All investors are interested in cryptocurrency because they are among the best performing assets for the last few years. The rise in the price of cryptocurrencies has stirred up a hype that they could be the next big thing for investment after stocks. Cryptocurrencies have been appreciated for their portability, divisibility and security.
Tables of content
- Understanding cryptocurrency
- Bitcoin
- Other cryptos that could take over Bitcoin
- Are cryptocurrencies a good investment?
- Conclusion
Understanding cryptocurrency
Cryptocurrencies are digital assets or tokens that are used to buy and sell goods and services under a secure network. This network is a decentralised structure that is distributed across a large number of computers and allows these tokens to exist outside of government and public control because they are mostly issued by private companies. The blockchain or the secured network is a system that ensures the integrity of transactional data. These are essential components of cryptocurrencies.
The first-ever blockchain-based cryptocurrency was Bitcoin. This is also the most popular and valuable cryptocurrency. Although in recent years, there have been a lot of alternatives to Bitcoin that have other purposes. Some of them can be considered smaller branches of Bitcoin while the others are cryptocurrencies devised from scratch.
Bitcoin
Bitcoin is a cryptocurrency that was launched in 2009 by Satoshi Nakamoto. It is the first digital currency asset that transformed cash as we know it. Who would have thought that money could be digitised as tokens and you could use that for buying and selling of services and also keep it private?
Bitcoin has been in the market for the last 12 years and it still has a very long way to go because now, it is not the only cryptocurrency, there are more digital coins around now. However, Bitcoin’s market value currently has exceeded $1 trillion. The total market value of all cryptocurrencies together is about $2.5 trillion.
Is Bitcoin good for long-term investment?
Bitcoin is a very popular cryptocurrency that has gained its popularity through the “network effect”, which means most people buy it because most people have already bought it. This is seen as a form of digital cash or digital “gold” by several investors.
Unlike stocks, Bitcoin gains value over time, not instantly, because the supply is fixed. The supply of Bitcoin is 21 million coins, unlike others. There are many people who think that Bitcoin has the actual potential of becoming a global currency. Although statistics suggest that Bitcoin is a great investment, it can be risky too.
Other cryptocurrencies that could take over Bitcoin
Yes, Bitcoin has earned its place in the market, but in recent years there are more different types of cryptocurrencies. There are more than 6,500 cryptocurrencies in existence as of September 2021. It is not necessary that each of the cryptocurrencies have high value, many of them are popular because they are backed by big influencers and investors. That is why there are 4 different cryptocurrencies that can become the next Bitcoin in the long run.
- Ethereum (ETH) – It is the second most popular cryptocurrency and can easily replace Bitcoin in the market. It is the first of the lot to bring in smart contracts and decentralised apps that are built and run without any fraud or third-party interference. ETH was launched in 2015. As of September 2021, the market value of Ethereum is $3,600 per unit.
- Cardano (ADA) – This is a third-generation cryptocurrency that is designed to fix problems that are not fixed by Ethereum and Bitcoin. It takes a research-driven approach and its technology is used to fix real-world problems. It is the best possible replacement for Bitcoin in terms of sustainability. Another perk of Cardano is that it uses only a fraction of the energy that is used to mine Bitcoin and Ethereum. As of September 2021, ADA trades at $2.50.
- Solana (SOL) -Solana can be the best replacement for Bitcoin in terms of speed. Bitcoin can only process about 7 transactions per second, while Solana can process about 50,000 transactions per second, which makes it much faster than Bitcoin and several other cryptos. This blockchain also has smart contracts and currently has about 300 projects running at once.
- Litecoin (LTC) – It has become the 6th largest cryptocurrency and was launched not much later than Bitcoin, in 2011 and is one of the first cryptocurrencies that follow the steps of Bitcoin. Unlike Bitcoin, it offers a faster rate of transaction time. Currently, it is valued at $180 per token.
- Digital Dollar – The word is still out if this is traditionally a Bitcoin or not. They can be best positioned to replace Bitcoin in terms of vulnerability. Soon, the digital dollar can become a threat to Bitcoin and replace it. However, these digital coins are backed by the government so they would be very similar to Bitcoin minus the fluctuation in the price.
Are cryptocurrencies a good investment?
There is no correct answer for this. If you have some cryptocurrencies, it is good for your profile because they have no price correlation with the US stock market. If your research shows that cryptocurrency’s usage and value will increase over time, it makes sense for you to buy some.
When you make an investment in crypto, you need to make sure that you have seen the long-term prospects and then made the investment. Although, if investing in crypto seems too risky, you can consider other ways of making money through crypto. You can think about investing or buying stocks of companies that facilitate crypto trading. These investments can be a safer option than the others, but they may not have the same outcome as investing in crypto.
Conclusion
Cryptocurrency is a brand-new technology that has been in existence for almost 10 years but gained popularity very recently. There are thousands of cryptocurrencies around but when it comes to investing in them, you need to see which aspects work out the best for you and if you are willing to take the risk involved in investing.
Also Read: What Are The Bitcoin Protocol
