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With over 1400 coins to pick from, how can you tell if one is worth investing in? Lets start by looking at the top ten coins.
To help describe these coins, so that they can be compared as equally as possible, I have used symbols to represent some of the unchangeable aspects of a crypto.
Now that you know how the shorthand model works, lets look at each crypto individually.
I have given a short description of the reason the crypto was created in the first place, and what problem it is attempting to solve. I also describe how the crypto is currently being used, which is not always in its initial intended way. Lastly, I look into its intrinsic value to investors. In order for a crypto to have long term value, it requires a financial eco-system. The eco-system requires interaction between the developers and the community who will ultimately use the crypto. This means there needs to be a way for the developers to earn income (so they can continue to develop), a way for the community to earn crypto (so the community has an incentive to be part of the project), a reason to spend the crypto, and an easy way for the crypto to be spent. If the crypto can't provide this eco-system then the crypto may struggle to survive long term.
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CoinMarketCap.com is the go to site for most crypto enthusiasts. Coin Market Cap maintains a comprehensive list of all the cryptos on the market. But if you are new to trading, or cryptos, the terminology can be a bit daunting. CoinMarketCap.com on 30th January 2018. Let's look at each column and decipher what information each column is conveying: # This is the Rank of the coin. Rank is determined by the Market Cap. The higher the market cap, the higher the rank. See Market Cap below. Name Obviously, this is the name the coin goes by, and is accompanied by its logo. The name is also a link to a page with more details, links, and graphs for the coin (see below). Bitcoin detail page on Coin Market Cap. Market Cap Market Cap is short for Market Capitalisation. Market Capitalisation is a way to determine the size of a currency. It is calculated by multiplying the Price by the Circulating Supply. (See Circulating Supply below) Market Cap = Price x Circulating Supply. For example, above BitCoin's Market Cap is Price: $11,320.70 Circulating Supply: x 16,833,825 Market Cap: = $190,570,682,677.50 (Rounded up to $190,570,682,678.00) Price Price is a volume weighted average of prices reported at each market. This means that they take an average of the price of a coin across the markets (exchanges), but markets that have a higher volume of trading (in that coin) is considered to be a closer reflection of the value, so their value is given more weight. The Price is also a link to a list of the markets that list the coin. Bitcoin Markets on Coin Market Cap. Volume(24h) Volume is the trading volume in the previous 24 hour period. This is calculated by adding all the buys and sells together that were filled in the previous 24 hour period. The Volume(24h) is also a link to a list of the markets that list the coin (see above). Circulating Supply Circulating Supply is an approximate number of coins that are in the general public's hands. By contrast the Total Supply is the total coins in existence currently and Max Supply is the approximate number of coins that will ever exist in the lifetime of the crypto. The Circulating Supply is also a link to the block explorer for that coin. Change (24h) This is the percentage the price has changed in the previous 24 hours. Price Graph (7d) This is a graph of the previous 7 days price changes. If you click the graph it links to the Coin Market Cap Charts for that coin. Bitcoin Charts on Coin Market Cap. Now, let's look at the top of Coin Market Cap's website. They have a very handy top bar, with additional market wide information. Starting from left to right: Cryptocurrencies This is the number of cryptocurrencies currently on the market. The link takes you to a list of all the cryptos, similar to the front page, but with slightly different details. Currency List on Coin Market Cap. Markets This is the number of market pairs available (BTC/ETH, BTC/USD, ETH/USD etc) across all markets. The link takes you to a list of all the market pairings for each coin. Market list on Coin Market Cap. Market Cap This is the total Market Cap of all cryptocurrencies. The link takes you the global charts for all cryptocurrencies. Global Charts on Coin Market Cap. 24h Vol This is the trading volume in the previous 24 hour period of all cryptocurrencies. The link also takes you the global charts for all cryptocurrencies (see above). BTC Dominance This is the percentage of the total market cap bitcoin has. The link takes you to the Bitcoin Dominance Chart. Bitcoin Dominance Chart on Coin Market Cap. English/USD This tab allows you to change the language and currency for the site. There is so much more on Coin Market Cap. Now that you have a basic understanding, explore the rest of the site. For more information about Coin Market Cap see the CoinMarketCap FAQ. You were very brave clicking that link! Don't worry, I will be gentle. Look! I have rewarded you already with a cute puppy (who can resist a puppy!). Ok, ok, I did spend an hour looking at puppy pics, but it was in the name of research, dammit! Let's just rip the band-aid off and dive straight in. What is a blockchain? A block chain is the method in which cryptos achieve decentralisation. Records (transactions and other details) get bundled together, called blocks. Each block has a code included in it that references the previous block, which keeps all the blocks in a chain. The data in any given block cannot be altered without the alteration of all blocks that occurred after the block, essentially making it impossible to maliciously alter the data, as making such an alteration would require the cooperation of the majority of the network. It is this arrangement that makes the network secure. What is consensus? Consensus is a process where multiple nodes (fancy word for 'someone's computer') agree that the data in a block, and in the chain, is correct. This is an important part of the security of the network as this is a double check that the data on the blockchain is the true data. There are a variety of methods a blockchain can adopt including: * Proof of Work (PoW) * Proof of Stake (PoS) * Delegated Proof of Stake (dPoS) * Leased Proof of Stake (LPoS); * Proof of Importance (PoI) * Delegated Byzantine Fault Tolerance (dBFT) * Tangle * So many more... I won't go into the details of each type (we will be here all day!), but I will touch on the two most common, Proof of Work and Proof of Stake. Proof of Work (aka Mining) This is first type and the most common method. In order to complete a block (chunk of data) the node (someones computer) has to figure out a very complex math problem. The complexity ensures that the computer has to use a lot of electricity. The electricity use (and ultimately the paying of the electricity) is the cost of being a node. When the node figures out the math problem, the node is rewarded with some cyrptocurrency. This is called a block reward. If a node (called a miner in this type of consensus) gets a different answer from other miners, then their answer is rejected. A rejection is a waste of electricity, so there is an incentive for the answer to be in line with other miners. In this type of consensus, in order to cheat the system you would need to control 51% of the computing power on the network, which is so difficult it is basically impossible. In this system the more computing power you have, the more likely you are the solve the math problem first, and so get the block reward. Because of this, many nodes join their resources together (called a mining pool) so that individual nodes get a more consistent reward. When too many computers join the network, and the math problems get solved quicker and quicker. This is a problem because this can interfere with the stability and security of the network. To combat this, the difficulty of the problem is increased so that the number of blocks created on the network remains consistent. This difficulty is called Block Difficulty. Proof of Stake (PoS) In this method, a node is not required to solve any math problems. Instead one node is chosen to process the transactions and other nodes are chosen to verify the transactions. In order to be chosen the node is required to provide a stake of currency. This stake is locked up in a virtual safe, and if anomalies are detected from the node, the stake is forfeited. The reward for this work is a percentage of stake, so the more currency you stake, the more likely you are to be chosen to process a block. This means you get a bigger reward, but you also risk more currency if you try to cheat. Now, obviously, the reality of blockchains and concensus is way more complicated than I have explained, so if you want some more technical detail, wikipedia is a great resource. Wikipedia on Blockchains or WikiPedia on CryptoCurrency. Next Steps... Continue your journey by checking out these articles next: Just like any currency, you store your coins in a wallet. But, of course, its not just any wallet. Its a digital wallet, or rather software that makes sure you have ownership over your coins. Source: pixabay.com There are several different types of coin storage, and many different options within each type. Each type has their own pros and cons, as does each option. I will touch on the most common options: * COLD STORAGE: Hardware Wallet; Paper Wallet. * HOT STORAGE: Web-Based Wallet; Software Wallet. COLD STORAGE Hardware Wallet A Hardware wallet is a physical object, usually similar to a USB Memory stick, used with software installed on your computer, to store your coins. These wallets are considered to be "Cold Storage" because they are not actively connected to the internet. This type of storage is considered to be the most secure because it is extremely difficult for someone other than the owner to steal the coins. Note that hardware wallets are limited as to the specific crypto they can store, and each wallet is different. Before purchasing one, make sure you check which cryptos it supports. There are currently two hardware wallets available for purchase in New Zealand: Nano S Ledger and Trezor. Both of these wallets can be purchased through a variety of resellers including https://coinsure.co.nz, or through variety of sellers on TradeMe. As with any online purchase, make sure you research the reseller to ensure they are legitimate. The advantages of a hardware wallet is that it is not connected to the internet, so unauthorised access is virtually impossible. The disadvantages of a hardware wallet is that they are portable, and easily mislaid. Paper Wallet A paper wallets are useful if you want to have an offline wallet, but do not wish to purchase a hardware wallet. A Paper wallet is normally generated by first by a software wallet, and then printed with the wallet address and the private keys. The advantage of a paper wallet are that it is not connected to the internet, so unauthorised access is impossible. The disadvantages of a paper wallet is that it is stored on an easily damaged medium, and often require an in-depth knowledge to set it up properly. Generally they are not advisable for a novice user. HOT STORAGE Web-Based Wallet Crypto exchanges offer a web-based hot wallet in order to buy and sell cryptos. These wallets are intended for short term storage with the express purpose of trading the coins in the wallet. In practice many users store cryptos in these wallets long term as they are very convenient and many cryptos can be stored their. However, this is not recommended as web-based wallets are vulnerable to hackers. The advantages of a hot wallet is the convenience of access and trade. With a username and password, you can log in to your exchange of choice and easily see your holdings, and your coins are immediately available for trading or moving to another wallet. Another advantage is that the security of your wallet is taken care of by someone else, and most exchanges will give you a variety of additional options for security such as two-factor authentication. The disadvantages of a hot wallet is that it is vulnerable to hacking and as you don't own the wallet (the exchange does) you don't have control over it. This means if the exchange closes or is hacked, then your coins are vulnerable to loss. Exchange also have their own rules as to how much you can transfer into your wallet at a time (most wallets have minimums) and rules as to how you can use your wallet. For instance many exchanges will not allow you to mine directly into one of their wallets. Software Wallet A software wallet is a wallet that you install onto your computer or mobile phone. You have complete control over this wallet, which means you are acting as your own bank, so the security of your wallet is entirely in your hands. Most cryptos have their own version of a software wallet where can can store one crypto or a variety of related cryptos. There are also multi-wallets such as Jaxx or Exodus which allow you to store a wide variety of cryptos. There is not yet a universal wallet that can hold any crypto. For a full list of available wallets, check out Crypto Compare. Next Steps... Continue your journey by checking out these articles next: Mining and Staking are the two most common ways to earn crypto, while being an active part of the crypto network. Miners and stakers form the basis of a crypto network, and do most of the work verifying transactions and building the blockchain. When a crypto is created its founders asks themselves an important question. How will our transactions get verified? Verification is called Consensus and is the process where transactions are confirmed as true and then secured into the blockchain. There are a variety of consensus types, but by far the two most common are Proof of Work (Mining) and Proof of Stake. Once a crypto has made the decision to use a particular type of consensus, they invite others to join their network as Miners (if they have chosen Proof of Work) or Stakers (if they have chosen Proof of Stake). Each type has its own reward structure. If you are a miner, then you will be rewarded for the amount of computing power you add to the network. If you are a Staker, then you will be rewarded for the amount of currency you stake. Mining In order to mine a coin, you will require a computer. The faster and more powerful, the better. There are three types of computers that you can use to mine, and the equipment you use depends on the particular crypto you wish to mine. CPU Mining; GPU Mining; ASIC Mining;
Staking In order to stake, you also need a computer. But not a powerful one, just one connected to the internet. You will also need the currency of your choice. This is your stake. This stake is locked up in a virtual safe, and if anomalies are detected from the node, the stake is forfeited. This is your incentive to not defraud. Your reward for this depends on the crypto you are staking, but is usually 5%. Most cryptos that are staked will have a calculator page that will help you calculate how much currency you need to stake in order to make a profit (over and above your expense of electricity and equipment you might purchase. Staking is generally a less technical venture, so is open to all those who have a computer connected to the internet, and spare cash. For a list of cryptos that you can stake, check out Proof-of-Stake Coins List. This includes the reward percentage, and appropriate links to get you started staking. |
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