As we said in Part 1, the digital economy is just in its infancy and as a crypto-curious investor, getting into this space early doesn’t only mean investing in Bitcoin.
In the first part of this article, we introduced you to the networks or infrastructure, such as Ethereum or Solana, that developers are using to build their crypto projects. Now, we want to introduce you to some of the alternative ways that you can invest in crypto, beyond buying and selling Bitcoin.
Crypto Exchanges for all
Thanks to digital exchange platforms such as Coinbase, Binance, FTX, which have made it possible for the everyday investor to easily buy and sell (coins / tokens / crypto currency), crypto has become more mainstream. So now, if you want to buy Bitcoin, or any other coin, you don’t need a degree in computer science, or to run expensive hardware in your basement. You can easily set up an online account with any one of the multiple crypto exchanges and 24 hours a day / 7 days a week, buy and sell crypto as you want.
Not only do these exchange platforms give you access to buying and selling crypto, but you can also buy their own native tokens which have a market value that can go up and down. So as these exchange platforms grow, the value of their native tokens also have the potential to grow. If you are more comfortable in the traditional markets, Coinbase went public in 2021, so you can even buy shares in Coinbase through your personal brokerage account.
Exchange platforms for the crypto purists
While exchange platforms like Coinbase have made crypto more accessible to the everyday investor, they don’t serve the needs of all. For those who are deeper into the crypto space, the range of services and coins available don’t necessarily meet their needs. This is where DEXs come into play. Decentralized Exchange Networks (DEXs) allow buyers and sellers to swap crypto between each other, users can remain anonymous as there is no requirement to register their information with the DEX platforms and also reduce, or completely eliminating middleman fees that are applied on traditional exchanges.
True DEX platforms largely meet the key principles that crypto purists value, but for those not so advanced in the crypto space, the nature of decentralization also means that there is no entity centrally monitoring activity, nor a point of assistance that you can reach out to if anything goes wrong.
Some of the top DEXs, by market capitalization or mainstream awareness are platforms such as UniSwap (UNI), PancakeSwap (CAKE), Curve DAO (CRV), SushiSwap (SUSHI).
Curve distinguishes itself by focusing on providing markets for stable coins like USDT and USDC at a low fee. While DEXs such as SushiSwap rewards its token holders with the opportunity to earn passive income by earning more SUSHI based on the token they already hold.
Democratized lending and borrowing
A popular area of innovation has been the emergence of lending and borrowing platforms. Token holders earn more tokens by lending or locking up their tokens; they can borrow using their existing tokens as collateral against what they borrow.
Staking and lending platforms have created an attractive way for token holders to earn passive crypto income on their investments. While it’s a great means of passive income for token holders, it also supports the validation of transactions on these various exchange networks, which helps increase the level of security on these platforms.
Crypto opens up the opportunities for people to borrow beyond traditional banking, by removing the need to provide personal information, to have a certain credit score rating, or to live in certain regions. It’s effectively democratizing access to borrowing for everyone.
However, we’ve learnt in recent months that with opportunities also come risks. The decentralized nature of these staking, lending and borrowing platforms means that users do not have the same consumer protections as traditional consumer financial services. So, if the company that created the platform goes bust, you’re likely to lose any investment you had staked with them. There are well-established platforms out there, built on strong code and good governance, but as with everything, you must weigh up the risks against the strength of benefits for you as an investor.
Leading platforms include, Compound (COMP), Yearn.finance (YFI), Aave (AAVE)
Governance by community
There’s a wide range of tokens provide some type of utility beyond being a means of exchange. They may entitle users to governance rights, meaning the more of the particular token you own, the more voting power you have in terms of future decision making related to that crypto project. Each governance token being equal to one vote, so if you want to be part of the community contributing to future decisions and governance, there are popular token which entitle you to governance rights. To name just a few:
Uniswap (UNI), Maker (MKR), SushiSwap (SUSHI), AAVE (AAVE), Yearn.finance (YFI), Compound (COMP)
Digital Ownership
If you haven’t heard about NFTs by now, you sure will soon. Whether its digital art, sports clips, digital music, in-game items, or proof of purchase of a physical item, NFTs have taken the market by storm.
Non-fungible tokens “NFTs” are one-of-a-kind assets, which grant ownership of a digital items. The digital data of the NFT is stored in a blockchain containing unique code which makes it completely distinguishable from all other tokens. As an owner of an NFT you can sell or trade it and those transactions are recorded on the blockchain. In 2021 the NFT market was worth $41 billion (source, Forbes Advisor). With the stratospheric rise of projects such as NBA Top Shot, or Bored Ape NFTs, overnight millionaires have been created, for example a Bored Ape NFT is recorded to have changed hands for $3.4 million.
NFTs are hyped as a way of guaranteeing ownership of a digital item due to it being recorded on the blockchain, but as with many new innovations, it is still unclear whether legal ownership is guaranteed in the physical world.
In this article series, we've focused on some of the most talked about products and platforms, but there are thousands more which in months and years to come could be market leaders. Even with the volatility in crypto prices, the low entry price for many of these assets means that if you invest small amounts now, which you can cope with watching increase and decrease over a given period, you could be early into an asset with the future potential to be worth significantly more.
Ultimately as an investor you should ignore the hype and put your money towards projects that you genuinely believe can solve a real problem in the long term. By staying consistent with your investments and assessing the level risk you are comfortable with, crypto could be a valuable asset and wealth builder. Bitcoin is still the market leader in crypto, but as the digital economy grows and matures, the future for crypto portfolios looks bright even beyond Bitcoin.
Join our community to learn more about getting into crypto early and making your
investment decisions not based on hype, but on your own personal well thought through strategy.
Disclaimer: this article is based on opinion and personal experience; it is not investment advice.
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