypto is occurring at a lightning speed pace, so if you weren’t part of the first wave of Bitcoin investors, don’t lose hope. Continue reading because there is so much more out there that likely aligns with your beliefs and interests and could create an ideal opportunity for you to test the waters as a curious crypto investor.
Comments