You can get filthy rich through crypto investing. You can see 20 times higher returns in crypto investing than you would put money into fiat currencies or equities. Of course, substantial risk accompanies the promise of enormous returns.
Over the past year, the cryptocurrency market’s capitalization has almost quadrupled. The total value of all altcoins, excluding Bitcoin, has grown from $60 billion to $ 225 billion — more than 270%. But, despite such impressive dynamics, the expectations of continuing the upward movement in 2021 remain.
Therefore, if you are looking to buy coins today to get massive returns into the far future, you have to do thorough research and be updated with events in the crypto space. Before you even buy your first coin, be aware of the pros and cons of this investment opportunity.
Let’s get to know this opportunity and check the different types of crypto to make an informed decision.
Types of cryptocurrencies
There are various types of crypto or coins you must know. What distinguishes one crypto type from another is the way the crypto came into existence, the method of verifying transactions, and the overall use of the crypto.
Below are the different types of crypto:
- Premined coins
- Mined coins
- Security tokens
- Utility tokens
These coins were already mined before public release. Since they already exist, what is left to do for project initiators is to distribute a portion of them for use by the public. However, the project owner keeps most of these coins. Therefore, the company behind the development of such coins controls the supply, which drew flak from crypto users.
Through mining, crypto initiators slowly release coins into the crypto world. They are coins that come to life through the mining process. If you engage in mining, you will get coins or a fraction thereof every time you add a block to the chain. The coin is your reward.
However, the cost of mining is a significant concern among miners of today. Mining requires a lot of electricity and computing power to accomplish, and the difficulty increases over time. Thus Bitcoin is the best sample of a mined coin.
Bitcoin is the first crypto, and you can own it through mining or buying it from someone else. However, the price of BTC now is very high, so it’s not a cheap variant. Bitcoin mining is now a challenge, and you would need a lot of money to buy just one coin.
Stablecoins are cryptocurrencies backed by real assets such as fiat currencies, commodities, or other cryptos. As a result, their prices do not fluctuate much compared to other coins, hence the term “stable.”
One advantage of stablecoins is buying these coins to convert your local currency into digital currency. Since the prices of these coins do not vary so much, you have enough time to decide what to do with your digital money. Are you going to buy another crypto? Or are you going to purchase a product or service?
They give the holder a stake in the ownership and share of profits in a company or another asset. The idea is similar to owning a share in the casino business. When the casino makes money, you will have a share of the profits. The concept behind security tokens is impressive, but successful implementation is yet to be seen.
You can liken a utility token to a chip in a casino. You can use it like cash to play games and give tips and then later convert the chip to cash when you are done playing. Unlike security tokens, owning utility tokens does not entitle holders ownership of a specific number of shares in a casino and its profits.
Here are some examples of utility tokens:
One good example is Filecoin. Protocol Labs, the company behind Filecoin, made $257 million selling it. When you have such a coin, you will gain access to the Filecoin crypto network. See the daily chart of Filecoin and its current price in the image above.
Pros and cons of cryptocurrency
Although cryptocurrencies bring many benefits and many businesses are looking to tap into the power of blockchain and crypto payment systems, you must be aware of the drawbacks. Let us look at some of the pros and cons of cryptocurrency.
Cryptocurrency has been a catalyst in society and the financial system. Transparency is an area where crypto is superior to the traditional banking system. Although you can see all transactions carried out in a crypto network, the identity of the parties involved in the transactions are anonymous.
|Crypto is a complex subject
One of the hurdles for widespread crypto adoption is the difficulty of the subject matter itself. How crypto and blockchain work, for example, is not an easy topic to deal with. If you have just been introduced to the crypto phenomenon, you will scratch your head the first time you hear the terms “crypto” and “blockchain.”
With crypto wallets, you can make transactions anytime, in any location, and with any device, from your computer to your mobile phone. Since you have easy access to your money, you can manage your finances efficiently.
|Extreme market fluctuations
Crypto provides an effective platform for payments and money transfers. However, the main draw of crypto among individual traders and investors is its use as an investment instrument. They are buying crypto to get massive returns the moment the price starts moving powerfully.
If you own cryptocurrencies, nobody will know about them, and if you make transactions, you do not need to share personal data with the other party. With this setup, the risk of identity theft is not existing. As long as you keep your public and private keys secure, your money and identity are safe.
|No insurance in case of loss
When you put your crypto in a crypto exchange, there is a chance that you will lose your investments. The security of crypto in exchange is questionable due to these three threats:
When you lose your crypto due to any of the above causes, there is no way you can recover your investments. This is because crypto is a decentralized system not backed by the government.
Crypto is a new technology with great potential. Its growth and success all depend on whether businesses embrace the technology and join the financial revolution. When this happens, the government has no choice but to give in and do its job of regulating this market. Without widespread adoption, the future of crypto is uncertain.