Investing In Cryptocurrencies

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Cryptocurrencies have a potential for both short-term and long-term growth. However, it should be noted that cryptocurrencies are one of the most riskiest investments as per 2019. As we know, the higher the risk the higher the potential returns. There are advantages in the technology that we have not been able to utilize before. I invest in cryptocurrencies only for the potential growth, I do not stake or mine any cryptos. But my crypto investments provide no passive income.

A stacked view of the dominance of the top cryptocurrencies.
A stacked view of the dominance of the top cryptocurrencies.
Cryptocurrencies, blockchain and paper money?

As history tells, in the old days we had cows, silver, gold and other commodities to trade. As society grew a paper money system was invented to track and index goods. However, the problem with commodities is traceability. If i borrow 50 euro from a friend, i could immediately refuse ever getting the 50 euro from my friend. So, this way i have gained 50 euro from my friend, with no trace of the transaction. But, the invention of the internet and credit cards achieved greater traceability. This allows us all to buy and sell virtually anything around the world.

As we know, governments are controlling the paper money. The virtual money in your bank account is backed by printed money in a government owned vault. In addition, the money you see virtually in the browser is printed paper somewhere in a vault and based on peoples trust to the government. In conclusion, the main difference in crypto and paper money is the way they are controlled. Cryptocurrencies are controlled by algorithms and peer-to-peer trust.

Why i like cryptocurrencies better than government issued currencies

The government controls the amount of money printed. Similarly, an algorithm controls the amount of block rewards. For instance, some cryptocurrencies have a unlimited supply, some has a predefined supply cap, and some is released with maximum supply distributed. An example like Bitcoin which has 21 million Bitcoins as a supply cap. Currently the circulating supply is ~17,5 million Bitcoins. Which means over time the Bitcoins will reach the maximum supply and its price will be solely determined on the trust to the algorithm.

The cryptocurrencies are published in a published ledger. This ledger is public, and every transaction is for everyone to see. This “ledger” is what we know as the Blockchain technology. Cryptocurrencies are governed by yourself meaning unlike a bank, a transaction cannot be withdrawn if you are exposed to a scam. Therefore, all transactions which you are involved in are your responsibility. In short, sending Bitcoins to a wrong address will lose the transferred funds.

For example, my public key for Bitcoin is 3Fj647u8jVMA82727RSwqoDiSZKsqHmq9H. This address is used to send me Bitcoins, and you cannot be used for anything else. The private key to this address is secret, hence the name “private key”. Whereas, gaining access to the private key unlocking the wallet with the Bitcoins is possible. This is why it is important to hold the private key secret and to have a backup of the long numbers and letters in a none digital place.

Centralization, decentralization, proof of work and proof of stake

One of the big topics in the Blockchain community is centralization vs decentralization and proof of work vs proof of stake. The whole idea of cryptocurrencies is to decentralize the money system. Even Bitcoin is becoming more and more centralized as the cost of mining Bitcoin is increasing. As of writing this blog post, 4 pools “own” over 50% of the total hash rate power in the Bitcoin network.

Bitcoin hash rate distribution (Source: Blockchain.info April 2019)
Bitcoin hash rate distribution (Source: Blockchain.info April 2019)

Bitcoin relies on the proof of work consensus. Essentially it means using computing power to compute calculations, called mining. The reward is giving to the first miner which solves the block problem. A currency like Neblio relies on a proof of stake consensus. The creator of a new block is chosen in a deterministic way. The chosen person depends on the wealth of the staker. The proof of stake system has no block rewards, the reward for the chosen of a block is the transaction fees.

Cryptocurrency investments

In the description and argumentation of my crypto investments i will discuss the blockchain technology. The focus will be the use of the crypto and why i see holding the crypto can reach capital gains, at some point.

1. Bitcoin (BTC)
The Bitcoin symbol/logo.
The Bitcoin symbol/logo.

While a lot of cryptocurrencies can be seen as questionabl, Bitcoin was the first adopted virtual cash. Satoshi Nakamoto proposed a virtual money system which cannot be tampered and fraudulently abused. It requires CPU power of computers to verify the transaction between people and reward the CPU power providers with Bitcoins as a payment for updating the Blockchain. The whole idea of Bitcoin is to control our own funds, without third party involvement. For further details of the algorithm and intentions of Bitcoin, consider reading the whitepaper.

Investing in Bitcoin seems to me like investing in an index funds for crypto. The general crypto market has thus far followed or been in some form of alignment with Bitcoin. Bitcoin is its own blockchain and does not control any altcoins. However, as Bitcoin surges altcoins has a tendency to follow shortly after and vice versa. Under the surge in late 2017 we saw transfer fees increase to unreasonable heights. This is one of the major cons of Bitcoin. Like MySpace was the first (mass adopted) social media platform, Facebook is running the show now. Hence, i foresee that Bitcoin will eventually lose market share. However, whether that will happen tomorrow or in 10 years i have no idea.

But as a general holding Bitcoin is to lower the general risk of my crypto portfolio.

2. Litecoin (LTC)
Litecoin logo
Litecoin logo

While the creator of Bitcoin, Satoshi Nakamoto is unknown. The creator of Litecoin Charlie Lee is active on social media. You should consider giving him a follow on twitter as he has a lot of informative updates on Litecoin. Furthermore, Charlie Lee is a former Google employee. He released Litecoin in 2011 whereas Bitcoin was released in 2009.

Charlie Lee from his Twitter account taking about his next steps in development of Litecoin.
Charlie Lee from his Twitter account taking about his next steps in development of Litecoin.

In short, Charlie built a lighter version of Bitcoin. Meaning that the fees are smaller, and the transaction speed is 4x faster. Litecoin will have a maximum coin cap of 84 million coins which is also 4x as big as Bitcoin.

Visualized speed of Litecoin compared to Bitcoin.
Image Credit:
https://litecoin-foundation.org/

In conclusion, i hold Litecoin is just like Bitcoin. They are some of the first cryptocurrencies. Most importantly, with a raising trust and understanding of crypto, i see having the most matured cryptocurrencies in my portfolio as a must.

3. Neblio (NEBL)
Neblio logo.
Neblio logo.

Firstly, NEBL is the project which i have the highest hopes for. Secondly, they are developing a blockchain platform to simplify blockchain to enable widespread enterprise adoption. Neblio is using REST API’s. In plain-speak means people will be allowed to develop applications on the blockchain using 8 different programming languages. Many blockchains are using 1 common programming language like javascript. Whereas Neblio applications can be developed in Pyhton, Javascript, Go, PHP, .NET, Java, Objective-C and Node.js. This is not the first time seeing multiple programming languages on a blockchain. However, their overall simplicity makes the use of the blockchain competitive in regard to other blockchains.

What draws me towards Neblio’s blockchain is the possibilities of use cases. The use case is generally only limited to your imagination. One of Neblio’s own examples are secure record management. Due to the security and decentralized ledger of the Neblio blockchain, it can be used for health records and financial transaction among other things. There are cases where a private network is more suitable for a user’s business need. This could be the example mentioned with healthcare, which hospitals would not like to be public displayed. Neblio has a fully open source node software and tools to tweak the Neblio network that meets the business case’s needs.

Neblio “commercial” video explaining Neblio core benefits.

Furthermore, Neblio is a proof-of-stake consensus meaning you can gain a passive income without expensive GPUs or ASIC machines.

In conclusion, I am very bullish on the long term for Neblio. They have multiple languages, multiple wallet options, has a reputation for delivering updates and milestones before expected date. In general, a project i understand and from my point of view just flying under the radar.

4. Nebulas (NAS)
The Nebulas logo.
The Nebulas logo.

Nebulas is a newer blockchain project which is developed by former NEO employees Hitters Xu and Aero Wang. They founded Nebulas in 2017 and has since moved from the Ethereum blockchain to their own mainnet. However, I will admit that Nebulas is a speculative investment as i cannot quite comprehend the advanced technology of the whitepaper (come on people, i am not a software engineer). However, they have 4 key features which sets apart from the competition. Nebulas Rank (NR), Nebulas Force (NF), Developer Incentive Protocol (DIP)/ Proof of Devotion (PoD) and Search Engine.

The NR is a universal blockchain measure of value. It is a ranking algorithm to help rank smart contracts, addresses, DAPPS etc. The NF is a protocol built in the blockchain which allows the blockchain to self-evolve. With the NF developers can update the protocol, averting hard forks. The DIP and PoD is a system to award developers with NAS for the contributions to which they make. It supports fairness and should be in the interest of the developers.

In conclusion, Nebulas has constructed a new type of search engine. By Nebulas’s ranking system it is possible to search in decentralized applications. The engine will allow users to find the most useful decentralized application.

5. Cardano (ADA)
Cardano logo
Cardano logo

Firstly, Ada is a fully open source project which runs the cryptocurrency called Ada. The blockchain uses the proof of stake consensus. Secondly, the main goal is to be an advanced smart contract platform. In addition, Just like Nebulas, Cardano has former high-ranking executives on board. The co-founder of Ethereum and Bitshares (now NEO) Charles Hoskinson is CEO of Cardona. Jeremy Wood is also a co-founder of project and together with Charles started Cardona after leaving the Ethereum project. Cardano aims towards developing a p2p innovation to provide financial services to the 3 billion people in the world who currently do not have these privileges.

My investment in Ada is simply to profit from the focus on smart contracts. When comparing to other platforms developing smart contracts like Ethereum, Cardano provides scalability and a strong academic background.

6. NEO (NEO)
NEO logo
NEO logo

If you have ever visited other blogs or websites, you might have heard that NEO is called the Chinese Ethereum. NEO is a blockchain platform and a cryptocurrency. Their focus is digitizing assets using smart contracts. Like Neblio, NEO supports multiple common programming languages. The development of NEO started as AntShares in 2014. In 2017 Antshares was re-branded as NEO.

The development of the platform is a combination of both in-house developers and a strong community of third-party developers. The third-party developers are the developing the DAPPS on the platform. With smart contracts NEO want to integrate blockchain technology creating ways for physical assets like money or company shares assets to be digitized. The assets can then be exchanged over the NEO network.

In short, I have invested in NEO as they have many former employees creating other big blockchain platforms. This builds my trust for their components to develop a usable product for the masses. I get a wrong tinkling feeling from the Ethereum co-founder Vitalik Buterin. Therefore, i have not invested in Ethereum.

7. ICON (ICX)
ICON (ICX) logo.
ICON (ICX) logo.

ICX is a blockchain project like Cardano and NEO. ICON has a focus on smart contracts. The end game is to have a blockchain platform were all industries can coexist and transact on a single network. Their beliefs are that blockchain has not yet seen mass adoption in due to real world technological and business limitations.

ICX smart contract.
ICX smart contract.

The picture of ICX’ smart contract system is the way ICX want the world wide industry to use their blockchain. To explain how they want it to work, see the below picture.

ICX smart contract for stocks, equities etc.
ICX smart contract for stocks, equities etc.

Each “Security company X” is involved in the smart contract. When a client purchases a stock, all companies will have updated their records as to who owns the shares.

I can see the use case in ICON, however the project seems extremely ambitious compared to many other projects.

8. Wanchain (WAN)
Wanchain logo
Wanchain logo

The blockchain project Wanchain is aiming to decentralize the financial industry with private, cross-chain smart contracts. This means that corporations can create blockchain applications for borrowing and lending, payments and settlements, transactions and exchanges etc. One of the core strengths of Wanchain is the anonymity. They are the blockchain that include privacy within smart contracts. They use a algorithm called ring signatures. In the ring signature your signature is mixed with other fake accounts. On top of that Wanchain generates a new address for each transaction.

Illustration of the ring signature.
Illustration of the ring signature.

The investment in Wanchain comes with the same reasoning as the investment in ICON. I can identify the use cases of the blockchain, and by investing in both Wanchain and ICON i am diversifying in projects for the financial sector.

9. LALA World (LALA)
LALA world logo.
LALA world logo.

The blockchain project LALA World is very a small project. They are not known by many. LALA World launched their ICO in 2017 and ranked 876 on coinmarketcap.com at the time of writing this blog. Their vision is to financial ecosystem which can support people around the world who are unbanked, undocumented, etc. LALA World has a focus on 4 major products in their ecosystem; LALA Transfer, LALA Card, LALA Bill Pay and LALA Lends. They are all as you think. LALA Transfer is the possibility for p2p local and global transactions. LALA Bill Pay to pay bills, LALA Lends for lending p2p and so on. However, LALA World has been caught copying another blockchains whitepaper. Since then LALA World has been declining in popularity.

Currently LALA World has their own blockchain and an, Andriod wallet, with an IOS wallet soon to come. However, they caught my attention with the focus on unbanked people. Investment wise this might not be the best idea, as people from undeveloped countries cannot pour billions into the ecosystem. However, i hope the developed part of the world will see this project. To help the betterment of people around the world.

Make sure to follow my portfolio value and income and watch my investments growth with me.

Jump to https://blockgeeks.com/guides for detailed information on cryptocurrencies, Blockchains and how they work. A lot of my knowledge has been built from websites like theirs. If cryptocurrencies interest, you i strongly recommend visiting their site.

I am by no means a big tech geek. If you should find any incorrect information in the post, please let me know.

ThePoorInvestor

I am ThePoorInvestor and I am on a financial independence journey. I am investing in P2P-lending to create a high cash-flow return. I disclose my income, expenses, investments and everything financially relevant. It is all for you to see, I have nothing to hide. I have invested in a total of four different investment types throughout my 2 years of investing.

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