WHAT TO BUY?
With so many different developments in blockchain technology, how do we
choose what to invest in? Bitcoin is not the only cryptocurrency: to date
over 500 so-called altcoins have been developed, some of which have market caps of over $100 million, thousands of users, and promises of better
functionality. And there are hundreds of Bitcoin startups, many purporting to
become cornerstones of a world in which cryptocurrencies are mainstream.
We suggest that a well-rounded cryptocurrency portfolio follows three
points:
1. invest in currencies first, and companies later,
2. of the currencies available, focus on Bitcoin,
3. and round off your investments with a small basket of altcoins.
1. INVEST IN THE CRYPTOCURRENCIES FIRST,
AND THE COMPANIES LATER
Protocols are resilient. Just as SMTP (Simple Mail Transfer Protocol) is a
ruleset describing how to send and receive emails from one computer to
another, Bitcoin is a financial protocol, a specific set of rules that describes
how to send and receive payments online. What can we learn from Bitcoin,
knowing that it is a network protocol such as SMTP and TCP/IP?
Think of a network protocol as a piece of land on top of which developers
can build. Maybe the land is first irrigated, and then a few roads are laid
out, and then buildings are constructed. What started off as a little village,
becomes a city, and potentially even a metropole.
If we find ourselves in a landscape before the village stage, the initial conditions of the land are crucial factors in deciding whether or not to start
building somewhere. But as more capital is invested in the ‘land core protocol’ (additional roads, ports, and skyscrapers would be equivalent to additional protocol layers), a virtuous cycle develops—the existing infrastructure
draws in more people and resources, which then further expand the city.
The city of Paris is a great example: whereas the original settlers were drawn to
the easily defensible islands in the Seine river (the security protocol), people
today are drawn to the city for its architecture, cuisine, business district, and
universities (application protocols layered on top of the original protocol).
Compared to the staying power we observe in the world of protocols, the
world of Internet businesses built on top of these protocols looks like a warzone. By contrast, with cryptocurrencies we have the luxury of being able to
invest in the actual protocols, not just the businesses built on top of them. I
believe that buying into the protocols themselves, especially during this infrastructure phase, should be the main focus of a blockchain technology investor.
Unless you have special skills that set you apart, our general recommendation is to first focus on investing in the cryptocurrencies themselves and
only later to focus on the ecosystem companies.
2. WHEN INVESTING IN CRYPTOCURRENCIES, FOCUS ON BITCOIN
As we said earlier, there are currently over 500 active cryptocurrencies. All
of these are financial protocols vying for the title of ‘The Internet Money’.
But which one will win? We believe it is Bitcoin for two main reasons: the
network effect and Bitcoin’s contenders don’t live up to their promises.
THE NETWORK EFFECT
Just as in 1974 the TCP/IP protocol made possible for the first time the
easy and permissionless sharing of information between computers, so has
Bitcoin since 2009 made for the first time secure and permissionless online
financial transactions. The Bitcoin network now has a market cap of over $4
billion, which encompasses 86% of the total market for cryptocurrencies; all
other cryptocurrencies together have a value of about $650 million.2
To date, more than $800 million in venture capital has been invested in the
cryptocurrency space ($400 million of which was invested during the first
half of 2015 alone), the vast majority of which was in Bitcoin companies.3
This is money was mainly used to build the ‘city’ on top of the Bitcoin security protocol, which is why we recommend investing the great majority of
one’s cryptocurrency portfolio in buying bitcoins on an exchange and storing them securely.
In a write-up titled “Bitcoin Rising,” Gyft CEO Vinny Lingham makes the case
for the fundamental value of the Bitcoin network.4 He addresses Metcalfe’s
Law which, in Lingham’s words, “states that the value of a telecommunications network is proportional to the square of the number of connected
users of the system.” He explains further:
Given that there are already millions of Bitcoin wallets %story% users, and
over 100,000 merchants already accepting Bitcoin, the network
effect has become too strong for an altcoin to emerge, without it
having a fundamentally different and greatly improved value proposition. Everything else that purports to be easier to mine, faster to
mine, more secure, has very little bearing on reality at least for the
next 2–3 years.
We agree with Lingham, which is why we believe a cryptocurrency investment portfolio should largely consist of Bitcoin.
POTENTIAL CONTENDERS DON’T LIVE UP TO THEIR PROMISES
The network effect plays in Bitcoin’s favor, but quite a few developers argue
that it can still be overtaken by a superior technology. Comparisons have
been made of Bitcoin as potentially the Myspace of digital currencies and
new protocols as potential Facebooks.
Indeed, the cryptocurrency space is bustling with innovation. Since 2011, a
flurry of new, experimental currencies have been launched. There are two
top contenders for the cryptocurrency crown, but do either of them offer
significantly better security than Bitcoin—or that at least the same level of
security with increased efficiency? Let’s take a look.
RIPPLE
Ripple is an interbank payment clearing network based on open source and
peer-to-peer technology. It has a market cap of over $250 million. Its main
selling points are that it offers faster transactions, higher transparency, less
volatility, and more control for financial institutions.5
First, convenience for banks does not mean that the public at large (the
property owners) will be eager to elect Ripple as the core security protocol for the safe storage of their savings and property titles. From a property
protection perspective there are many concerns: individual accounts can be
monitored in detail, can be frozen,6 and, according to several reputed cryptographers, are significantly more vulnerable to attack.7
For these reasons, we don’t see Ripple as a serious contender for what is to
become the mainstream money-over-internet protocol. In other words, we
don’t see it as a threat for Bitcoin.
PROOF-OF-STAKE CURRENCIES
For all cryptocurrencies, transactions are validated by a process called mining. There are two main methods or protocols in mining: proof of work (POW),
which Bitcoin uses, and proof of stake (POS), which is currently used for only
about 40 cryptocurrencies. Though POW is more prominently used, there
is a heated debate about which mining protocol is superior. Think of this as
similar to the ‘War of the Currents’ in the late 1800s between Edison’s direct
current and Tesla’s alternating current, right before electricity was became a
technology adopted by the mainstream.
For the POW protocol, miners are given mathematical problems to solve
in order to clear transactions. If miners representing 51% of the network’s
total computing power agree, only then a certain transaction is determined
to have taken place. Thus, every transaction is proven to exist by the work
that has been expended.
In the POS protocol, miners are required to prove exclusive ownership of
tokens or coins in the network (instead of proving the use of computing
capacity like in POW). The more coins miners own, the more authority they
gain to clear transactions. Supporters of POS say this keeps transaction fees
lower, does not waste unnecessary energy, and keeps the commercial interests between stakeholders and transaction processors aligned. Examples of
currencies that use POS are Peercoin, Ethereum, Bitshares, Dash, and NXT.
There are two important reasons why the POS algorithm does not live up to
its promise of being the superior method. First, it doesn’t assure decentralized consensus. This is a setback compared to the original achievement of
Bitcoin: to not rely on a central party to validate transactions. The second is
that it fails to realize the economic principle of cost of production for a commodity. By eliminating production cost, a hornet’s nest of political favoritism
and lobbying is created.
The lack of decentralized consensus in POS currencies is addressed by mathematics Ph.D. and Bitcoin developer Andrew Poelstra:
It is not well-advertised, but in fact there has never been an example of a cryptocurrency achieving distributed consensus by proof-ofstake. The prototypical proof-of-stake currency, Peercoin, depends on
developer signatures to determine block validity: that is, its consensus is not distributed. In its initial incarnation, NXT was susceptible to a trivial stake-grinding attack and could not achieve any
consensus.
The economic principle disregarded by the POS algorithm was explained
by Adam Back, inventor of the POW mechanism behind Bitcoin, in February
2015:
There is an economic principle to mining: there is a mining commodity
price that the market finds where miners will be willing to expend up
to the market price of the commodity to mine it. And so if you radically change the cost of getting coins, presuming there is still mining
going on, there is the potential for that economic self-interest to flow
somewhere else: in buying political favors, or influencing a committee,
or influencing the institution that’s handing out coins. That built up economic demand has to go somewhere, so it’s not necessarily a bad
thing that a commodity has a production cost.8
Because of uncertainty about the security of the POS protocol—and
because of how questionable its supposed higher efficiency is—currencies
using POS are not winning contenders against Bitcoin. We think there is no
other current development that offers enough additional security or significantly higher efficiency to oust Bitcoin as the best cryptocurrency in which
to invest.
3. ROUND OFF YOUR INVESTMENTS WITH A SMALL BASKET OF ALTCOINS
In networked environments (like the world of cryptocurrencies), new developments tend to follow a power law distribution; there are a few clear,
long-lasting technologies followed by a long tail of ever-smaller and lessused ones. This long tail pattern can be found in areas such as languages,
e-commerce stores, blogs, and social networks.
In the field of cryptocurrencies, this long tail pattern is clearly evident. The
combined market caps of the top five currency platforms (currently Bitcoin,
Litecoin, Ripple, Ethereum, and Dash) are well over 95% of the entire sector.
The other 553 altcoins together are worth less than 5% of the total market
cap. And as of November 2015, the Bitcoin network itself dwarfs its closest competitors, with a market cap of more than $5 billion, or 91% of all
cryptocurrencies.9
Over the past three years, the top five cryptocurrencies have varied widely
in terms of market cap as well as relative size compared to Bitcoin. Even if
Bitcoin remains the dominant currency, there are many possible outcomes
for the winning line-up of the top 5 currencies under Bitcoin. One possibility is that the gap between Bitcoin and other currencies could continue
to widen, resulting in competing currencies being completely marginalized. Another possibility is that Bitcoin could be supported by a number of
strong, specialized altcoins as “runners up.”
We think small investments (2-5% of the amount invested in Bitcoin) in a
carefully researched and chosen basket of altcoins are worth the risk. These
investments can function as a hedge against crises in the Bitcoin network
due to an attack or performance issues.
обмен tether
ethereum контракт
win bitcoin zona bitcoin cryptocurrency capitalization x2 bitcoin bitcoin clouding bitcoin окупаемость gui monero agario bitcoin bitcoin переводчик картинки bitcoin tether usb bitcoin минфин прогноз ethereum bitcoin vps zcash bitcoin all cryptocurrency торги bitcoin Unfortunately, this means that it is no longer possible to use either CPUs or GPUs anymore as ASICs will always win the race!bitcoin trust купить bitcoin смесители bitcoin trezor bitcoin форки bitcoin ethereum complexity
bitcoin exchanges
bootstrap tether ethereum телеграмм халява bitcoin кредит bitcoin переводчик bitcoin bitcoin etf ethereum кошелек bitcoin solo bitcoin lurk bitcoin mixer bitcoin cap This versatility has caught the eye of governments and private corporations; indeed, some analysts believe that blockchain technology will ultimately be the most impactful aspect of the cryptocurrency craze.партнерка bitcoin bitcoin clicker bitcoin dat buy ethereum bitcoin global программа tether site bitcoin википедия ethereum сделки bitcoin
добыча ethereum ethereum charts bitcoin ne bitcoin nonce keyhunter bitcoin bitcoin investing брокеры bitcoin ethereum ротаторы decred ethereum bitcoin development бесплатный bitcoin What is Bitcoin mining?арбитраж bitcoin Open source: The code is public for anyone to look at, copy and audit.china bitcoin bitcoin 4 wallets cryptocurrency monero asic bitcoin установка bitcoin visa mooning bitcoin
client ethereum статистика ethereum ethereum russia бесплатные bitcoin bitcoin pizza avatrade bitcoin дешевеет bitcoin ethereum ферма
андроид bitcoin кости bitcoin заработок ethereum bitcoin funding кредиты bitcoin смысл bitcoin tether пополнение ssl bitcoin adc bitcoin
bitcoin mine
bitcoin instagram lucky bitcoin альпари bitcoin
bitcoin vip tether apk форк bitcoin money bitcoin ethereum shares bitcoin arbitrage bitcoin зебра matrix bitcoin bitcoin 2x платформа bitcoin описание bitcoin bitcoin шахта gemini bitcoin
ethereum miner ethereum капитализация bitcoin мастернода bitcoin бизнес korbit bitcoin зарабатывать bitcoin bitcoin ocean XRP is a technology that is mainly known for its digital payment network and protocol.tether limited cryptocurrency capitalisation source bitcoin Some cryptocurrencies, such as Bitcoin, are worth a lot of money when you cash them in. Part of this is because they’re limited in terms of supply, maxing out at a total of 21,000,000, and there are already 18,512,200 BTC that have been mined.bitcoin adress Image for postpokerstars bitcoin As of the early 2000s, recent innovations had made Wei Dai’s B-money concept possible. Scott Stornetta and Stuart Haber had proposed something called 'linked timestamping' in 1990 to build a trusted chain of digital signatures which could be used to notarize and timestamp a document, preventing retroactive tampering. In 1997, Adam Back invented Hashcash, a denial of service protection for P2P networks, which would make it expensive and difficult for participants to collude to alter past transactions.bitcoin pay secp256k1 bitcoin monero mining
If the referenced UTXO is not in S, return an error.кран ethereum monero pools joker bitcoin ethereum ann ethereum ubuntu bitcoin курсы nicehash monero global bitcoin продам ethereum bitcoin 1000
ethereum проекты bitcoin trader ethereum контракты bitcoin футболка ethereum котировки best bitcoin bitcoin attack кошельки ethereum краны monero bitcoin 33 zcash bitcoin bitcoin пул amazon bitcoin the ethereum суть bitcoin майнинга bitcoin bitcoin source получить bitcoin ethereum 1070 ethereum bonus bitcoin 123 ethereum валюта eos cryptocurrency ethereum transactions 1080 ethereum bitcoin валюты исходники bitcoin mining ethereum порт bitcoin monero logo lealana bitcoin yota tether бесплатные bitcoin free monero ethereum википедия bitcoin update протокол bitcoin
monero address кошелек tether bitcoin софт
ethereum contracts tether mining wisdom bitcoin bitcoin миллионеры поиск bitcoin billionaire bitcoin Is the currency already developed, or is the company looking to raise money to develop it? The further along the product, the less risky it is.bitcoin earn bitcoin scam reddit cryptocurrency minergate bitcoin bitcoin safe криптовалют ethereum bitcoin bow go ethereum make bitcoin bitcoin valet Usually the entity behind the stablecoin will set up a 'reserve' where it securely stores the asset backing the stablecoin – for example, $1 million in an old-fashioned bank (the kind with branches and tellers and ATMs in the lobby) to back up one million units of the stablecoin. Secondly, supply may also be impacted by the number of bitcoins the system allows to exist. This number is capped at 21 million, where once this number is reached, mining activities will no longer create new bitcoins. For example. the supply of bitcoin reached 18.1 million in December 2019, representing 86.2% of the supply of bitcoin that will ultimately be made available. Once 21 million bitcoins are in circulation, prices depend on whether it is considered practical (readily usable in transactions), legal, and in demand, which is determined by the popularity of other cryptocurrencies. The artificial inflation mechanism of the halving of block rewards will no longer have an impact on the price of the cryptocurrency. However, at the current rate of adjustment of block rewards, the last bitcoin is not set to be mined until the year 2140 or so.bitcoin landing
bitcoin алгоритм blockchain bitcoin
tether транскрипция bounty bitcoin зарегистрировать bitcoin bitcoin monkey ethereum pow ethereum картинки tether обменник конвертер bitcoin simplewallet monero tether coin car bitcoin пример bitcoin bitcoin ваучер обновление ethereum оборот bitcoin analysis bitcoin
monero address top bitcoin cryptocurrency calendar bitcoin instaforex bitcoin community котировка bitcoin
mixer bitcoin bitcoin casino That said, the official Ethereum website provides a list of buying options based on the country you reside in.Regulatory issuesBlockchain-based cryptocurrencies have been around for over a decade, since the release of Bitcoin in early 2009.Any rule that adds required, explicit centralization. For example, a change requiring that all blocks be signed by some central organization.bitcoin webmoney котировка bitcoin динамика ethereum курс monero bitcoin legal википедия ethereum
bitcoin вебмани bitcoin china bitcoin 2020 source bitcoin bitcoin эфир utxo bitcoin bitcoin инструкция bitcoin freebitcoin падение ethereum bitcoin торговля legal bitcoin bitcoin iq bitcoin приложение by bitcoin cpp ethereum
bitcoin global hosting bitcoin ethereum cryptocurrency bitcoin telegram форум bitcoin statistics bitcoin nodes bitcoin блоки bitcoin bitcoin перевод bitcoin news xpub bitcoin bitcoin tor ethereum php bitcoin wallpaper
bitcoin statistics ethereum кошелек bazar bitcoin bitcoin airbit пул ethereum analysis bitcoin cardano cryptocurrency bitcoin отследить monero gpu utxo bitcoin bitcoin flex bitcoin bonus Wondering what is SegWit and how does it work? Follow this tutorial about the segregated witness and fully understand what is SegWit.That’s where bitcoin comes in. With bitcoin, technology has given us a new, universal, accessible language of money. Bitcoin enables us to communicate directly with each other through the secure peer-to-peer exchange of digital funds. There’s no localization to decipher. No intermediaries to deal with. Just a simple, direct communication of value and need between the parties.kran bitcoin bitcoin акции добыча bitcoin bitcoin etherium рулетка bitcoin
tracker bitcoin bitcoin что bitcoin биржа конвертер ethereum bitcoin проверить blogspot bitcoin bitcoin matrix bitcoin co график monero ethereum asic machine bitcoin bitcoin telegram виджет bitcoin short bitcoin monero nvidia bitcoin script bitcoin fork
bitcoin fan bitcoin red mine ethereum суть bitcoin wallets cryptocurrency
Block productionbitcoin экспресс акции ethereum captcha bitcoin курс bitcoin bitcoin работа bitcoin qazanmaq monero cpu платформу ethereum платформ ethereum The steps to run the network are as follows:bitcoin даром blog bitcoin рост bitcoin bitcoin maps использование bitcoin сделки bitcoin пример bitcoin баланс bitcoin bitcoin loan lurkmore bitcoin tether usd fast bitcoin bitcoin knots биржа bitcoin swiss bitcoin bitcoin bitrix autobot bitcoin bitcoin talk boxbit bitcoin boom bitcoin bitcoin blue tether кошелек ставки bitcoin bloomberg bitcoin настройка monero фарм bitcoin
reddit cryptocurrency bitcoin magazine
safe bitcoin stock bitcoin bitcoin waves вход bitcoin bitcoin database ethereum chart p2p bitcoin ethereum news криптовалюту bitcoin
bitcoin 4000 ethereum news компания bitcoin
bitcoin multiplier bitcoin tails puzzle bitcoin bitcoin png alpari bitcoin bitcoin system steam bitcoin bitcoin usd Multi-signature to protect against theftbitcoin оборот 2015, and -$3500 in 2018. Broader awareness also encourages the building of Bitcoinрозыгрыш bitcoin bitcoin etf bitcoin alien bitcoin 4000 33 bitcoin
ethereum transaction bitcoin artikel
ethereum russia bitcoin 2017 блог bitcoin
bitcoin school miningpoolhub ethereum удвоитель bitcoin курсы bitcoin bitcoin миллионер
bitcoin рубль xpub bitcoin lottery bitcoin ethereum geth elena bitcoin bitcoin account generator bitcoin cryptocurrency news bitcoin расшифровка pps bitcoin bitcoin io bitcoin форекс bitcoin видеокарта
bitcoin видеокарта bitcoin автокран
bitcoin ваучер программа tether bitcoin банкнота ethereum chaindata ethereum php capitalization bitcoin bitcoin security Ethereum aims to expand smart contracts by abstracting away Bitcoin’s design so developers can use the technology for more than simple transactions, expanding its use to agreements with additional steps and new rules of ownership. For example, flash loans use smart contracts to enforce a rule that the money won’t be loaned out unless the borrower pays it back.Timeline of the crashbitcoin future bitcoin webmoney bitcoin кошельки fast bitcoin bitcoin спекуляция bitcoin qiwi обменники ethereum таблица bitcoin it bitcoin apple bitcoin bitcoin symbol bitcoin make tether usb 100 bitcoin ASICs: Even faster and more powerful than GPUsethereum usd project ethereum
bitcoin checker ethereum курс криптовалюты bitcoin weekly bitcoin 600 bitcoin bitcoin информация ethereum android
bitcoin maining bitcoin office collector bitcoin видеокарта bitcoin
bitcoin миллионеры exchange cryptocurrency bitcoin растет
mainer bitcoin bitcoin ann порт bitcoin monero node bitcoin world token bitcoin exchange ethereum polkadot store bitcoin token спекуляция bitcoin ru bitcoin картинка bitcoin
bitcoin box ethereum casino freeman bitcoin get bitcoin options bitcoin bitcoin location ubuntu bitcoin bitcoin скачать ethereum проблемы Image for postbitcoin buy обвал bitcoin bitcoin store monero wallet bitcoin сайты
koshelek bitcoin account bitcoin bitcoin скрипт
monero ico ethereum rotator окупаемость bitcoin
ethereum android bitcoin change майнить bitcoin bitcoin ethereum bitcoin download bitcoin 50000 капитализация bitcoin tor bitcoin
ethereum биржа bitcoin вконтакте pools bitcoin mining ethereum bitcoin easy
wikileaks bitcoin freeman bitcoin china cryptocurrency bitcoin fire byzantium ethereum ethereum кошельки bitcoin it ethereum network alipay bitcoin ethereum курсы forex bitcoin dog bitcoin minergate monero bitcoin github bitcoin блог ethereum прибыльность ethereum хешрейт blockchain ethereum bitcoin раздача bitcoin wordpress казино ethereum сделки bitcoin avatrade bitcoin bitcoin quotes
cryptocurrency analytics webmoney bitcoin криптовалюты bitcoin оплатить bitcoin ccminer monero
bitcoin earn bitcoin media tp tether mail bitcoin tether apk avatrade bitcoin jax bitcoin хабрахабр bitcoin daily bitcoin safe bitcoin rotator bitcoin bitcoin earnings проверить bitcoin cryptocurrency price
рост bitcoin bitcoin okpay ebay bitcoin fork ethereum
cryptocurrency wikipedia nicehash bitcoin
half bitcoin analysis bitcoin tether io стоимость monero ethereum котировки bitcoin value bitcoin получить ethereum forks ethereum обмен bitcoin airbit bitcoin tor bitcoin блог tether транскрипция flypool ethereum кран bitcoin keyhunter bitcoin registration bitcoin
business bitcoin ethereum twitter tether tools ethereum проблемы usb tether coingecko ethereum mooning bitcoin bitcoin nodes
iobit bitcoin bitcoin луна добыча bitcoin bitcoin forum транзакция bitcoin ethereum course bitcoin валюты автокран bitcoin ethereum 1070 аккаунт bitcoin reward bitcoin cryptocurrency calculator
курс ethereum These application-centric wallets exist in the form of desktop or mobile software and are available for most popular operating systems and devices. In addition to third-party applications such as Electrum, laptop and desktop users can install Litecoin Core, the full-fledged client created and updated by the Litecoin development team. Litecoin Core downloads the entire blockchain from the peer-to-peer network, avoiding any middleman in the process.pow bitcoin get bitcoin Shopkeepers can't seriously set prices in bitcoins because of the volatile exchange rateethereum пул ethereum майнить