Things To Consider When Buying A Cryptocurrency

in bitcoin •  7 years ago  (edited)

Buying a cryptocurrency requires some forethought. Here are some factors to consider:

  1. Set up your wallet first so that after you buy the cryptocurrency on an exchange, you transfer it to your own possession. Don't keep it on the exchange. A large amount of exchanges (more than 25%) have been hacked.

  2. Consider the cryptocurrency's governance. You are buying a decentralized cryptocurrency. Insist on decentralized governance where holders with "skin in the game" can vote on proposals. Google Dash's governance - which is among the best in the cryptosphere. Many newer cryptocurrencies -- e.g. Zencash -- are modeling their governance after the Dash model. The issue is significant as many crytpocurrencies -- e.g. Bitcoin -- have had problems gaining a consensus to address problems that arise like the need to change blockchain size.

  3. Consider any centralized ownership or mining. Some coins -- e.g. Dash -- had instamines where a very limited number of individuals likely received the bulk of the coins early on. Other coins -- e.g. Litecoin -- have a heavy concentration of mining being done (at times, more than 50%) by one mining pool.

  4. Consider the transaction speed. Due to block size issues, Bitcoin takes a longer period of time to send to a recipient than does Dash and PIVX, which offer almost instant transmission.

  5. Consider the usage cost. Bitcoin costs more than many other cryptocurrencies per transaction.

  6. Consider the daily volume at coinmarketcap.com. Bitcoin and Ethereum are widely used, as reflected in their daily volumes. Be skeptical of cryptocurrencies that are not widely used or accepted. That may limit your ability to use the coin in transactions.

  7. Consider "off brands." Want Ethereum's smart contract capability without the big price? Consider Ethereum Classic, which forked from Ethereum and is cheaper with smart contract capability. Consider forks (Zcash v. ZenCash) and prices when shopping.

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