The crypto market is of great interest to the financial community right now. Investment firms, hedge funds, and big banks are all breaking out their microscopes to take a closer look. Right now, investing in crypto currencies is akin to riding on a roller coaster. A lot of people are making money, but if not careful, you can lose your shirt. Like any investment portfolio, it is important to diversify your holdings, and there are hundreds of them out there.
Some crypto technologies adapt and improve upon previous technology, making it unique and differentiated. Others have found creative ways to incorporate blockchain technologies into their own designs. Researching each crypto currency helps to understand those technologies, how they fit into the industry, and what the market trajectories looks like.
Perspectives are changing. We now have to view crypto currencies as more than alternatives to fiat money. Not all crypto coins, in fact, are even designed as a means of exchange; some coins are just fuel for the underlying technologies. You might look at each cryptocurrency as a commodity, a store of value, or a digital currency. You might even look at some as a purchase of common stock in a company. But when comparing Bitcoins and Ether, one major difference is in the supply. Bitcoin was designed to have a fixed supply of 21 million coins; Ethereum does not have a cap on supply, which makes it inflationary. But the true market value of each is affected by more than supply alone...
The most notable concern with top crypto coins is the technology's scalability. The question is whether the blockchain technologies, which serve as transactional systems, can process an increasing volume of transactions. With Bitcoin, there has been an ongoing debate in the community on a solution for bottlenecks. Under its current configuration, Bitcoin's blockchain can process 3-7 transactions a second, which is less than Ethereum at 20 transactions per second.
Both systems rely on a very large network of miners to make all of this possible, creating an issue with availability and transactional fees. Specifically, Bitcoin's low transaction rates result in high transaction fees, which means that user growth and trading can be negatively affected. However, as more miners support the proposed scaling solution, this issue could begin turning around on August 1st.
Ethereum, on the other hand, has had some scaling issues of its own. Because the Ethereum platform allows people to create their own coin, many tech startups are implementing it into their technology. This allows companies to launch an Initial Coin Offering (ICO), much like an Initial Public Offering, in order to gain funding and investor interest. With an increasing volume of ICOs launching, and investors infusing capital in the hundreds of millions, it is easy to understand why the Ethereum network would be hitting thresholds.
This leads us to concerns about crypto coin exchange markets. Coins should be purchased online in a place that is considered safe, secure, consistent, and reliable. With increasing transactional volume, exchange marketplaces have had their own issues with service availability, resulting in investor panic. What's more, the reality is that the market is in the limelight right now, which makes it a target for cyber criminals. Generally, the tech used by crypto companies is inherently secure, but exchange marketplaces are still susceptible to attack. When assessing the risks, it is important to remember that the bigger the company or its technology, the more they become a target.
Finally, it is only fair to the crypto market to consider its age and maturity. While Bitcoin has been around for 8 years, Ethereum is 2 years old and has a 23-year old founder. The Ethereum platform exploded in growth this year. New, disruptive technologies will always have issues. However, software is not static, and it is possible to code solutions to problems. In fact, we are witnessing this happen with the Bitcoin developer community right now. But regardless of the growing pains, we have to pay attention to what people are saying and consider the problems that are being solved. With Russia and Australia slated to adopt Bitcoin on July 1st, the world will keep on turning (for now).
We've talked a lot about Bitcoin and Ethereum, but as we mentioned earlier, there are hundreds of coins out there. The driving force behind all of this is the technology underneath. Stay tuned for our follow-up article: Crypto Coins Worth Checking Out.