If you have been following the financial markets, there is no doubt that you will have heard of Bitcoin.
There are people who have made fortunes from this Cryptocurrencies when they invested in the early stages back in 2010.
Although there is great potential for the currency to keep climbing, no one knows how much more leg work it has till it has topped out.
Hence, if investors really wanted to make the returns that the early Bitcoin investors did, then they would need to invest in a promising Altcoin.
What is an Altcoin?
An Altcoin is the catchall phrase for all coins that are not Bitcoin. They are cryptocurrencies which differ according to their protocols.
There hundreds of Altcoins currently on the market. Some of them were created for a specific purpose. Some of them are similar to Bitcoin but differ in hashing etc.
There are also some Altcoins that were created as part of a “Fork” of Bitcoin itself such as Bitcoin cash and Bitcoin gold.
Some Altcoins, however, are merely forks of Bitcoin. This means that they were created when the Bitcoin blockchain split.
There are also some Altcoins which are highly suspect. They have attracted interest for the wrong reasons and investors have keenly invested.
We will run over the top 4 cryptocurrencies that you should consider investing in as part of a well balanced portfolio.
Litecoin has often been called the “silver” to Bitcoins gold. It is viewed as one of the foremost alternatives to Bitcoin. This is because it has a great deal of similarities.
Like Bitcoin, Litecoin is a Proof of work cryptocurrency that is mined by computers all around the world. Litecoin also has a limitation in supply which means that it is naturally deflationary.
However, Litecoin differs in a key way when it comes to its hashing algorithm. Whereas Bitcoin uses a SHA 256 algorithm, Litecoin makes use of the Scrypt algorithm.
This means Litecoin can overcome one large challenge that Bitcoin is well known for. That is the problem with ASICs that are able to mine the coins in an uncompetitive manner.
This consequently means that all of the miners cannot be in a centralized location and it gives the power back to the community of decentralized miners.
Another key benefit of Litecoin is the speed of their transactions. In May this year, Litecoin implemented SegWit. This, added with the benefit of the Scrypt algorithm means that transactions can be processed in minimal time.
The final consideration of Litecoin and why it should be considered as the best investment is because of the cohesiveness of the development team. Unlike with the Bitcoin community, there are no disagreements and infighting about the path forward for Litecoin.
When investing in Altcoins, you should always try and diversify among the tech of the cryptocurrency and the underlying purpose.
With that been said, a cryptocurrency portfolio that did not consider an investment in Monero would be really unwise.
Monero (XMR) is one of only a few privacy conscious coins. These are essentially coins that are designed to be 100% private and untraceable.
Although many people may think of Bitcoin as being “secure” and “private”, it generally is not quite that.
This is because Bitcoin transactions are 100% traceable. This means that if you were to send a-lot of Bitccoin and eventually wanted to cash it out, people could find out who you are.
This is not the case with Monero.
Using something called “Ring Signatures”, when you send a Monero transaction, your public address is hidden from view.
Similarly, the sending address and the amount that was sent is also hidden from the blockchain. What this implies is that no one knows who was transacting as well as the amount.
While you may not have an immediate need for privacy, they are a great way to make sure that cyber criminals cant trace the amount of wealth you have in your wallet.
There are also other privacy coins that are on the market like ZCash, but the technology behind Zero Knowledge proofs is not entirely convinced a number of users.
Currently the second most valuable cryptocurrency by market cap, Ethereum is also a highly advanced blockchain that wants to aid in the creation of decentralized applications.
The Ethereum protocol was created in order of other developers to code projects on their blcokchain. Once the developers are finished coding their apps, they will upload them to the decentralized Ethereum network.
The result of this are Decentralsied Applications (dApps). There have already been a great number of developers who have built on the Ethereum blockchain.
In order to pay developers for the work that they are doing on the blockchain, Ethereum tokens are used (ETH). These have become a cryptocurrency in their own right and it has had an amazing rally over this year.
Another reason why ETH is such a good investment is because of what they want to achieve in the long run. The Ethereum team would like to create the Ethereum Virtual Machine (EMV).
This will be one massive decentralized computer that is run across numerous nodes (computers) on the network. The goal of the Ethereum team is to replace the client server architecture.
Ripple is an interesting cryptocurrency for a number of reasons. The first of which is the main purpose of it.
Unlike the other coins, Ripple was not developed to decentralize structures. It was created in order to help banks streamline cross border payments.
We all know how long and troublesome bank transfers can be. These can be even more problematic when one has to look at those payments that have to be made across borders.
The SWIFT banking system sometimes takes three to four days to clear. This is no doubt a hindrance to global commerce and most people have just resided themselves to the fact.
Ripple is an established Fintech company that wants to change this. They have developed something called the Ripple protocol and hyperledger. These will allow banks to send funds in a matter of milliseconds.
The protocol can also complete many more transactions per second than Visa or mastercard. This means that funds can be sent right across the world in an instant.
The native token or cryptocurrency of Ripple is XRP. This is the coin that is sent between banks in order to keep track of transactions on the ledger.
Although ripple has had an explosive start to the year, it has been quietly in stable territory for the past 4 months.
This means that those who want to consider an investment should do so now. The company has also announced a range of important partnerships with companies such as American Express.
If they announced another strategic partnership, then the token is bound to jump by another large percentage before the end of the year.
Diversification is Key
When it comes to investing in cryptocurrencies, diversification is key. This is indeed a well known investment thesis but is holds true more so for crypto.
This is because cryptocurrencies are really volatile. You need to make sure that you are not too exposed to one particular risk.
Hence, holding a range of different Altcoins that serve different purposes and have different protocols means that you are able to diversify amoung the technology.
Of course, another investment truth that is well known is that you should never invest more than you are willing to lose. With cryptocurrencies, this is more relevant than ever.