A digital coin is created on its own blockchain and acts in much the same way as traditional money. It can be used to store value and as a means of exchange between two parties doing business with each other. Tokens, on the other hand, have far more uses than just digital money.
Tokens are created on top of an existing blockchain and can be used as part of a software application like to grant access to an app, to verify identity, or to track products moving through a supply chain. They can represent digital art like with NFTs, or " non-fungible tokens " that certify something as unique. There has even been experimentation using NFTs with physical assets, such as real-life art and real estate.
Blockchain technology is open source, meaning any software developer can use the original source code and create something new with it. Developers have done just that. There are estimated to be more than 10, different cryptocurrencies in circulation at the time of this writing, and the figure keeps increasing.
For reference, the number of cryptos surpassed 1, only four years ago. Part of the reason for the surge is the relative ease with which new cryptocurrencies can be created. The source code of one can be used to build another. For example, the Ethereum network could be used to create your own personal digital coins. Sometimes there are "forks" in the software code that change the rules about how a crypto is governed, which can lead to the creation of a new crypto.
Surging crypto prices have led many developers to try getting a cut of the action. And blockchain technology has usefulness beyond just digital currencies. So, while some cryptos might be a bubble that will eventually pop, the decentralized nature of the technology and the broad scope of how it can be applied in the software world are two reasons why there are so many cryptos. Bitcoin is considered the first cryptocurrency created, and other individual cryptocurrencies are known as "altcoins" a combo word derived from "alternative coin".
It's difficult to say which cryptos are the best ones, but Bitcoin and some of the largest altcoins out there are top-tier options because of their scalability, privacy, and the scope of functionality they support. Table by author. Data source: coinmarketcap. Data as of March 4, There really isn't one "best" cryptocurrency since each has different features built in based on what the developer designed it for.
Here's an overview of some of the most popular digital coins and how each is being used. Bitcoin is regarded as the first decentralized cryptocurrency using blockchain technology to facilitate payments and digital transactions. Instead of using a central bank to control the money supply in an economy like the Federal Reserve in tandem with the U. Department of the Treasury or third parties to verify transactions such as your local bank, credit card issuer, and the merchant's bank , Bitcoin's blockchain acts as a public ledger of all transactions in the history of Bitcoin.
The ledger allows a party to prove they own the Bitcoin they're trying to use and can help prevent fraud and other unapproved tampering with the currency. A decentralized currency can also make peer-to-peer money transfers like those between parties in two different countries faster and less expensive than traditional currency exchanges involving a third-party institution.
Ether is the token used to facilitate transactions on the Ethereum network. Ethereum is both a cryptocurrency the actual coins are measured in units called Ether and a software development sandbox. Tether is a stablecoin, or a currency tied to a fiat currency -- in this case, the U. The idea behind Tether is to combine the benefits of a cryptocurrency such as no need for financial intermediaries with the stability of a currency issued by a sovereign government versus the wild price fluctuations inherent with many cryptos.
Binance Coin is available on the Binance cryptocurrency exchange platform, along with other digital coins that are available for trading. Binance Coin can be used as a type of currency, but it also facilitates tokens that can be used to pay fees on the Binance exchange and to power Binance's DEX decentralized exchange for building apps. Rather than an investment, USD Coin is envisioned as everyday money that can be spent with merchants on the internet.
Investing in cryptocurrencies is a little different than investing in shares of a company. Stock represents ownership of a business and a claim to profits the company generates. Purchasing coins of a cryptocurrency, though, is a speculative bet on the price movement of that digital currency -- which can be highly volatile and is subject to the law of supply and demand since digital currency by itself is not a dynamic asset.
Cryptocurrencies can be exchanged for other digital currencies or for fiat currencies like the U. But there are other ways to make money besides trading. Certain cryptocurrencies can be "staked" to earn rewards.
Available for desktop and mobile, Exodus allows users to secure, manage and exchange cryptocurrencies like Bitcoin BTC , Ethereum ETH and more across an industry-leading 10,plus asset pairs from a beautiful, easy-to-use wallet.
Exodus is on a mission to empower half the world to exit the traditional finance system by Its social trading features are top notch, but eToro loses points for its lack of tradable currency pairs and underwhelming research and customer service features. Gemini is a cryptocurrency exchange and custodian that offers investors access to over coins and tokens. Offerings include both major cryptocurrency projects like Bitcoin and Ethereum, and smaller altcoins like Orchid and 0x.
Gemini is 1 of the only brokers with multiple platform options based on skill level. In addition to a host of platform choices, Gemini users also have access to insured hot wallets to store tokens without worrying about digital asset theft. Learn more about what Gemini can do for you in our review. From Bitcoin to Litecoin or Basic Attention Token to Chainlink, Coinbase makes it exceptionally simple to buy and sell major cryptocurrency pairs.
More advanced traders will love the Coinbase Pro platform, which offers more order types and enhanced functionality. The 1st cryptocurrency was Bitcoin, invented in by an anonymous developer named Satoshi Nakamoto. It also led to the growing acceptance of cryptocurrencies as both an investment opportunity and as a medium of exchange, a way to securely transfer money from one currency owner to another digitally and without the use of traditional banks or financial institutions.
Cryptocurrencies are designed to function as money, an alternative to the fiat currencies of the world, many of which are in various stages of erosion through inflation or are at risk of government seizure.
Cryptocurrencies offer a hedge against inflation, especially in countries like Venezuela. Cryptocurrencies offer several advantages when compared with traditional banking, money transfers, and fiat currencies. Cryptocurrencies come with a list of considerations that can help investors make safer investments. Since the blockchain industry is still in its infancy, most cryptocurrencies are highly volatile. This being said, some cryptocurrencies, like stablecoins , offer low risk investments with higher returns than riskier investments like real estate.
Cryptocurrencies and decentralized financial products are still in their formative years. Initial coin offerings can be tempting, particularly with the parabolic rises common to ICOs. Almost as common is a precipitous fall following the ICO.
More established currencies help to prevent some of the volatility and provide better liquidity than found with newly minted cryptocurrencies. Many early investors have found themselves without a viable way to exit the position. If cryptocurrencies are here to stay, some very good opportunities are likely to exist among the most commonly traded currencies, while also minimizing risk due to abandoned projects or lack of liquidity. Most cryptocurrency investors choose to hold both Bitcoin and altcoins.
However, altcoins often provide higher returns during a bull market, making them attractive investments for risk-tolerant individuals. The term altcoin refers to any cryptocurrency other than Bitcoin. Craving more cryptocurrency knowledge? Benzinga crafted a specific methodology to rank cryptocurrency exchanges and tools. We prioritized platforms based on offerings, pricing and promotions, customer service, mobile app, user experience and benefits, and security.
To see a comprehensive breakdown of our methodology, please visit see our Cryptocurrency Methodology page. This content should not be interpreted as investment advice. Cryptocurrency is a volatile market, do your independent research and only invest what you can afford to lose.
Want to advertise with us? Send us a message. Best Cryptocurrencies. Table of Contents [ Show ]. Buy Bitcoin. Buy Ethereum. Buy Polygon. Buy Sushi. Buy Solana. Buy Chainlink. Best For Low Minimums. Overall Rating. Read Review. Webull is widely considered one of the best Robinhood alternatives. Best For Active traders Intermediate traders.
Pros No charges to open and maintain an account No account maintenance fees or software platform fees Intuitive trading platform with technical and fundamental analysis tools. Cons Only offers 14 coins. Best For Newcomers to the cryptocurrency world Ease of use Trezor integration. Cons FTX app not available on the mobile app.
Best For Copy Trading. Best For U. Pros Several major cryptocurrencies and altcoins Expansive network of social trading features Large client base for new traders to imitate.
Visa, for example, transacts with bitcoin. The larger banks are beginning to incorporate bitcoin transactions into their offerings as well. The value of bitcoin tends to fluctuate a lot. You may see the price go up or down thousands of dollars during any month.
If wild fluctuations like these make you nervous, you may want to avoid bitcoin. Another reason to reconsider investing in bitcoin is its price. For investors who want to avoid buying a fraction of a bitcoin, this is a negative. Ethereum is a network that allows developers to create their own cryptocurrency utilizing the network.
Even though it came out years after some other cryptocurrencies, it has far exceeded its place in the market because of its unique technology. The upgrade will shift Ethereum to a proof-of-stake-based consensus that will reduce the number of coins and render mining obsolete.
This can lead to transactions taking longer to process when the network is overloaded. Transaction fees are also high. Security has also been an issue. However, The Merge upgrade is expected to make the blockchain more secure. After a steep decline, the price is once again on the upswing.
Because of its performance, binance coin has proven to be one of the more stable investment options. US version. Investors who trade frequently should note that Binance has briefly paused deposits and withdrawals for some networks, including Polygon and Solana, recently while it implemented upgrades. What sets binance coin apart from its competitors is that it was created by a company instead of a group of tech developers.
The Cardano network has a smaller footprint, which is appealing to investors for several reasons. It takes less energy to complete a transaction on Cardano than on a larger network like Bitcoin. This means transactions are faster and cheaper. Cardano also claims to be more adaptable and more secure. It consistently improves its development to stay ahead of hackers. Even with a better network, cardano may not be able to compete with larger cryptocurrencies. Fewer adopters mean fewer developers.
The platform has big plans, such as launching an incubator that would help Africa reach its potential as a major economy, but it remains to be seen whether it can live up to that potential. Your investment may lose money one day and make a profit the next.
Instead of getting caught up in the day-to-day changes, look at the big picture. Polygon was created by a development team that made significant contributions to the Ethereum blockchain platform. Polygon is designed for Ethereum scaling and infrastructure development, according to CoinMarketCap.
Polygon has backing from the Binance and Coinbase cryptocurrency exchanges. Individuals who buy those assets also gain ownership of Zo Metaverse real estate. Perhaps more significantly, an Indian state government is using Polygon to issue caste certificates to help deliver government benefits to over 1 million low-income citizens, according to CoinTelegraph.
A hacker discovered the exploit and notified Polygon, which had a fix in place within two days. The Terra blockchain uses stablecoins — that is, coins pegged to fiat currencies such as the U. The result has been an increase in demand for UST and less volatility for LUNA than some cryptocurrencies have experienced over the last several months. This makes Avalanche more scalable and better able to handle large volumes of transactions — up to 6, per second.
News reported. AVAX began trading in , in a hour initial coin offering. Sirer introduced the cryptocurrency via a white paper in Its launch took place in Chainlink uses a decentralized oracle network to facilitate secure interactions between blockchains and external data feeds, events and payment methods the developers hope will allow smart contracts to become the dominant form of digital payment, according to CoinMarketCap.
Chainlink is also the choice for the new inflation index being built by decentralized finance company Truflation to serve as an alternative to the consumer price index. The Truflation index is designed to be more accurate, more transparent and more resistant to censorship than the CPI. Despite its proven utility and support from major players, chainlink has experienced the same kind of volatility as other cryptocurrencies.
A new cryptocurrency network could easily climb the ranks and emerge as a leader above other platforms. As an investor, the smartest thing you can do is to stay abreast of market happenings. In choosing the top eight picks, the following factors were considered.
How long has the cryptocurrency been around? How has the company performed during its years in business? Past performance is not indicative of future performance. At any time things can change, and an investment may perform better or worse than it has in the past.
How does the platform compare to others in terms of usability and security? The first thing you want to look for is the speed at which transactions occur. The network should be able to handle transaction traffic with ease. You also want to make sure your investment is secure.
Most cryptocurrencies use blockchain technology , making all transactions transparent and easy to track. That is, you can sell on an exchange, directly to another person, or even at an ATM. As with buying, you will be able to trade cryptocurrencies directly for fiat money on certain exchanges. This will obviously involve two transactions, double the fees, and a longer period of market risk exposure.
These debit cards reflect the balance of cryptocurrencies you own. When you use them with vendors, your cryptocurrencies are automatically converted to fiat currency; for the merchant, the payment will look the same as a prepaid or regular bank card.
Source: CoinDesk. Initial coin offerings , known as ICOs, are a rising phenomenon within the crypto world. In essence, they help firms raise cash for the development of new blockchain and cryptocurrency technologies. You may well hardly be able to sell until the newly issued cryptocurrency is accepted for listing on an exchange.
Though popular, ICOs carry a lot of risk, are not suitable for crypto beginners, and require a multitude of additional considerations. Alternatively, if you prefer to outsource your active investing, there is an ever-growing number of funds you can leverage. Many of the active funds will achieve this by picking the right cryptocurrencies at the right time.
While this may mean higher absolute returns, it also means that somebody is managing your risk. This can prove significant in the high-volatility world of crypto: Double-digit percentage price swings within 24 hours are not uncommon. A disadvantage of these funds is that their fees are higher than those for passive products. Another option is to construct the exposure yourself—something that virtually nobody would do in the equity space given the multitude and low cost of passive products.
However, in the crypto space, it is more appealing given the current dearth of products. One approach is to buy a vehicle that tracks one very liquid cryptocurrency. Since Bitcoin BTC is the original cryptocurrency and has long dominated the space, the few passive products in existence today track BTC. Furthermore, you do not have to worry about logistical issues like how to buy, sell, or store your cryptocurrencies.
However, one disadvantage is that they may be trading at a premium to underlying net asset value. Going one step further is an investment product that tracks several cryptocurrencies. Currently, various products are being developed for this purpose. As always in investing, this diversification will likely provide better risk-adjusted returns, such as a higher Sharpe Ratio.
That is, although you will not match the returns of the single best-performing cryptocurrency, your risk should drop more than enough to compensate for this. It is not yet clear how such products will allocate between the various cryptocurrencies, but the obvious options are either equal weighting or market capitalization-based weighting.
In any event, your fund manager will handle this weighting for you. There is now another, well-publicized way to get exposure to BTC: Bitcoin futures. These futures are meant to help manage price volatility and allow investors to speculate on the price of BTC without having to directly own it. Second, in geographic regions where BTC trading is prohibited, such as Bolivia and Bangladesh , these futures would allow investors to participate.
Needless to say that futures are advanced financial products, so you should procure adequate information and advice before using them. Perhaps unsurprisingly, security is of utmost importance when it comes to cryptocurrencies. This includes writing down private keys on a piece of paper, storing them on a hardware device such as Trezor or Ledger , or using a cold storage company such as Xapo or Swiss Crypto Vault which store your BTC private keys in Swiss bunkers.
For either type of storage, you typically simply send your coins to the public address of your storage. Once you need your coins, you can send them to wherever you need them, like an exchange account. The trade-off here is between liquidity and security because you may need hours check exact time with your cold storage provider to get your coins out of more secure storage, which can be an eternity in crypto trading time.
So, the decision around how much of your crypto portfolio goes into what kind of storage depends in part on your propensity to trade and your view of imminent market movements. Still, security and storage should be key items on your crypto to-do list. Just as investing in another asset class, you should monitor your investment, even if you are a long-term holder. This includes tracking price information on sites such as coinmarketcap. Personally, I also like the mobile app Blockfolio , which allows you to input your crypto portfolio and track its value in real time.
To stay up to date with the newsflow in a rapidly evolving industry, social media are indispensable for cryptocurrencies, including Twitter, Reddit, and Medium. On Reddit, you should join the appropriate boards, while on Twitter, you can search for the appropriate hashtags such as BTC and bitcoin for BTC, or LTC or Litecoin for Litecoin and follow frequent, knowledgeable commentators on the subject.
There are also other sites that provide more technical data for example, number of transactions or hash rate. These sites often differ by the specific cryptocurrency you are looking at, but for BTC, valuable resources include bitinfocharts. Few would argue that tax regulations have fully caught up to the rapid development of the cryptocurrency space. In , the IRS Revenue Ruling dictated that cryptocurrencies should be treated as personal property , with gains or losses on purchases or sales.
Therefore, capital gains or losses should be recorded as if it were an exchange involving property, and if utilized as payment, it should be treated as currency but must first be converted to its fair market value. Still, the ruling left many questions unanswered. And, even within the US, states are treating cryptocurrencies differently. Consider New York State, which remains wary and has created the BitLicense system , which imposes guidelines on crypto companies conducting business with New York residents.
In contrast, Vermont and Arizona have both recognized smart contracts and have assigned legal standing to records tied to blockchain , the underlying technology of all cryptocurrencies. This is undeniably a lot to digest. However, if you are an equity investor, there surely was a time when you hardly knew anything about the markets. Perhaps you timidly opened your first brokerage account, bought your first mutual fund, then your first individual stocks, international stocks, and perhaps eventually graduated to options and futures.
Is it worth it? I am a biased person to ask. And I admit that there is a steeper learning curve, but you are also entering a new asset class at an early stage, possibly providing you with opportunities harder to find in the relatively efficient world of established asset classes.
For the record, I do not advocate substituting all other asset classes with crypto—merely that crypto should also be considered, though you should remain aware of its risk. If you are curious and decide to move forward with crypto investing, then you may want to start slowly and simply.
I personally started by putting an amount of money that I was comfortable losing completely into one of the established exchanges, bought a little of the mainstream cryptocurrencies, and soon started to get a feel of whether this was for me. The best way forward for you will depend, of course, on your specific circumstances and preferences and may well include not investing in crypto at all.
Just do not simply ignore the space and discard it out of hand without doing a little research for yourself. Good luck. The views expressed in this article are for informational purposes only. The article is not intended to be investment advice, and should not be used or relied upon as such. Seek a duly licensed professional for investment advice. Furthermore, nothing in this article is an offer to buy or sell or a solicitation of an offer to buy or sell any security, product, service or investment.
All information and opinions expressed in the article are believed to be current as of publication and are subject to change without notice. The author has not received and will not receive direct or indirect compensation in exchange for expressing specific views in this article.
You can buy cryptocurrencies via exchanges, finding a counterparty, cryptocurrency ATMs, or directly via a private bank since some banks are now offering cryptocurrency trading services and related products. You can sell cryptocurrencies via the same buying channels: exchanges, finding a counterparty, cryptocurrency ATMs, or directly via a private bank. You can also utilize cryptocurrency debit cards, which allow users to spend cryptocurrency directly from their virtual wallets.
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