Editor's note: To profit from cryptocurrencies, you first have to master the basics... The complexity of cryptos can scare away even the most experienced investor. But Crypto Capital editor Eric Wade says it pays to learn about this relatively new asset class. That's because the opportunities in this space are just getting started... According to Eric, cryptos will eventually change nearly every industry – from banking to medicine and everything in between. And the better you understand cryptos and the technology that powers them, the easier it will be to lock in life-changing gains... In today's Masters Series – excerpted from a multiday Digest series that originally ran in November 2019 – Eric answers some of your most pressing crypto-related questions. Read on to learn what a crypto is (the short version)... what sets it apart from traditional currencies... and how to separate the incredible opportunities from the junk...
What You Want to Know About Cryptos... But Are Too Embarrassed to Ask By Eric Wade, editor, Crypto Capital Over the past few years, you've probably heard a lot about cryptocurrencies... Bitcoin – the original and oldest cryptocurrency – went on a tremendous run in 2017, soaring roughly 2,000% in less than a year... peaking at nearly $20,000 that December. But then, just as quickly, its value plunged more than 80% throughout 2018. It went through another similar run in 2020 and 2021. In the midst of the COVID-19 crash, bitcoin fell to a low of $4,106.98. Then, it rallied for almost two years, peaking at an all-time high of $69,044.77 in November 2021. All told, it gained 1,581% in that time span. It's a hot-button topic in financial circles... The crypto space is full of fantastic opportunities. However, many individual investors simply don't know how cryptos work – or what they're good for. So in today's Masters Series, I'll answer several common questions to help you better understand this space. If you want to make money in cryptos, you need to know the basics first... What is a cryptocurrency? It's a long-running joke in the industry that the hardest thing about cryptocurrencies is explaining them in less than an hour. It's a complex topic, but here's my one-sentence definition... A cryptocurrency is a computer program that makes digital coins and tokens that anyone can use over an extremely secure network. At their heart, they're computer programs – or teams of computer programs that all work together. Bitcoin – which you'll often see written as "BTC" – is the best-known crypto and the easiest to understand... Physical "bitcoins" don't exist. You can't hold them. Bitcoin is simply digital money that isn't controlled by a government, group of people, or corporation. One part of the bitcoin computer program allows the safe transfer of coins from one bitcoin investor to another. That should make sense... If you're going to use bitcoin as a currency, you need a way to send and receive them. Another part of the program watches every transaction, making sure no fake or fraudulent transactions take place before they're verified. Since we're talking about hundreds of millions – and sometimes billions – of dollars in bitcoin exchanging hands every day, preventing fraud is important... It's like if credit-card company Visa (V) suddenly announced that anyone in the world can download its software and start verifying its transactions in exchange for a cut of the fees. That's how the bitcoin computer program works... Anyone can run the program and even verify transactions for a cut of the transaction fees. Yet another part of the bitcoin computer program works like a ledger, keeping a permanent record of all the transactions. The ledger is like bitcoin's accounting books... It's a public list of all the bitcoin transactions that have ever happened. For example, if Alice pays Bob for a service with bitcoin, it's recorded in the ledger for both people. But not only that... It's also recorded in the ledger for Carl, Debra, and anyone else who runs the bitcoin program. (Of course, that's a simple explanation, because people's names aren't used on the bitcoin network. Instead, the ledger uses unique bitcoin addresses... They're like super-long phone numbers.) You'll commonly hear this ledger called a "blockchain." The blockchain was one of bitcoin's biggest innovations. Since every transaction is public, it can be verified by anyone else within minutes in most cases. While every bank in the world shuts down and reconciles its database with other banks every night, bitcoin runs 24 hours a day. The word "crypto" comes from bitcoin's super-strong cryptographic code... In other words, it's the same type of secret code used to protect highly classified government information. The code makes sure the bitcoin network and the ledger stay secure... Alice doesn't want Bob to be able to steal from her – or to even guess her password. And no one else wants the database to be manipulated... So they're all protected with the secret code. With cryptocurrencies, all these pieces of the puzzle work together to make it possible for us to buy, sell, and transfer them safely... even though no one is in charge. That's right... No central party – like a bank or government – is in charge of bitcoin. It's why you'll often hear cryptos like bitcoin referred to as "decentralized." The blockchain has spurred radical innovation in nonfinancial industries, too... For example, some cryptos can be used to transfer virtual items in video games. Others track pharmaceutical drugs from their raw ingredients all the way to a hospital bed... help build artificial-intelligence networks or insurance marketplaces... and countless other uses. In short, cryptos are already touching almost every industry on the planet. OK, so I know bitcoin is a crypto. But what other cryptos exist? And how many does the world really need? Yes, bitcoin is a crypto. And at least for now, it remains the biggest and the most popular. But after bitcoin launched, all sorts of entrepreneurs dreamed up ways to make their own cryptos with different features than bitcoin... For example, Ethereum (ETH) supports "smart contracts," which enable automatic financial transactions. And Binance Coin (BNB) can get you discounts and other benefits on the world's busiest crypto exchange, Binance.com (and its American counterpart, Binance.US). Bitcoin is extremely strong – some experts say it can't be hacked – but it's also pretty slow when it comes to verifying transactions. Imagine if you're buying groceries... Instead of swiping your card and being approved in seconds, it can take minutes – or hours, in rare cases – for Bitcoin to verify a transaction. So faster cryptocurrencies were developed. Also, in recent years, other cryptos came along that can better protect your privacy by hiding information about your transactions. And others added specific features like a built-in programming language or "programmable money." That unlocks the potential for automated financial transactions... Imagine, for example, if you only had to pay for insurance when you were physically driving your car. Thanks to smart contracts – financial transactions that don't require human intervention – that day will come. Smart contracts are impacting everything from the lending industry to prediction markets to robotics and more. Other cryptos target specific use cases. Called "utility tokens," they grant the holder certain privileges... for instance, voting rights or access to a specific service. We're also seeing more "security tokens" emerge... They're similar to stocks and can do things like pay dividends, include embedded financial reports, and more. You can find more than 18,000 cryptos in the world today. And the short answer to the final question above is... It's hard to know how many we actually need in the world. You see, of the tens of thousands of cryptos that exist, we only like a few dozen or so right now. Some cryptos are designed to serve as currencies, like bitcoin. But as I said, many cryptos have been created to complete company-specific tasks or other narrow-focused ones... These tasks can range from tracking real gold to verifying data to even proving you're old enough to purchase alcohol without sharing your personal information. This year and beyond, we expect to see these specific use cases soar. And frankly, some other cryptos are simply worthless products from crafty computer programmers who are just trying to cash in on the popularity of this exciting industry. With that said, teams of entrepreneurs trying to solve problems and improve industries are also building cryptos. You can find cryptos for banking, advertising, voting, investing, betting, making music, tracking our food supply, verifying art... and hundreds more. So while we have a narrow focus on certain cryptos we like today, that could change in the coming months and years as some of these new, innovative cryptos prove their values. Openness is one of the core values of the crypto industry...
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Most crypto transactions can be verified by anyone, anywhere, at any time. And this idea of openness extends to the computer code used to create a particular crypto. Most of the time, the developers of a crypto release their code for free (under what's known as an open-source license). That means anyone can take a crypto's code, copy it, modify it, and release it with a different name. This openness has pros and cons... On the downside, it leads to a lot of copycat cryptos that don't do anything unique. But on the other hand, coders can build upon and leverage the work of others. That has led to radical innovation in the space. While we have thousands of cryptos in the world today, we believe there could be millions one day. Moving between them will be seamless, instant, and free (or nearly free). And in many cases, end users might not realize a crypto or blockchain was involved in their transactions at all. But even though investors now have so many cryptos to choose from, bitcoin has remained popular because it aims to be a very "hard" form of money. Eventually, bitcoin will have zero inflation, which appeals to a lot of investors. You see, bitcoin's supply is finite... Eventually, we'll have 21 million bitcoin in the world and no more. That's how bitcoin's founder programmed the network... And it means that's all that can be created. That makes it very scarce. And the cryptographic code we talked about earlier assures bitcoin buyers that no one will ever water it down in the future. What if I just own a few bitcoin and don't worry about all the other cryptos? If you were only going to pick one crypto to invest in... it should be bitcoin, hands down. It's the oldest, biggest, strongest, and best-known crypto. And in fact, we always recommend crypto investors maintain bitcoin as their single largest crypto investment. But it's also just scratching the surface of the potential gains you could see... Many investors buy some bitcoin and start to learn about the broad choices of other cryptos available in the world. Then, they start to see the appeal of some of these cryptos. One of our main goals in Crypto Capital is finding tiny cryptos before they become big cryptos... For instance, we discovered one crypto that's committed to fixing problems with online advertising. And they're big problems for many people, too... Websites track our every move and sell that data to the highest bidder, for example. Many folks don't like that. So an entrepreneur who previously invented one of the most popular Internet browsers in the world created a crypto that can protect your privacy while improving your online browsing experience. At the same time, you can use this crypto to support the creative people who make all the websites and videos that you love to use and watch. This is only possible with the power of crypto... So we believe it's worth looking at. Plus, it gives investors an opportunity to get in on the ground floor of an exciting new technology. It's also a lot easier to find a crypto that's worth, say, $10 million that has the potential to quickly rise to $100 million than it is to find one worth $100 million that will quickly rise to $1 billion. That's how we've seen returns of 1,000% or more in as little as a year. How do you separate cryptos poised for success from ones that are junk? What qualities set good cryptos apart from others? It doesn't matter what sort of investing you're doing – from stocks to venture capital opportunities to real estate to cryptos... Putting time and effort into your research is always the best way to outperform the market. Your data and ability to identify trends must be better than the market's. That's why we travel the world to attend crypto conferences in good times... and why we've participated in virtual conferences during the COVID-19 pandemic. We make it a point to talk directly to founders and try out every new product we can get our hands on. The qualities of a great crypto project aren't much different than what I looked for in stocks when I worked as a financial adviser at one of Wall Street's biggest firms... First, you need a stellar founding team. You also need a product that can truly go global. And you need great economic incentives (what we call "tokenomics"). Cryptos have some unique factors that we should consider, too... Decentralization, for example, is key. Remember, decentralization means no central party – like a bank or government – is in charge. We want to see a crypto with hundreds or thousands of computers running its software in a lot of different countries. We also want to see a thriving community of users, contributors, and advocates for the project. When all of these things align for a small, unknown crypto... you could potentially make life-changing gains from just a small investment. Good investing, Eric Wade
Editor's note: In recent years, Eric has offered subscribers the chance to lock in gains of 595%, 1,195%, and even an incredible 1,837% on lesser-known crypto recommendations. Now, he says a specific crypto is flashing a huge buy signal... According to Eric, one opportunity could outperform anything else in the market right now – and a small investment today could lead to gains of five times or more by the end of the year. It involves a special technology that's creating a brand-new type of crypto market. But Eric says the window to make life-changing returns is closing fast. Get the details here.
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