Out of the choices above, Ethereum.
Before we look at the coins in detail, let's start
with the potential ROI (100% = 2x Original Investment).
Bitcoin’s current market cap is $193,165,354,468 in
order for you to make 100% this number would need to double to
just under $400 Billion.
Ethereum’s current market cap is $44,715,990,083
, roughly 1/5th of Bitcoins. In order for you to
make 100% the price would need to increase to just under $90
Billion. - Mathematically this is more probable.
Ripple’s current Market Cap is $9,738,948,906 in
order for you to make 100% this would need to increase to just under 20
Billion. This is the most mathematically possible.
Which cryptocurrencies are investors more likely to
put their money into?
Bitcoin
A purely peer-to-peer version of
electronic cash would allow online payments to be sent directly from one party
to another without the burdens of going through a financial institution.
Digital signatures provide part of the solution, but the main benefits are lost
if a trusted party is still required to prevent double-spending. We propose a
solution to the double-spending problem using a peer-to-peer network. The
network timestamps transactions by hashingthem
into an ongoing chain of hash-based proof-of-work, forming a record that cannot
be changed without redoing the proof-of-work. The longest chain not only serves
as proof of the sequence of events witnessed, but proof that it came from the
largest pool of CPU power. As long as honest nodes control the
most CPU power on the network, they can generate the longest chain and outpace
any attackers. The network itself requires minimal structure. Messages are
broadcasted on a best effort basis, and nodes can leave and rejoin the network
at will, accepting the longest proof-of-work chain as proof of what
happened while they were gone.
Peer-to-Peer (P2P): is a technical way of saying computers
(peers) that are connected together via the internet.
Timestamps: are
a sequence of characters that identify exactly when a certain event occurred,
giving the exact time and date.
Hashing: is
the process of compacting large quantities of data into smaller fixed sizes
(the image below might help)
Proof-of-work: is
the verification that the individual peer created the said hash
Nodes: are
computers that are connected to the blockchain
Bitcoin is a first generation cryptocurrency, that
was created in 2009 with the intention to become the currency of the internet.
However, Bitcoin faces several scalability issues.
The Problems with Bitcoin
1. Energy consumption
A study from Digiconomist found that each
transaction on the Bitcoinblockchain uses 236 KWh worth of electricity, this
amount is enough to power 8 U.S households for an entire day.
Now to put things into perspective, there are over
300,000 transactions per day. At this rate, Bitcoin uses more electricity per
year than the whole of Nigeria and this is only increasing.
Read more here: Bitcoin Energy
Consumption Index - Digiconomist
Proof of work is vastly uneconomic and damages the
environment at an alarming rate.
2. Scalability issues
Energy consumption will hinder the scalability
issues of Bitcoin, however the other issue that arises with POW mining is that
with the increase in cost associated with mining BTC it is less economical to
mine Bitcoin. This would limit the distributed nodes (miners) globally and
allow a larger percentage of control to the dominant mining pools / farms.
This would lead to a more centralised blockchain,
where they can change the rules of BTC as they please.
The supply of Bitcoin is finite, capped at 21
million. Eventually (currently predicted for 2140) Bitcoin's supply will run
out. Once this happens, miners will no longer receive rewards for completing
blocks but instead will be given fees. The fees will be drastically high in
relative terms, and people will stop using the blockchain.
Also, if miners decide that this is uneconomical
for them to process the transactions and use their computing power elsewhere
the speed of transactions for Bitcoin will drastically slow down, rendering one
of the fundamental values of a Bitcoin (speed) useless.
3. The unknown future
Bitcoin is not a superior blockchain, there are
hundreds of projects that are faster, cheaper and more valuable than Bitcoin.
Bitcoin has market dominance because it is one of the first and most topical
cryptocurrency (did you know that the price of BTC has a direct correlation to
the amount of google searches). Here are a few things that could really end
Bitcoin’s dominant era:
I) Blue chip company coming into the markets
This is more so for all cryptocurrencies, but
Bitcoin in particular. It’s not a matter of if but a matter of when a blue-chip
company such as Facebook, Amazon or Google decides to implement their own
cryptocurrency, they will dominate the market.
The consumer's trust is already with these big
companies, and they have the power and capital to influence the entire market.
Another possibility is a potential ‘world coin’
which global governments will all agree on using, this may seem unrealistic but
it is definitely not impossible and many benefits would arise from having such
a currency.
II) Quantum computing
Bitcoin is said to be Quantum resistant, on the
whitepaper it mentions that:
‘To compensate for increasing hardware speed and
varying interest in running nodes over time, the proof-of-work difficulty is
determined by a moving average targeting an average number of blocks per hour.
If they're generated too fast, the difficulty increases.’
This may seem quantum resistant but it is important
to understand that the difficulty is changed every 10 minutes and this is more
than enough time for QC to mine all of Bitcoin’s remaining coins.
The other issued that QC represents is that there
is a possibility of QC calculating people’s private keys for their BTC wallet.
I do not know the technical details of how this is done, but from what I have
read this is possible.
III) Bitcoin bubble
My last point for this section is that Bitcoin is
not being bought as a store of value or a currency by most people, for most
people Bitcoin is a speculative investment hoping to make a fortune on
something they really don’t know much about.
Once the bubble reaches its peak, and people start
panic selling, Bitcoin will inevitably crash with that. After all, Bitcoin’s
price is determined by demand vs supply.
To conclude, Bitcoin’s price is driven by demand.
With the massive publicity of Bitcoin, and the introduction of Bitcoin Futures,
this has lead to a massive increase in price.
However as an investment, I believe the scalability
issues will hinder BTC’s growth.
Ethereum
What is Ethereum?
Ethereum was created in 2015 by a man called
VitalikButerin.
Vitalik had the vision of not only having a
decentralised cryptocurrency (like Bitcoin) but also allowing decentralised
applications to be created on the Ethereumblockchain that use Smart Contracts.
The whole idea of blockchain is to remove the power
from the third parties and allow the user to control their own data.
What is a decentralised application?
“Ethereum is a decentralized platform that runs
smart contracts: applications that run exactly as programmed without any
possibility of downtime, censorship, fraud or third-party interference.
These apps run on a custom built blockchain, an
enormously powerful shared global infrastructure that can move value around and
represent the ownership of property.
This enables developers to create markets, store
registries of debts or promises, move funds in accordance with instructions
given long in the past (like a will or a futures contract) and many other
things that have not been invented yet, all without a middle man or
counterparty risk.” - Ethereum Project
To understand this better, I’m going to give an
example of how decentralised apps and smart contracts will change the world we
live in:
I’ll use pizza as my example, because everyone can relate
to pizza!
Say you wanted to order pizza to your house, you
have to create an account, enter your banking details and give the app your
address to receive your pizza. Many people overlook the risks that are
associated with trusting a third party to handle such sensitive data. If this
companies' servers are hacked into, the hacker will have your bank details and
your address… Scary stuff.
So, you ordered a chicken BBQ pizza, which is
everyone’s favorite, and they turn up with a ham and pineapple pizza (wtf), or
worse yet they don’t turn up at all! As you have already paid for this pizza,
what do you do? The process of refunding this money, is entirely reliant on a
third party (often PayPal or your bank) and can take weeks if the refund even
happens. Placing your trust in this pizza company is again a risk that is
overlooked.
Now let’s use the same example using
Ethereum’sblockchain.
You want to buy pizza, you go onto the
decentralised app and place your order – your data is stored on the blockchain
and you give permission via a smart contract for the pizza company to view your
address.
Your order is created in a smart contract and once
the order is delivered and verified by you that it is correct, the funds are
released to the pizza company.
This may seem minor for a pizza company, but think
about more expensive goods and services that users will benefit from this
blockchain.
Here’s a few:
·
A smart contract can be created to
pay a worker for every hour they work, they log their hours on the blockchain
and then after verification the funds are instantly transferred to them
·
Buying goods internationally can be
tracked and verified – reducing fraud.
·
Property buying can be facilitated
through the contract
·
Every industry that has a contract in
place will be able to use the blockchain of Ethereum
I hope that it is now clear that the technology
behind Ethereum will have a real world use and change how business operates
entirely.
It is worth noting that Ethereum is also vastly
quicker than BTC, average block time being 15 seconds for Ethereum opposed to
10 minutes for BTC.
Ethereum is a second generation blockchain, and the
implementation of smart contracts and decentralised applications makes it a far
more valuable investment in my opinion.
Ripple.
Ripple connects banks, payment providers, digital
asset exchanges and corporates via RippleNet to provide one frictionless
experience to send money globally.
I do not invest in Ripple for the reasoning that
they sell their tokens at a discounted rate to banks and financial institutions
and also they hold a large amount of their cryptocurrency which from 2018 can
be sold.
Thanks for reading,
Devin
P.S. If you sign up, you’ll receive an exclusive
email that details the top 5 cryptocurrencies I invest in and why.
No comments:
Post a Comment