In 2011 my brother told me about Bitcoin, but I didn't really read up on it. Back then we decided to buy some Bitcoin, but couldn't manage it because no one sold Bitcoin in Guatemala. On June 14, 2017 he told me to look up Bitcoin again. I immersed myself in researching Bitcoin, blockchain and cryptocurrencies for 12 hours straight and bought my first (fraction of a) BITCOIN the next day. Since then I've gone from; 1) wanting to hold Bitcoin to; 2) wanting to invest in cryptocurrencies to; 3) wanting to actively participate and dedicate my time to promoting and working on blockchain projects. Now I'd like to share.
GENERAL THOUGHTS
- The underlying tech behind bitcoin and other cryptocurrencies is highly disruptive. It will change the way people do business and trade value.
- Cryptocurrencies can be classified in several categories depending on their function and value.
- Considerable risk is involved in investing in cryptocurrencies, but the potential for oversized returns justifies taking the risk.
CRYPTO DIVERSITY
Not all cryptocurrencies are alike and some defy easy classification. They can be designed to serve a particular function and have other uses generally ascribed to money, but they can also be much more than money. In order to better assess their value it is important to understand the use cases for the different coins and tokens in circulation. Money has 3 characteristics that can help ascribe value to a cryptocurrency.
- Store of value: saving for later use thus smoothing purchases over time.
- Unit of account: provide a common base for prices.
- Medium of exchange: something people can use to buy and sell from one another.
In addition to being used as money cryptocurrencies can serve other functions (not limited to the ones listed below).
- Serve as a proof of ownership.
- Offer a reward for participating in a consensus driven platform.
- Reward users of a social network.
- Allow organizations to raise capital.
- Grant voting rights.
- Distribute revenue.
- Proof of identity.
- Store information.
RISK FACTORS AND EXPECTED RETURNS WHEN INVESTING IN CRYPTOCURRENCIES
This is not financial advice and I am not a financial advisor. This is only my opinion and I can be wrong about understanding the amount of risk involved in buying cryptocurrencies. It is important you do your own research before investing any money.
- Governments ban, over-tax or somehow otherwise make the use of cryptos impractical. However if this doesn't happen, they offer a better way to trade value, instantly and without the need of a trusted intermediary.
- The cryptocurrency you invest in loses trust, splits or has its value diluted due to the adoption of competing alternatives. However, if you hold a crypto that gains widespread use the expected return on investment will be, to quote DT, "YUGE".
- The volatility of the market can cause losses in short and medium term investments and speculation in the space will deter more widespread adoption. Cryptocurrencies are a better form of money because they are not controlled by a central authority and are mathematically deterministic, and in most cases avoid inflation or are designed to be deflationary. They offer the best option for trading and holding value, but this still entails considerable risk due to points 1 and 2 and the volatility of the cryptocurrency markets.
IN CONCLUSION
I’m convinced cryptocurrencies will revolutionize the world economic landscape and distribution of wealth, and later on the way societies are governed. We are at the first stage of adoption and it is a singular opportunity to participate in a world altering economic and social revolution.