Cryptocurrency Bitcoin Investing For Beginners Print

CRYPTOCURRENCY &
BITCOIN INVESTING FOR

BEGINNERS
HOW YOU CAN PROFIT FROM THE WORLD'S FASTEST
GROWING ASSET CLASS INCLUDING BITCOIN,
ETHEREUM, DEFI, NFTS & ALTCOIN GUIDES
DIGITAL INVESTOR HUB

PREFACE
The invention and the rise of the crypto market is arguably

some of the most important revolutions of the previous
decade in finance and technology. Cryptos literally represent
the amount of progress we have made in gaining our
freedom back from the centralized institutions that are
currently handling a majority of our money. These digital
assets proved that individuals like us have the power to take
control of our own funds by parting ways from big banks as
the dependency factor gets eliminated.
In just about 12 years since their inception, the progress

made, and the milestones achieved by the crypto market is
mind-boggling. A phenomenon that started with a simple 9-
page whitepaper of Bitcoin in 2009 is now worth about two
trillion dollars. With more than 9,400 asset classes, 360+
crypto exchanges, and close to $200 billion in daily trading
4 | P REFACE
volume, the crypto market has made an unignorable impact

in the finance world.
More assets and high trading volume translate to numerous

potential opportunities. There is no other market in the
world that has made more millionaires in much less time
than the Crypto market. Of course, there is a flip side to it
where hundreds of thousands of people lose money at the
same speed. But the point I'm trying to make here is that you
can change your life by investing in cryptos with the right
education and practice. It has worked for me and millions of
others with fewer resources and talent than you currently
possess.
What does this book cover?
I have curated a specific chronology and drafted the table of

contents in a way that won't confuse novice crypto
investors. I have covered the most important aspects of
crypto investing, such as risk management and the rise of
NFTs while not shying away from the crucial basics such as
picking a coin and choosing an appropriate crypto exchange.
By the end of this book, you will be equipped with all the
knowledge to go out there and get started with investing in
cryptos. You will have stronger fundamental knowledge
than an average novice investor, robust understanding of
altcoins and most importantly, the confidence to get out
there and conquer the crypto world. Let’s get started.
DISCLAIMER
Please do consider using this e-book only for directional purposes and not
as an ultimate guide. All the content provided in this book is as accurate as
per the time of writing. But there might be some minor errors in content
or typography. Therefore, use this guide with the utmost care and cross-
check the facts before making any investment or trading decision.
This book is curated by professional authors who have a lot of experience

in the crypto field. They could have got this information from various
sources or their own experience. That doesn’t mean their predictions can’t
go wrong. Also, this guide links to various investments and related
financial products that the authors have used before.
The ideas/suggestions provided by the authors in this book are simply the
ones that have worked for them before. They make no claims that these
suggestions will work no matter what. So please be careful before making
any real investments and verify the actualities before making decisions.
Always remember that due diligence is crucial while making investments
in crypto space.
Both the author and the publisher hold no responsibility for the funds you
are going to invest and the losses that you may incur. The whole purpose
of this guide is to educate and direct you on the right path while making
investment decisions. We hold no responsibility or liability to any
individual or entity concerning any damage or loss caused or alleged to be
caused directly or indirectly by this e-book.
© Copyright 2021 - All rights reserved.
The content contained within this book may not be reproduced,

duplicated or transmitted without direct written permission from the
author or the publisher.
Under no circumstances will any blame or legal responsibility be held

against the publisher, or author, for any damages, reparation, or monetary
loss due to the information contained within this book; either directly or
indirectly.
Legal Notice:
This book is copyright protected. This book is only for personal use. You
cannot amend, distribute, sell, use, quote or paraphrase any part, or the
content within this book, without the consent of the author or publisher.
Disclaimer Notice:
Please note the information contained within this document is for

educational and entertainment purposes only. All effort has been executed
to present accurate, up to date, and reliable, complete information. No
warranties of any kind are declared or implied. Readers acknowledge that
the author is not engaging in the rendering of legal, financial, medical or
professional advice.
"Warning: There is no guaranteed magic formula to
getting rich, investing involves high risk and there is
always the chance you can lose a lot of money. Successful
investing that yields wealth & prosperity involves
rigorous research & analysis. Only invest money you can
afford to lose. The opinions inside this book, are just that,
investment opinions. The information is for
entertainment & educational purposes only, nothing is
personalized investment advice. Please check with your
own financial advisor / investment professional before
investing. Please review the financials & fundamentals of
any investment opportunity before investing. We are not
responsible and take no responsibility for the investments
you make, these are your decisions."
CONTENTS
Part I
INTRODUCTION TO CRYPTOS
1.1 What are Cryptos? 17
1.2 How it All Began? 25
1.3 Why did Bitcoin and Cryptocurrencies 33
Catch on?
1.4 What Made Bitcoin Unique? 37
1.5 The Bitcoin Fundamentals 43
1.6 Cryptos in the Current Financial and 49
Social World
1.7 Mainstream Adoption of Cryptos 53
1.8 What Is Mining? 59
1.9 How are cryptos different from fiat 63
currencies?
Part II
INVESTING IN DIGITAL CURRENCIES
2.1 Basics of Investing in Digital Currencies 69
2.2 How to Invest in Cryptos? 71
2.3 Different Storage Methods 103
2.4 How to buy cryptos in the safest way 109
2.5 What cryptos are better for investing? 121
Part III
OVERVIEW OF NFTS
3.1 What Are NFTs? 137
3.2 The Standard of NFTs 149
3.3 The Future of NFTs & Blockchain 153
Technology
3.4 Key Characteristics of NFTs 163
3.5 What are the top NFT Projects? 167
3.6 Where can NFTs be applied? 173
3.7 Why is there so much hype on NFTs? 177
3.8 How could NFTs benefit Artists and their 181
Fans?
3.9 What are the Top NFTs in the Market 185
Right Now?
3.10 Investing in credible NFTs with future 187
potential
Part IV
UNDERSTANDING CRYPTO MARKET
CYCLES
4.1 The Bull and Bear Market 191
4.2 What are Crypto Market Cycles? 195
4.3 Different Stages in the Crypto Market 197
Cycle
4.4 How to Invest in Cryptos Based on These 203
Market Cycles?
4.5 How to Survive Crypto Market Declines? 215
4.6 Different Crypto Investing Strategies You 221
Must Know
4.7 Psychological Profile of a Day 225
Cryptocurrency Trader
4.8 Profitable Exit Strategies for Crypto 229
Investors
Part V
BRIEF GUIDE TO CRYPTOCURRENCY
EXCHANGES
5.1 What is a Crypto Exchange? 237
5.2 Types of Crypto Exchanges 239
5.3 How do Cryptocurrency Exchanges 243
Work?
5.4 Top Crypto Exchanges 247
Part VI
Part VI
ALTCOIN INVESTING
6.1 Types of Altcoins 257
6.2 The Rise of DeFi 263
6.3 Altcoin Market Capitalization 271
6.4 Top performing Altcoins in 2021 275
Part VII
RISK MANAGEMENT IN CRYPTO
INVESTING
7.1 What is Risk Management? 301
7.2 Basic Risk management techniques you 319
must know
Part VIII
ALTERNATIVE CRYPTO INCOME STREAMS
8.1 Crypto Staking 325
8.2 What is Offline Staking? 329
8.3 Staking on Zilliqa 335
8.4 Crypto Lending 347
Final Words 351

I
INTRODUCTION TO
CRYPTOS
1.1 WHAT ARE CRYPTOS?
B y definition, a cryptocurrency is, “a digital currency

in which encryption techniques are used to regulate
the generation of units of currency and verify the transfer of
funds, operating independently of a central bank.”
Cryptocurrency often called crypto, is a fusion of two words

cryptographic and currency. A cryptocurrency is a purely
decentralized digital currency based on blockchain
technology. Unlike fiat currencies, there is no physical form
of cryptocurrencies, they are merely lines of codes stored in
different computers around the world – that is why they are
decentralized. They are secured cryptographically which
makes them impossible to manipulate and eliminates the
problem of double-spending.
18 | CRYPTOCURRENCY & BITCOIN INVESTING FO R B E G…
Cryptocurrencies are categorized into four primary groups,

i.e., stablecoins, security tokens, mining-based cryptos, and
utility tokens. Note that altcoins are every other cryptos
apart from Bitcoin. the term altcoin means alternative to
Bitcoin. As of this publication, there are over 5000 altcoins
in circulation.
While they are still relatively new to the financial world and
have yet to find the same kind of adoption and acceptance as
traditional currencies, cryptocurrencies can still do (almost)
everything that a traditional currency can, and they can do
some unique things that traditional currencies cannot do. In
some cases, such as sending funds to other people quickly
and cheaply, they are actually the better option! As time goes
on and more people begin to use them, it is possible that
certain cryptocurrencies will replace certain traditional
currencies in a lot of applications.
There are many different kinds of cryptocurrency. It’s easiest

to organize this section by looking at those different kinds,
describing what makes them unique, and giving a few
examples for each. But before we do that, let’s touch on the
difference between a token and a coin, as this is important
for understanding the two major categories of
cryptocurrency.
What is a coin?
1.1 WHAT ARE C R Y P T O S ? | 19
Coins, on the other hand, are native to their own

blockchain. This is the primary difference between coins and
tokens. So, Bitcoin, for example, is a coin, since it resides on
its own network and is primarily used as currency and store
of value. Bitcoin is widely usable, and its use is not just
restricted to its own network.
Now that we’ve established the difference between a token

and a coin, let’s look at the different major categories of
cryptocurrency.
DAPP/protocol
Sometimes called ‘Blockchain economies’ these

cryptocurrency projects are a base layer upon which other
applications, cryptocurrencies, and systems can be built. So,
while they are not themselves strictly cryptocurrencies, they
typically have their own native cryptocurrency. An example
of this is the Ethereum network, one of the most popular
cryptocurrency projects, and its native currency Ether
(ETH). Other such examples include NEO, EOS, and
Ethereum Classic (ETC).
Mining-Based Altcoins
These altcoins are the most similar to Bitcoin since they

have the same mining process as Bitcoin. Most top altcoins
are mining-based; some include ETH, Dogecoin, Litecoin,
Ripple (XRP), and Cardano (ADA).
20 | CRYPTOCURRENCY & BITCOIN INVESTING F O R B E…
Security tokens
These are altcoins which are typically issued in an initial

coin offering (ICO). Security tokens are traded like stocks or
bonds since they offer pay-out such as dividends or
shareholding in a business venture. Since security tokens are
cryptos representing real assets, they are subjected to
security regulation laws. Siacoin and Tron (TRX) are
examples of security tokens.
Privacy coins
Privacy coins are true to their name, with a clear emphasis

on private transactions. Exchange of goods and services
yields lots of data, data which can be misused, or used
against the parties involved in the transaction. Privacy coins
aim to prevent that by masking transactions, so the identity
of the parties is not revealed. Prominent privacy coins
include Monero (XMR), Zcash (ZEC), Dash (DASH), and
Verge (XVG).
Utility tokens
As described above, platforms like Ethereum allow for the

launching of utility tokens on that network, which serve
specific functions. Tokens launched on the Ethereum
network are typically done through the ERC20 token
creation mechanism. A great example is Basic Attention
Token (BAT) which is used to literally pay for the attention

of users of the Brave internet browser. Users are actually
incentivized with BAT to watch ads; thus, the BAT serves a
clear and specific purpose.
Stablecoins
Stablecoins are coins that are pegged 1:1 to the dollar,

various global currencies, gold, or other assets. They are
meant to be a digital equivalent to some other asset. Why do
this? The reasoning is pretty simple, because it is much
easier to trade a digital dollar or digital gold equivalent than
it is to trade the real thing. Stablecoins have risen greatly in
prominence in the last few years, as they form liquidity
mediums for crypto markets, and help connect crypto
markets to legacy markets. The most widely used stablecoins
are Tether (USDT), USD Coin (USDC), TrueUSD (TUSD),
and DAI.
Since cryptos are inherently volatile, stablecoins are

designed to solve the volatility problem by tying the value of
a crypto to another asset. This means that the price of a
stablecoin will only fluctuate as much as the price of the
asset whose price it’s pegged to. Stablecoins can be said to be
derivatives of sorts. Stablecoins are further classified into;
Cryptocurrency collateralized stablecoins. Their

value is pegged on other cryptocurrencies.

However, to mitigate the underlying volatility in
cryptocurrencies, these coins are over-
collateralized.
Fiat collateralized stablecoins. Fiat currencies
collateralize these coins in the ratio of 1 to 1. The
best example is USDT.
Non-collateralized stablecoins. The stability of
these coins depends on an algorithm which
determines the supply of the coins. The algorithm
alters the supply based on demand. It is akin to the
model most central banks use to control the
economy's supply of physical cash.
Now we have reviewed the different functional types of

cryptocurrency. It’s important to note this isn’t a fully
exhaustive list, but it does cover the major categories that
make up the market. Industries impacted by these different
cryptocurrencies are many, and include:
Banking
Peer to peer payments
App development
Supply chain
Medicine
Privacy
Cybersecurity
Data storage
Governance
Social media
Art and property.
1.2 HOW IT ALL BEGAN?
I t all started with Bitcoin! Although Bitcoin is widely

regarded as a currency, it is classified as an asset. An
asset is defined as “a useful or valuable thing, person, or
quality.” But it’s not just any asset, it is the greatest
performing asset in human history, by which we mean its
value has increased more than any other asset currently in
the market. How did this happen? Why did this happen? We
will get to that, but first we need to set the stage and describe
further what Bitcoin is.
Bitcoin is a cryptocurrency, the first cryptocurrency and was

first made public back in 2008. Bitcoin was invented
anonymously by a person (or persons) called Satoshi
Nakamoto.
The idea of Bitcoin is simple, but some of the details are

technically complex, so we will focus on the idea and the
main features of Bitcoin. First, the idea of Bitcoin is money
without the control of a central bank or government. Money
that is internet-based, and without restriction of national
borders. Money that is free. But how is this possible? If
nobody is printing it, how does it come about? If no
government is backing it, how does it have value? Both great
questions, let’s address those quickly.
How is Bitcoin Created?
Bitcoin is created through a process called ‘mining’. In

short, networks of computers around the world work to
solve hashing algorithms, which are mathematical
equations designed to create encryption for the Bitcoin
network. Put simply, computers trade their power,
through the solving of hashing equations, to ensure the
Bitcoin network is both secure and decentralized (without
direct control). This process also involves the verification
of transactions on the network to prove they are
legitimate. Since a central clearing house like a bank or
government isn’t involved in proving the authenticity of
currency and transactions, the computers on the Bitcoin
network are the ones that must do this. When a batch of
transactions are verified through this hashing function
they are printed to a ‘block’. These blocks continue on in
1.2 HOW IT AL L B E G A N ? | 27
an ever-growing chain, hence the origin of the term

‘blockchain’.
Blockchain effectively ensures that the network is both safe

and free and prevents a classic problem in digital money
design called ‘Double-Spending’.
What is Double Spending?
Well let’s say you have a digital currency like Bitcoin. How
do you know that the Bitcoin you have is a real one? As with
any currency, someone might try to counterfeit it. Since
each block of transactions is verified by the network, this
system prevents transactions from being printed twice.
How does Bitcoin have value?
This is a less technical but equally complicated question,

bordering on the philosophical depending on who you ask.
Some would say, how does anything have value? The dollar
for instance. It’s not backed by gold or silver anymore. It’s
just backed by ‘the full faith and credit’ of the government.
What does that mean? We’re not sure either. In the case of
Bitcoin, the simplest answer is this, it has value because
people use it and trade it.
Markets create value for things, and Bitcoin has a robust

global market. Functionally speaking Bitcoin works as both a
store of value (without central control) and a payments
network. On the Bitcoin network you can send Bitcoin to

anyone around the world quickly and easily for very little
cost. You can also use Bitcoin at a variety of online and
physical retailers and other merchants. So, in this way it
establishes and gains value as well.
So now we’ve tackled two of the most important questions

related to Bitcoin. Let’s look at the qualities, as an asset, that
make Bitcoin unique. Other examples of assets, for
reference, include gold, property, cash, art, etc.
So how does Bitcoin distinguish itself from gold and fiat

currency? Notably, we see that it is highly portable, where
gold is not. Being that it is an internet native digital
currency, Bitcoin can be quickly and easily transferred
around the world. This is significant because Bitcoin also
manages to accomplish things Gold does, that FIAT
currency does not accomplish. For one, Bitcoin has a totally
fixed supply, so it is like gold in that aspect, but even better,
as the total number of Bitcoins that will ever be created is
already known. That number is 21 million, and will never be
exceeded. Gold, on the other hand, exists throughout the
world and throughout space, so we aren’t ever going to be
sure of its maximum supply. While it is scarce, it isn’t scarce
on the level that Bitcoin is. Why is this important? Because
in the law of supply and demand, a lower supply leads to
greater demand and greater price.
The Origin Story
The origin story of cryptocurrencies started with Bitcoin.

While you won’t find many cryptocurrencies’ origins as
unique as the original coin, Bitcoin, they all have their
reasons for existence and a purpose for using them. The first
piece of advice in investing in cryptocurrencies is to
understand and recognize these origin stories. It’s the first
chance you have to see whether it’s a legitimate tool or a
scam. Who is behind the cryptocurrency? Does it seem to be
a viable concept? Does it make sense to link a
cryptocurrency to this concept?
Reading these narratives will be a first step in recognizing

what’s worth investing in and which cryptocurrencies have
value.
The Origin of Bitcoin
Where Bitcoin comes from has become the most told and
infamous story in the crypto universe, while also the least
understood. If you have ever looked into Bitcoin, then you
have probably come across the pseudonymous founder
Satoshi Nakamoto. It’s he who began the craze by
publishing a white paper on how to develop the
blockchain. This paper provided the blueprint to launch the
technology craze, the blockchain, which you’ve heard so
much about. Then, only a few weeks later, Nakamoto
released the opportunity to mine and buy the digital coin,

Bitcoin.
This set off a digital gold rush as people joined the craze to
seek out and uncover the coins. While you may have heard
this story, what’s missing is what happened in the years after
Nakamoto launched his project. Circumstances allowed
Bitcoin’s value to appreciate as people adopted the coin in
greater force. It’s a story that’s also relevant to you, since you
must understand why people adopted this random digital
dollar.
The History of Bitcoin
The community of digital coin enthusiasts, libertarians, and

online anarchists jumped at the idea of a decentralized
currency. It’s something that they had long sought, since it
provided protection against the federal government, and it
served as a practical way to conduct transactions. As miners
leaped into Bitcoin, seeking new blocks of the chain that
would unlock more coins, another group found that the
digital asset served another purpose. Criminals believed they
could use the currency anonymously to buy products on a
site called the Silk Road. This site served as a hidden black
market online, becoming a prominent spot to buy and sell
drugs, guns, and other illegal services. It’s this use that drove
the early appreciation in price.
Since criminals dominated the early transactions, it unfairly

stigmatized Bitcoin as merely a tool to conduct illegal
activities. Cryptos have struggled to remove this stigma,
even to this day.
Another major problem that faced Bitcoin for the first year
of its existence: there wasn’t a way to turn the Bitcoin into
cash. Even to this day, Bitcoins can’t survive on their own
without another currency to describe their value. So, there
must be ways for users to turn the Bitcoin into US dollars
(or other currencies) in order to cash out, if that’s what you
wanted to do.
It wasn’t until the Bitcoin Market was developed as the first

Bitcoin exchange, which provided miners and users the
ability to exchange Bitcoin for cash or cash for Bitcoin. This
also provided the opportunity to use the coin as a way to
exchange services, leading to the first real-world transaction,
which took place in May 2010, by Florida programmer
Laszlo.
Since these initial hurdles of allowing people to use Bitcoin

to buy and sell goods were solved, Bitcoin has hit new and
remarkable heights. WikiLeaks began to accept them as a
form of donation in 2011. Existing Bitcoins surpassed $1
billion in market cap for the first time in 2013. That same
year, Bitcoin crashed after surpassing $100 for the first time
because a hack exposed the precariousness of the coin.
Venture capitalists jumped into the scene, providing start-

ups in the cryptos and Bitcoin space the funds to grow.
Bloomberg even added Bitcoin’s ticker to its terminal. Yet, it
wasn’t until mid-2017 when another turning point occurred.
Bitcoin finally hit a tipping point in the eyes of the
mainstream media, investors, and spenders. This set off a
frenzy of buying that created the 1,700 percent appreciation
in price, and officially secured the coin as a potential
investment option.
1.3 WHY DID BITCOIN AND
CRYPTOCURRENCIES CATCH ON?
W hile cryptos are massively popular right now, it

is hard to imagine a time when almost everyone
shunned them, or at the very least, were critically skeptical
of them. Here are some of the main reasons why cryptos
rose to mainstream popularity.
Security
We described above the double-spending problem, and how

Bitcoin solves the problem of security and double-spending.
Thus, Bitcoin is fundamentally much more difficult to forge
and make counterfeit compared to gold and dollars.
Decentralization
One of crypto’s greatest strengths is the ‘self-governance’

structure. They are not controlled by any government or
bank. It is outside the control of any specific nation or

power. This prevents it from being used against the people.
As we know, money is a form of control, so freeing money
from central control increases the freedom of the average
person.
Programmability
Bitcoin fundamentally ushered in the era of smarter form of

money. Let’s look at precious commodities, like gold for
example. Gold is just gold, it’s an element. There’s little you
can do with gold besides create jewelry with it, make
computer parts, or store it in bars. Dollars are a bit more
dynamic, but at the end of the day, it’s still just paper. Even
in digital form dollars lack any fundamental sophistication.
Bitcoin on the other hand is a modern invention that was
born in code. It is fundamentally a more ‘programmable’ sort
of money than the other two options.
Flexibility
One specific example of the flexibility of Bitcoin and other

cryptocurrencies compared to legacy forms of value is ‘Smart
Contracts’. A smart contract is “a computer protocol
intended to digitally facilitate, verify, or enforce the
negotiation or performance of a contract. Smart contracts
allow the performance of credible transactions without third
parties. These transactions are trackable and irreversible.”
1.3 WHY DID BITCOIN AND CRYPTOCURREN C I E S C A… | 35
This technology means that within the monetary medium

itself (cryptocurrency) we can now structure contracts that
auto fulfill when certain conditions are met. This opens up a
nearly infinite set of possibilities for how money can be used
and how value can be transacted and helps clarify how
cryptocurrencies fundamentally expand the capabilities of
money.
After the huge success of Bitcoin, several other

cryptocurrencies emerged. These cryptocurrencies are called
altcoins. The next section will focus entirely on these
altcoins and offer a glimpse into the world beyond Bitcoin.
1.4 WHAT MADE BITCOIN UNIQUE?
B itcoin’s status comes from the fact it was the first.

Many of the cryptos that have followed use Bitcoin’s
blockchain as a starting point to produce variations of the
crypto that got the whole market started. When Bitcoin is
compared to other cryptos, the other cryptos often solve a
problem that Bitcoin didn’t plan for, expect, or find worth
fixing. Yet, even though that’s the case, Bitcoin remains the
most high-profile, important crypto in the space. That brand
recognition provides some safety for Bitcoin investors.
It's the Industry Leader
When media organizations report on the rise and fall of the

crypto market, what they base it on is Bitcoin. It’s the S&P
500 of the crypto space, and its performance will determine
how crypto sentiment is perceived. Because of this status, it
38 | CRYPTOCURRENCY & BITCOIN INVESTING F O R B E G…
has the most eyes focused on it, so if it suffers a 10 percent

fall, comments will follow, usually asking if this signals the
end of the crypto bubble.
This attention leads to more trades in Bitcoin than any other

crypto, which creates side effects, both good and bad. Since
it’s the most traded, the impact of momentum has a
significant effect on how your investment performs. As
prices rise, the rush into the Bitcoin market will suddenly
increase. If prices fall, then they will fall lower than they
should, most likely because of the momentum that the fear
brings to investors. These momentum shifts create
rollercoaster rides that have very little to do with whether or
not Bitcoin has grown as a potential currency.
It Moves All Tides
When Bitcoin moves upward, so does the rest of the crypto

universe. It’s the bellwether of the crypto space, driving
status for a number of the other cryptos in the investment
sphere. When Bitcoin performs well, suddenly there is more
interest in altcoins, like Litecoin or Ethereum. When it does
poorly, then so will the rest of the crypto space. As an
investor, you want to have your money in investments that
will do well on the products’ own merits, undeterred as
much as possible by larger macroeconomic issues. Within
the crypto space, Bitcoin’s the investment that’s closest to
achieving that goal.
1.4 WHAT MADE BITCOIN U N I Q U E ? | 39
It’s Decentralized
Bitcoin doesn’t have a start-up sitting behind the code,

trying to develop blockchain technology that has a specific
use or targeting a specific niche or seeking a specific
customer. It’s decentralized, so unlike other cryptos, the
performance of Bitcoin isn’t determined by whether or not
the start-up also does well.
Instead, what you want to see from Bitcoin is that it’s

growing as a tool for transactions. Therefore, as an investor
in Bitcoin, you want it to become a more prominent way for
people to conduct business more than become a tool for
business. That’s a higher bar for adoption, in many cases,
since it takes a more mainstream need to grow and prosper.
Bitcoin isn’t alone as a form of decentralized currency. It has

a number of forks, which are currencies that were developed
to solve problems within Bitcoin’s original code. These have
now become prominent currencies on their own. These
forks are decentralized. Other decentralized currencies have
also launched to solve Bitcoin’s issues, which could
potentially cut into its mainstream appeal. That hasn’t
happened yet, though.
It’s Adaptable
Since Bitcoin grew to such heights as the first crypto and the
most prominent name in the space, there’s a bevy of
entrepreneurs who have sought to fix problems within the

Bitcoin code, which leaves it at a disadvantage to other
upstart cryptos. For example, since Bitcoin’s transactions are
public, a number of cryptocurrencies have used the idea of
anonymous transactions as a tool to increase investment
interest in a new crypto. This problem isn’t just one to
attract criminals. Businesses would prefer to ensure that
there’s greater privacy to the transactions they make, and for
what those transactions are made. A number of developers
have discovered ways in which Bitcoin can be conducted
anonymously. While these strategies haven’t reached the
status of implementation, it could become a feature one day.
The Investing Community Has Bought In
Unlike most other cryptos, for the most part, the investing
community has shown a willingness to at least test the
waters in the Bitcoin pond. A futures market has been
developed where investors can trade futures contracts,
betting on the fact that Bitcoin will rise or fall. Electronic
trade funds (ETF) have invested in Bitcoin in order to ride
the momentum waves, providing a buffer for returns.
Goldman Sachs has opened a Bitcoin-trading arm. And a
number of different entities have asked the SEC for the
opportunity to develop the first crypto index funds targeted
to retail investors, which would be heavily weighted toward
Bitcoin. It’s the one crypto that has driven all of this
1.4 WHAT MADE BITCOIN U N I Q U E ? | 41
momentum, which improves the adoption rates and

provides security, creating a floor for your investment.
It’s Synonymous with the Crypto Image
While all cryptos have a stake in the perception and

marketing of cryptocurrencies, there isn’t one that has more
of an image and fan base than Bitcoin. It’s a fad all its own;
T-shirts, paraphernalia, bumper stickers, and actual gold
coins have been developed around it. It represents
something far bigger than itself: decentralized currency,
freedom, liberation from a central government, isolation,
technical achievement, and riches all wrapped up in its
simple name. It has become not just a cryptocurrency, but
also a status symbol. This helps protect it as the main coin
within the crypto space, since the imagery helps sell Bitcoin’s
use.
1.5 THE BITCOIN FUNDAMENTALS
D eveloping fundamentals for your

investments will depend on what you look for in
the cryptocurrencies you prefer, and what you expect to see
crypto
from solid performing names. So, the basic fundamentals

that you eye will differ based on your individual preferences.
You should keep that consistent when evaluating Bitcoin as
well. There are certain fundamentals, however, that you will
be required to at least take notice of, since it’s a decentralized
currency. No matter what, you’ll need to know how the
adoption of Bitcoin as a currency has grown and why it has
improved. If it has failed to grow, you need to understand
why. Beyond that, there’s some other fundamentals that
most investors will at least take note of.
Correlation with the VIX

If you’re looking to find an index to track volatility, seeking

to find an opportunity to buy into Bitcoin, there’s no clear
answer. Since Bitcoin remains a very new investment
vehicle, institutions and universities are only beginning to
understand what drives the Bitcoin price. But there’s one
index that has shown an early relationship with the price of
Bitcoin, and that’s the Chicago Board Options Volatility
Exchange Index (VIX), also known as the Fear Index.
The VIX tracks market volatility. The more the volatility,

the higher the VIX goes. It’s known as the Fear Index, since
this volatility indicates that there’s a lot of concern in the
market, if it rises. Over the past couple of years, the VIX
volatility and Bitcoin’s volatility have been remarkably
similar, according to the CBOE Global Markets, which
developed the VIX. As the VIX rises, so does Bitcoin. When
it falls, there’s some evidence that Bitcoin will fall as well.
Again, it’s still early days in this analysis, so it’s premature to
link it as a certain connection or causation, but early
indications show some relationship.
Track Coins in Circulation
As Bitcoins are mined, it reduces the amount of potential

new coins that could enter the market. The ongoing theory
is that this will eventually lead to a tightening of the coin—
remember that supply is fixed— which should lead to
increases in the price of Bitcoin, assuming demand remains
1.5 THE BITCOIN FUNDA M E N T A L S | 45
at its current levels (or hopefully increases). It’s unclear if

this theory will prove true, since there are a whole bunch of
other cryptocurrencies available, which could impact the
supply side, reducing this impact. But Bitcoin investors
won’t actually know if this works in their favor until the
market reaches the point where this dynamic can play out.
Still, as the supply tightens, expect a run-up in prices while

investors prepare for this potential result. You can track the
number of Bitcoins in circulation at Bitcoin.info, which
updates daily as additional coins are discovered.
The Blockchain
Without a computer science degree, it’s not always easy to

conceptualize the blockchain. It’s essentially a digital ledger
that tracks transactions within its code, providing a public,
searchable, and infinite record of a cryptocurrency (or other
item in which the chain was built to track). What’s different
about the blockchain, separating it from past attempts to
develop a digital currency? It’s important to at least
tangentially understand the mechanics of the blockchain in
order to grasp and differentiate between the various
cryptocurrencies.
Nakamoto developed the blockchain as he searched for a

cryptographic answer to the digital coin. Cryptography is
often synonymous with encryption or protecting data from
outsiders. It’s the effort to develop codes, systems, and

mirages to protect data, scrambling it so no one can piece all
the information together, unless they have a code that does
it automatically. Often, this is done through encryption,
which is a specific way to scramble the data so nothing can
read it except the owner of the information. But in some
ways, Bitcoin’s blockchain also uses complete transparency
to accomplish its goal. Although there are plenty of
touchpoints in the coin-purchasing process where
encryption plays a major role, such as when you receive a
private key to unlock your coins (lose the key and you lose
the coins), the Bitcoin’s blockchain itself is completely open,
since others can see where those coins move over time.
Each Bitcoin has its own digital signature, and each owner of
the coin has a mark that represents his or her ownership. It
sits within the ledger. This means each coin is tracked
through the entire lifetime of its use. This creates a level of
historic transparency, both for good and ill. For instance, the
IRS can go back and track every purchase ever made with
Bitcoin. It also means you don’t need a third party—such as a
bank—to process transactions, since the blockchain can do it
automatically through this code, tracking every coin along
the way.
Digital Contracts Unlock Blockchain Potential

1.5 THE BITCOIN FUNDA M E N T A L S | 47
Since blockchains don’t necessarily require a third party,

they have created a new type of “smart” contract, which
offers even more uses for the blockchain, beyond cryptos.
Ethereum, the company that developed the second most
popular cryptocurrency, ether (which also goes by
Ethereum), created the digital or smart contracts first
theorized by Nick Szabo, a sort of crypto philosopher, in the
late 1990s. Blockchains that have the ability to create smart
contracts can approve agreements that two sides initiate. For
instance, let’s say Company A wants to send $10,000 worth
of ether to Company B for coding services that Company B
provides. Within the digital contract, there can be certain
benchmarks that Company A demands that Company B
must live up to in order to receive payment. As Company B
works its way through those requirements the project is
tracked on the blockchain. It’s like a digital project manager.
At the end, no one needs to confirm that the requirements
were reached because the blockchain has traced every step,
sending Company B the coins once it fulfills all the
benchmarks.
Note that these contracts have a dramatic impact on business

interest within the blockchain landscape. IBM, for instance,
is using the blockchain tools developed by Stellar’s contract
technology to conduct transactions among some banks in
the South Pacific. At the time of the announcement, IBM
48 | CRYPTOCURRENCY & BITCOIN INVESTING FO R B E…
estimated it would help conduct $1 billion of cross-border

payments in this manner.
The uses for these contracts go beyond international

payments. Supply chain firms can incorporate such a
contract to track movements of supplies, paying vendors
once it receives shipments intact. It provides security in
compliance-heavy arenas, since the rules around the
compliance can be incorporated into the blockchain
contract, ensuring business is conducted correctly from a
legal standpoint. And it improves transparency, both
internally and externally. Companies can use internal
blockchains to track these movements and then can turn to
them when needing an accounting of shipments.
The potential remains extremely significant. Some have

likened the advent of the blockchain to the creation of the
Internet, and businesses are only now beginning to figure
out the various ways in which they can use the technology.
1.6 CRYPTOS IN THE CURRENT
FINANCIAL AND SOCIAL WORLD
C ryptocurrencies are how the blockchain confirms

these agreements or transactions, depending on the
situation. It’s why when businesses use the Stellar
blockchain, they will conduct the transaction in its
cryptocurrency, lumens. Then the businesses can sell the
lumens to cash out and obtain the value in their local
currency.
Imagine a currency exchange that was completely digital.

This would be the blockchain where there are euros, dollars,
and yen, along with lumens, Bitcoins, and other digital coins
available for transacting. A Japanese business could sell
something in dollars, move the payment into lumens by
adding it to the blockchain, and then send it to Japan, where
it would cash out the lumens for yen. Instead of paying a
huge fee on the transaction, they pay a very small price, due
to the blockchain and the cryptocurrency, lumens. The
whole thing, in this case, would be tracked on the blockchain
via the use of the lumens.
Exchange of Value
There are blockchains that don’t require cryptocurrencies,

since there’s no monetary transaction occurring. But in
blockchains where there’s an exchange of value, either
through retail, services, contracts, investing, or lending,
then the cryptocurrency is the token used to track the digital
ledger. For instance, if Nakamoto sold his very first Bitcoin,
then as it moved around the Bitcoin atmosphere, being
bought and sold, there would be a stamp on the Bitcoin
blockchain providing a digital map to everyone who ever
owned the coin.
Understanding where cryptocurrencies live take a little

imagination. It means we’ll have to get into the intricacies of
the computer science and design.
Cryptocurrencies are decentralized, meaning the blockchain

incorporates them to conduct business within its
infrastructure. But the blockchain is a peer-to-peer network,
so instead of living on one server, the blockchain’s code lives
on many different nodes. A node is a term used to describe
1.6 CRYPTOS IN THE CURRENT FINANCIAL A N D S O C… | 51
the computers or electronic devices that have downloaded

the blockchain’s code.
Cryptos as Investment Tools
As more people or businesses use a specific cryptocurrency,

it appreciates. Let’s imagine the following scenario. Let’s
take Nakamoto’s very first Bitcoin again and say it’s early
days in cryptos, when no business accepted them. The only
other person in the world who knows about Bitcoin is an
owner of a sandwich shop. Now let’s say Nakamoto, excited
about going somewhere he can actually spend his new
currency, buys a $5 sandwich with one Bitcoin. Now the
value of one Bitcoin is $5.
As more people become aware of Bitcoin, suddenly they’re

willing to sell far more for one coin. Now, the sandwich
shop owner can pay his $2,000 rent using the Bitcoin, since
there’s a larger community willing to spend that much for
the single coin. That community’s desire is tracked via the
Bitcoin spot prices on exchanges, which calculate the current
value of the coin. It’s basic supply and demand.
You invest in cryptocurrency because you’re betting that the

cryptocurrency you own will appreciate even further.
Imagine that it’s appreciated so far from its original value of
$5 that now the sandwich shop owner could sell that
original Bitcoin for a luxury vacation or a car. It’s this price

appreciation that people invest in. That’s why it’s important
to understand the technology behind the cryptocurrency,
since you’ll need to determine whether it has the chance of
having far more users than just a single sandwich shop.
1.7 MAINSTREAM ADOPTION OF
CRYPTOS
I n the past few years, as the price of these tokens has

gone to the moon and back, traditional investment
firms and exchanges have embraced the currency as a
legitimate form of investment. The Chicago Board Options
Exchange and the Chicago Mercantile Exchange began
offering the trading of futures contracts in late 2017, which
opened up the opportunity for at-home E*TRADE users to
buy and sell futures.
Over the years, cryptocurrencies, especially Bitcoin, have

evolved from little-known fringe assets to mainstream
investment commodities. According to Mastercard, digital
assets are becoming a more important part of the payments’
world.
Over the years, cryptocurrencies have gained massive

mainstream popularity. Both institutions and reputable high
net worth investors are flocking the crypto market for
varying reasons. Here are some of the most notable
institutional investors in the crypto market.
MicroStrategy Inc.
MicroStrategy Inc. is publicly traded and is arguably the

company that started the domino of multi-billion-dollar
firms adopting BTC on the balance sheets.
The company first invested in Bitcoin on August 11, 2020,

by buying $250 million worth of BTC. In September 2020, it
added $175 million worth of BTC to its portfolio, making its
total spending $425 million to purchase BTC, whose value
surged over 21% by November 2020. In December 2020, the
company raised $650 million in debt to fund the further
purchase of BTC. It continued upping its BTC portfolio
through a series of smaller purchases worth $20 million in
January 2021. On March 1, 2021, MicroStrategy Inc.
purchased $15 million worth of BTC. It is estimated the
company owns about 90,859 BTC.
MicroStrategy also adopted a new treasury reserve policy on

September 14, 2020, making BTC its primary treasury
reserve asset.
Tesla Inc.
1.7 MAINSTREAM ADOPTION OF C R Y P T O S | 55
Tesla, Inc. needs no introduction. The company updated its

investment policy to diversify its cash on hand to maximize
returns for the shareholders. According to its policy, a
portion of its cash on hand would be invested in alternative
reserve assets, including Bitcoin. Subsequently, Tesla Inc.
purchased BTC worth $1.5 billion in January 2021. The
company also announced that it plans to start accepting
payment in BTC in the future.
Other notable public companies getting in on Bitcoin

include Galaxy Digital Holdings with $770 million worth of
purchase; Square Inc. with $206 million; and Marathon Pent
Group with $210 million worth of BTC purchase.
Financial Institutions Getting in on Bitcoin
Global financial institutions and financial service companies

are also getting in on the Bitcoin craze. The irony in this is
that these financial firms publicly shunned Bitcoin in a not-
so-distant past. Here are the most prominent entrants:
Mastercard
On February 10, 2021, Mastercard announced that it too was

jumping on the Bitcoin bandwagon. In a statement, it
acknowledged that digital assets are beginning to play an
important role in global payment systems.
Although it partnered with various parties, including BitPay

and Wirex, to create crypto cards, the cryptocurrencies still
do not move through Mastercard’s network. The company
acknowledged that it had witnessed an increasing number of
people using Crypto Cards to access and convert their
cryptos to fiat for spending. To this end, Mastercard
announced that later in the year, it would start supporting
select cryptocurrencies directly on its network.
This would enable almost every merchant to accept Bitcoin

as payment. If a merchant doesn’t accept crypto as payment
and a buyer only wants to use crypto, they wouldn’t have to
convert to fiat first. The network will accept the payment in
crypto and convert it to the merchant’s preferred currency.
This would tremendously cut inefficiencies.
Visa
On March 3, 2021, Visa unveiled its roadmap to Bitcoin and

crypto banking to be launched later in 2021. Over the years,
Visa has partnered with about 35 Bitcoin and crypto
platforms to provide payment services. It’s now partnering
with First Boulevard – a digital bank to develop APIs which
will allow Visa-client banks to integrate Bitcoin and
cryptocurrencies. This will enable the banks to facilitate
Bitcoin and cryptocurrency buying and trading services.
PayPal
1.7 MAINSTREAM ADOPTION OF C R Y P T O S | 57
On October 21, 2020, PayPal announced that it would allow

users to buy, hold, and sell cryptocurrencies. This was a
significant milestone, especially for the over 26 million
merchants available on the platform. With PayPal’s digital
wallet, users can use Bitcoin, Ethereum, Bitcoin Cash, and
Litecoin for online shopping to request and send money.
Why are Institutions Getting in on Bitcoin?
Depending on their business models, various institutions are

getting in on Bitcoin for different reasons. Here are the most
significant ones:
Inflation Hedging
In 2020, the coronavirus pandemic forced governments and

central banks globally to engage in aggressive expansionary
fiscal and monetary policies. The effect was increasing the
supply of fiat money in circulation to prevent irreversible
economic depression. While this strategy may have worked,
its aftermath threatens unsustainable inflation levels, which
would lead to a drop in the purchasing power of fiat money.
Consequently, institutional investors chose to amend their

policies to invest in Bitcoin and other cryptocurrencies to
ensure a store of value. That’s because cryptocurrencies are
decentralized and not impacted by fiscal or monetary
policies, making them immune to inflation.
Investment
Bitcoin is categorized as an investment asset. What makes it

especially important is its scarcity – the supply of Bitcoin is
capped at 21 million. This means that its value entirely
depends on its demand. Given the surge in demand for
cryptocurrencies experienced in 2020, Bitcoin was the best
asset to invest in. for example, the total value of
MicroStrategy’s BTC portfolio is nearly double the average
cost it spent accumulating the holding.
Revenue Expansion
As admitted by Mastercard in its press release, there is an

exponential increase in the aggregate trend of transactions
using crypto cards. Financial service companies like
Mastercard, Visa, and PayPal, earn their revenue from
transaction fees they charge for sending and receiving
payment and from currency conversion fees. The higher the
number of transactions on their network, the more revenue
they earn.
1.8 WHAT IS MINING?
M ost of the blockchains that create, and host

cryptocurrencies are peer-to-peer networks,
meaning they run with the aid of nodes, or a community of
computers that all host the code that makes up the
blockchain. In the digital world, this allows the code to exist.
But the peer-to-peer network extends further, because these
computers also help to approve transactions. For approving
transactions, they’re paid with user fees. They also receive
the new coins that are unlocked by approving the
transactions.
The reason the blockchain has its name is because within the
code, the files look like a series of blocks. In fact, block is a
term within the blockchain that essentially is a file that holds
a specific number of transactions. Consider it one page on a
ledger (and remember, since the blockchain is a digital
ledger, it has an infinite number of pages). The miners

approve transactions, and once they’ve approved enough
transactions to fill up a block, it’s confirmed on the chain of
code. For doing so, the miner receives a Proof of Work
problem, which is the blockchain’s way of proving that the
work the miner did resulted in enough energy (in this case
computing power) to require payment. This Proof of Work
is essentially an algorithmic riddle, which the miner’s
computers solve. Once it’s solved, the miner receives a new
coin.
The Complexity in Crypto Mining
Since the most easily reached Bitcoins have been mined to

this point, it takes a massive enterprise to find new ones.
Warehouses filled with computers running scripts to
untangle another coin run twenty-four hours a day, seven
days a week, in many cases. These mini enterprises, often
with a staff of one person, can sap a town’s energy supply.
Some small towns and cities have even banned the mining of
coins because of the impact on their local energy capabilities
As the mining becomes more profitable – if the price of a

coin rises – then the supply has tightened. Theoretically, that
should improve the appreciation of the coin.
Not All Cryptos can be Mined

1.8 WHAT IS M I N I N G ? | 61
There are some cryptocurrencies—like Ripple’s XRP—that

originally controlled the supply of the coin in a way similar
to the Federal Reserve. This means the company, or the
owners of the cryptocurrency determine when to release
more coins into the market. In order to fend off criticism
that Ripple was trying to tightly control XRP, potentially
creating inflationary pressures, Ripple revamped its strategy,
so 1 billion XRP will be released each month via an escrow
account, until all coins have been released to the public. This
rubs some investors the wrong way, since it differs from the
libertarian views that are prominent within the
cryptocurrency space. You’ll want to keep this in mind, as
you do your research.
The Mining Process
One separation from digital coins and fiat currencies is that

there’s typically a set limit on the number of coins that will
exist when a new cryptocurrency pops up. For instance,
Bitcoin has 21 million coins that can be mined within its
code, and it takes a tremendous amount of energy and
computing power to mine these coins. In total, about 88%
have been mined. Once the twenty-first millionth coin does
get dragged out of the code, there will never be another
Bitcoin.
This adds an investing layer that you see often in

commodities such as oil and gold. Since those natural
resources are limited, there’s a ceiling on the supply that

reaches the market. When it comes to the dollar, that ceiling
isn’t there. The Federal Reserve can increase and decrease
the amount of money within the economic system, which
changes the supply, in hopes to control inflation or fight
deflation. Many crypto enthusiasts enjoy the fact that there’s
not a governmental stranglehold on the token supply.
1.9 HOW ARE CRYPTOS DIFFERENT
FROM FIAT CURRENCIES?
C ryptos and fiat currencies are worlds apart. Here are

some of the main differences between crypto and
fiat currencies.
Cryptos are scarce
If you ever took an econ 101 class, you know that one
property of money is its scarcity. For something to be of
value it has to be scarce, and the scarcer it is, the more
valuable it will be. That's why even in ancient times, they
didn't use grains of sand instead of cereals for barter trade.
What does this have to do in the debate of Crypto vs fiat?
Well, for the longest time, central banks have controlled the
amount of money in circulation to determine the value of a
country's currency. When inflation is higher, contractionary
policies are implemented to mop up excess liquidity.
Similarly, when inflation is dangerously low, expansionary

policies help bring back liquidity into the market. Suffice to
say, the value of fiat money almost entirely depends on these
two policies.
Cryptocurrencies, on the other hand, are limited. Since the

supply of cryptocurrencies is limited, their value will almost
entirely depend on their demand. For example, Bitcoin is
capped at 21 million coins. This property has made cryptos
invaluable as a store of value since crypto holders do not
have to worry about inflation eroding their purchasing
power. This was witnessed in 2020 when central banks and
governments globally adopted aggressive fiscal and
expansionary monetary policies. Naturally, these policies
threatened unprecedented inflation. Consequently,
institutional investors opted for cryptocurrencies as a store
of value. Due to their decentralized and limited supply
nature, these policies would not impact their value.
Cryptocurrencies are decentralized
A decentralized financial system means that the control of

the entire financial system shifts from the government, and
the few elite financiers and bankers. Inarguably, the most
notable contribution of cryptocurrencies is ushering the
decentralized finance (DeFi). DeFi mimics the traditional
financial system's functions but built entirely upon
blockchain technology and is entirely decentralized.
1.9 HOW ARE CRYPTOS DIFFERENT FROM F I A T C U R… | 65
Since DeFi is based on the Ethereum platform, anyone can

develop a particular financial service, say a lending platform.
Here, you create the rules of how that particular service will
operate, and once you deploy it on DeFi platform, it
becomes decentralized – you no longer have any control
over it. This means that individuals globally can trade with
each other without the stringent rules and regulations
pervasive in the traditional financial system. DeFi eliminates
the fiat financial systems' hurdles and puts everyone on an
equal footing regardless of their financial status or influence.
II
INVESTING IN DIGITAL
CURRENCIES
2.1 BASICS OF INVESTING IN
DIGITAL CURRENCIES
C rypto investing involves buying and holding an

asset over the longer term. Investing is focused on
the bigger picture, and investors tend to ignore the shorter-
term price fluctuation and concentrate on the fundamental
quality of the asset. The primary goal of investors is to attain
the maximum possible return on investment by holding as
an asset for the maximum duration possible. In investing, it
is believed that in the long run, the asset will appreciate; that
is why investors will overlook the short-term price volatility
and even continue accumulating their portfolio size when
the price is low.
Note that investing involves buying and owning the actual

asset. For example, a Bitcoin investor will buy and receive
BTC in their wallet. This means that there is no leverage
involved when investing. One of the most significant
advantages of investing is that if the market crashes, you will

only lose the equivalent of the amount you have invested.
However, this is rarely the case since it is unheard of for the
price of an asset to drop to $0. Compared to trading, a small
market shift in the opposite direction could wipe out a
trader's capital and sometimes run a negative balance when
using leverage.
2.2 HOW TO INVEST IN CRYPTOS?
T here are many different theories and strategies that

all claim to turn your crypto dollars into riches.
Each one of those strategies can work; they may have left
someone with a profit in specific cases. For instance, if you
invested in Bitcoin in January 2017 and cashed out in April
2021, your investment would have appreciated over

64000%!
That doesn't mean it will work for everyone, especially since

Bitcoin has had wild fluctuations within the four years to
2021. For the faint-hearted, the long-term Crypto investing
strategy may not be viable. That's a lot of risk to take on, and
an iron-clad mental fortitude is necessary.
In this chapter, we will look at how to invest in coins

because you believe in the technology, and you view it as a
way to make speculative bets on a growing sector.
Picking the best Cryptos to Invest in
Considering there are well over 5000 altcoins to choose

from, the process of selecting the best Crypto is considerably
exhausting; that's if you don't get caught up with choice
paralysis. You must consider a lot when thinking about
individual coins to invest in, since there's an opportunity
cost involved. Not only might you be wrong about where
you're placing your money, but it's also preventing you from
investing in another spot where you could be seeing
significant gains. It's the problem with coin picking or being
forced to choose specific coins.
That's why you must come up with a strategy that you

believe in. To do so, you'll want to consider a few areas that
are ubiquitous across all cryptos. That way, you're at least
2.2 HOW TO INVEST IN C R Y P T O S ? | 73
evaluating the coins based on a set of criteria. You can then

exercise that criteria across all layers of cryptos. As much as
you can, evaluate them on the same criteria across all the
crypto names, in order to ensure that there's consistency in
your process.
Do You Believe in the Technology?
What's the purpose of the blockchain and, therefore, the

cryptocurrency that's viable on the blockchain? How will
companies interact or incorporate the blockchain? Will
retail customers embrace the idea of using the coin as an
everyday currency?
These are some of the questions you will need to ask about
every coin that you evaluate. Despite the early days of
mainstream crypto investing looking more like a run by
speculators, as this sector grows, it's the technology leaders
who will drive usage and investment. Right now, that isn't
always the case, since customers are only beginning to
understand the technology, its use within their business
systems, and the start-up companies providing the
blockchains. At some point that will switch: the crypto
market will be much more technology driven, and the
money will flow toward those companies that have proven
themselves useful. How beneficial that is for regular
consumers and investors will be dictated by the purpose of
the specific blockchain and the corresponding coin.
If it's simply a decentralized currency where no company

operates the blockchain, like Bitcoin, then decide whether or
not the technology will allow enough users to spend coins
on a regular basis to justify the market cap. If it's a smart
contract tool, like Ethereum, then evaluate ether on whether
or not there's enough demand among corporate entities to
justify future gains. Starting with the technology will give
you a base to begin evaluating more short-term indicators
surrounding the currency.
Do You Trust the Management Team?
Along with the prowess of the technology, learn about the

management team in place. Do the Crypto's leaders and
founders fill you with confidence? How much weight you
place in this could be based on what the blockchain company
hopes to achieve.
For instance, if the Crypto comes out of the development of

a blockchain start-up, whose ultimate goal will be to
eventually earn a profit from investors using its platform,
then you need to research not just the technological prowess
of the developer, but also the business acumen of its leader
running the financial arm of the company. If you find that a
crypto has a developer that's well respected in the
engineering community or has become a star within the
blockchain space, that's a good sign. If the company also has
a cofounder who has a background in growing successful
start-ups, it's another great indicator. If, on top of that, it has

generated interest from top-name venture capital firms,
that's a third indication that there's sufficient weight and
intelligence going into evaluating this company as a value
add. That will help the Crypto that's the public face of this
venture.
Evaluate the Transactions
One consistency across all cryptos, no matter whether they

court big business or regular consumers, is that they need
more transactions in order for the valuation of the coin to
grow in a fashion that's not simple speculation. It's one of
the few ways in which there's hard data that can be evaluated
across the currencies, in order to highlight which ones have
improved and which one's struggle.
For coins that have significant transaction rates, look at the

growth of those transactions over the past year, past few
months, and past few weeks. Do you see growth? Or do the
transactions perfectly track the movement of the coin itself,
which indicates all the buying and selling is done for
investment purposes? If transactions perfectly track the coin,
then that's a problem. It indicates that speculators have
driven much of the transactions in the space, creating
movements in the coin based on whether investors have
decided to dump it or buy again. It's a unique wrinkle in
Crypto investing, since an investor buying and selling the
coin is the same as a regular user purchasing and spending

the token. When it comes to transactions, they all fall into
the same bucket. Therefore, if you're seeing transactions
track perfectly with the price of the coin, you're seeing how
much speculation is at play in driving the price.
Most importantly, you want to see a basement below which

transactions aren't dropping. This indicates consistency in
the number of transactions, and the higher this basement,
the better off for the coin. If, instead, you're seeing
transactions jump into the hundred thousand one day, then
fall to practically none the next, you have to ask yourself
why this is happening. If you then look at the price and
discover a sudden jump then fall in value, one coming
quickly after the other, it's an indication that the spending
came from speculation, which won't sustain the coin.
The Crypto's market capitalization
It's not just transactions you want to look at though, since

there's another layer to the spending puzzle, and that's how
many coins are available within the blockchain design.
Knowing the fundamental coin cap, or the limit on the
number of coins in circulation of the currency you're
researching provides some clues into how the coin is spent
(if at all).
Say you have a crypto with a market capitalization of $10

billion. That tells you something about the goal of the coin.
Its creators have a design in place that requires significant
spending in order for it to function as it's intended. You
don't have a coin cap in the billions unless you expect
significant transactions using the coin. This implies that
businesses and large institutions are also part of the plan,
since the large coin cap protects the coin price from large
single purchases. The high cap ensures the price doesn't
move too much from the single purchase and that there's
enough liquidity in the system to process the sell. Bitcoin,
for example, has a coin cap of 21 million, while Ripple's XRP
has a cap of 100 billion. The difference in size is partly due to
the fact Ripple wants to attract financial institutions, which
operate using large-scale transactions.
The coin cap also shows you how much more run room the
coin has before it hits its ceiling. Since most cryptos control
for issues like inflation through limiting the number of coins
that the market will ever see, there's value as a coin nears the
top end of the cap. It's then that, theoretically, supply ends
while demand continues to grow, driving the price of the
Crypto higher.
Calculating Owner Use
You can take the evaluation of this coin cap further, though,
by then calculating how much of the coin is actually
transacted on a daily basis. By looking at the circulation

supply, or the amount available to currently spend, and the
transaction rate, you can calculate the holding rate of coins,
that is, how much users are holding on to the coins. These
numbers will be high, since more users are holding on to
coins, than spending. But if you do this analysis for a
number of coins, it will at least tell you which ones are being
spent more than others, as a percentage of the coins
available.
Comparative analysis
There are a number of different valuation models and

websites that can be used to compare between the various
cryptos in the market. these include comparing the market
capitalization, the number of coins in circulation, and the
daily traded volume. All these give you a glimpse into the
profitability of a crypto over others.
It's important to remember, however, that any of these

comparisons are simply that: comparisons. The world
doesn't know what it means if one coin is transacted at a
slightly higher rate than another, since the information
could be meaningless if the weaker-transacted coin catches
interest from a large organization, giving it a sudden boost
of legitimacy and stable levels of spending. Then that one
coin that looked weaker will suddenly outperform the
stronger coin. Note that in the crypto market, none of these

comparisons will predict the future.
Instead, what you're doing through this analysis is creating a

way to compare coins on a holistic level, so you have some
sort of basis for the coins you like versus the coins you don't.
Inherently, it will eventually come down to your gut
instinct, since there's no mathematical equation to provide
an answer.
There are, however, a number of other valuation models

you can use to compare two coins. Here's a quick list, which
will provide a simple rundown of some of the tools that
investors use:
Mining Rewards
This explains how expensive it is to mine or approve

transactions. Is there incentive for a community to embrace
the coin? Has that incentive become too expensive?
Network Value to Transactions Ratio
This compares the market value of the coin to the number of

transactions a day.
Owner Concentration
Do a small percentage of people own the vast majority of

coins? This highlights the amount of interest from people
not intrinsically linked to the coin.
Transactions per Second
A higher rate per second indicates a stronger ability to scale,

if the demand of the coin grows.
What Businesses Have Signed On?
As you're evaluating cryptos that are linked to a start-up of

some sort, it's going to be imperative that the start-up grows
its business in order to encourage further coin usage. As an
evaluator of these coins, the onus is now on you to track and
determine just how interested these businesses are in the
technology. Having a running list of companies (or the
number of companies) that have shown commitment to the
coin will help provide a layer of understanding on just how
much business interest remains in the coin.
For decentralized currencies that target mainstream

spending, you should keep a running list of places that will
accept the coins. If the coin's transactions creep up, and
there's no increase in the outlets where they're spent, that
increase might have more to do with speculation. If, instead,
a major online retailer or payment system accepts the coin,
then a transaction move forward might indicate that there's
a growth in the basement number of transactions you can

expect moving forward. That's the growth you want to see.
Evaluating Individual Currencies
There's a tendency when looking at the cryptocurrency

landscape to fall in love with certain names. Maybe it's the
management team of one currency that you find as an
attractive quality in the coin. Maybe it's the transaction rate.
Maybe it's the business narrative. Maybe it's just a gut
feeling that has caught your interest. Whatever the specific
reason, there's a danger in falling in love with one coin. It
blinds you to the downside, which can be particularly
damaging if the coin then jumps after you've committed
your funds, convincing you to throw more money at the
name.
Easy way to Determine a Crypto's Credibility
As you've probably gathered throughout this chapter, there

isn't one tried-and-true way to bet on cryptos. They're far
too new to create this level of reliability. That said, there are
certain things you should make sure you understand and
have accounted for, before buying into any new name.
This checklist will help you as you get started:
What's special about the Crypto's

blockchain? There must be something unique

about the blockchain that the currency resides on. If
it lacks differentiation from its competitors, any
sort of short-term rise will soon fall back. Since
you're not in the day-trading space, why would you
commit funds toward the name only to see your
gains rise then fall?
What's unique about management? You
want credible people at the helm of a
cryptocurrency, and, more importantly, you want
credible people who are willing to put their name
on the project. While Satoshi Nakamoto gets a pass
because he or she invented the blockchain, all other
cryptos need to have credible management or
founders. If those founders are impossible to find,
then you have to ask yourself why.
Do you have space in your portfolio? While
you may have found a new name you have some
interest in, which has a unique capability and
strong founding partners, if there's not space in
your portfolio, then you probably want to avoid it.
This will keep you safe from yourself. Treat your
portfolio like a zero-sum entity. If you're adding
something, then you need to subtract from another
name. If there's no place to subtract, then weigh
whether investing in the coin is worth risking your

financial security.
Remember that there's no clear winner in the crypto space,

so even that gut feeling is just speculation. You don't want to
get overly caught up in one name, mostly because you don't
want to find yourself blinded by it. It's more than okay if you
lose out on some of the gains. These crypto investments
remain so speculative that it's better to come in a few days
late than overcommit to a name that then plummets.
There are a few ways to account for this concern.
Don't forget the potential downside
One of the reasons people fall in love with one coin is that
they've had short-term success investing in it. If you plan to
start out investing 10 percent of your crypto portfolio in the
name, then find yourself increasing that percentage to 20
percent and beyond, well, you've forgotten about your original
plan. You've fallen prey to the thought that what has happened
will continue to happen, leaving yourself exposed. Instead,
pretend as if you never made a dime on the specific coin. Start
over, evaluating the coin from the beginning, looking at how
the coin is traded, why it's traded, and how often it's
transacted. How do these numbers compare to other coins?
What inherent risk does the coin bring to the table? What
84 | CRYPTOCURRENCY & BITCOIN INVESTING FO R B E…
hasn't shown its face yet? And what's driving the momentum
forward? By resetting, and going back to the beginning, you
might find that you have overlooked critical situations that
could leave your overinvestment in the coin at risk.
If, instead, you're reaffirmed, then pick an appropriate

percentage level within your portfolio to target based on
your new analysis, being careful to not creep above the
number. Technically, by doing this, you're still trying to time
a market. But if it's the only way to prevent you from
increasing your risk in an unsafe way, then at least you're
managing your temptations. This is more understandable in
the crypto market because it's so tiny, new, and lacking
traditional investing structures, such as mutual funds and
exchange-traded funds (ETFs).
Don't Change the Amount You Invest
If you've set aside 5% of your pay to invest in

cryptocurrencies, don't change that amount in the belief that
one name will rise. If you start increasing the amount
irrationally, there's a very real chance you'll start investing
more, and more, trying to cover a loss or risking your
savings on short-term gains.
This is when you should display portfolio discipline. You

have set a portfolio that you believe will provide you with a
certain amount of return, if the crypto space moves forward.
It's not a guarantee that you will gain untold riches, but
based on what you can afford to invest and how much risk
you can take on, this portfolio is designed to protect you and
help you still profit. If at the first sign of excitement, you're
trying to increase the size of your stake and changing the
makeup of your portfolio, then you're displaying very poor
portfolio discipline.
If you're going to make a mistake in this realm, though, then

move part of your crypto portfolio into the coin you're most
interested in. Again, increase the size of the percentage
dedicated to the coin, and stick to that size, rebalancing
every quarter. Do not increase the amount in which you're
investing in the cryptocurrency space, since you chose the
original percentage for a reason.
Don't dwell on short-term speculative trades
As you do your research and become intrigued by smaller

altcoins with less name recognition, invest in the coins. You
should still, however, leave these names to the smaller
corners of your portfolio.
There's a lot that goes into a winning cryptocurrency. Take

a look at Bitcoin. It doesn't have the best technological
advantage in the blockchain space. It doesn't have
significantly more transactions than some other coins. It
doesn't even have a known founder. And a lot of the places
that accept Bitcoin also accept other cryptos. In trying to

answer the question, "Should Bitcoin remain the most
important name in the space?" from a pure analysis
perspective, probably not. Yet, because it was first and
because of its name recognition, its brand, and its use cases,
Bitcoin remains atop this digital hill.
That makes it very difficult to escape the name. When you

make a claim that XYZ crypto should become the market
leader because of its superior technology, strong leadership,
and everything else that's right for the coin, there's an
important word within the mix. That's should. It doesn't
mean it will. Plenty of smart, well-thought-out start-ups
have failed. Just because the coin should appreciate doesn't
mean it will. In fact, there's a significant hurdle before it can
reach a status where it's disrupting the space or even
becoming a more mainstream name, and that's actual use.
That's why you should invest in the name. But avoid

overweighting these names too much, since you can't
calculate many of the reasons that cryptos increase in value.
At least not yet.
Know when to stop
A wise investor always knows when they have gone too far
and it's time to stop, or pace themselves. If You Find
Yourself Trading a Lot, Stop!
A sign you've gotten addicted to trying to pick out specific

names and riding their coattails is if you're starting to
increase the amount you're trading on a daily or weekly
basis. Since you have a portfolio construction, and there are
fees involved with every transaction you make in cryptos,
you have little reason to trade every day.
What happens, when you start finding yourself trying to

pick out winners, is that your mind changes regularly. One
day, you have a gut feeling about NEM. The next, it's
actually Cardano. The next, lumens. You can't keep up with
this changing landscape because you can't actually know
which one will gain. If your trading picks up though,
evaluate why it has started to grow. If you're trying to
increase your gains using momentum, forcing you to move
from one name to another, then it's likely because you're
trying to time the market. If that happens, return to your
long-term thesis around cryptos, and let that play out instead
of trying to pick daily winners.
When to Hold and When to Sell?
Knowing when to hold onto or sell your crypto investment

is just as important as selecting the right Crypto to invest in.
When to Hold?
In crypto terms, holding onto your crypto investment is

often called HODLing.
When to hold and when to sell your investment will become

one of the biggest questions that new investors will face,
once they've picked out the names that they decide they
want to commit to. This question has many different factors
and can go far beyond just basic investing strategy. While
the vocal Crypto investing community often talks about
how they moved in and out of different coins, seemingly at a
head-spinning clip, in fact your decisions to hold could
prove to be the best one you make for the long-term stability
of your investment. Don't get caught up in the day-to-day
conversations that can make you feel inadequate or as if
you're missing out on an opportunity by not selling. In fact,
you don't know what the end result of the decision to sell
cost the owners who are bragging about their remarkable
gains, especially when your account for fees and the
opportunity cost of fleeing.
Therefore, when thinking about holding, these factors

should be your guide.
Do You Still Believe in the Technology?
One thing you've read over and over again is how nascent
the cryptocurrency technology and markets are. This means
that you're on the ground floor of an asset for which there's
no ceiling, yet. There's the potential for huge gains, when
looking over the timespan of years. If your investment shot
up 25 percent, while that's nice, there's no reason that over a
significant time frame—say ten years—that you wouldn't see

a 25 percent annual gain. Why would you want to exit when
you're working with that potential?
That's why you have to ask yourself, do you believe in the

long-term opportunity in cryptos? If so, and there's no
reason that the Crypto you have an investment in would
become obsolete in that potential future, why leave? While,
yes, it's true the 25 percent gains might be gone the next day,
you're not playing this market in order to capture a small
gain. Ideally, you're looking for a long-term shift in how we
use and spend digital dollars, which provides plenty more
long-term gains to capture.
Do You Need the Money?
Since you're only investing money that you can afford to

lose, what's the hurry in cashing out? The whole point of
this portion of your investment portfolio dedicated to
cryptos is to find something that will prove exponentially
profitable. If you're pulling out of the market at the first sign
of gains, then you either invested money you couldn't afford
to invest (which means you should get out of the market) or
you haven't fully committed to the investment. If you truly
don't need the money, as should be the case, then there's no
harm in keeping your funds in the crypto name, since you
want to be there in two or three years, in case your
investment has multiplied by three or four times. There's no
harm in waiting, since you're gambling with the portion of

your portfolio designed for this specific reason.
When Your Initial Investment Falls
There's a natural tendency, whether you're investing in

stocks, bonds, funds, and, yes, cryptos, to run as soon as you
see the value suddenly plummet. It feeds on the worst fears
of investing, and that's loss aversion. It's the notion that
we're more scared of actually losing money than the
prospect of gaining.
This notion can get you in a significant amount of trouble in

your investing life, if you do not check it carefully. That's
because if you're selling on the downside, you're locking in
losses. Take an investment of $100 into DOGE. Let's say the
$100 falls by 30% shortly after the investment processes, and
you immediately cash out. You've now locked in a $30 loss,
guaranteeing you will end up in the red on the investment.
Now let's say that three days later, the price of DOGE jumps
by 60%. You could be up by $12, at this point, instead of
down $30. You don't want to sell on the slide because it
guarantees that you're going to lose money.
If anything, consider this time of depreciation an

opportunity to buy, if you have the funds to do so. Why?
Because you have a chance to purchase the coins at a deflated
price, assuming you believe in the long-term potential of the
currency. Say you're adding $100 into your portfolio every

month, and the first month you bought the coin at $100,
which is now priced at $70. If you continue purchasing the
coin at the same pace that you originally planned, then the
$100 isn't just purchasing you one coin, but one coin and
nearly half of another coin. Your total portfolio now has
almost two and a half coins. Now let's say the price doubles
to $140 during the next month. You then have nearly $350
in coins, on an investment of $200. That beats the $140 you
would have had if you stopped buying when the coin's price
fell. It also crushes the loss of $30 that someone would have
locked in if they chose to walk away as the price fell.
When to Sell?
One strategy you'll see as you talk to more people about their
cryptocurrency investments is that they're almost looking to
cash out their investment as soon as they place the funds
into the market. It's as if such an investor believes that the
market will move simply because of his small infusion and
eat away his gains just because he decided to enter. Or if he
enters and immediately experiences gains, it's like an action
movie stunt trying to get the money out, as if he somehow
tricked his way into a profit. Don't be like this investor.
There's an inherent timing of the market when you're

selling because it's at that moment when you're locking in
whatever gains or losses you've earned over the time frame
in which you've invested money in the crypto space. That's

why you should be very careful when you're deciding to
make this move, since you're also locking in fees by making
the transaction. And doing it too often can rack up those
transaction fees, cutting into any profits you may have
gained over the past days or weeks. Here are factors you
should consider when deciding to dispose of your crypto
portfolio.
When It's Time to Rebalance Your Portfolio
Assuming you're not trying to day-trade your way into

profitable gains within the crypto market, then rebalancing
your portfolio will likely be the most common reason you'll
need to sell. What this does is move your targeted portfolio
percentages back in line with their intended mark.
Say when you began to invest you targeted a 50 percent

stake in Bitcoin, 30 percent in ether, and the rest in a various
number of other coins. Over time, as the prices of the coins
fluctuate, these percentages will become completely out of
whack. Say after three months your portfolio now has about
75 percent of its value in Bitcoin, 10 percent in ether, and 15
percent in the other coins, after Bitcoin propelled forward
while other coins either remained stagnant or stalled. In
order to get the balance back in order, you can sell the gains
in Bitcoin, and reinvest them into the other coins. This
assumes you want to keep the original portfolio structure
(which hopefully you do, and you're not being swayed by

some short-term movements in the coins).
In this case, you would sell the amount that makes up the
Bitcoin that has created a 25 percent increase in the portfolio
and spread the gains across the other coins in order to get
them back in line. You would do this, while also accounting
for your ongoing influx of cash that you commit to the
market. You'll have to pay fees on these transactions, so you
won't want to rebalance too often. A common habit is once
every quarter or twice a year.
When Something Crucial Changes in the

Structure of Your Investment
While you don't want to be in the business of trying to time

the market, there's a reason to sell a crypto investment if the
purpose of the coin completely shifts. Since many of the
coins are backed by start-ups, these companies could
dramatically change the focus or structure of the company,
moving on a whim. If these changes alter your investment
thesis in the coin, then it's probably time to escape.
The changes would probably occur for two reasons. First,

say a blockchain, like Ripple, originally sought to court
financial institutions with their technology. You liked this
narrative and bought in. Now let's say the company suddenly
announces that it can't find footing in the financial
institution space and will now look at retail suppliers as their

main target. While this is a farfetched scenario, if something
like this occurred then it opens up the coin to a much
different set of obstacles and competitors. It could change
the way you view the company and the coin, which means
you should probably sell if you don't believe in the new
focus.
The other scenario, which is more likely in the crypto space,

is if a technological change occurs that you don't believe in.
Say Bitcoin decided to change its structure to allow for faster
transactions. Well, this could hurt a coin like Litecoin,
which tries to sell itself on the basis of the ability to transact
faster. Maybe you think this is a big enough change to escape
Litecoin. Or what if Litecoin decided it wanted to change its
structure to hide users even more, and you disagree with this
technological alteration? Then you would maybe want to
escape the investment.
When You No Longer Believe in Cryptos
It is pretty obvious – do not invest in something you do not

believe in. Successful investors are often the ones who invest
in assets they believe in. Right now, it's easy to see the
potential in cryptocurrencies because it's based on new
technologies, it's still finding its form in the larger economy,
and most governments haven't taken significant steps in
order to build their own cryptos. That could all change
tomorrow, if something comes along that redefines how the

world views the potential of this space. If there ever comes a
time when you no longer feel optimistic that the
cryptocurrency narrative will turn into a world-changing
tool, then it's probably time to leave. That's not because your
investment has failed, but instead due to your inability to
support the trend. It'll make it nearly impossible to manage
your investment with clear eyes if you inherently don't
believe it can perform well. In that case, it makes sense to
leave.
How the Management of a Crypto Company

affects your Investment Decision?
The Importance of Management
Since many cryptocurrencies, particularly altcoins, that you

may throw your dollars into also have a business side based on a
blockchain start-up, it's important to know who makes the
decisions that shape the future of the business and, therefore,
the coin itself. Even if the coin, like Bitcoin or Litecoin, doesn't
have a company working behind the scenes, it's still vital to
recognize the person who created the network. As you perform
your analysis, evaluating whether or not there's a technological
need for the blockchain component or coin, it's going to help if
you know something about the management. Does it come
from a background of creating such cryptos? Has it shown a
technical superiority over peers? The answers to these sorts of
questions provide a base level of trust. If you trust the person,

there's a better chance you will trust the technology. That
doesn't mean that some important technology won't come from
some unknowns—after all, almost everyone was an unknown at
some point. It's just that if you research a coin developed by
someone who doesn't have a long track record in the space, then
you should require a higher bar for the technology before you
decide to place your funds in the investment.
When looking at an altcoin that has the blockchain company

behind it, though, there's a difference in what to expect from
the management, depending on who the person is and the
background they bring to the project. For some, it's the
technology that they have their hands on, leaving the
business building to others. For other leaders, those focused
on growing the company, it's about looking at the start-ups
that they've developed, proving a track record of success.
You'll want to see both types of leaders within these
companies, since both areas of the business have some major
technological and business marks to reach before they find
long-term success.
Then, there's a third group, which might not run a crypto or

own a blockchain company. Instead, these are the prominent
investors and thinkers in the space, which will help shape
the future of the coin through their ability to conceptualize
what will come or the power (or lack thereof) they have to
shape policies. Knowing where they invest—or
understanding where they're looking next—can provide
clues on how the cryptocurrency market is moving in the
future.
What's Their Reputation?
In order to evaluate whether or not the company leader

you're investigating has the stuff to pull off the success you
need, first look at the reputation they have within the crypto
space. Do they have a name that resonates on message
boards and blockchain circles? Do people talk about them
with respect or revulsion?
This is where going to the message boards and crypto

groups can help you gain some insight into how the
community views the technical acumen of the founder. This
tactic, though, really only works for the leaders that develop
the product, as opposed to the business leaders, since the
community has only so many facts at their disposal to
evaluate the company. Also, you're going to find stronger
opinions on these boards about the philosophy behind the
code, rather than whether or not the CEO knows how to
negotiate, for example. Since the code is open-source, there
are a number of other engineers weighing in and outlining
strengths of the platform. There's hard proof in that
discussion, which is why it's worth listening to.What Else

Have They Done?
It's rare that a superstar coder or gem of a business leader

comes out of nowhere to fully surprise the world,
developing a technology that no one could solve. Of course,
in the history of innovation, it has happened. But for your
sake, don't bet your dollars on the whim of a shooting star,
until others have touted the technology.
Instead, you want to view the technical leaders based on

what they've created in the past. While this might be the
first time, they've developed a blockchain tool that has
gained steam, there's usually a sign that there's interest,
intrigue, and legitimate talent prior to the launch of the
specific Crypto you're studying. You can search a name
online to get a feel for someone's past work. Also, check out
GitHub.com, a platform for developers, and see if the person
has created projects in the past. You want to see that this
isn't some get-rich-quick scheme, but a general interest in
the space. It will better protect you from scams or
uninteresting technology.
From the business side of things, it's easier to research. The

talent that has started to lead the development of a company
has certainly fallen more on the shoulders of CEOs and
presidents who have a history of creating within the
business world. It's not always going to be someone that has
already made billions—after all, if he was that successful in

another sector, he would probably stick with where he's
most knowledgeable.
You want to see proof that the business leader has some
success in leading start-ups, building them into larger
companies, and sticking around. Has he been a CEO before?
Where? How did that company do while he was there?
These are specific searches you can make when evaluating a
leader, which help provide some clarity around the talent
you're investing in.
Are They a Part of the Online Conversation?
When it comes to technical leaders, since the blockchain

space is so new, there are a number of outspoken
developers, all having a conversation about how specific
blockchains are developing, and the philosophy of the
science behind improving chains in the future. This creates a
back-and-forth between these crypto billionaires and the
community of developers that follows the space. Since
there's an effort to prove the validity of the technology, and
help shape its future, these crypto creators remain a part of
the everyday conversation, either through Twitter, Reddit,
or by creating white papers and videos outlining their most
recent additions. These leaders will provide regular analysis,
which allows you to form opinions on the ones you find
most insightful and intriguing. Follow the names through
their social media outlets and, over time, you will form
stronger opinions, separating out the leaders you don't agree
with or find intellectually shallow.
Do They Explain Themselves? Are they

Accountable?
The thing about talent is that they don't shy away from
promoting and cheerleading their creation. They're not
necessarily shilling their Crypto or blockchain, but they're
unafraid to defend it. Buterin is a perfect example of this.
While he has gone on record to say the crypto enthusiasm
has become too exuberant at times, he's also at the forefront
defending his technology and the blockchain in general. It's
important to see a leader so willing to defend the
technology, since right now it's all cryptos and blockchains
have. It will lead to more adoption and understanding of the
space and provide you with a comfort level that this person
actually knows what he's talking about.
Have They Proven Their Technical Acumen?
For most of us who didn't study cryptography or the outer

reaches of computer science, understanding whether or not
a founder's technical acumen reaches a high enough bar is
tough. After all, there are only so many times you can read a
white paper to determine if the actual concept makes sense
from a technological standpoint. You shouldn't have to make

such a leap.
That's why the community remains a resource, to help you

with the technology side of things. What have others said
about it? This world is full of opinionated developers, all
willing to call B.S. on the technology if it begins to make
headway. Rely on these discussions to decide whether or not
you believe it has technological value. If 100 percent of the
community is against the technology, then it's probably a
situation you want to avoid. If it's split, take the discussion
holistically and determine which side of the aisle you come
down on.
But don't outsource your opinion on the need for the tool.
Does the blockchain solve a legitimate purpose? Does the
Crypto serve an audience that's currently overlooked by
other offerings? Is there a market for the coin? These are
factors you can weigh on your own. Don't be afraid to form
opinions on that, even if you have to trust others to outline
why the code is legit or not.
2.3 DIFFERENT STORAGE METHODS
W hen you buy cryptocurrencies, you store them in

a crypto wallet. A cryptocurrency wallet is a
program that allows you to receive, send, and store
cryptocurrencies. There are several types of cryptocurrency
wallets. Some of them include desktop, mobile, online,
hardware, and paper crypto wallets.
It's no exaggeration to say that a crypto wallet is the single

most important thing to protect for as long as you are
involved in Crypto and digital currency. As soon as you have
the crypto wallet software installed on your computer or
mobile device, you will be presented with a crypto wallet
address. That crypto wallet address is the identification
number by which you are known as a member of the crypto
network. It acts as your account number to send, receive,
and store cryptos.
To give you a sense of some of the variations of wallets out

there, here's a quick rundown of some of the options:
Desktop wallets
Hardware wallets
Mobile wallets
Paper wallets
Web wallets
While this only touches on the most common, and safe

versions, it's important to remember that however you
decide to spend or hold your currency, there's probably a
tactic out there for you.
How Wallets Store Your Coins?
When you buy a crypto, there's a public key, which is used

on the blockchain to signal that it's a recognized coin.
There's also a private key, which you use to access the
specific coin when you want to sell or spend it. The wallet
stores the private key for you. If you lose this key, then you
lose your ability to access the coin. They essentially
disappear, since the wallet won't be able to find the coin,
you're referencing without the code and you won't be able to
prove you're the owner of said coin.
Types of Storage
2.3 DIFFERENT STORAGE M E T H O D S | 105
Besides the brain wallet, there are two ways you can store
the coins. You can either link the coins via an online
method, known as "hot" storage or you can store it offline,
which is referred to as "cold" storage. How often you spend
or sell your coins will dictate which type of storage you
select.
Hot Storage
An easy way to remember whether or not your cryptos are

at risk from hackers is this: if they're online, then there's a
potential that hackers could grab them. It doesn't mean it's
going to happen but storing your investment on a digital
wallet increases the chances because not only do the coins
rest online, but also, you'll have to give a third party—the
digital wallet—your information. If the wallet company itself
is hacked, you could very well lose your coins.
So why use them? Because you spend a lot. It's cumbersome

to move coins from cold storage, back online, then back to
cold storage. It will take a few minutes, in some cases,
especially if you're using the hardware method, which is
storing them in a tool that's similar to an external hard
drive. People who spend the coins often will probably
consider a digital or mobile wallet, at least for a portion of
their portfolio, in order to have easier access to the coins. If
you have a sizeable stake in cryptos, only store the coins you
plan to buy and spend in hot storage. Having a larger

portion of your stake in cold storage will protect your
portfolio.
Cold Storage
Holding your coins in cold storage means you're holding

them in an offline account that has no access for hackers. It's
the safest way to store your portfolio, and one that you
should use for most of your coins.
To achieve this, you have a few different methods at your

disposal. First, you can store them in hardware that looks
similar to a USB drive, where you upload the key onto the
tool, then unhook it from your computer. This stores the
contents in the device, leaving it secure from any third party
(unless someone were to rob you and take the drive).
Another option is on a desktop wallet. Some large investors
have a computer that sits offline at all times, storing their
Bitcoins and cryptos on the desktop tool within the
computer. If they need to sell any of their coins, the
computer comes online only briefly while the transaction
processes.
Another method is by using the digital barcodes, known as

QR codes, as your key, which you can print out onto a piece
of paper. Known as a paper wallet, this piece of papyrus will
2.3 DIFFERENT STORAGE M E T H O D S | 107
hold both your public and private keys. It's one of the safest
methods to shield your computer from malware, but if you
lose the paper or the QR code becomes wrinkled beyond the
point of recognition, then your Bitcoins are gone forever.
2.4 HOW TO BUY CRYPTOS IN THE
SAFEST WAY
B efore we discuss ways of buying cryptos, let's first

have a look at how these cryptos come into existence.
How Are Cryptocurrencies Created?
We will refrain from diving into the technical details of how

cryptos are created. Instead, we will break down the ways in
which they come into existence, in the simplest terms
possible.
Initial Coin Offerings
Many of the cryptocurrencies that come to market are

backed by a start-up company. This company has developed
the blockchain that tracks the coins for a specific purpose,
whether it's to help send money across borders more easily,
to improve tracking of supply chains, or some other

attribute that might appeal to businesses and consumers. To
raise money for the projects and to improve the appeal of
the cryptocurrency, the company will run an initial coin
offering (ICO). These are in some ways like an initial public
offering (IPO) through which a company will raise money
by selling stock. But there are major differences between an
IPO and an ICO.
You Don't Own the Company
When buying into an ICO, you're purchasing the

cryptocurrency that the blockchain firm has offered. This in
no way entitles you to an ownership piece of the business.
By owning XRP, you don't suddenly have a vote in how
Ripple operates. By purchasing ether, you do not have a say
in Ethereum's next upgrade. Instead, you're simply buying
the currency and can decide when to sell it.
This differs significantly from an IPO. By owning stock in a

public company, you do get a vote. If you have thirty shares,
you have thirty votes. While this doesn't necessarily allow
you decision-making powers, it does give you some say in
how your investment operates. It also provides you with
some investor protections, offering recourse if the company
acts fraudulently.
2.4 HOW TO BUY CRYPTOS IN THE SAF E S T W A Y | 111
You Don't Get Insight into the Company
ICOs have become a notorious microcosm of the Crypto

investing experience, since they've become a prominent way
to scam investors. This has brought much criticism toward
the regulations regarding ICOs, since companies releasing
the coins don't have to provide much information about
how they operate, what strategy they have for growth, and
what plans they have moving forward. They don't have to
share their balance sheets, provide documentation that
they've even made a sale, or show profit figures. In essence,
these companies are ghosts beyond what information they
independently choose to share with potential buyers of the
coin.
That's not the case when you invest in an IPO. Prior to the
launch of the IPO, the companies are required to provide
detailed financial information to the SEC. This becomes
public prior to the date of the IPO, so investors interested in
the company can weigh the health of the firm.
It's a Start-up That's Launching the ICO
The companies that launch ICOs are fairly young firms.

They don't have a long history of success, years of profits, or
even a plethora of investors (although some do have angel or
series-A investors). Typically, a company launching an IPO
has shown the ability to grow revenues or profits for some

time. Since the financial information of the company will
become available during the IPO process, institutional and
retail investors will judge the company's performance,
providing a harsh look at where it has been and where it's
going. This weeds out companies that have no real reason to
go public other than as a quick money grab. These bad
players are more difficult to discover during the ICO
process.
The appeal of investing in ICOs comes from the ability to

get into a new coin for incredibly cheap, which gives you the
opportunity to own a larger share of the name. The other
reason? Bragging rights for getting into a coin early that
then takes off. Both of these are fine reasons for owning an
ICO name. Just know if you choose to go this route, there's a
far better chance that the money you're spending will never
be seen again.
You Can't Know Which Coins Will Rise
It took Ethereum's ether nearly two years to rise consistently

above $20 a coin. Early investors in ether wouldn't have
found it to be a particularly exciting investment until 2017.
There's a likelihood that many early investors left, tired of
waiting. The point is that investing in ICOs is extremely
risky, since you can't know which coins will take off, because
there's very little information about the blockchain that

supports the coin, and it could take years before your initial
investment thesis plays out.
It, therefore, won't hurt to wait a while before selling off

your cryptos after an ICO. The flip side of the ether story,
taking two years to reach $20, is that it would have given
any investor far more time to buy into the coin, as more
information about the technology became known. Over the
two years in which ether did very little, the world grew to
know the founder, Vitalik Buterin, and Ethereum had
started to court large companies that showed interest in the
blockchain technology. It gives you time to know which
ones seem like legit businesses. Sure, you'll own fewer
shares, most likely, but there's an improved chance you're
not throwing your money at a bad business.
1. They're Mined
This is the process that Bitcoin made popular. Deep within

the blockchain's code, there are a certain number of coins,
and miners look for those coins to uncover new ones. Once
they're uncovered, miners can then sell the coins to the
market, just as you would sell them. The difference is the
miners didn't have to pay market rates to obtain the
treasure. If there's a market, as there is for Bitcoin, then the
coins will be snatched up quickly.
2. They're Controlled
The company Ripple used a controversial strategy when it

launched its Crypto, the XRP. Instead of an ICO, it mined all
the coins, gifting a large portion of them to their executives.
They then trickled out coins periodically, based on a number
that the company determined would drive demand and
ensure supply. The community turned against XRP due to
this setup, so the company decided to take about half of the
total XRPs and place them in an escrow account. The
account funnels out 1 billion XRPs each month. If any of the
coins go unclaimed that month, then the XRPs return to the
escrow account until all of the XRPs are in circulation. It's a
unique setup, one that might have an appeal to other
companies, since it does offer some control in the coin.
3. They Fork
Blockchains are (typically) open-source software, and a

community can sometimes tweak, test, change, and improve
the system, seeking upgrades to the way it operates. Since
there are weaknesses in the original blockchain—particularly
when speaking of Bitcoin—the community sometimes wants
to tweak the blockchain that the Crypto runs upon. If the
community, in mass, approves the tweak, then a new coin
isn't produced. But sometimes the community disagrees
with a solution. In this case, the minority group produces
what's referred to as a hard fork, where an entirely new coin
develops. This will be discussed in further detail in the next

section.
A Hard and Soft Fork
While the mechanics of creating a hard and soft fork can be

complicated, generally speaking if the community of users
and developers of a blockchain decides to make an
improvement that the majority of the community or
developers agree with, then it creates a soft fork, or a switch
in the code that the original cryptocurrency will adhere to.
This means the currency continues on under the new rules,
without changing the makeup of the coin.
Sometimes, though, this change isn't approved by a vocal

minority within the crypto community, which leads to a
disagreement on the future of the Crypto. These
disagreements can arise when the minority group believes
the blockchain should change to improve the coin in some
way, or it can arise because the majority believes a change
must occur and the minority group disagrees. Instead of
holding hostage the wants of the vast majority of the
community, which agrees with the change, a minority forces
a hard fork, in which a large percentage of developers will
move with the original coin. The ones who disagree with
the larger community will create a new cryptocurrency,
which takes into account the less popular decision.
What Happens in a Hard Fork?
When a hard fork occurs, creating a new cryptocurrency, it's

similar to a stock split. Current holders of the currency will
receive a certain amount of the new coin. For instance,
when Bitcoin cash was created during a hard fork of
Bitcoin's blockchain, a Bitcoin holder received one Bitcoin
cash if she owned Bitcoin at the time of the fork and the
exchange, she used recognized Bitcoin cash. It's not always
this one-to-one dynamic; there are instances where a split
will lead to receiving multiple coins of the new token. It's
dependent on the reason for the fork and those driving the
change.
Now, let’s understand the safest ways to buy cryptos
Finding the Right Exchange
Part of picking the exchange is personal preference. There

are features and user interfaces that you might find more
appealing in one exchange that are lacking in others.
Another part of picking an exchange has to do with security.
Since regulations have only begun to tighten around
exchanges, you'll want to make sure any platform you use
has passed the most up-to-date regulatory reviews. The last
consideration in your exchange selection should be whether
or not you can get the best price for your cryptos. Since
prices can differ based on the exchange you use, it's worth
monitoring multiple exchanges when you begin to think
about selling your coins.
Check their insurance policy
What you need from an exchange, more than anything else,

is the knowledge that if you use it as a regular way to buy
and trade cryptos, you won't lose all your investment if it's
hacked. However, because of the lack of regulation
surrounding crypto exchanges, there's still no such promise
that an exchange will pay you back if it suffers a breach.
Whether or not an exchange will pay back what's lost will

depend on the exchange and how much the hackers stole. It's
a risk, no matter what exchange you choose, which is also
why it's good to use various ways to store your coins, from
multiple wallets to different exchanges; that way not all your
crypto eggs are in one proverbial basket.
Stay Local
It is relatively easy advice to say stay within an exchange

that's located in your country. Since there are plenty to
choose from, you can easily find an American-based
exchange that matches your aesthetic needs, as well as quell
some of your security concerns. The same goes for someone
living in Japan, South Korea, or Hong Kong. Since these
locales have a high stake in the crypto game, they have local
exchanges that have done the due diligence that's expected at
this point in the crypto lifecycle and will adjust to any
changing regulations.
But it makes sense to stay local, since if something goes

wrong, then you'll have an easier path to collect. It's not
going to be as easy if you live in the US and trade in Japan. If
a hack occurs, you're potentially dealing with language
barriers. Plus, you'll have to become much more familiar
with the Japanese government and judicial system in order
to try and collect.
Monitoring Other Exchanges
Since there are hundreds of exchanges across the world, it

creates an investing arbitrageur's dream in that there's
plenty of ways that one exchange could price one coin
significantly lower or higher than others. It's an issue that
exchanges have tried to dampen, in an effort to create a
unified price for each Crypto. Yet, it hasn't completely been
achieved. The price differences can become more dramatic,
since there are certain altcoins embraced by one country,
while other countries aren't as enthused by the same names.
While exchanges have taken steps to reduce the

opportunities available through arbitrage, it's good to keep
an eye on at least one South Korean, Japanese, and Hong
Kong exchange, as you'll be able to start to notice what

altcoins the local areas view more attractively than in
the US.
If you decide to go the arbitrage route, be sure the price

differences make up for any fees you might pay, either to
process the payment on the blockchain or to pay the
exchange for the service. If you do try to arbitrage, you'll
probably want to have a number of different coins on
different exchanges. It can take some time—up to a few days
—to transfer coins between exchanges, which means price
fluctuations could flush out the opportunity. Finally, don't
forget to calculate the tax implications of all the buying and
selling, as it will also play a role in your returns.
Check That It's Registered
If you're in the US and using predominantly a US exchange,

be sure to check that it's registered with the Securities and
Exchange Commission (SEC), a federal agency that's
empowered to monitor investing markets in order to
protect investors. Since the SEC has cracked down on
exchanges, the reputable ones will have registered with the
agency.
If You Don't Know, Ask
There are so many forums available to crypto investors,

both for new investors and veterans in the space. If you're
unsure about a certain exchange, ask a forum to get a sense

of the reputation that the exchange has amongst the crypto
community. While it's not fail-proof, there's a sense of relief
if you're going with an exchange that the community
overwhelmingly backs.
2.5 WHAT CRYPTOS ARE BETTER FOR
INVESTING?
I n a market with over 5000 cryptos, selecting the best

cryptos to invest in can be a daunting task. Investing
needs to take a different approach than trading. For traders,
they have the advantage of buying or shorting the market
which means they benefit from the short-term market
fluctuations in any direction. For crypto investors, the
primary objective is to select the cryptos which have the
potential of appreciating in the longer term, ignoring the
minor short-term price fluctuations.
Before we give you our recommendation for the best crypto

to invest in, here are a couple of things you must keep in
mind.
Find Complementary Investments

What you’ll have to ensure you avoid, since you have to put
together your crypto exposure on your own, is accidentally
doubling up on one investment. Say you take $500 and
invest $200 in an ETF, $200 in Bitcoin, and $100 in other
cryptos, then how much Bitcoin exposure have you created?
You would then have two-fifths of your portfolio directly in
Bitcoin. But you also have to calculate the percentage that
the ETF is exposed to Bitcoin. Say it’s 6% of the ETF, that’s
$12 of the $200 with direct exposure, which then goes to
$212 of your total exposure to Bitcoin, or 42% of the $500.
While the 2% change might not impact your decision, it

highlights what could happen if you place a greater
percentage of the investment in the ETF. Instead, if you split
evenly the entire $500 between a Bitcoin and an ETF,
hoping that you’ve diversified your crypto investment, think
again. First of all, only $265 has exposure to cryptos,
assuming the same 6% ETF portfolio exposure to Bitcoin.
The remaining $235 is invested in other stocks the ETF has
chosen. Of the $265 in cryptos, it’s 100% invested in Bitcoin.
You haven’t diversified within cryptos at all, other than as a
way to protect a very small portion of your portfolio from a
hack.
Again, work under the assumption that once you invest this
money, it’s gone. Since you’ve already lost it by placing the
dough into the blockchain sphere, why not just go for the
2.5 WHAT CRYPTOS ARE BETTER FOR INV E S T I N G ? | 123
names that could prove the most valuable to you? This

would mean ignoring the ETF option—unless the SEC
changes its rules or you genuinely like the ETF for other
parts of your portfolio. Instead, take a bet, since that’s what
you’ve decided to do, and throw your investment at specific
names. This will provide you with as much diversification as
possible when investing in the crypto space, and it commits
your money to names that could rise significantly. It may
remain a small possibility, but you won’t see large gains from
the ETF, unless all of its investments perform reasonably
well.
Don’t always rush for unregulated ICOs
Initial coin offerings (ICOs) have become the most common

method by which new cryptos are introduced into the
market. While there have been some successful ICOs in the
past, namely Ethereum, most scammers use ICOs as their
weapon of choice.
The quickest way of spotting a scam ICO is if you are

promised: "guaranteed returns" on your investment. When
it comes to cryptos, there is no such thing as a guaranteed
return on investment. If you are new to cryptocurrencies,
you are better off investing in mainstream cryptos – avoid
ICOs.
Hunt for the utility of the crypto

We cannot stress this enough. If you are new to cryptos,

you are better off investing in well-established and
mainstream cryptos. We covered the most important
cryptos in 'Session 2'. If you'd want to invest in something
exotic, then you better be ready to do some serious due
diligence.
Take Ethereum, for example. Its massive success can be

attributed to its contribution to the kick-starting and
furthering development of decentralized finance. Ethereum
gave crypto developers globally a platform to build their
own decentralized applications. Ethereum gave us smart
contracts! By some measure, every altcoin brings some
utility to the DeFi ecosystem. For example, the crypto
community is continually addressing problems with
scalability, absolute privacy, and interoperability. These
issues can be used as a yardstick to measure the usefulness of
an altcoin. If it doesn't address at least one of them, then do
not bother investing. Chances are, you'll be parking your
fund in dud crypto.
How to Build Your Own Index – Guide
If you’ve decided to place a few bets into names that would

give you exposure to different types of opportunities, coins,
and blockchain companies, then you can build your own
index, moving the exposure as the fluctuations of the market
move down and up. You can do so by matching your
investment portfolio to what you can expect to see within

the crypto market.
Let’s pretend you have $1,000 to use for this process. You’ve
decided that you want a broad range of names, somewhere
between five and seven coins. Use the market capitalization
of the coins to determine what percentage of your portfolio
should go in each coin. It’s how many index funds would
calculate the coin exposure, if a crypto-index fund existed.
Since Bitcoin fluctuates around 50% of the total crypto

market capitalization, you have $500 in Bitcoin. It’s prudent
to listen to the crowd sometimes in investing, and the crowd
supports the idea of ether right now, which accounts for
10% of the market cap, so $100 will go into Ethereum.
You’ve now also got 50% in a decentralized currency and
10% in a mainstream start-up.
Next, find some non-mainstream cryptos to also place a few

dollars in. Say you’re a fan of XRP, Stellar, and Cardano.
Those names combined, have about 15 % of the market cap,
so you can split them along their percentages, with $100
going to XRP and $25 going to both Cardano and Stellar,
respectively.
You probably want some exposure to decentralized currency

platforms not named Bitcoin. This could lead you to coins
such as Litecoin, Monero, and IOTA, which would account
for about 5% of the portfolio. Now you can look at Bitcoin

cash in order to hit the forks, by placing $50 in the coin,
which accounts for about 5% of the total market cap.
That leaves you with 15% to move out to different names

within the space, as well as the opportunity to place $100 or
so into ICOs directly (if you want to take that risk). With the
biggest names, you’ve accounted for about 85% of the top
100 market caps in the crypto space. The extra 15% can be
used for various other targets. You can also use the 15% to
invest more in Bitcoin or Ethereum or another name you
particularly like. Just know that by doing so you’re investing
more into the name than the value of the coin, compared to
the market. You’re overinvested in that name. It’s fine to do
this, especially in a nascent market like cryptos, but by doing
so, you’re making a claim that you believe that name will rise
more than others.
Once you’ve done the research, and figured out what names
to invest in, then this is what it will look like if you have
$1,000 to invest:
Bitcoin = $500
Ether = $100
XRP = $100
Bitcoin cash = $50
Litecoin = $30
Cardano = $25
Stellar = $25
IOTA = $10
Monero = $10
Various other names and ICOs = $150
This strategy gives you exposure to nine different names,

along with whatever coins you choose to invest in with the
extra $150.
Prices will move the size of this portfolio up and down,

depending on whether certain names perform well, and
others perform poorly. This, over weeks and months, will
drastically change the percentage of your portfolio in each
name.
For instance, if Bitcoin falls by 60% and ether rises by a

similar amount, your portfolio could now be almost equally
balanced between Bitcoin and Ethereum. You’ll want to keep
an eye on these percentages, and every month or quarter,
rebalance these coins by purchasing those that have fallen
and selling some of the coins that have gained.
You can reinvest the gains back into the coins that have
fallen, which will also give you more coins of the ones that
drop in price. This is beneficial if the coins rise, since it will
create a compounding effect where you’re no longer just
gaining on, say, five coins (the original purchase), but now
profiting on ten coins (the amount you rebought plus your

original purchase, in order to rebalance the portfolio).
Don’t Follow the crowd – Avoid FOMO
When it comes to investing, it is not a good idea to jump

into the buying frenzy. Fear of missing out (FOMO) could
end up being the difference between you picking wining
crypto to invest in and sticking with joke crypto. We live in
the age of sensational media headlines, which may seem like
a call to action. Whenever you see such sensational
headlines, master all the courage you can to avoid falling
into the FOMO rabbit hole.
We have witnessed random cryptos being pumped by

celebrities to capture global media attention as an
investment-worthy token, only for them to end up being
utter scams. The problem with such media hype is that the
value of the cryptos tends to be overvalued. Whenever you
see an unknown cryptocurrency being hyped, be cautious,
especially if such tokens aren't proven in the DeFi
community. They could be a run-of-the-mill pump and
dump scam. This is when crypto is hyped by those who own
them to inflate the price. Once people start buying, and the
price goes up, they sell their cryptos in the market, leaving
unsuspecting investors with dud cryptos and massive losses.
Passively earn by staking and lending your crypto

holdings
Crypto Staking is an alternative to crypto mining. As a

crypto investor, you intend to hold your portfolio for a
longer period, i.e., HODLing. While your portfolio might
appreciate in the long run, you should also consider staking
your cryptos. That way, you will earn interest instead of
your crypto lying around idly. Consider staking as some sort
of 'value addition' tactic.
Staking is one of the easiest ways for you to earn periodic

income passively. Since the advent of the Proof-of-Stake
(PoS) consensus mechanism, crypto holders can lock up
their cryptos in a smart contract which can then be used to
verify the transaction in a blockchain. In this case, stakers
are the validators on the network. When you validate
transactions on the network, the network rewards you –
often in cryptos.
This presents an easy way to earn passive income while still

maintain your crypto portfolio. More so, some crypto
wallets allow you to stake your cryptos directly. You can also
stake from crypto exchanges like Binance.
Note that not all cryptos can be staked. If you intend to

stake, you should consider investing in cryptos that can be
staked.
Crypto lending is also an ideal way of earning passive

income while maintaining your crypto portfolio. You can
earn interest by lending your cryptos via several crypto
lending platforms or crypto exchanges. Crypto lending has
become rampant with the growth of crypto derivatives.
Leveraged traders need to borrow cryptos for trading. These
cryptos are often lent by spot investors who are
compensated through daily interests. This way, your
portfolio earns interest while you hold for the long haul.
Identifying the Top Cryptocurrencies
Several factors go into choosing the top cryptos. These

factors include:
The daily traded volume: the higher the better.

This implies that there are a lot of people trading
that particular crypto. Active trading ensures that
there is efficient price discovery, and also
guarantees that the crypto won’t fall into oblivion
and lose its value.
Market capitalization: This shows the top-
performing cryptocurrencies in the market.
Mathematically, market capitalization = crypto’s
price x number of coins in circulation.
A crypto’s market capitalization can also be used to track its

performance, since its price fluctuation impacts its real-time
market capitalization. Investors can use this to track their
portfolio and also structure their portfolios based on the
percentage of the market capitalization.
The number of coins in supply. Remember that

cryptocurrencies are, by design, limited in supply,
and they are only gradually increased in the market.
In theory, cryptos with the highest number of coins
in circulation tend to face the least price volatility.
The type of crypto. As we mentioned earlier,
altcoins can be categorized into stablecoins, security
tokens, privacy coins, or utility tokens. While
creating your portfolio, you may include cryptos
from each of these groups. This would be
diversification at its best.
Top 20 Cryptos Based on Market capitalization (As

of April 2021)
Top 20 Cryptos Based on Circulating Supply

III
OVERVIEW OF NFTS
3.1 WHAT ARE NFTS?
N on-Fungible Tokens (NFTs)
While cryptography and blockchain technology is

evolving quickly, digital assets and their classifications
evolve right alongside them. An excellent example of one
such fast-paced change in the crypto world is creating non-
fungible tokens (NFTs). Before we understand what NFTs
are, let's revisit the traits inherent in money.
What is Fungibility?
The best way to understand what NFTs are is to understand

what they are not.
You have used money before, so you may intuitively know

the meaning of fungibility. But you may not understand the
term "fungible", which we'll try to explain right now. The

term fungibility has to do with a currency's ability to retain
its standard value and maintain uniform acceptance. What
this means is that the history of a currency doesn't in any
way affect its value. So, every piece of the currency is equal
in value to other pieces of the same currency.
For instance, if you have a $100 note in your wallet right

now, it has the same value as the $100 note that your
neighbor has. If the two of you take the money to a
restaurant, the restaurant owner will also accept them
equally even though yours was printed in 2020 and your
neighbor's $100 bill was printed in 2018. Even if your
neighbor's money came from the devil himself or was used
in a drug deal before they received it, its value remains
unchanged at the grocery store. The same goes for
cryptocurrencies. 1 BTC in the US has the same value as 1
BTC in Germany.
In a nutshell, fungibility means that an asset is

interchangeable with another asset of similar value. You can
replace a $100 note with another $100 note in our above
example, and there will be no change in value. More so, you
can break down the $100 into smaller denominations, and
you would remain with money worth $100. The same goes
for cryptocurrencies too. They can be subdivided into
smaller units and spent independent of each other.
3.1 WHAT AR E N F T S ? | 139
This is the simplest explanation of the power of fungibility.

This also implies that any currency without fungibility may
likely collapse because it will be unstable. Regardless of the
type of currency – fiat or digital – fungibility is essential.
Note that fungibility is relative. That means that it is only

applicable when we are comparing multiple assets. Let's take
the example of plane tickets – you have business class,
economy class, and first-class flight tickets. These tickets are
fungible within the specified classes since you cannot justly
exchange a first-class ticket for an economy-class ticket
without losing some value.
However, the concept of fungibility can also be subjective. In

the above example, if someone prefers sitting by the
window, they will attach more value to their ticket than, say,
one which allows them to sit by the aisle. The same can be
said about money as well. If you have a 1 cent coin, it is
worth just 1 cent to you. But to a coin collector, it might be
worth a lot more than just 1 cent.
So, What Are Non-Fungible Tokens?
In crypto, fungible tokens can be exchanged for each other,

with their value remaining constant throughout. So, every
cryptocurrency you know of is a fungible token. Their value
remains the same regardless of who owns it. Non-fungible
tokens can be said to be the exact opposite of this.
They are a group of blockchain-based tokens that were

created to be unequal. At first, you might conclude that it
doesn't make much sense to create unequal tokens, especially
after examining the definition of the term fungible. Well,
you're right if we are discussing currencies, but blockchain
tokens can represent other things beyond currency.
Blockchain technology offers endless possibilities.
As a result of their distinctive individual attributes, non-

fungible assets are not interchangeable. They possess unique
attributes that make it impossible to exchange or replace
them. The most popular NFT in the crypto space is
CryptoKitties. There are thousands of CryptoKitties, but
they are not designed to be equal. They all have their unique
features, such as their fur color, facial expression, name, fur
pattern, eye color, and other special features.
If you choose to purchase a CryptoKitty, you also gain

ownership of a non-fungible token. The non-fungible token
you own will correspond with that Kitty, and some of these
kitties are more valuable than others. On the platform,
participants can buy and sell their CryptoKitty NFTs for
different amounts of fungible tokens, such as Ether, based on
how rare their NFTs are.
Advantages of Blockchain Technology

3.1 WHAT AR E N F T S ? | 141
The main reason why NFTs have gained massive popularity

can be attributed to their use of blockchain technology.
Therefore, the advantages of NFTs can be the same as those
of blockchain technology.
It Offers Transparency
Remember, I mentioned earlier that the records are stored

in blocks stored in various computers, or nodes, around the
world. This implies that when trade data is published to a
common platform, it's easier for regulators and stakeholders
to plug into this database and obtain real-time information.
Users on the blockchain network can easily verify and track

transactions in the decentralized and public ledger. Even in
the case of a private blockchain, all those who are given
access to the records can view the entire record of
transactions. The alteration of data is almost impossible
because all parties involved can view the data stored in
several computers in different locations worldwide. Any
alteration will be seen by all and instantly rejected and
corrected.
Decentralized Network
One of the core features of blockchain technology is

decentralization, and it is one of the major benefits, too.
Instead of storing data in one central or single-point server,
the data is stored in different computers because the

blockchain system is completely decentralized. This also
implies that authority can't control the entire network in a
bid to advance its agenda.
The decentralized feature of blockchain also increases its

security while making it a fair system of distribution. With
blockchain technology, users can directly access data from
the web and even store their assets. This decentralized
feature of the distributed ledger comes with several benefits.
First, it reduces the cases of failure because everything on

the blockchain network is organized. It's a system that
doesn't rely on human calculations, and this makes it
extremely fault-tolerant. There are no cases of accidental
failures in this kind of system. And still, there are additional
benefits of blockchain's decentralized structure:
It gives users control over their properties: There is

no need for participants or users to depend on a
third party to help them maintain their assets.
Instead, they can do it themselves simultaneously.
No scams: Since the system runs mainly on
algorithms, it leaves no room for people to scam
others out of their assets. Also, no single individual
can use blockchain for their gain. But it's also
3.1 WHAT A R E N F T S ? | 143
important to note that there are other strategies

that hackers adopt to steal people's funds, and some
of these strategies have been successful.
Less susceptible to breakdown: The decentralized
structure of blockchain enables it to overcome any
malicious attack. It's usually more expensive for an
individual or group of individuals to attack the
system, making it less likely to break down.
Secured Data Courtesy of the Peer-to-Peer

Network
With the increase in the information exchanged and

frequently updated among participants within the network,
the blockchain gets stronger even as the participants
increase. One of the core features of a distributed ledger is
the P2P network, and the term "peer" has to do with the
computer system existing within the blockchain network.
For instance, the Bitcoin blockchain comprises about a

hundred thousand nodes. So, all participants make use of
and provide the network's foundation at the same time. All
nodes are regarded as equal within the network. A peer
offers other users’ part of its resources, like processing speed,
bandwidth, and disk storage, without central coordination
by any host or server.
However, it's crucial to note that while all nodes are equal,
each one of them can handle different duties. So, a node can
either be a miner or a full node. In the case of a full node, the
complete data stored on the blockchain containing all
transactions from the first to the most recent will be copied
to a single device in the connected network.
This means that the data stored on the blockchain cannot be

lost or destroyed, as doing so would entail destroying all the
full nodes in the network. So, in the case of Bitcoin's
blockchain, for anyone to destroy or alter any information,
they need to destroy the same information in every full
node. There are approximately one hundred thousand.
Another aspect of blockchain technology that ensures the

credibility of the data stored in it is governance. The
majority of participants in a blockchain system will have to
agree on any data added before it can finally become part of
the definitive blockchain. This differs significantly from
central (and in most cases secretive) ledgers stored in central
servers.
This implies that multiple parties can determine what data is

written or altered, and they can also remove a dubious date,
which helps create a more honest system. Let's consider the
existing centralized land registry systems. The database
administrator of a centralized registry system can alter the
3.1 WHAT AR E N F T S ? | 145
records and cover their tracks without other participants

knowing.
On the other hand, if the land registry is held on a

blockchain system, which has multiple participants who
have access to the information, such as regional and local
government or NGOs, then when a database administrator
makes such dubious changes, others would have to agree
before those changes can be recorded. They can also detect
questionable changes, which would not be added without a
majority consensus.
Ease of Use
Another benefit of blockchain technology is that it's easy to

use and fast, especially with competent integration
capabilities. Since there are no intermediaries, the flow of
money or data is quicker. In financial institutions like banks,
transactions involving huge sums of money take several days
to complete due to various protocols.
Also, most financial institutions work based on defined

working hours, and online transactions are not permitted on
holidays in some countries. On the other hand, blockchain
technology is not restricted by public holidays or weekends;
essentially, transactions can be made any day or any time
quickly and safely.
In addition, blockchain is open-source software, which

further cuts down on the barriers to entry and leads to a
stronger developer base and enhanced transparency. Open-
source software means that it is collaboratively produced,
freely shared, developed transparently and published for the
benefit of the community instead of being the property of an
individual or a single organization that uses it to profit. Note
that no single company or individual develops, owns, or sells
the software. This helps eliminate bottlenecks in the process
of developing the open-source software.
Security/Immutability
As soon as the blocks are sealed cryptographically, it's no

longer possible to copy, delete, or edit them, and this ensures
the immutability of the digital ledger. Remember,
decentralization is a core feature of blockchain technology,
and it helps ensure that there is no central point of failure or
error within the network.
Since there are no weak points within the system that

hackers can exploit, there are also zero chances of malicious
attacks, and this helps boost the reliability of the network.
Every transaction requires a digital signature via public and
private keys that use different cryptographic schemes to
ensure complete encryption.
Trust
3.1 WHAT AR E N F T S ? | 147
The identity of participants in blockchain transactions are

confidential, and this ensures that everyone involved can
deal freely with others via the secured network. Perhaps the
top two benefits of blockchain technology include complete
anonymity and transaction security. Well, not all blockchain
transactions are completely private as the identity of
participants in some blockchains like Bitcoin can still be
traced.
However, there are privacy coins such as Monero, Zcash,

Dash, and several others that focus mainly on providing
complete anonymity of transactions within the network.
Transactions in centralized networks require the address
and other personal information of users, and such
information may end up in the hands of hackers, as we have
seen recently. But privacy-focused blockchain networks
ensure that the addresses of each wallet are protected by
constantly changing the addresses, which makes it extremely
hard to trace payment transactions.
Blockchain Offers Faster Settlement
The current banking system is very slow, and, in some cases,

a transaction can take several days to process after finalizing
all settlements. Apart from being slow, it's a system that is
prone to corruption. But one of the striking benefits of
distributed ledger technology is that it offers faster
settlements, especially when compared to the existing
banking systems. With blockchain, people can transfer

money faster, which will save them a lot of time while
making life easier for foreign workers.
In short, blockchain offers reliability, privacy, ease of use,

and freedom from third parties. With so many benefits, it's
clear its journey is just starting.
3.2 THE STANDARD OF NFTS
W hat is the ERC-721?
Currently, most NFTs are implemented on top

of the Ethereum platform as ERC-721tokens. You can find
other tokens under NFT, with different standards and other
protocols and blockchain, for example, on NEO or EOS, but
ERC-721 is currently the most popular standard of NFT.
The ERC-721 has a set of standard features and attributes
that define it in the form of a smart contract. You need to
follow these attributes and features to own, trade, and
manage the ERC-721. Simply put, the ERC-721 provides us
with a standard for creating and exchanging NFTs. Each
ERC-721 marker is unique in that it does not belong to
ERC-20 markers.
There is another key difference between the ERC-721 and

ERC-20 tokens. ERC-20 tokens are divided, just as you can
divide one $10 banknote into two into five dollars.
However, ERC-721 markers are not divided. Can anyone in
their right mind share a ticket or a baseball card? No, just
like with NFTs.
The ERC-721 is currently the most commonly used standard

for digital art and blockchain gaming. Hundreds of Dapps
have since used it, and more than a million unique tokens
have been created.
ERC-721 vs ERC-1155
Although the ERC-721 was an instant success and was used

to create probably millions of NFT, it also had some
limitations. For example, it was expensive for deploying
large databases of items.
To overcome these shortcomings, Vitek Radomsky decided

to create his standard - ERC-1155. This means that the
ERC-1155 is an advanced and better version of the ERC-
721, offering many new features to create NFTS.
For example, with the new ERC-1155 standard, you can use
both an infinite number of non-fungible and fungible assets
in one deployed smart contract. According to Vitek
Radomsky, it is also easy to work with the blockchain
3.2 THE STANDARD O F N F T S | 151
network. He also argues that this new set of standards is

good for the blockchain-based gaming industry and is also a
good option for creating tokens for all forms of ownership,
whether digital or material.
3.3 THE FUTURE OF NFTS &
BLOCKCHAIN TECHNOLOGY
W ith the gradual decline in the number of high-

profile critics of Bitcoin and blockchain
technology, the future of the crypto space is quite exciting,
especially considering the innovations entering the market
daily that show greater and bolder uses of distributed ledger
technology. And in 2021, NFTs have emerged as one of the
biggest winners.
NFT's are manufactured according to the ERC-721 token

standard prepared by Ethereum developers. Some platforms
make it possible to perform the transaction easily so that
users do not drown in the technical world of blockchain. All
you need to produce NFT is a digital cryptocurrency wallet.
After uploading the file to be produced as NFT to the IPFS
system through these platforms, the parameters of the NFT
that cannot be changed are determined.
After determining the features such as how many will be

produced from NFT, price, how many shares will have to be
paid on the next sale, NFT is produced by paying the
transaction fee of the blockchain network. Upon completing
the transaction, NFT's are transferred to the cryptocurrency
wallet and recorded on the entire blockchain, where the
production is carried out.
The trust factor in blockchain technology is expected to rise,

as predicted by Forbes. The impact of this technology
remains under speculation. Still, with the increasing number
of applications already at work in the market, it's only a
matter of time before distributed ledger technology spreads
to every industry.
In 2017, analyst firm Gartner predicted that we could

compare the universality of blockchain to "all things digital",
and that prediction has, without question, become a reality
after just three years. The firm's Trend Insight Report also
shared the following forecast:
The worth of at least one innovative business built on

distributed ledger technology will be $10 billion. Only 10%
of enterprises will accomplish any radical change by using
blockchain. The business value added by blockchain by 2026
will grow to about $360 billion and grow further to over
$3.1 trillion by 2030.
3.3 THE FUTURE OF NFTS & BLOCKCHAIN T E C H N O… | 155
Here are some of our predictions about the crypto world,

inspired by active blockchain networks that are introducing
real, transformative change to different industries.
Interconnectivity Will Soon Be a Reality
No doubt, it might take several years before we reach

interconnectivity at a maximized level, especially
considering that interoperability can assume different forms.
The IBM blockchain team revealed that, presently, about
83% of corporate organizations are convinced that assurance
of governance and standards that permit interoperability
and interconnectivity among permissionless and
permissioned blockchain networks are crucial in
determining their participation in the industry-wide
blockchain network.
One-fifth of them believe that it is essential. Thus, there are

already several projects working on the concept of
connectivity between on-chain and off-chain networks and
interoperability as demand increases. A good example of one
such project is Polkadot, which we discussed earlier.
Confirmation of the originality of the asset
NFT provides increased security and authentication of

valuable assets. In doing business, trust is crucial, and
therefore blockchain can increase trading and commercial
activity in risky markets. Distributed registry technology
(DLT) builds confidence in non-interchangeable industries

where counterfeiting and falsification, such as works of art
and memorabilia, are common. According to research firm
Havocscope, more than $480 million worth of art is stolen in
the UK each year.
Technology can always recognize the originality of a

collectible item; Track it. Create an operational and legal
supply chain and a set of documents on the control,
possession, and transfer of parts of it. This is very similar to
how Bitcoin is constantly monitored throughout its journey.
Depending on how innovators develop an application for
perceived uses, the technology will also record the history of
non-interchangeable assets; Add time tags for key events
and provide auction prices and other confirmed
information. NFTs are a key component of the non-state
economy without borders Web 3.0. This is still a very fresh
innovation, and in the coming years, there will be the best
possible variations.
Blockchain-powered Government Systems
With the gradual decline in the negative perception

governments hold about distributed ledger technology; they
are now more eager to implement many of their processes
via blockchain. This is because it offers them more freedom
not only to experiment but also to stay transparent. For
instance, the Dubai government is working towards
becoming the first government to run all its systems on

DLT. Others are exploring ways to integrate it into their
existing systems, and we will see more in the future.
Digital Identity
DLT is capable of providing blockchain-based, cross-border

identity standards for every citizen of the world. This
implies that in the future, blockchain will not just digitize
people's identities but further enable us to digitize assets.
Standardization
Blockchain technology is evolving at an extremely fast pace,

and we should expect it to become standardized with time.
This will ensure that people can easily implement DLT and
collaborate on blockchain technology's improvement.
World Trade
Blockchain will likely become the underlying technology for

world trade in the future. This is because it provides all the
promising and necessary features that facilitate business
transactions between parties that do not trust each other.
Already, it has significantly improved supply chain and
logistics as well as the financial and remittance sectors. It's
easy for anyone to engage in trade because all actions on the
blockchain are immutable and transparent.
Some Blockchain Startups Will Fail
Just like every new technology, DLT is undoubtedly

immature in its implementation. This means that it may end
up falling short of the expectations of investors at some
point. Also, false starts in the deployment of blockchain will
result in rash decisions, failed innovations, and complete
inability to achieve set goals.
The process of transformation in this sector will be gradual

and will require time and patience. A few years ago, Gartner
predicted that most traditional businesses would remain on
the sidelines and observe the existing applications of the
technology before jumping in.
This is already happening, as we've seen central banks

explore the creation of CBDCs after observing the successes
demonstrated by various stablecoins and the expected launch
of Facebook's Libra. But we already have national crypto,
which is Venezuela's Petro. Also, Russian President
Vladimir Putin proposed the issuance of the "Crypto Ruble",
while China is already testing its digital version of the
Renminbi. More countries are likely going to join in the
future.
Key Drivers of Future Mainstream Adoption of

Cryptocurrency
According to PricewaterhouseCoopers (PwC), the

participants' pace at which the crypto market grows will be
determined. Growth spurts will also characterize the growth
in legitimacy from individual participants or what they refer
to as "credentialing moments."
In their opinion, for the cryptocurrency market to enter the

next phase of stable expansion and mainstream acceptance,
five core market participants will play a significant role.
Consumers and Merchants
The truth is that digital currencies offer consumers faster

and cheaper peer-to-peer payment options than what is
being offered by traditional money service businesses. That's
not all – they don't even need to provide their details while
enjoying these services. But although digital currencies have
seen increased adoption as a payment option, consumers
may still be reluctant to use them to purchase goods and
services because of their volatility.
Instead, they would prefer to trade it. In 2015, a PwC

Consumer Cryptocurrency Survey revealed that just 6% of
respondents said they were "extremely" or "very" familiar
with cryptos. However, there has been a significant increase
in familiarity since 2015, and consumers are already gaining
access to innovative offerings and services that they don't
enjoy with traditional payment services.
This will further drive acceptance, as consumers experience

crypto benefits such as nearly instantaneous settlements, low
transaction fees, elimination of chargebacks, and several
other advantages.
Investors
Other participants who will play a role in the mainstream

acceptance and expansion of digital currencies are investors.
Many investors appear to be quite confident regarding the
opportunities associated with digital currency and
cryptography. The "inherent value" of blockchain
technology, which we have already discussed, is perhaps the
strongest reason these investors are optimistic. The more
established cryptocurrency firms have already begun to
attract institutional investors and the attention of Wall
Street.
Tech Developers
We have also seen an increase in the number of talented tech

developers interested in crypto mining. Others have chosen
to focus on entrepreneurial pursuits like developing wallet
services, exchanges, and altcoins. The opinion of PwC is that
the crypto market is just starting to attract talent that has
what is required to take the industry to the next level.
However, if the market is to gain mainstream adoption, then

corporations and consumers must perceive digital currency
as a user-friendly solution for their common transactions.

The industry also needs to develop cybersecurity technology
and protocols.
Regulators
When it comes to the treatment, classification, and legality

of cryptocurrency, government attitudes worldwide are
generally inconsistent. But as we can see, this is gradually
changing. Some governments are beginning to explore ways
to regulate cryptocurrencies in their countries while also
considering the best options to leverage its underlying
technology. Regulations are currently evolving at different
paces in different locations around the world.
Financial Institutions
Most of us are used to the services of banks because they

have traditionally served as the connection between those
with money and those in need of it. However, recent trends
have proven that the banks' middleman position has been
diluted. Disintermediation in the banking sector has evolved
at a fast pace.
Consequently, we have seen an increase in the creation of

Internet banking and advances in mobile payments. We've
also seen an increase in consumer patronage of alternative
payment options like Apple Pay, Amazon gift cards, and
Google Wallet.
These are the five participants who will play a significant

role in the mainstream adoption of digital currencies.
Experts believe digital currency in the financial sector
represents the beginning of a new era of tech-driven
markets with the potential to disrupt longstanding business
practices, conventional market strategies, and established
regulatory perspectives.
All of these features will undoubtedly benefit consumers and

increase macroeconomic efficiency. Since cryptocurrencies
possess the groundbreaking potential to transform the
payment system, consumers can access an efficient global
payment system anytime and anywhere. The only restriction
they may experience would be their access to technology,
instead of factors like having a bank account or credit
history. The truth is that the discussion is no more about the
survival of cryptocurrency; instead, the discussion is about
how the crypto space will evolve and attain maturity.
3.4 KEY CHARACTERISTICS OF NFTS
A lthough NFTs are built upon blockchain

technology, they have distinct features than those
that set them apart from cryptocurrencies. Here they are:
They are rare: This shouldn't be confused with scarcity

which is one of the primary features of most cryptos. NFTs
are rare in the sense that they are unique tokens tied to rare
items such as music. More so, they are also scarce, which is
where they derive their value from. Although NFT
developers can create as many NFTs as they wish, they often
limit the number of tokens.
NFT's are rare because they are unique and non-copyable. In

addition to the knowledge that rare things are generally
valuable, a very limited number of artists and producers
have NFT, especially at this time. This is a good
opportunity, especially in a constantly evolving virtual world

where we cannot easily predict what will happen. If we
make a very simple assumption that the values of the
products offered for sale in the first place will be lower than
in the future, it may also mean that we may have products
that will be sold much more expensively in the future.
NFT's have no lifespan and are very available for purchase

and sale so that they can be retained for years. In other
words, turning a product, you don't want to end your life
into an NFT can also mean attributing a partial infinity to it.
They are non-interoperable: You cannot exchange one

NFT for another. Whether they are collectibles, gaming, or
any other type of NFT, they can't be interchanged. With
cryptos, you can always exchange one crypto for its
equivalent in another crypto – for example, you can
exchange 1 BTC for its equivalent in ETH or any other
crypto.
Sellability: Because all NFT's are buy and sellable, they

allow you to make all your products available for business.
You can also download products if you use some brokerages.
This can make NFT a virtual-only product.
Indivisible: NFTs cannot be divided into smaller

constituent units. Unlike cryptos or fiat currencies, NFTs
only exist as one whole item.
3.4 KEY CHARACTERISTICS O F N F T S | 165
Indestructible: Thanks to the immutable nature of

blockchain technology and smart contracts, NFTs cannot be
altered, duplicated, or destroyed. This means that whoever
buys the NFT owns it and not the creator of the NFT. If the
owner sells the NFT, they cannot falsify the ownership
records since this is impossible with blockchain technology.
This property of NFTs is what makes their potential in the
music industry invaluable. We will discuss this in a later
section.
Verifiable: The identity of the NFT owners are permanent

records on the blockchain network. When NFT changes
hands, the subsequent owners can be verified. This ensures
that digital artwork such as video clips and music can be
traced back to their original owners. It makes authentication
much easier and efficient since third parties won't be needed
for the process. More so, NFT is produced with royalty if
the manufacturer wishes to do so. This copyright also means
that the buyer has all commercial rights of the product, such
as promotion and advertising, through the relevant
blockchain. This means that it will also increase the
commercial value of all kinds of products.
Unique: Each NFT is different from one another, which is

perhaps the most significant characteristic of NFTs. As
we've mentioned above, NFTs cannot be interchanged with
one another due to their uniqueness.
No one NFT can be made other than the same smart

contract with the same token number. This means that a
manufactured token is single and solitary and cannot be
produced or copied any other way. This is similar to the fact
that the Guernica painting, which Picasso drew with his
own hands, is priceless, although there are thousands of
copies. This is confirmed by blockchain and can be seen by
everyone.
3.5 WHAT ARE THE TOP NFT
PROJECTS?
N FTs are special from other blockchain assets since

they are linked to a specific asset in the market.
This is unlike most cryptos which are generated through
mining. However, what's important to note is that owning
the NFT is like owning a digital receipt of the ownership of
the underlying asset. It doesn't mean that you possess the
ownership rights of the physical or digital asset.
Here are some of the top NFTs as of this publication.
1. FLOW
The Flow NFT project is a developer-friendly blockchain

that serves as a foundation for a new generation of
decentralized game apps and digital assets. Although it is a
layer-one blockchain, it is backed by a team of blockchain
experts behind some of the biggest names in NFT and
consumer blockchain applications such as CryptoKitties

Dapper Wallet and the NBA Top Shot.
As of this publication, Flow had a market cap of about

$205159 and is available on major crypto exchanges.
2. Enjin
Enjin is one of the leading companies that offer an

ecosystem for several digital products, making it relatively
easy for anyone to monetize gaming products. That means
that game developers can tokenize in-game items via
Ethereum – backed by Enjin's ERC 20 token. Enjin coin is
one of the cheapest altcoins in the market – $2.5 as of this
writing – and offers investors the highest growth potential
among altcoins.
As of this publication, Enjin had a market capitalization of

over $750 million.
3. Decentraland (MANA)
MANA is built upon Ethereum, and it allows users to create,

experience, and monetize content and applications. With
MANA, they can purchase virtual property to navigate
through, develop, and monetize however they want.
As of April 2021, MANA had a market capitalization of over

$471.35 million. It was launched in February 2020 with an
ICO worth $24 million. The platform utilizes one ERC-20
3.5 WHAT ARE THE TOP NFT PR O J E C T S ? | 169
(MANA) and one ERC-721 (LAND) token. To acquire

property, MANA must be burned.
4. Axie Infinity (AXS)
Pokémon inspired Axie Infinity. It is a trading and battling

game platform that allows users to monetize battle creatures
called Axies. They can collect them, breed, and trade them.
The unique thing about the platform is that it is partially
owned and managed by the players. To participate in voting.
The players must use the Axie Infinite Shards (AXS) ERC-
20 token.
Note that the Axies can be customized into various forms,

with some taking up more than 500 body parts. They can
also reproduce up to 7 Axies which users can sell at the
marketplace. As of April 2021, Axie Infinity had a market
capitalization of over $115 million. It was released on
November 4, 2020.
5. Gods Unchained
Do you remember playing card games and trading them

with friends like Yu-Gi-Oh? Some collectors have gone as
far as listing cards on eBay or other online markets to
complete their collections. As you can see, in the past, it was
not easy to exchange and collect cards. Card collectors have
had to deal with various uncertainties – What happens if I
pay for a card and I don't get it? What if the card I bought
online is fake? How do I prove ownership after purchasing a

card?
Well, Gods Unchained has created a collectible card game

where cards are given as NFT. Therefore, since ownership
of cards can be digitally transferred, you can solve all the
above problems and verify the authenticity of each card.
Moreover, you can quickly change the ownership of cards
through a simple Ethereum process.
6. NBA NFTs
NBA Top Shots is undoubtedly one of the most popular

platforms for NFT's based on the FLOW blockchain. It's a
new concept where different moments from various NBA
games are captured and converted into NFT's. There are
various tokens with different rarities. For example, some
moments are converted to only a few NFT and others –
thousands of NFT.
This is why the value of some of them increases rapidly as

investors flood the market to own them. Even more
interesting, the platform quickly became one of the most
excited, and each package drop takes thousands of people on
the waiting list eager to join.
7. CryptoKitties
3.5 WHAT ARE THE TOP NFT PR O J E C T S ? | 171
It is impossible not to talk about CryptoKitties because this

was the first use of NFT to hit the mainstream media. Its
concept is closely linked to Pokémon Go. Instead of
collecting Pokémon, each with unique features, you can
collect digital crypto cats that come with certain features. By
breeding cats, you can create new cats and thus discover new
features.
8. OpenSea Marketplace for NFTs
Finally, it is worth mentioning the OpenSea market, which

allows any NFT to be auctioned on the platform. OpenSea
acts as a decentralized marketplace where trading takes place
under a smart contract. CryptoKitties allows you to trade
with more than 200 NFT types, including SuperRare art,
Gods Unchained cards, and even Ethereum domains.
9. Terra Virtua Kolect (TVK)
TVK is a crypto marketplace for NFTs that accommodates

both creators and collectors in one ecosystem. It was
launched on January 20, 2019, in partnership with
established media companies like Legendary Entertainment
and Paramount Pictures and raised about $2.6 million in
an ICO.
As of April 2021, it had a market capitalization of over $840

million.
10. Origin Protocol (OGN)
This is a decentralized marketplace and is often known as

DShop in the NFT crypto world. It hosted the first-ever
auction for a tokenized musical note album by 3LAU – a
renowned musician for over $11.6 million.
As of April 2021, it had a market capitalization of over $104

million.
3.6 WHERE CAN NFTS BE APPLIED?
N FTs have found their niche in the digital space.

When you think about it, you may ask yourself,
why didn't this come sooner? Here are some of the
prominent areas where NFTs are used.
Online Gaming
One of the sectors that NFTs are revolutionizing is the

world of gaming. Most characters in games acquire tradeable
items such as clothing, property, and weapons. To make
these assets tradeable for real-world cash or in-game tokens,
we can create non-fungible tokens for them. This has led to
the creation of online digital economies for fictionalized
products. A good example of a project in this space is
Decentraland.
Collectibles
CryptoKitties are great examples of NFT collectibles.

CryptoKitties are digital cats on the Ethereum blockchain.
The idea behind this NFT is to enable buyers to nurture
these kitties and reproduce, just as they would in real life.
Within a few weeks of launching in 2017, about $20 million
was spent on them. But the collectibles market is not limited
in any way, as it extends in different directions. Another
excellent example of the usefulness of NFTs involves art
collecting. Experts can verify and authenticate paintings and
sculptures before creating a non-fungible token for each
piece of art.
The owner interested in selling their piece of art can list the
non-fungible token on an auction platform as evidence that
they are the true owner of the asset and proof that the asset
is genuine. This is a smart way to digitize the process of
provenance and an excellent way to prevent fraud and
forgery in the art world. Remember, blockchain technology
is decentralized and can't be changed by a single individual,
so ownership of art assets can safely exist on the blockchain.
This can also be done for jewelry, stamps, autographed

guitars, baseball cards, and other collectibles. The legitimacy
of every transaction will be guaranteed by the security of
distributed ledger technology.
Identity and Certification

3.6 WHERE CAN NFTS BE A P P L I E D ? | 175
NFTs can play a vital role in the verification of identity.

Instead of the traditional driver's license, you can receive a
non-tradable digital token, and this could apply to other
certificates such as a birth certificate. Even though you don't
trade such tokens, they can interact with the appropriate
authorities for proper verification. With such digital
certificates, you can easily and voluntarily share your details
with doctors, employers, and any other entity that requires
your personal information.
Licensing
Another great example of the effective use of NFT is its use

for software licensing. According to experts, the creation of
licenses based on NFT can reduce piracy and allow people to
sell their license on the open market for profit. Thus, users
can also avoid annual subscriptions, use the software against
the purchased license and after using it to sell it to someone
else. The license, in this case, acts as an asset for users.
Software developers can also take advantage of the benefits
because they can create smart contracts that will generate a
share of the profits from resale or anything else that can
generate revenue for the original developer.
This is a win-win situation that NFT offers to both users

and developers. This can reduce piracy and can also allow
users to make some money from their purchases. The same
model applies to the music industry, as we will see later on.
Tickets
Tickets share a lot of similarities; however, they also have

values that are extremely different. Although tickets to your
local school baseball game and a Manchester United match
versus Chelsea will grant you admission to the events at a
specific time and place, they are usually difficult to transfer.
NFTs can standardize ownership of a particular asset
category while still enabling the assets in the category to
maintain different market values. So, NFTs could
revolutionize the ticket sales industry.
It's quite hard to think of a theoretical limit to what we can

digitize with NFTs. Things like digital collectibles, real-
world property, and identity qualifications could all exist on
the distributed ledger in the form of tokens, which you could
keep, sell, share, or show. This also implies that you can do
business instantly with anyone regardless of their location. It
would even be possible for companies to manage their entire
inventories by using digital tokens. We can boldly say that
NFTs are the true foundation of the future economy, though
there is a need for a lot of development within the
ecosystem.
3.7 WHY IS THERE SO MUCH HYPE
ON NFTS?
I n a sentence, NFTs allow us to own digital assets truly.
NFT's were first used to represent in-game assets.

Initially, Ethereum proved popular by using blockchain
games and collectibles such as CryptoKitties on the
blockchain. NFT's, which are used to represent in-game
assets controlled by users, have also started to be used in
digital art. NFT's, which help to give identity to digital
artworks where authenticity and ownership are very
difficult to prove and control their usage rights, were then
gradually used in physical assets. At this point, it is
important to remember that digital works are the most
suitable product for copying and reproducing, albeit in low
quality. That's why NFT's are intended to acquire the
product from the original manufacturers of these products.
When we think about it like this, we have a lot of digital

assets (our Twitter account, the games on our steam
account, the blogs and articles we publish...), but we don't
own any of them. These encoded assets are on the Internet,
belonging to the hosting they are in. We can't sell games that
we think belong to us on our steam account, or when we try
to sell our Fortnite skin through Amazon or Etsy, we'll see
how difficult it is, even impossible. We cannot sell our
tweets on eBay, which are ours on our Twitter account and
receive thousands of interactions. Here is the most general
answer to what is NFT, based on being able to own digital
assets. We can say that it is aimed at making it possible to
sell all this.
For example, Beeple's EVERYDAYS NFT, which was sold

for a record-breaking $69.3 million. Although we can
download the images in this collage separately and find their
images from Google, what Winkelmann was selling was the
original rather than the works themselves. Since the collage
he made was NFT, the person who bought the work
received the first and unique version made by the creator.
That's why so much money was given. For the first time,
NFT has allowed users to move, market, sell, and purchase
their digital assets outside of their location. That's the
general reason people got so excited all of a sudden.
3.7 WHY IS THERE SO MUCH HYPE O N N F T S ? | 179
So, why is anyone paying for something that's

already in the public domain?
There is a difference between downloading an image or

animation to a computer and having the original file
supported by an NFT token. The files you download cost
nothing, while the NFT-supported painting is an original
work of art by the artist. Likewise, everything happens in
the physical world. You can download a photo of Van
Gogh's picture or order a hand-drawn copy - in any case,
such copies will not cost as much as the original. Having
only one NFT token in the digital world allows you to sell or
gift a work of art and get a percentage of subsequent resale.
Why are NFTs so expensive?
The existence of value is always associated with scarcity. The

scarcity of digital art has again been confirmed by blockchain
and NFTs. In addition, people value every object, including
the digital space. That's why collectible physical sports cards
sell for thousands of dollars on eBay. In computer games, T-
shirts and even star-signed napkins, the designs of objects
and real banknotes themselves are valuable only because
people accept them. It's only worth what others are willing
to pay for them. When it comes to NFTs, value is
determined by collectors. Some people may want to buy
NFTs for speculative purposes, while others may want to
show their support for their favorite artists. By doing this,

they ascribe value to the NFTs.
The NFT collectors we see are not usually from the

traditional art world.
3.8 HOW COULD NFTS BENEFIT
ARTISTS AND THEIR FANS?
W ell, an NFT is an intellectual property whose

right is publicly approved on the blockchain.
A big and enduring challenge in the digital art world is how

easy it can be to copy and distribute. As soon as something is
copied and duplicated for free, the value of that asset
decreases and the whole market perspective disappears. For
something to be worth anything, it has to be inadequate.
Blockchain helps digital artists solve this problem by putting
forward the idea of a "digital shortage": publishing a limited
number of copies of items and linking them to unique
custom tokens.
Blockchain technology is a fairly new technology platform

that connects millions of devices and is open to all. If you've
never heard of blockchain, you may be familiar with Bitcoin

or Ethereum cryptocurrencies that use this technology.
In this case, the token is a digital certificate stored in a secure

and decentralized database. He approves of your right to
something unique. You can add it to anything: JPEG, GIF,
MP4, even music. This token, which proves ownership of
the "original" file, is stored in the blockchain.
Anyone can download and share your picture, even print it

and hang it on their wall, but you're the only one who owns
it. And only you, respectively, can sell this work of art. In the
crypto world, the blockchain itself will be the "expert" that
confirms the reality of the picture.
Here's why NFTs are particularly invaluable to the music

industry:
They preserve ownership rights: Since NFTs

are based on blockchain technology, they are
decentralized, and no one can alter the ownership
data. This means that an artist will own the rights
to their music and not third-party music executives
and streaming platforms who make billions off
their work. This contrasts with buying things like
music from the iTunes store, where users don't
own what they're buying; they just purchase the
license to listen to the music
3.8 HOW COULD NFTS BENEFIT ARTISTS AN D T H E I… | 183
They are authentic: It is impossible to create

counterfeits of an NFT. This is thanks to the
immutable nature of blockchain technology. The
music industry is plagued by counterfeit streaming
sites and downloading websites. This robs artists of
the fruits of their labor; with NFTs, they can ensure
that only genuine copies of their work get passed
around.
They are transferable: NFTs are sold in open
marketplaces that are decentralized. This means
that artists can directly distribute their music to
their fans and receive the proceeds directly in
crypto. The approach could also enable payments
for derivative works by creatives working with
others' original music or other artistic content.
Musicians who have Released NFTs
On Sunday, April 25, Eminem announced a partnership

with NFT marketplace Nifty Gateway for ShadyCon.
ShadyCon will offer original instrumental beats produced by
Slim Shady himself and a pair of action figures. The sale
occurs on the Nifty Gateway platform and consists of 5,000
editions of "TOOLS OF THE TRADE" and "STILL DGAF",
both for a price of $50, which sold out almost instantly. The
latest NFT is a limited-edition single copy called "STAN'S
INITIATIVE", which is currently sold at auction. The tracks
will only be available as part of the limited edition and one-

of-a-kind NFTs.
Linkin Park rapper and songwriter Mike Shinoda took to

Twitter to announce his first NFT artwork. The piece, called
Centennial Flow, landed on NFT auction site Zora
yesterday. As of this article, the highest bid is coming to
18,000 Dai. Since the value of the DAI is fixed at US dollars,
it is $18,000.
R&B artist Abel Tesfaye, known as The Weeknd, made $2.9

million from his first NFT. The Weeknd has released
previously unheard-of The Weeknd songs in its collection.
He sold the pieces through Nifty Gateway, owned by
Gemini, an NFT marketplace known for selling NFTs by
famous artists. The cheapest parts were priced at $100, while
others were sold to the highest bidders. Open releases
highlighting episodes of The Weeknd's unreleased track
raised $1.4 million in a 15-minute sales span. The tender
lasted 24 hours and closed at $490,000. The auction earned a
total of $2.29 million through open releases.
Other celebrities who have launched NFTs include Snoop

Dogg, Lindsay Lohan, Grimes, Lewis Capaldi, Kings of
Leon, Soulja Boy, and John Cleese.
3.9 WHAT ARE THE TOP NFTS IN THE
MARKET RIGHT NOW?
2 021 has seen the surge of NFTs. It is worth noting that

NFTs have been around since 2017, and evidently,
they will stick around. The market for NFTs is changing as
new ones are minted almost daily, while the existing ones
keep surging in price.
When investing in the top NFTs with potential for future

growth, you must first identify the most credible NFTs in
the market. Here is a list of the top NFT protocols and
tokens ranked by their market capitalization as of April
2021.
3.10 INVESTING IN CREDIBLE NFTS
WITH FUTURE POTENTIAL
H ere is a list of the top stores of collectibles and

NFTs crypto tokens. These offer you a credible
source for NFTs with future potential.
IV
UNDERSTANDING CRYPTO
MARKET CYCLES
4.1 THE BULL AND BEAR MARKET
W e have to understand the bull and bear market

concept first before understanding the crypto
market cycle. Bear and bull market concepts, which are
common terms in financial markets, give information about
the direction (trend) of the market.
The bullish market is the period when the market is on an

upward trend. Crypto prices will remain optimistic in the
future, and investors will continue buying. It is assumed that
the origin of this term comes from the belief that bulls lift
everything from the bottom with their horns. It is also
possible to encounter comments such as "the beginning of
the bull market".
In the bear market, the situation is the opposite of in the bull

market – the market is on a downward trend, and investors
are pessimistic. This pushes them to liquidate their crypto

portfolios which leads to a drop in the market prices. For the
bull market to start, it is technically expected to have risen
20% from the lowest level of the relevant market.
Stages of The Bull Market
Phase 1 – Collection: The stage at which very

cheap goods, which are sold by loss-making and
discouraged investors, begins to be collected by
large investors. There is no significant uptrend yet,
and interest in the market, in general, is still scarce.
Phase 2 – The Acquisition Wave: The stage
where the signs of improvement in the market are
now clearly noticed after the collection phase, and
small investors are now involved in the buying
wave, and trading volumes increase.
Phase 3 – Saturation: With the increase in
volume, the market has reached a certain
saturation, and the buyer has decreased
considerably in the
Market. It shows that the Bull Market is coming to
an end, and a wave of sharp falls can be expected to
begin.
4.1 THE BULL AND BEAR M A R K E T | 193
The bear market concept is a frequently used term for crypto

trading and all financial markets (stocks, bond market). The
bear market is often used in situations where markets are
pessimistic, and there is an expectation that prices will be on
a downward trend for a long time. If crypto enters the bear
market, the main trend must first be downward
(downtrend); however, there is a 20% downward movement
from the previous peak level. While there is no consensus
on how long the bear market will last, prices are expected to
continue to fall for a long time. As demand decreases, no one
wants to buy those products, and prices continue to fall.
4.2 WHAT ARE CRYPTO MARKET
CYCLES?
T he crypto market has no fundamental like other

segments of the financial markets. In the stock
market, you'd expect that the prices are impacted during the
earning seasons. The financial performance of a company
and the demand for its products determines the price of its
shares. Similarly, in the forex market, geopolitics and
economic news releases impact the exchange rate of
currencies. This means that investors and traders can plan
their investments accordingly depending on whether these
factors are positive or negative.
However, the crypto market is driven by what could

accurately be described as irrational exuberance. With over
7800 cryptocurrencies in circulation, their price is
determined by the market demand.
But, as with every other segment of the financial market, the

crypto market experiences highs and lows, which forms a
cyclical pattern. However, unlike the economic cycles of
recession, recovery, and expansion, which take years to
form, the crypto market cycles are much shorter. That is
because of the inherent volatility in the crypto market. The
crypto market cycles could only last weeks or just a few
months.
In general, the periods between two high or low levels of an

asset's price are considered market cycles.
What differs between traditional exchanges and

cryptocurrency exchanges is the volatility of
cryptocurrencies. While NASDAQ's sharp daily movement
is thought to be 1-2%, it is normal to witness fluctuations of
up to 10% in the crypto market.
4.3 DIFFERENT STAGES IN THE
CRYPTO MARKET CYCLE
T hese cycles are primarily driven by investors and

traders' psychology and can be analyzed to predict
the impending bullish and bearish market trends accurately.
The market cycle is usually the trends and stages
encountered in the markets. At these stages, some assets and
cryptocurrencies may perform better against their
competitors due to their business models. Market cycles are
the intermediate stages between high and low point.
Here are the different intermediate stages that make up the

crypto market cycles.
Stage 1: Hope
"Hope" is the first sign of recovery after a serious stage of

disbelief (Stage 10 – the final stage in the cycle). Hope often
comes after the cycle of depression, when crypto prices are
at all-time lows. The market shows positive signs for a new

bull run. However, investors are still careful and invest a
small amount gradually.
Stage 2: Optimism
Optimism defines the second stage in which prices rise when

investing in new capital. It reaches this stage when the
market has been on a steady bullish trend for extended
periods. Cryptos show a positive outlook, and investors and
traders are pouring to invest at this stage. Rising crypto
prices and non-volatile markets mark this stage.
Stage 3: Faith
As time goes on, optimism turns to faith. This stage of

"faith" is described as one of the first signs of the bull
market. Investors are looking for new opportunities in the
market. This stage is marked by steadily rising crypto prices
and non-volatile markets.
Stage 4: Excitement
If you know what you're doing, it might be a good idea to

look for alternative investment options. People can easily get
caught. They're excited about random projects because they
believe nothing can go wrong, everything's going well.
Stage 5: Euphoria
4.3 DIFFERENT STAGES IN THE CRYPTO MA R K E T C… | 199
This stage can very well be described as irrational

exuberance. The end of a prolonged bullish trend is defined
as the stage of happiness. At this stage, people take over
emotions. Traders and investors believe that the current bull
run will continue indefinitely. Typically, most new crypto
projects are often developed and financed at this stage.
There is only one direction: up, up, and up. At this stage of
the bull run, "stupid money" takes over the crypto market.
This is the stage where we expect to see sensational
headlines of how well the crypto market performs.
At this stage, smart money profits throughout the parabolic

movement.
Stage 6: Complacency
At this stage, the bull run stagnates when people's high

expectations are not met. The first signs of a retrospective
market begin to appear. This stage is very dangerous as it is
a stage where people expect to move upwards again. Many
investors are unprepared for the market downturn.
Typically, the smart money starts exiting their long

positions and take profits from the successful bullish trend.
Stage 7: Anxiety
Finally, people realize that this bull run cannot last forever.
They see the market reversing, losing value, and money.
The fear of losing distracts traders with the awareness of not

getting hurt, and thus much greater losses can be
experienced.
In the crypto CFD market, this stage often ushers in the

bears. Traders begin going short.
Stage 8: Denial
The value of investments continues to fall, and many

investors refuse to sell in the hope of an even bigger
correction. Investors are defensive because they are
convinced, they are investing their money wisely. However,
usually, almost no money can survive this stage.
Stage 9: Panic
As the bear market becomes a new reality, the market

continues to decline. Investors desperately try to save their
money by selling their investments because they are afraid of
losing everything. Usually, a large sale occurs at the stage of
panic.
This is where the bears take over the market. As the

investors in long positions continue to dump their cryptos,
the bears begin to short the market aggressively.
Stage 10: Depression

4.3 DIFFERENT STAGES IN THE CRYPTO MA R K E T C… | 201
People lose all hope and belief in current market conditions.

This is the lowest point for the market in the crypto cycle.
Typically, the market might remain in this stage for an
extended period. The prices are at rock bottom, and most
crypto projects die here.
4.4 HOW TO INVEST IN CRYPTOS
BASED ON THESE MARKET CYCLES?
A s markets turn from bear to bull, there needs to be a

"recovery" phase. Markets are unlikely to enter a
real bull market until losses in the previous bear market
improve.
Thus, the optimism/belief stage can be the ideal entry point

of a new bull market. Generally speaking, buy altcoins and
BTC when the market is weak (anger, depression, or
disbelief) during the depression or accumulation period (i.e.,
a long accumulation period of $300 from mid-2014 to 2015).
Also, buy Bitcoin and other cryptocurrencies when the
market is strong (feelings of optimism, belief, or happiness).
This is not a foolproof model for the crypto market cycles.

Different cryptos might follow their cycles which differ from
other cryptos. However, note that the bear markets do not
fully recover in some extreme cases or may not recover at

all. This is the case with Aurora (AOA), which we will
explain later.
What are the Important Steps to Understand

Market Cycles?
Market cycles are a natural thing; admit it.

Eliminate your feelings completely
Be on the lookout for positive and negative market
forces that may forebode the beginnings of a new
cycle.
It may be difficult to determine the ideal entry and
exit points.
Market cycles help analysts make better decisions.
Buy low and buy high. It's as simple as that.
Before investing in the crypto market, here are some key

terminologies that you will encounter regularly.
Accumulation: The process by which one builds a

position in crypto. It involves gradually increasing the size of
your portfolio over time.
Arbitrage: The differing prices between exchanges for the

same market.
4.4 HOW TO INVEST IN CRYPTOS BASED ON T H E S… | 205
Ask/Bid: Sell orders (ask) and buy orders (bid) in the order
book on an exchange.
Averaging Down: The process of lowering the average

entry cost of one's position by buying lower incrementally.
Bag: A position in crypto. How much of a particular crypto

you have in your portfolio.
Bull/Bear: Bulls are traders who expect the prices to go

higher while bears expect prices to drop.
Circulating Supply/Total Supply/Maximum

Supply: The amount of crypto currently available for
transactions (circulating supply); the amount of crypto
currently in existence (total supply); the maximum amount
of crypto that can ever come into existence (maximum
supply).
Distribution: The process by which one reduces one's

position in crypto.
FOMO: Fear of missing out. We will explain this later in

this chapter
FUD: Fear, uncertainty, and doubt.
Fundamental Analysis: The evaluation of crypto based

on its intrinsic properties, its prospects, its utility, and its
community, as well as macro factors, such as the economic

and sectoral landscape.
HODL: Originally, this was a mistype by a drunk individual

on the Bitcryptotalk forum but has recently come to be
adopted as 'Hold on for Dear Life', after comments by the
CFTC Chairman, Chris Giancarlo.
Intraday/Intraweek/Intramonth/Position: Trades
intended to be entered and exited within a day/a week/a
month/over a month.
Leverage: The ability to borrow capital against your initial

position to magnify your exposure.
Limit Order: An order set to be executed when the price

hits the level predefined in the order itself.
Liquidity: The ability to buy or sell crypto without moving

price. Illiquid markets suffer from greater volatility.
Margin Trading: The use of leverage to open a position

greater than your level of capital.
Market Cap: The market capitalization of crypto can be

calculated either by multiplying the price of the crypto by its
circulating supply (to find its current market cap – also
defined as 'network value') or by its maximum supply (to
find the maximum network value when all cryptos have
come into existence). For this book, I will be using the

former calculation unless specified.
Masternode: The collateral used to secure a crypto's

network, which provides rewards for the owner periodically
as long as the masternode is live.
Microcap/Low-cap/Midcap/High-cap: A microcap is
a crypto with a market cap between 0-25BTC; low-cap, 25-
250BTC; midcap, 250-2500BTC; and a high-cap has a
market cap above 2500BTC.
OHLC: The four values depicted by a candlestick on a chart

– the open, high, low, and close.
Order Depth: A chart found on exchanges illustrates the

number of buy orders vs sell orders in the market.
OTC: Over the counter, or non-exchange-based, trades.
Pre-mine: The amount of crypto that was mined in the

genesis block, usually for development.
Pump-and-dump: The artificial engineering of explosive

upwards movement that is followed by even more explosive
selling. In crypto trading, almost every market cycle of every
altcoin is heavily manipulated by the pump-and-dump
strategy rather than fundamentally based growth.
Rich-List: The list of addresses found on a crypto's block

explorer depicts the largest holders of that crypto and their
transactions.
Risk: Either the percentage of your portfolio is occupied by

a position or the level of volatility in the market for any
given crypto.
Stop-Loss: An order set to be executed if the price trades

below the predefined level to prevent further losses.
Support/Resistance: Price levels have historically been

reliable points at which market participants have heavily
bought (support) or sold (resistance).
Technical Analysis: The method of evaluation that is

entirely dependent upon a crypto's chart, with the chart
being an illustration of that crypto's price-history.
Walls: Extremely large orders in the order book.
Whale: A market participant with a sizeable position, far

greater than the average investors.
Volume: The amount of any given crypto traded across a

particular period.
What to Keep in Mind When Trading or

Investing?
Emotions
An unbreakable rule when trading and investing is that you

should never involve your feelings in trade. Consider buying
Bitcoin based on the average dollar cost strategy: Let's say
the price of Bitcoin has dropped by 40% in three days.
What's going to happen now? Obviously, according to the
average dollar cost strategy, it is time to make a second
investment in cryptocurrency and average the initial trading
entry price. But instead, almost everyone does not complete
the second purchase, fearing further devaluation. This
happens only because of emotions. In this case, the fear of
loss affects traders and completely disrupts their action
plans.
FOMO
If you are one of the investors who will not buy Bitcoin for
the second time in the example above, you should not think
of yourself as a trader, especially a cryptocurrency trader, in
the future. It is very important to overcome your FOMO
immediately after a failed trade, missed entry opportunity, or
selling a cryptocurrency. Do not regret the profit you
missed, and do not feel guilty about your lost transactions.
Set yourself an action plan with a set of objectives and act
accordingly, just like you're a pre-programmed computer.
People aren't rational.
Plan your trading and investment strategy
Once you've placed the target sales orders and the

cryptocurrency has reached its initial destination, you'll need
to close half your location. In the meantime, it's important to
raise your stop loss level to the first entry-level, so you don't
lose out. At the second target level, you must close an
additional quarter of the position. Now, once you get your
investment back with the profit, you can stay in position
with the remaining quarter. At this point, the snow game is
unlimited. Cryptocurrencies that gain 2,000% in two weeks
are not uncommon. You are only safe when you are in a
position with your wife, and trading becomes much easier.
In trading, the best way to achieve this is by using trailing
stops.
Not Every Cryptocurrency That Loses Value

May Rise
Another most commonly made mistake is to look for dead

cryptocurrencies, which are expected to return to their old
prices according to their value against Bitcoin. This is the
equivalent of catching a falling knife.
Some cryptocurrencies are years away from peak levels.

Aurora is an example. Over the past two years, AOA has
consistently dropped. Some cryptocurrencies are
depreciating and gradually exiting trading, and altcoins with
4.4 HOW TO INVEST IN CRYPTOS BASED ON T H E S E… | 211
low market value and volume can also be seen as a

remarkable scenario.
Time is Money
A week in the cryptocurrency market is much more in

traditional capital exchanges in terms of events. A trader
who wants to jump into cryptocurrency trading has to
follow it on an hourly basis, not just daily. However, it is
necessary to take into account the time spent on the process.
Sometimes it helps to be a long-term investor instead of a
daily trader. By the way, as a daily trader, it does not mean
that you have to buy, sell, and trade every day. A trader can
reach their goals in minutes as well as within months. Think
about the time you want to invest in studying and
monitoring the market. Keep in mind that your time has a
marginal cost, or in other words, your time has a price tag.
If you have decided to trade daily with time and effort, it is

always good to start small and examine the performance by
increasing the investment amount over time. This is an
additional benefit of cryptocurrencies; they offer the
possibility of trading in microtransactions.
Most Common Mistakes
Trading or investing in particular crypto because

it's relatively cheaper
A common misconception among beginners is to look at the

price of cryptocurrency instead of its market value. Just as
you evaluate a company with a market value calculated by
multiplying the number of shares by multiplying a single
share price, the same applies to altcoins.
The market value can be obtained by multiplying the

number of tokens in circulation and the token price. For a
low-priced cryptocurrency like Ripple, there is only a
psychological effect on buyers. Therefore, when reviewing
cryptos in CoinMarketCap to invest from now on, look
mainly at cryptocurrencies with a high market value and
focus less on the price of cryptocurrencies.
Don't Put All Your Eggs in One Basket
Cryptocurrencies are really unpredictable and inherently

volatile. When Bitcoin loses its value against the US dollar,
4.4 HOW TO INVEST IN CRYPTOS BASED ON T H E S E… | 213
altcoins often go through the same process. Simple

mathematics suggests that even keeping part of the portfolio
in altcoins such as Ethereum and Litecoin is often not
enough to prevent a large portion of the portfolio's dollar
value from being wiped out Bitcoin price drop.
Accumulate Bitcoin!
Many traders have reduced the number of Bitcoin they hold

in the past year and have profited well from it. Over the past
year, BTC has gained over 26000%. As investors, it is
important to keep Bitcoin as your core asset, not forget the
value of dollars, and sometimes make a profit. You should
always look at the bigger picture; it is just one layer of your
options to invest in cryptocurrencies.
Accumulating BTC has been the primary investing strategy

for MicroStrategy Inc. The company first invested in Bitcoin
on August 11, 2020, by buying $250 million worth of BTC.
In September 2020, it added $175 million worth of BTC to
its portfolio, making its total spending $425 million to
purchase BTC, whose value surged over 21% by November
2020. In December 2020, the company raised $650 million in
debt to fund the further purchase of BTC. It continued
upping its BTC portfolio through a series of smaller
purchases worth $20 million in January 2021. On March 1,
2021, MicroStrategy Inc. purchased $15 million worth of
BTC. It is estimated the company owns about 90,859 BTC.
4.5 HOW TO SURVIVE CRYPTO
MARKET DECLINES?
T hanks to the crypto derivatives market, traders can

go as long or short as they please. However, crypto
investors in the spot market do not have the luxury of
shorting the market since they own the underlying crypto.
Here are some neat tricks on how to survive declines in the
crypto market.
Set Your Goals: Both Long Term and Short Term
Knowing your investment goals and time horizons are two

important factors that will determine your investment
decisions. Investors can be divided into short-term investors
or long-term investors. Short-term investors thrive in a
volatile environment where they tend to make investment
decisions in very short periods and frequently. They can
hold on to their investments for days, hours, minutes and
even seconds! Short-term trading is quite risky and is usually

done by experienced investors.
For regular retail investors, the long-term investment

approach is a safer strategy for long-term investments.
Given the potential and gradual adoption of blockchain
technology, cryptocurrencies can profit in the long run.
With a longer-term horizon, you don't need to be exposed
to short-term price changes that create mental and
emotional tension.
If you can, Avoid the Unknown Tokens
The lesser-known tokens are those with low market cap or

cryptos that pass through the ICO but are not yet listed on
any exchange. These tokens are rarely traded because they
are listed in fewer exchanges or probably because they
receive very little demand. Little-known tokens are quite
risky because they do not have an established track record,
and their prices can be extremely volatile due to their low
liquidity. Prices can vary significantly if a large transaction is
made on an exchange.
Although these cryptos offer the potential for the highest

growth, they can cause you great losses if their prices drop.
As witnessed at the beginning of 2018, a market downturn
could significantly reduce these tokens' prices. However,
4.5 HOW TO SURVIVE CRYPTO MARKET DE C L I N E S ? | 217
when you have significant experience and knowledge about

them, you should incorporate them into your portfolio.
Always Do Comprehensive Research First
Research in this complex and fast-moving world of

cryptocurrencies is invaluable. Conduct thorough due
diligence before making any investment decisions. If you are
investing in a new token or cryptocurrency, first evaluate
the website and the team behind it and read the reviews
about it. Ensure that the project identifies the issues it
addresses, and that the solution is explained in detail. But
when you have a clear idea of the direction, potential, and
absence of potential hazards of the project, you should be
willing to invest.
Know Your Limit
When new to the cryptocurrency market and trading, it is

best to avoid high leveraged products and strategies. If you
do not fully understand the mechanics behind the
functioning of the market, products such as cryptocurrency
derivatives, options, and CFDs should be avoided. Strategies
such as margin trading are also highly risky and should be
avoided to reduce your risks. Investing in cryptocurrencies is
already risky due to their volatility. Trading using leverage
can significantly increase your risk, especially in a volatile
market where a small percentage change can wipe out your

trading account.
Diversify!
Diversifying your investment is key to managing your

portfolio. Simply put, a crypto portfolio is a smarter
investment than investing in just one or a few cryptos.
Without diversification, your losses are directly linked to a
single investment. A loss in one crypto can be spread around
and diluted by gains in other cryptos in a diversified
portfolio. This significantly lowers the overall losses of your
portfolio.
Don't give in to FOMO
Fear of losing out (FOMO) often generates extreme

excitement in a way that drives investment decisions for a
particular token. Investing in a cryptocurrency based solely
on excitement and speculation is an unreasonable move and
can cause significant losses for investors. Like we've
mentioned before, always do your due diligence before
investing in the crypto market.
Ignore High Price Movements
Volatility in the cryptocurrency market is quite common. It's

important not to be overly enthusiastic or overly pessimistic
when looking at the price movement because market
4.5 HOW TO SURVIVE CRYPTO MARKET DE C L I N E S ? | 219
volatility can cause a high degree of anxiety and FOMO,

both of which can be detrimental to your investment
decisions.
Declines Come, Decreases Go
Market cycles are a natural part of the free market. The

volatile nature of the cryptocurrency market can shorten the
market cycles of bulls and bears compared to the traditional
and mature fiat markets. It is important to enter the market
with a focused and long-term investment horizon.
4.6 DIFFERENT CRYPTO INVESTING
STRATEGIES YOU MUST KNOW
B efore choosing a cryptocurrency trading strategy, it is

important to understand the difference between a
trader and an investor. Traders make their gains in shorter
periods, sometimes minutes or hours, while investors are
more passive and have a long-term perspective. Investors
buy stocks and hold them for months or years based on
long-term returns.
Cryptocurrency traders evaluate purchases and sales based

on technical analysis. Using charts that track past price
trends, buy at their lows, and sell as the slope rises. Investors
use more basic analysis, reviewing industry research,
company balance sheets, and newsletters. The trader's
activity intervals are too small to enter this level of detail.
If you are a cryptocurrency trader, you need to be vigilant

for intraday movements and keep a close eye on the market.
You are more likely to succeed during periods of high
volatility. Those who are successful in trade are those who
are successful in responding to rapid developments.
Crypto Scalp Trading
Scalp trading is a casual trading style in which positions are

bought and sold in seconds and minutes. In scalp trading, a
trader doesn't hold anything for long. The idea here is to buy
larger positions that are likely to move upwards. This is a
type of trade whose tempo is quite high but just as good as
its potential gain.
The key to scalp trading is never holding a position for more

than a few minutes, whether it's a win or a loss. If your
technical analysis is in place, you will continue to profit by
trading adequately for one day. Trading platforms do not
allow you to trade speculatively without it. The gains from
scalp trading are small, the profits of which are increasing.
Being a speculative trader requires good research skills and
extensive financial knowledge.
Day Trading
Scalp trading is a form of day trading that involves short-

term intraday trading. Scalp trading is a full-time business
and does not give you time to do anything else. Day trading
4.6 DIFFERENT CRYPTO INVESTING STRATE G I E S Y… | 223
is buying low and selling when a position is on the rise. Or

shorting the market by selling high and buying when the
prices drop.
Day traders often already have occupations. They enter a

position when it is low and track the movements of that
position throughout the day. The one-day trader foresees at
what point his position will presumably peak thanks to
technical research. The best way to trade day is to use
automation to set sales prices and avoid losses. Similar to
scalp trading, your technical analysis will make the
difference between success and failure.
Position Trading and Swing Trading
Swing trading is similar to day trading, but you keep the

position for days or weeks. Position trading is longer-term,
with trading cycles that can range from a few months to a
year. In this type of trade, decisions are based on technical
analysis and price predictions, not basic analysis.
Automated Trading (Algorithmic Trading)
Machines are always faster than humans. When it comes to

day trading, this is an important point to consider. Using
an automated trading system, you can buy and sell orders
and determine the ideal conditions for entry and exit of
these trades. With this type of technology, a trader's
earnings can be significantly increased, and at the same
time, the need to constantly monitor your investments

disappears.
Automated trading platforms are often not suitable for long-

term traders who want to buy and hold. Active traders,
especially those who use day trading strategies, position, or
swing trading, can benefit highly from using automation if
available. Scalp traders can also benefit from this, but
programming is more complex, and the risk factor is high.
4.7 PSYCHOLOGICAL PROFILE OF A
DAY CRYPTOCURRENCY TRADER
A nyone can be a crypto trader. A cryptocurrency day

trader should be aggressive and not be afraid to take
risks. Anyone who wants to do this as a profession should be
fully committed to it.
Day trading is also not for people who don't like to take
risks. Billions are traded in the crypto market daily. While
losses are inevitable in day trading, the key is to have a
proper trading goal and an attuned psychological
perspective.
The people who make the most money are usually the ones
who take the most risks. Scalp trading is a high-risk strategy;
gains and losses occur within minutes. Position trading is
less risky; you have as much time as a few market cycles to
get rid of the losing trades.
In cryptocurrency trading, your choice of style should be

based on the lifestyle you want. Day trading is stressful
under any circumstances and requires constant market
monitoring. Position trading and long-term investment are
more passive with the ability to buy and sell in your spare
time. When deciding which of these trading styles suits you
best, consider the suitability of your time and your level of
commitment to trade.
Another factor to consider is the level of training required

for each trading style. Active cryptocurrency traders need a
trading and statistics platform with direct access. Passive
investors use media reports to make trading decisions. Your
knowledge of these concepts can help you choose a trading
style.
Practice in the Trading Simulator First
It is best to apply each of these trading styles one at a time

before making your final decision. It will not be possible to
learn everything about cryptocurrency trading overnight, so
you should constantly research.
Anyone who starts trading cryptocurrency loses money

initially, but those who stick to the trade and advance their
skills as a cryptocurrency are often profitable in the long
run. Leaving your job and starting day trading as a
profession can be a distant dream, but it is not impossible.
4.7 PSYCHOLOGICAL PROFILE OF A DAY CRY P T O C U… | 227
The choice you make about your trading style doesn't have
to be permanent. Many people start with position trading
and gradually move towards swing trading and scalp trading.
Some start the trading day and decide that more passive
trading or investment strategy is more suitable.
4.8 PROFITABLE EXIT STRATEGIES
FOR CRYPTO INVESTORS
I n crypto trading, knowing when to exit a trade or

liquidate your portfolio is equally as important as
knowing when to enter a trade. Typically, every good
trading and investment strategy clearly outlines the entry
and exit conditions.
These trading strategies are designed to maximize the

potential profits or minimize the downside if the market
trends against you. This is typically achieved by using
various order types available to traders and investors.
The best strategy is for investors to use pending orders.

These orders allow them to execute a position at specific
pre-determined price levels. They also give them the
freedom of not having to monitor the market throughout
the trading sessions, which can be helpful to avoid FOMO.
Stop loss and take profit orders are the ideal exit strategies
for crypto investors, especially considering that the crypto
market is often volatile.
Here are the most profitable exit strategies for crypto

investors.
Stop-Loss (S/L)
A stop loss is very important as it acts as a warning sign to a

trader and tells them when to stop trading because of the
risk of losing further amounts with an investment.
For a long trade, the SL is placed below the current market

price, while for a short sell, it is set above the market price.
This ensures that if the market goes against you, you already
know your downside.
Due to possibly a lack of experience, some beginners never

know when to cut their losses and move on to the next
trade. When they start losing money, they always think that
they can recover their money, so they continue trading
despite their margins running out. Other traders may have
stop losses, but they do not have the discipline to stick to
them. This group is no different from the one without a stop
loss. Another set of traders may be tempted to move their
stop loss in the negatives or readjust it to accommodate
more losses when they trade, but this is also ill-advised.
Traders should always move stop losses upwards and in the
4.8 PROFITABLE EXIT STRATEGIES FOR CRY P T O I N… | 231
direction of a win rather than down and to an even larger

loss position.
Take Profit (T/P)
Take profit levels are used to close positions when the

market price reaches a specific level. The TP level is meant
to secure profits in case of slippages. For a short position,
the take profit level is set lower than the current market
price. This is because short sellers anticipate that the price of
crypto will drop. For long positions, the take profit is set
above the prevailing market price. That's because buyers
expect that the price will increase.
Trailing stop order
The trailing stop order is a modification of the sell and buy

stop orders. This order is used to stop loss and take profit at
the same time. It is an invaluable risk management tool for
traders and investors who would wish to avoid any large
losses or secure their profits as the market continues to
trend in their favor. Here is how it works.
For long positions – where you have bought a crypto, the

trailing stop is often set at specified pips below the market
prices. For example, if you set the trailing stop order at 10
pips, it will always move 10 pips behind the market order
(i.e., trail it). So, as the bullish trend progresses, the trailing
stop keeps rising. If the market changes into a downtrend,
the trailing stop doesn’t move, and when the market price
reaches it, your long position is closed at a profit.
The same applies for a short position. In this case, the

trailing stop order is set above the prevailing market price.
While these methods are ideal for exiting a position, here

are some pending orders which traders and investors may
use to enter into positions profitably.
Buy Limit Orders
This type of order is the type of order entered to buy cryptos

at a level below the current market price. This level is often
considered the support level for the crypto's price.
Sell Limit Orders
The type of order given to sell at a level above the current

market price. The price action analysis determines that
prices will rise to that level and fall again from that level.
The reference level for this order type is the resistance
points in the chart.
Buy Stop Orders
A buy order is set at a price level above the current market

price. The investor enters the position by predicting that the
rising trend is confirmed if prices rise and exceed a certain
4.8 PROFITABLE EXIT STRATEGIES FOR CRY P T O I N… | 233
level. In this case, the price breaks through the resistance

level and continues rising.
Sell Stop Orders
A sell order is placed below the current market price. The

investor enters the position by predicting that the
downtrend is confirmed if prices fall and break below the
support level.
V
BRIEF GUIDE TO
CRYPTOCURRENCY
EXCHANGES
5.1 WHAT IS A CRYPTO EXCHANGE?
A cryptocurrency exchange is an online platform where

users can buy, sell, or store their cryptocurrencies.
Currently, most crypto exchanges offer various trading

services such as leveraged trading, trading crypto indexes,
crypto futures, and lending services. All this is thanks to
decentralized finance and smart contracts, which we
discussed in previous chapters. Arguably, the massive
popularity of cryptocurrencies can be attributed to the
growth of crypto exchanges. They have helped increase
liquidity in the crypto markets and increase the efficiency in
the price discovery of the over 7800 cryptos in circulation.
Crypto exchanges work similarly to a regular brokerage

exchange that you might use to buy or sell stock. Crypto
exchanges, however, operate specifically for the purpose to
provide access to different cryptocurrencies. Here you can
buy, sell, and store your portfolio of cryptos.
At any time when you keep your funds on an exchange, you

have full confidence in that legal entity. They function as
crypto wallets. Although larger platforms have a pretty good
history, it is impossible to say that anyone is outside of
corruption or security breaches. Hacks and stories of fraud
are common in the cryptocurrency space, and exchange
wallets are among the most at risk of losing funds while
offering the peak of accessibility for active traders.
5.2 TYPES OF CRYPTO EXCHANGES
Crypto exchanges can be categorized as centralized

exchanges, decentralized exchanges, peer-to-peer (P2P)
exchanges, and crypto brokers.
Centralized Crypto Exchanges (CEX)
Centralized cryptocurrency exchanges are online platforms

used to buy and sell cryptocurrencies. These platforms are
one of the most common methods that investors use to buy
and sell cryptocurrency assets.
Some investors may find the concept of a "centralized"

exchange somehow confusing, as cryptos are decentralized
currencies.
Centralization refers to the use of an intermediary or third-

party to help conduct transactions. Buyers and sellers rely on
this intermediary to manage their assets. This is also
common in a banking organization where customers rely on
the bank to keep their money safe.
The irony here is that banks offer security and monitoring

that an individual cannot achieve independently. In the case
of a centralized cryptocurrency exchange, the same principle
applies. Traders rely on the exchange to complete their
transactions safely and use the network of users on the
exchange to find trading partners.
CEXs often comply with strict Know Your Customer (KYC)

and Anti-Money Laundering (AML) regulations. That
means if you expect absolute privacy, such exchanges are not
ideal for you. Coinbase and Kraken are examples of
centralized crypto exchanges.
Decentralized Crypto Exchange (DEX)
DEXs are built upon blockchain technology and do not

require official interventions or third-party brokerage
services; transactions occur faster. And it certainly costs less
than the centralized ones. In addition, most decentralized
exchanges allow their users to transfer their investments
directly to wallets on the hardware they have.
One of the most ground-breaking developments in

blockchain technology is the concept of decentralized
cryptocurrency exchanges. In their simplest form, these
exchanges can be considered cryptocurrency trading
platforms that allow their users to exchange value without
any third party and reduce risks such as theft and fraud.
Moreover, by their very nature, DEXs are better equipped
than more traditional exchanges to prevent problems such as
price manipulation, trading volume inflation, etc.
Essentially, there are two types of DEX.
The first is DEX, where all buy-to-let transactions

take place on the blockchain. In these exchanges, all
transactions take place directly on the blockchain.
Then there are the DEXs, where buy-to-let orders
take place outside the blockchain. Such exchanges
use pools of funds instead of the so-called "order
book". Uniswaps considered the flag bearer of such
decentralized exchanges.
Peer-to-Peer (P2P) Crypto Exchanges
These exchanges are also called direct crypto exchanges

because they are designed to facilitate crypto exchange
between individuals. In such crypto exchanges, there is no
consensus market price for particular crypto. Rather, buyers
and sellers quote their preferred price and find suitable
matches which can and are willing to transact with them.
Users are free to negotiate among themselves for the best
possible terms. After an agreement of the terms of the
transaction, both parties coordinate the transfer of cryptos
and are free to select the mode of payment.
In many instances, the direct crypto exchange also serves as

escrow for the cryptocurrencies, which are then released to
the buyer once payment has been received. Such crypto
exchanges have proven to be vital in underdeveloped
countries. However, before you engage in buying and selling
on a P2P crypto exchange, ensure that you have checked the
market price of the crypto you intend to purchase.
Crypto Brokers
Cryptocurrency brokers are similar to centralized crypto

exchanges. However, crypto brokers set the prices at which a
user can buy. Typically, this is often the market price plus a
premium that enables the broker to profit. This model is
similar to exchanging forex at your local bank. Note that
transactions in this type of crypto exchange exclusively
occur between the crypto broker and the user. There are no
transactions between buyers and sellers. Crypto brokers are
often the preferred platforms for individuals new to the
crypto universe.
5.3 HOW DO CRYPTOCURRENCY
EXCHANGES WORK?
Cryptocurrency exchanges are platforms where you can buy

or sell cryptocurrencies in real currencies or
cryptocurrencies. You can convert fiat to any cryptocurrency
you want through these sites, and you can convert your
cryptocurrency asset to other cryptos of fiat.
Cryptocurrency exchanges work with the traditional

exchange system. The only difference from the traditional
exchange system is that you can make your investments with
your bank and cryptocurrency exchange account; you do not
need a brokerage.
One of the primary factors most users consider when

choosing a crypto exchange is the cost of using the platform
and whether they get to keep their private keys. Having
custody of your private keys means that you are in full
control of your cryptos.
Advantages of Decentralized Cryptocurrency

Exchanges (DEX)
DEXs are the most popular crypto exchanges in the crypto

sphere. Considering all the advantages of decentralized
exchanges, it is not surprising that they are becoming more
and more popular every day. Even big names like Coinbase
and Binance have begun to develop decentralized versions of
their names, exchanges.
The biggest advantages of a decentralized exchange include:
Account information is not shared with the

exchange operator on a DEX. Therefore, it is more
resistant to attacks, manipulations than a
centralized exchange. Instead, you can keep money
in your account, and you'll be the only one with
access to your account.
Theoretically, states or regulators cannot shut
down a DEX because they are operated on the
blockchain network through a wide variety of
nodes. Of course, governments can shut down a
DEX through malware.
DEX works through various nodes throughout the
cloud. This means it will continue to operate even
if there is a server that is experiencing access
problems or has been attacked.
It has a higher degree of privacy because you do not
share your data with third parties. Most DEXs do
not have KYC requirements. That means you get to
maintain total anonymity.
You keep control of your money in your account
since DEXs allow you to keep your private keys.
Disadvantages of Decentralized Cryptocurrency

Exchanges (DEX)
Decentralized exchanges are not suitable for everyone

since they have some serious drawbacks – especially for
newbies.
Here are the drawbacks of DEX that everyone should know:
There is a greater workload because normally,

transactions such as trading and money transfers
are covered by a central cryptocurrency exchange.
They are not regulated or insured. Central
exchanges have funds to return the money at any
time. That's why they keep escrow funds for quick
withdrawals.
Most DEXs do not allow payment by credit or debit
card or bank transfer.
Prices are low, and transaction volume is limited,
which can keep fees high.
Services from decentralized exchanges are limited.
Services to stop losses and losses, including margin
trading and fiat currencies, are generally not
offered.
There may not be customer service that you can
contact when there is a problem.
A DEX can be much more expensive than a
centralized exchange because you may need to buy
Ethereum Gas (Ethereum services) when you trade.
This means that trading in a decentralized
cryptocurrency exchange can be more costly than a
trade that sometimes occurs on the central
cryptocurrency exchange.
5.4 TOP CRYPTO EXCHANGES
Coinbase
Coinbase is one of the largest centralized crypto exchanges

in the world. It was founded in 2012, making Coinbase one
of the oldest crypto exchanges in the world. It offers
multiple services to its clients. The services offered by
Coinbase include Coinbase brokerage service, crypto trading
services via Coinbase Pro, Coinbase wallet, and Coinbase
merchant solutions.
It uses both secure online and offline servers to secure its

clients' digital currency from hackers. 98% of the customers'
digital currency are held in "cold storage," i.e., secure offline
servers away from prying hackers. The remaining 2% is held
in secure online servers to ensure that its customers'
liquidity needs are met.
IDEX
IDEX is the first Ethereum based decentralized smart

contract exchange for supporting real-time trading. It was
launched in September 2017, is one of the most popular
decentralized exchanges currently in use. Not only does it
have more than 200 varieties of tokens, but it is also one of
the decentralized exchanges with the most features. Some of
its more advanced features are instant cancellations, instant
market orders.
The platform is decentralized and focused on speed and

currently has one of the best DEX trading volumes in the
world. IDEX has a user-friendly interface. One of the most
accessible platforms of its kind. This platform is an all-
inclusive decentralized financial rendezvous point for
DAPP's, where you can also see various Aurora references.
Kraken
It is a centralized crypto exchange based in San Francisco;

Kraken is one of the largest cryptocurrency exchanges in
North America. It supports the following 20
cryptocurrencies. They include Bitcoin (BTC), Bitcoin Cash
(BCH), Dash (DASH), Dogecoin (DOGE), Litecoin (LTC),
Stellar Lumens (XLM), EOS (EOS), Ethereum Classic
(ETC), Ethereum (ETH), Gnosis (GNO), Iconomi (ICN),
Melon (MLN), Augur (REP), Tether (USDT), Monero
(XMR), Ripple (XRP), Zcash (ZEC), Cardano (ADA),
Cosmos (ATOM), Qtum (QTUM), and Tezos (XTZ).
Kraken offers both spot and futures trading on margin. It

also allows for dark pool trading if you want your
transaction to stay off public records
Poloniex
It is a centralized crypto exchange headquartered in

Delaware. Poloniex has over 90 tradeable cryptocurrency
pairs.
BitMEX
Bitcoin Mercantile Exchange (BitMEX) is a Seychellois

crypto exchange. It is banned in the US and these countries:
Canada, Cuba, Crimea and Sevastopol, Iran, Syria, North
Korea, Sudan, Hong Kong, Bermuda, and the Republic of
Seychelles.
Waves.Exchange – Decentralized Exchange:
Waves. Exchange is a decentralized exchange trading point

of the Waves platform, which provides an accessible
environment for new ICOs and crypto projects. With a
rather interesting structure, Waves DEX is a hybrid
combination of both decentralized and centralized markets.
It allows users to transfer, trade, issue, and stake cryptos and
uses a centralized matching application to speed up exchange
trading times.
Users can trade with Ethereum or Bitcoin for Waves tokens

with any token other than the exchange trading list such as
Zcash, Litecoin. Any coin created on the Waves platform is
supported. One of the unique features of the Weaves
network is that it allows users to create their versions of
crypto assets that can be traded on the DEX platform and
trade with them on the platform.
Stellar DEX
Launched in 2014 by Ripple co-founder Jed McCaleb, Stellar

is an interesting cryptocurrency and blockchain project to
facilitate payments between people.
Stellar DEX supports both fiat and cryptocurrencies. One of

the best features of Stellar DEX is that it has a
groundbreaking guide system. In summary, with the help of
this feature, the platform automatically finds the most
affordable trading pairs for you.
To trade through Stellar Dex, users need to create a key

parity to switch to the Stellar network. The key consists of a
public key and a secret key. The first is used to identify the
account and is also where users can get money. The secret
key is used to access the account and perform transactions. It
is very important to keep this key safe because anyone can
access the relevant account on the Stellar exchange.
Bancor Decentralized Exchange
Bancor is one of the largest decentralized stock market

solutions for buying and selling tokens. The most interesting
aspect of this exchange is that, as with most DEXs, it does
not have familiar liquidity problems. Since it does not use
P2P transactions to match buyers and sellers, it is not based
on the traditional trading model available on other
decentralized exchanges. This means that users buy and sell
tokens they want to buy or sell directly from the Bancor
Wallet.
BISQ Decentralized Exchange
BISQ, formerly known as Bitsquare, is a peer-to-peer

platform that is truly decentralized and anonymous status.
To ensure that no software components are centralized, Tor
uses routing, local computing, and personal wallets.
However, it should be noted that trading in BISQ is
significantly slower due to these features. It was launched in
2014, and at that time, it was one of the first Decentralized
Autonomous Organizations (or simply DAO). It currently
supports over 126 cryptocurrencies, including Bitcoin and
Ethereum, the two most popular coins.
To start trading on BISQ, users need to download the
official software.
Uniswap
Uniswap is a completely decentralized protocol designed at

the top of the Ethereum blockchain. It enables automatic
liquidity and is currently the largest decentralized exchange
by trading volume.
The platform is extremely easy to use. Users need to install

Metamask, as all financial transactions will take place
through a decentralized wallet. Metamask is a wallet that
connects users to the Ethereum blockchain through the
browser. After connecting with Metamask, you can launch
the Uniswap application and trade and pool.
0x DEX
0x is an open-source protocol designed to facilitate peer-to-

peer digital asset swaps in a completely decentralized
manner that runs on the Ethereum blockchain. What sets
the 0x apart is that it allows users to save on transaction fees
using an off-chain order transfer system.
Binance DEX
Many of the existing DEX platforms use the flexibility of the

Ethereum blockchain to achieve their goals. Binance is one
of the leading cryptocurrency exchanges globally. It started
participating in the DEX movement following the launch of
local blockchains. Binance CEO Changpeng Zhao said that
Binance DEX is a decentralized exchange developed on
Binance Chain with low latency, high efficiency, low fees
and UX similar to existing centralized exchanges. Oh, of
course, you have your keys and your money. You don't need
to put your money on the stock market.
Airswap Protocol
Airswap does not require any credentials and does not

charge fees for investors to start trading. There are many
similarities between Airswap and 0x but studying their
differences will clarify a wide range of Ethereum-based
approaches to DEX.
Airswap works on a simple protocol that eliminates third

party escrow and registration of the user on the platform.
Buying and selling are simple on the platform where the
maker will set the price, and the taker will accept the
transaction or request. The project is built on a Swap
protocol that has the ability to gives trading freedom to
almost all type of token.
Kyber Network
Kyber Network has been around since the advent of DeFi

technology, allowing users to exchange tokens without
intermediaries instantly. The platform allows merchants to
exchange various types of crypto to be fully compatible with
a wide range of smart contracts, even if it is based on
Ethereum.
VI
ALTCOIN INVESTING
6.1 TYPES OF ALTCOINS
The simplest definition of altcoins is they are

cryptocurrencies that were created after Bitcoin. They are
alternatives to Bitcoin. Data from CoinMarketCap shows
that there are over 7800 altcoins in the market as of April
2021.
Although the primary function for the altcoins to serve as

means of exchange – as cryptocurrencies – they have diverse
functions apart from their transactional value. The
thousands of altcoins in the market can further be
categorized depending on the function they perform.
Here are the different types of altcoins:
Stablecoins
Two serious challenges facing Bitcoin right now are the
issues of scalability and volatility. The primary reason that
stablecoins were created in the first place was to reduce
volatility. Most merchants and businesses are reluctant to
accept crypto payments because they are extremely volatile.
To solve this problem, stablecoins emerged to provide

stability in price by tying the value of the digital currency to
existing fiat currencies. Among the most common fiat
currencies that stablecoins have used to back up their
currency are the euro, USD, and gold. Some of the most
popular stablecoins include Tether, USD Coin, PAX,
Binance USD (BUSD), HUSD, and TrueUSD (TUSD),
among several others.
Mining-Based Altcoins
The name already explains what they are. The primary

source of generating these sets of altcoins is through a
mining process that involves solving challenges to unlock
blocks. This set of coins is more similar to Bitcoin, and a
look at the top coins as of September 2020 shows that most
altcoins belong to this class.
Privacy Coins
A privacy coin is a type of cryptocurrency that deliberately

obfuscates a transactions link. This ensures that the wallet
activity between the transacting parties remain anonymous
and cannot be tracked. It becomes impossible to establish the
transaction history or the funds that a particular wallet holds
with cryptographic obscuring.
The best privacy coins of 2021 are Monero and Pirate Coin
(ARRR).
Utility Tokens
Their name also reveals what they are – tokens that provide
a claim on services, and in some cases, they are sold to
people as part of an ICO. For instance, Filecoin is a utility
token that was offered during an ICO, and it was designed to
be exchanged for decentralized file storage space.
Security Tokens
These altcoins are usually launched in an ICO and are linked

to a business. They share many similarities with traditional
stocks and offer holders some dividend, such as ownership
in a business or a pay-out. When you look at the more than
7,000 cryptocurrencies on the market, you will discover that
they all can be classified as at least one of these types of
altcoins. For instance, Litecoin is an example of a mining-
based altcoin, while Filecoin is a utility token.
Presently, there are three generations of cryptocurrency, and

Bitcoin belongs to the first generation. All first-generation
digital currencies share some common traits. For instance,
they employ Proof of Work mining, and their platforms are
mainly based on Bitcoin source code, which is written in
C++ language. In addition, they all have a limited scripting
language.
Note that the SEC is constantly on the watch for new utility
tokens and security tokens. The regulator uses the Howey
Test to determine whether a particular token is classified as
a security token or a utility token. Utility tokens are not
subject to the same regulations and requirements that
security tokens are because they are not considered
investment contracts.
Although their source code style now varies, their initial

releases were based on the existing Bitcoin base. The
Ethereum project ushered in second-generation
cryptocurrencies, and this wave introduced the concept of
smart contracts. This was regarded as the most significant
contribution to the crypto space since the creation of
Bitcoin. Projects that emerged as second-generation cryptos
also share some common traits, such as a virtual machine
that runs decentralized software/contracts and smart
contracts on the blockchain, among several other signifiers.
The third generation cryptos have taken it a step further by

leveraging the successes that previous generation cryptos
achieved. Projects like Cardano belong to this newer crop.
Common traits of third-generation cryptocurrencies
include:
A focus on scalability, which is built into the base

platform
Interoperability/cross-chain transactions with
other digital currencies, which is built into the core
of most projects
Third-generation smart contracts with formal
software verification to guarantee perfect software
Core systems with governance and compliance,
instead of just building accessories on top.
6.2 THE RISE OF DEFI
One could easily argue that the popularity of Ethereum is

because it ushered in and facilitates decentralized finance
(DeFi).
The cryptocurrency industry is witnessing the force of a new

movement known as Decentralized Finance (DeFi). It is the
general term for several financial applications in the
blockchain focused on disrupting financial intermediaries.
DeFi is unique because it has managed to significantly
expand the use of distributed ledger technology from its first
simple use for money transfer (by Bitcoin and some first-
generation cryptos) to more complex financial use cases.
Decentralized finance has to do with financial services

leveraging smart contracts and blockchain technology to
render several financial services instead of using lawyers and
banks as intermediaries.
Experts are of the view that DeFi will help reconstruct the
banking system in a permissionless way. In traditional
unsecured lending, both lenders and borrowers are legally
required to know each other's identity. There is a legal
requirement that the lender assesses the ability of the
borrower to repay the debt. Well, such requirements do not
exist in DeFi; instead, it's all about preserving privacy and
mutual trust. Regulators are currently faced with striking a
delicate balance between stifling innovation and being
unable to protect people from the possible risks of such
investments. For instance, this is an unregulated space, and
people may end up losing their money.
The success of DeFi is achieved by smart contracts.
Smart Contracts
There is no doubt that smart contracts have what it takes to

disrupt industries like telecommunication, music, banking,
film, insurance, education, and many others. The phrase
"smart contract" is commonly used in the crypto space to
describe a computer code that can facilitate the exchange of
property, money, or other valuables.
Anytime the parties involved meet the predefined rules, the

agreement will be automatically enforced. This is undoubtedly
the smartest form of decentralized automation. Since they run
on the blockchain, smart contracts operate as they're
programmed to, and there is no possibility of downtime,
fraud, censorship, or interference from a third-party.
The truth is that all blockchains can process code; however,

a good number of them are still limited, and this is where
Ethereum differs. Instead of providing limited operations,
the Ethereum platform offers developers the resources to
build any application.
Here is a simple explanation of what smart contracts can do

– individuals can exchange stock, money, property, and
other assets without needing to engage the services of a
lawyer. This significantly reduces the expensive third-party
costs that are often incurred during such transactions. This
is one of the reasons many people believe that Ethereum is
superior to Bitcoin.
How do Smart Contracts Work?
It starts with predefining the contract: At this point,

all the terms of engagement are established by all
stakeholders. This could be the specific currency used for
making payments, the variable interest rate, or the currency
rate. Also, the terms for execution are set while predefining
the contract, and this could be the date, time, or several
other criteria.
Events: This is where events (like the information received
and the kick-off of the transaction) instantly trigger the
implementation of the contract.
Execution and delivery: They determine the movement

of value. It also determines the terms of the contract based
on the fulfillment of the set conditions.
Settlement of contract: This is the final stage of the

process, and it can take place in two ways. The first is off-
chain assets, which means physical assets such as fiat and
stocks. In this case, the changes to accounts on the
distributed ledger will have to match the off-chain
settlement instructions. The second type of settlement of
contract is on-chain, which has to do with digital assets. The
accounts are automatically settled in the case of virtual assets
like digital currency.
With smart contracts, to get the particular product you

want, all you need to do is deposit the cryptocurrency
required. The entire process is automated, so if a buyer or
seller fails to fulfill their end of the bargain, the transactions
will not be completed. The Ethereum smart contract will
instantly cancel the transaction in the spirit of "if you don't
comply".
The truth is smart contracts could be complex or simple

contracts. A good example of simple, smart contracts is the
time-stamping services for an art registry. It can also be used
by non-profits, governmental organizations, and semi-
governmental organizations to maintain records. These
could be records for schools, land titles, university degrees,
and birth certificates.
On the other hand, several regulatory aspects make up

complex contracts. One excellent example is the
Decentralized Autonomous Organization, which is also one
of the most complex smart contracts.
Advantages of Smart Contracts
Trust: With smart contracts, you won't lose your

documents, and no one can steal them because they are
encrypted and safely kept on a shared secured ledger. Also,
with smart contracts, you don't need to trust the individuals
you're dealing with from any location around the globe, and
you shouldn't expect them to trust you either. The system is
unbiased and effectively replaces trust.
Autonomy: There isn't a need for third parties or a

facilitator, which gives you complete control of the
agreement.
Safety: If smart contracts are implemented appropriately,

they are very difficult to hack. Also, your documents will be
safely stored by the environments for smart contracts, which
are effectively protected with complex cryptography.
Savings: There isn't a need for advisors, estate agents,

assistants, notaries, and other intermediaries. This also
translates to a significant reduction in the exorbitant fees
that come with their services.
Efficiency: The time you would normally waste

processing documents and sending them to specific locations
is saved when you use smart contracts.
Transparency: All relevant parties can easily access the

terms and conditions of the contract. The moment an
agreement has been established; it won't be disputed
anymore.
Accuracy: A basic requirement for every smart contract is

that all the terms and conditions of the contract should be
recorded in detail. The reason for this is that a single
omission can lead to transaction errors. This helps
automated contracts avoid the pitfalls that are common with
forms that are completed manually.
Clear communication: I mentioned earlier that there is

a need to record everything in detail. This is what ensures
that there is no misinterpretation or miscommunication.
Clear communication also helps eliminate the inefficiency
associated with communication gaps.
Storage and Backup: During every transaction, smart

contracts are also used to record important transactions. So,
the details of all stakeholders are permanently stored when
used in a contract. This helps for future reference, and in the
event of data loss, the parties involved can retrieve the
attributes of the contract.
Guaranteed outcome: One of the reasons most people

involved in transactions go to court is because one or more
persons have failed to abide by the rules and terms of the
agreement. But smart contracts can significantly lower or
even eliminate the need for litigation. Parties will always be
committed to operating by the rules of the underlying code
when using self-executing contracts.
6.3 ALTCOIN MARKET
CAPITALIZATION
Typically, the top-performing altcoins are often determined

by their market capitalization. So, what is market
capitalization, and why is it so important in the crypto
sphere?
Market Capitalization is simply the price of a coin multiplied

by its circulating supply, total supply, or maximum supply,
depending on what you are looking for.
In this book, we will exclusively be referring to the

circulating market cap (price multiplied by circulating
supply) when we talk about the market cap of a coin. A
maximum market cap is useful for the same reason that
maximum supply is useful: it allows you to value your
position not just at current prices but also at the point at
which the coin's entire supply has come into existence.
However, for this section, we will focus on the market cap as
calculated using circulating supply, as it provides the most
insight on potential growth and for assessing potential exits.
Before we get into the gritty details, I think it will be useful
to outline the four categories of market cap that we use.
These four categories are microcaps, low caps, midcaps, and
high caps, and we identify them as follows:
Microcaps: 0-25BTC (roughly $0 to 250,000 at

current prices)
Low caps: 25-250BTC (roughly $250,000 to 2.5
million)
Midcaps: 250BTC-2500BTC (roughly $2.5 million
to $25 million)
High caps: 2500BTC and above (Above $25
million).
Every trader and investor’s aim is explosive growth, not

minimal growth. The magic of the crypto sphere is in its
unique capacity to turn a very small amount of money into a
significant amount of money, and microcaps and low caps
are where that magic happens. Sure, the high caps can be
very profitable to day-trade when you already have a large
amount of capital – certainly more so than day-trading forex
or equities – but this book is for those of us who didn't have
much capital, to begin with.
You can access the top-performing altcoins at
CoinMarketCap.
6.4 TOP PERFORMING ALTCOINS
IN 2021
The crypto space is an extremely fertile field for research,

even as innovative projects introduce smart ideas into the
mix. There will certainly be fourth-generation
cryptocurrencies in the future as space continues to develop.
Let's look at some of the top cryptocurrency projects at the
moment.
While there are over 7800 altcoins, the top altcoins

distinguish themselves from the pack by advancing the
existing blockchain infrastructure. In this section, we will
review the top six altcoins which are revolutionizing the
crypto sphere.
In our opinion, these are the altcoins with the highest

growth potential in the long term.
Ethereum (ETH)
By the end of 2020, the Ethereum price was somewhat above
$720, with a total market cap of approximately $70 billion.
Ethereum soared at the beginning of 2018 to its highest
price of $1423 on January 4, 2021. At that time, Ethereum
had a total market cap of $138 billion!
Ethereum rose by approximately 3000% in 2017 and became

the second-largest cryptocurrency, second only to BTC.
Ethereum is now looking to move away from the Proof of

Work (PoW) blockchain to become a Proof of Stake (PoS)
network. This means the coin would be staked instead of
mined. The transition is to make Ethereum the most secure
cryptocurrency in the world. This year Ethereum co-
founder Vitalik Buterin is heading to move towards the new
network. It could lead to a massive rally in the price.
In the first four months of 2020, ETH has gained over 280%.
The Ethereum network enjoys the support of a global

system of volunteer nodes who've already downloaded its
entire blockchain to their computers. They help ensure the
full enforcement of all consensus rules in the system and
ensure that the system is honest, all while being rewarded
for their efforts. Smart contracts control the rules and
several other network features.
Those who can make changes are the users, and they have
full control of their data. This is a democratized and
decentralized system that functions like the Internet but is
not controlled by a central authority. Anyone (whether a
complete novice or tech-savvy veteran) can easily build,
release, run, and monetize their apps on the network.
Ether vs Ethereum
Sometimes people see it as crypto, but by definition,

Ethereum is a software platform that runs as a decentralized
app store and also a decentralized Internet. However, a
robust system like this requires a currency to enable users to
pay for the computational resources they need to run a
program or an application.
Ether is both the native digital currency of the Ethereum

platform and a kind of "fuel" for the decentralized apps
within the platform. For instance, users have to pay a
transaction fee with Ether if they want to change
something in any app within the Ethereum network. The
fee will enable the network to process the requested
changes. The system automatically calculates the
transaction fees based on the amount of "gas" needed to
execute the request.
Most exchanges use the name Ethereum when listing Ether;

for instance, you will see a "buy Ethereum" option on
Coinbase, but what that truly means is you're buying Ether
tokens. The token is backed by the Ethereum blockchain,
and users can sell it for cash on an exchange.
The Future of Ethereum
Ethereum positioned itself at the heart of DeFi.
The truth is that the future of Ethereum looks good, even as

it is gaining more adoption. For instance, Samsung has
already added ERC-20 capabilities in the Galaxy S10
smartphone. This implies that the wallet on the smartphone
will feature Ethereum and Bitcoin and allow the phone users
to add ERC-20 tokens directly to their wallet.
At the core of Ethereum's innovation is the Ethereum

Virtual Machine (EVM), which allows developers to run any
program with any programming language. The creation of
blockchain applications has been simplified and made more
efficient than ever before by the Ethereum Virtual Machine.
So, there is no need for developers to build an entirely
original blockchain for every new application.
IOTA
IOTA remains the top distributed network for the Internet
of Things (IoT) in the crypto world. Apart from IoT, the
project also differentiates itself from several other
blockchain-based networks. Though it's a public distributed
ledger, IOTA is unique because it was created without using
blocks or chain, as we explored earlier.
So, we can say that IOTA doesn't use blockchain technology;

instead, it uses Directed Acyclic Graph technology and
Tangle to provide consensus, so there is no need for miners.
The project has been around since 2015, when the earliest
blockchain projects emerged, which makes it one of the
oldest companies within the crypto space.
The IOTA team had initial funding of 1,337 BTC, which

was about $500,000 at the time. This may seem like a small
amount, but ICOs and crowd sales were not common in
2015. All its tokens were issued to the participants in the
crowd sale. None were reserved for the advisors, developers,
and founders.
However, the community donated about 5% of the total

supply of tokens to the IOTA Foundation. This served as the
source of funding for the project. The focus of IOTA is to
enhance the growing machine economy, which can be
achieved by powering all the machine-to-machine payments
required to enable the IoT.
IOTA has been one of the major gainers of 2021. It has
gained more than 640% in the first four months, reaching
historic highs of $2.73.
No Mining in IOTA
While there is the possibility to mine other cryptocurrencies

within the blockchain, IOTA does not have this. As a result,
some positive and negative features come from this
situation.
The inability to mine IOTA means that the amount of IOTA

in the market does not suddenly change. This causes no
sudden fluctuations in the value of IOTA.
On the other hand, the inability to mine IOTA is a negative

situation for cryptocurrency miners.
IOTA DAG Technology

As previously mentioned, IOTA's underlying technology is
Tangle, a data structure based on Directed Acyclic Graph
technology (DAG). This technology was created specifically
for IOTA. Like blockchain technology, which increases its
security as more nodes are added, the DAG data structure
also strengthens its complexity with an increased number of
nodes and transactions, which further boosts its security.
The structure of Tangle is a graph made up of connected

nodes that have edges. The node connections are routed to
ensure they have a direction, which means that moving from
point X to point Y is not the same as moving from point Y
to point X.
Being acyclic implies that it doesn't have a circular structure,

which also means moving from one node to the other along
the edges translates to always moving forward and never
encountering the same node twice or backtracking. Tangle
doesn't use the popular Proof of Work blockchain; instead,
it requires that every participant on the IOTA network
confirms two other transactions before their transaction can
be confirmed.
This ensures that the system is a completely decentralized

and self-regulating peer-to-peer network. One of the
reasons IOTA is feeless is because of its consensus – there is
no need for miners since the participants confirm
transactions. Since the network has managed to eliminate
the need for miners, there is no need to pay anyone.
All that the users end up paying for each transaction is the
small amount of the computing power they use when
confirming two other transactions. This is an effective
structure because, while every single transaction is being
confirmed and those who confirmed it also get their
transactions confirmed, there will be weight built up behind
all the transactions.
The network will become more reliable, and the

transactions will also become immutably secure as the
weight increases. The challenge that IOTA may face has to
do with its DAG network, which could be taken over by an
attacker who gains control of 33% of the network's hashing
power.
The IOTA Foundation introduced a special node known as

the Coordinator to help prevent a potential attack on its
hashing power. The primary goal of the Coordinator is to
protect the network from attacks, and the IOTA Foundation
controls it. However, despite its intentions, some experts
have criticized the Coordinator in the field for being
centralized.
Uses of IOTA
Smart Energy: The speed at which the energy sector is
moving toward the Internet of Things is extraordinary,
including the decentralization of the electricity grid. What
makes IOTA an ideal solution for the energy industry is that
it is feeless and scalable.
Supply Chains and Manufacturing: Since IOTA can

provide immutable documentation at every point (which
helps ensure the authenticity of goods), it can help in the
manufacturing and supply chain stages. It would be possible
to know the origin of a product by writing data in Tangle,
including the country where it was created. It could also be
possible to know when the product was manufactured and
trace each product to the employees directly involved in the
manufacturing process. Manufacturers, distributors, and
consumers can gain more trust in the products they buy
because all the data can be recorded and stored.
Smart Cities: In January 2018, Taipei moved to transform

the city into a futuristic smart city by signing an agreement
with IOTA Foundation to test the technology. This involved
creating a digital ID card based on Tangle and integrating
IOTA into all air pollution monitoring devices.
Ripple (XRP)
Remember, most altcoins have focused on other things and

serving as a means of payment, which also applies to Ripple.
Ripple is both a payment protocol and a digital currency
with an underlying open-source infrastructure to help
facilitate the movement of money.
The main reason for Ripple's success is that it's a payment

system that doesn't just work for digital currencies. Ripple
uses blockchain technology to protect and speed up
international payments. If you were trying to make an
international bank transfer today, processing the transaction
would take between 2-10 days. The same transfer takes a
few seconds when using Ripple.
But to truly understand Ripple, you need to understand how

the money remittance industry works. First, we'll look at the
business model of most money remittance companies.
When we hear about money remittances, the first company

that easily comes to mind is Western Union, one big player
in the field. For several years, Western Union has been used
by individuals worldwide to send money to their families
and friends. The relatively decentralized nature of the
company's operation is perhaps what makes it most
convenient for people.
Its operation differs significantly from a SWIFT payment

with traditional banks. Once you make a payment at any
Western Union branch, the money you paid doesn't leave
the branch.
The XRP
Sometimes, people assume that Ripple is the same as XRP,

but they are two different things. I believe you now know
what the Ripple network is, so what then is XRP? It's a
token just like Ether, which serves as the native token of the
Ethereum network. XRP is a digital asset and the native
token of the Ripple protocol used as a transaction fee on the
network.
The transaction fee is approximately 0.00001 XRP, and once

this fee has been paid, the network will destroy it to create a
cost and stop the issue of transaction spamming of the
ledger. The network also facilitates transactions, even in the
absence of a chain of trust between all parties involved.
If the Ripple network fails to establish a chain of trust, the

parties involved can use XRP in the exchange. The payment
gateway provides the price for such transactions in XRP. But
the purpose of XRP is not only as a currency of last resort
because it offers several benefits that make it more efficient
for people to transact with the token.
For instance, XRP transactions can be settled in less than

four seconds, which means that once an individual sends the
funds, they will change hands almost immediately, unlike
Bitcoin transactions that can sometimes take a few hours
depending on the number of transactions. The XRP token
cannot be faked to any degree because it is a digital asset
with verifiable properties. Of course, what this means is that
people can trust the Ripple network.
The truth is that the potential for Ripple to transform the way
global financial systems work significantly can never be
understated. The concept of "Nostro Banks" is another aspect of
the remittance industry that Ripple is attempting to disrupt. If
you don't know what Nostro Banks are, they are bank accounts
held by other banks in foreign fiat currency. The reason they
keep such funds is to help facilitate foreign exchange payments.
Ripple Offers a Distributed Protocol
The project is focused on being a payment system that will

enable anyone to transfer not just money but anything of
value across the world with minimal fees and as quickly as
possible. The protocol structure was designed to route a
payment from one person to another with the lowest fees
possible.
So, what's the difference between Ripple and the Western

Union example I used before? The two Western Union
agents must trust each other before they can have an
agreement, but with the Ripple network, it's not compulsory
that all the parties involved trust each other before they can
complete a transaction.
Instead, the protocol enables two agents interested in doing
business to contact a third party that trusts the two of them
to help complete the transaction. It doesn't have to be just
one agent; it could even be a chain of agents who trust each
other. The protocol does search the entire Ripple network
and attempt to create a chain of trust that will be used for
every transaction.
With the Ripple network, you can transfer anything that

humans can ascribe value to. You can transfer physical assets
like commodities and other things as long as the two agents
connected to the Ripple network have agreed to exchange
the assets.
SEC Sues Ripple
In December 2020, the U.S. Securities and Exchange

Commission (SEC) initiated a lawsuit against Ripple and its
two executives – the chairman, co-founder and former CEO
Christian Larsen, and its current CEO Bradley Garlinghouse.
The SEC alleges that they breached sections 5(a) and 5(c) of
the U.S. Securities Act of 1933 by conducting an unlawful
offer and sale of securities.
In the lawsuit, the SEC also points out that the two
executives made profits amounting to about $600 million.
This is from $1.38 billion proceeds from the public sale of
XRP between 2013 and 2020, which the SEC stipulates is an
unregistered securities offering.
There have been many challenges to the lawsuit. The

defense lawyers asserting that the sale of XRP is beyond the
purview of the SEC. that is because other branches of the
U.S. government have legally declared that XRP is a
currency and not a security.
Despite this, XRP gained over 525% between January and

April 2021, hitting 3-year highs of $1.96.
Chainlink (LINK)
One of the cryptocurrencies that have been gaining quite a

lot of attention is LINK. With a market cap of over $3.4
billion, the project already occupies space among the top 20
cryptos on CoinMarketCap. Once you hear the phrase
"smart contracts", what quickly comes to mind is Ethereum,
and this is because when Ethereum was launched in 2015, it
came up with the concept that has transformed blockchain
technology.
In the first four months of 2021, LINK gained over 225%

reaching historic highs of $44.35.
Earlier, we talked about smart contracts and what the

Ethereum platform has to offer. But there is one issue with
the Ethereum smart contract: it can only work with data on
the Ethereum blockchain. Of course, they can serve as
extremely useful tools for developers but not as useful as
they could be. So, is it possible to include data from outside
the chain?
Establishing a way to introduce data from outside the

Ethereum blockchain would significantly boost the potential
use cases of smart contracts. This is one issue that the
founders of Chainlink discovered and stepped in to resolve.
They created Chainlink in such a way that it would be
possible to pull data from off-chain sources.
This implies that Chainlink oracles can use data pools,
Application Program Interfaces (APIs), and other real-world
sources. This means that Chainlink is opening up the
chances for smart contracts to utilize any piece of data
regardless of the source.
For projects that require off-chain data, the Chainlink

project will be extremely useful. The project is focused on
bridging the gap between traditional data, which we are all
used to, and the future of distributed ledger technology.
Uses of Chainlink
The most significant progress that Chainlink has made is its

partnership with the SWIFT banking transaction network.
SWIFT remains a top player in the global financial network,
and any company involved with it could end up with several
other partnerships within the financial sector. This includes
partnerships with insurance outfits, payment processors,
and banks.
Although SWIFT does not use Chainlink directly, the

blockchain project is helping them develop the SWIFT
Smart Oracle, which further increases the possibility of
future integrations between the two companies. One very
interesting thing about Chainlink is that it currently has
little competition within the crypto space. Some of the
projects currently working on blockchain oracle
development still lag behind Chainlink.
Chainlink has also built partnerships with other companies like

Request Network, which is an exchange platform focused on
being the standard for exchanging fiat and digital currencies.
They have also entered into a partnership with Zeppelin OS –
an operating system specifically designed to create smart
contracts. Since its launch on the Ethereum main net,
Chainlink has continued adding new partners and node
operators. This is positive news for the team behind the project,
which has focused more on development instead of marketing.
Cardano (ADA)
This project was first conceptualized by Charles Hoskinson,

who is also one of the founders of Ethereum. The fact that a
network of academics and scientists from different
universities worldwide were assembled to review Cardano
protocols before they were released makes it the world's first
peer-reviewed blockchain.
The main algorithm that drives the Cardano platform is

Ouroboros. It's an algorithm that mines coins with the Proof
of Stake protocol, and it was designed to cut down on the
use of energy and the time required to make new coins.
Ordinarily, with a Proof of Stake algorithm, nodes with the
highest number of coins can create transaction blocks in a
blockchain.
In 2021, ADA has been among the top gainers. In the first
four months, it gained over 630% reaching all-time highs
of $1.56
Cardano is classified as a third-generation crypto and smart

contract platform. The project has revealed significant
improvements on the scaling issues that Bitcoin, Ethereum,
and other coins experience. The platform comprises two
layers; the first one is the Cardano Settlement Layer (CSL) –
designed to help settle transactions that use ADA. The
second one is Cardano's Computation Layer (CCL),
containing the smart contract logic that developers can
leverage to move funds programmatically.
They all work toward ensuring that the project's

development is consistent with its roadmap. Hoskinson
believes that Cardano belongs to the third generation of
distributed ledgers. He believes that we have passed through
three generations of blockchain, the first being Bitcoin and
money transfers and the second being Ethereum and smart
contracts.
Ethereum is a second-generation blockchain and has done

an excellent job as a smart contract platform, but it requires
evolution.
There are three major issues that Cardano wants to solve:
Sustainability
Scalability
Interoperability.
Polkadot (DOT)
Polkadot is seen as a next-generation blockchain protocol

that connects several specialized blockchains into a single
network. It may very well be the global network of
blockchains, which will serve as the foundation for a new
peer-to-peer Internet. From the developability,
interoperability, governance, and scalability perspectives, the
Polkadot platform is strong enough to make the vision of
Web3 a reality finally.
The team behind the project has managed to build on the

revolutionary promise of the previous generations of
cryptocurrencies with several fundamental benefits. With
the Polkadot blockchain, other blockchains can benefit in
several ways.
The growing popularity of Polkadot led to DOT's growth of

over 312% in the first four months of 2021 to hit a yearly
high of $48.33.
How Polkadot Blockchain Benefits other

Blockchains?
Scale
A good look at the crypto space reveals that most

blockchains are in isolation, and the amount of traffic they
can process is quite limited. Since Polkadot is a sharded
multichain network, it can process several transactions on
different chains simultaneously. This helps to deal with the
bottlenecks experienced on legacy networks that only
manage to process transactions one-by-one.
Its parallel processing power helps improve scalability and
provide the appropriate conditions for increased adoption
and future growth of digital currencies. The sharded chains
connected to Polkadot are known as "Para chains" since they
all run on the network in parallel.
Interoperability
Just like the mobile apps on a smartphone, networks and

applications on the Polkadot blockchain can easily share
information and functionality without depending on
centralized service providers that have suspicious data
practices. One of the things that separate Polkadot from
previous networks, which mostly operated as standalone
environments, is that the platform offers interoperability
and cross-chain communication.
This will open the door to innovative new services, and

users can conveniently transfer information between chains.
This means that a chain that offers financial services can
easily communicate with a different chain that focuses on
the provision of access to real-world data (oracle chain).
Specialization
One of the features of blockchain architecture is that there

isn't a one-size-fits-all blockchain project. To support
various features and use cases, blockchains often make trade-
offs. So, a chain might optimize its network for file storage
while another might optimize for identity management. The
novel design of every blockchain on the Polkadot network
can be optimized for specific use cases.
This means that blockchains are free to offer excellent

services and improve the security and efficiency of their
networks without having to bother with unnecessary code.
Teams can develop and customize their blockchain more
efficiently and more quickly than before by building on the
substrate development framework.
Ease of Upgrade
Blockchains, just like all software, need upgrades to ensure

that they remain relevant and further improve on their
services. But we've seen an increase in the number of "hard
forks", which often happens when upgrading conventional
chains. A hard fork creates two different transaction
histories, which can split a community in two and usually
requires some months to accomplish. With the Polkadot
platform, blockchains can upgrade without a hard fork, and
this will give them the chance to evolve and adapt easily
when new and improved technology becomes available.
Self-governance
All the communities on Polkadot are free to govern their

network as they desire, and they even hold a transparent
stake in the future of Polkadot's network governance. So,
various teams can freely customize and optimize their
blockchain's governance to suit their needs. They can swap
in pre-built modules for faster deployment and experiment
with new ideas.
The core features of the Polkadot blockchain have already

opened a world of possibilities for us and can put people in
control of their digital lives.
VII
RISK MANAGEMENT IN
CRYPTO INVESTING
7.1 WHAT IS RISK MANAGEMENT?
In any form of investing, risk is inherent. In crypto

investment, the volatility of cryptocurrencies and
uncertainty regarding the future of the blockchain
technology represents the biggest risk.
For crypto investors, there are a few ways of mitigating

these risks. Note that these measures do not eliminate the
risk but rather reduce the chances of being significantly
impacted by an unexpected market trend.
Only invest the amount you are willing to lose
There’s a reason you decided to research cryptocurrencies,

weigh their downsides, and place a few dollars on specific
names, whether they were names you had never heard of
before your crypto dive began or were industry staples, like
Bitcoin. It’s now time to return to these reasons, since
depending on when you invested, your original
commitment could look a lot different than it does now.
The biggest fear new crypto investors have is that as soon as

they put their money in, they will only see dramatic falls,
confirming their dread that they bought at the height of the
hysteria. While there’s no way to avoid the price fluctuations
(if you’ve invested), there are tactics you can turn to so
you’re not trapped by this fear. If you do happen to buy
during a heightened sense of exuberance in the market, and
you only bought in because of the rising valuations, then you
won’t likely stick around for long. If you believe in the
technology, however, then the ability to remain committed
will be much easier, even as prices see a short-term tumble.
Hopefully you bought in because you believe in the
innovation.
Some think they cannot lose $500, until that money starts to
disappear. If you see your money shrink, and immediately
begin to stress about the commitment, then you probably
invested too much. Right size the amount you’ve invested to
make sure it’s only the amount you can afford to see
disappear—and not lose sleep over it—in a blink of an eye.
While limiting your exposure protects your finances, it also

provides you security from the urge to pull out too early.
Since markets fluctuate (especially crypto markets), you will
experience moments where your investment falls. The goal
isn’t to time every movement. That’s impossible. Instead,
over an extended period, you should expect a gain of some
sort. Hopefully, after years, you see a very large profit. If you
invested too much, and you stress out as the investment
falls, then you’re going to exit before you get a chance to see
those gains.
One could argue this is the more dangerous scenario. If your

investment starts to propel upward as soon as you commit
your funds, there’s an urge to think that it’s due to your own
intelligence or ability. Let’s just get this out of the way: the
price appreciation of your investment has practically no
connection with your own ability as a crypto coin picker. It’s
complete luck. Yet, when people fall for this seductive pull,
they tend to become overexuberant about the coins,
committing far more funds than they can afford to lose,
buying into their belief of their inherent skill. Even worse,
they may start to spend on the margin, borrowing the funds
to buy more coins, putting themselves at the threat of
bankruptcy.
The possibility of potential profits often lures novice traders.

As the saying goes, the more you invest, the more you earn.
While maybe true, the downside is that the more you invest,
the more you also stand to lose. But this shouldn't
discourage you from trading; it should encourage you to
learn proper capital allocation techniques.
As a rule of thumb, traders of all levels of experience are
encouraged to allocate not more than 10% of their total
account on a single trade. This means that if you have an
account balance of $1000, the maximum amount you should
risk in a single trade is $100. Some might argue that this caps
your potential profit compared to trading with a total of
$1000. While this might be true, it also significantly limits
your potential losses to just $100. It is better to live to fight
another day than go all in, only to crash and burn.
That’s why it’s even more important in these situations to

return to the reasons for investing. What did you hope to
gain from your investment? What was the best-case
scenario? The worst-case? Using that as a guide when you
see your investment double in three days will prepare you
for an eventual fall and leave you restrained enough to not
overcommit.
Diversify
One of the biggest mistakes an exuberant investor can make

is to take the initial rise in the coins as a sign that this will
continue forever. What happens in these situations is that
the investor will cash out their retirement funds or savings
to commit more money at the rising investment. It’s not
only a mistake that could leave you with very little at the end
of the day, but also a poor understanding of why you
diversify your investments.
Since, at any moment in time, you will have some
investments gaining while others decline, diversification—
where all of your investments are working in tandem with
each other to provide protection—will prevent deep declines
that could leave you with nothing. The basement-level goal
here, with all of your investments working together, is that
they will gain a percentage greater than inflation, leaving
you with enough at the end of your career to retire with. It’s
not to capture a runaway investment train.
Those who ignore diversification will commit their funds to

cryptos, thinking that they will continue to guess the coins
that perform best, leaving them with mammoth victories.
Over years, you will end up worse than when you started
and, in the process, destroy your safety net.
If you started your investment journey by trying to

diversify into different parts of the crypto sphere, then
stick with that strategy, even if some names suddenly
perform remarkably well. It takes some fortitude to do
this, but you’re not diversifying into different crypto
names in order to have exposure to all and then abandon
the plan as soon as one name starts to outperform.
Diversification is done so you can have exposure to a
number of different names, in the case a few start to show
that they’re lasting options in the space. If you abandon
your plan, then a few months later you could find yourself
on the wrong end of the momentum stick, while the
names you exited surge.
If it becomes clear that a particular altcoin might explode

into dominance, potentially replacing Bitcoin, then it makes
sense to invest significantly in that crypto. The future may
have room for many cryptos, it also may have room for very
few. You have to adjust if it turns out few will last in the
crypto space.
Reinvesting Gains
There are going to come times when you see a coin move
forward in value at a significant pace, forcing you to think
about selling in order to capture gains. Say, hypothetically,
you bought $50 of Stellar’s lumens at $0.20, and it’s now
worth $10. So, your 500 coins are now worth $5,000. It’s
perfectly reasonable to want to cash out and capture the
gains since you’ve participated in a bull-run on the coin. Say
you do cash out all but five shares. What should you do with
the $4,950?
From a tax perspective, you have cashed out, meaning it’s a

tax incident requiring a measure of filing. So, you can pocket
the change and feel good about your decision, using it to pay
down debt or go on a vacation. You can also spread that cash
among your other crypto investments, buying more coins in
the other names that could also show improvement over the
next few years. If you stick to your portfolio strategy, then
you could reinvest in the names that have fallen below your
target percentage.
When investing in the stock market, your investments will

often receive periodic payments in the form of dividends.
Investors then must decide if they do keep the dividends,
providing a small influx of cash, or do they reinvest. All you
have to do is look at the S&P 500 to understand the impact.
Over ten years, it has returned about 8% on an annual basis.
Reinvesting the dividends returns a total of 9.5% a year
during the same period. Why? It’s because when you
reinvest, you’re buying more shares. That allows for greater
gains when the market moves up.
The same can occur in the crypto space. If you have five
coins that have doubled in value, you can keep waiting out
those coins. Or you can divest from some of those coins—say
two—and reinvest that money elsewhere. Since the coins
you would be purchasing are likely to be cheaper than the
ones you just sold, you can end up with more coins across
the crypto universe. If there’s forward momentum in one
coin, you do well. If there’s forward momentum in both
coins, you do much better.
Reinvesting gains has significant power when you’re

rebalancing your portfolio. Let’s say you’ve decided to stick
with a portfolio that gives you a stake that equals 40% in
BTC, 20% ETH, 10% in XRP, 10% in lumens, 10% in LTC,
and 10% in various ICOs or other coins.
After a couple months, some of the coins have performed

better than others. Now your portfolio looks more like 52%
Bitcoin, 30% ether, 10% XRP, 5% lumens, 2% Litecoin, and
1% the ICOs (remember that this is likely due to the rate of
failures in the ICO world).
It’s time to rebalance, so you’ll sell a portion of your Bitcoin

and ether stakes to move them in line with the target range
of 40% for Bitcoin and 20% for ether. But then what do you
do with the extra gains, once you’ve brought your lumens,
Litecoin, and ICO percentages back up? That’s where you
can reinvest equally through all five coins. This gives you
more coins in each bucket, without necessarily changing the
percentage of your portfolio. When further gains occur,
then you’ll own more cryptos which will compound your
returns.
Be Patient for the Long-term
One reason people who see short-term gains overweight

their picking capabilities is that they don’t look at their
overall portfolio. While some may see gains, there’s also a
likely chance that others will see falls. But ensuring that
when certain names take a dramatic move forward,
remaining committed to the portfolio will provide stability
to the emotional pull that could lead you into trouble by
dumping all your funds into the coins that are surging.
This is also especially true for leveraged crypto investors and

traders. Using technical analyses, you might identify critical
support and resistance levels and use combinations of
pending crypto orders to enter and exit the crypto market.
Here are the best pending orders to incorporate:
Take Profit orders
These are orders to your broker to close an open position

when the price reaches a specified level above the entry-level
for a buy order and lower than the entry price for a short
position. Take profit orders can also be modified into limit
orders.
When you open a long position, it means that you expect

the price to go up. As a risk management technique, you
should set a take profit level. This is a specific level where
you'd want your trade to be closed and for you to take the
profits accumulated so far. Typically, the take profit level for
a long trade is set above the buying price.
Similarly, when you go short, you expect that the price will
drop; this means that you set the profit level for a short trade
below the selling price.
Stop Loss Orders

As the name suggests, these are designed to limit a trader's
downside. They are meant to close out a position if the
market trends in the opposite direction. For example, if you
open a short position, you hope that the price will drop.
Instead, if the currency pair rises, it means that you are
accruing losses on your trading account. If these losses
continue, your account could be wiped out. However,
setting a stop loss order lets you instruct your broker to
automatically close your position after the losses in your
trading account reach a specific level. Here's how they
are set.
When you open a long position, you expect that the price
will rise. But in the off chance that the market doesn't go
your way, it means that your trading account will accrue
some losses. Setting a stop loss ensures that your trade will
be closed at a specific level, preventing your account from
taking further losses. For a long trade, the stop loss is set
below the buying price.
Similarly, when you short sell, you expect that the prices will
drop. If the market adopts an uptrend, it means that your
trading account will accrue losses. Setting a stop loss level
ensures the losses you take are capped. For a short sell, the
stop loss level is set above the selling price.
Trailing Stop Orders

This order is a modification of the buy stop and the sell-stop
orders. Note that the difference with this order is that it isn't
used to open positions but for risk management purposes.
This order is used to mitigate significant losses in an already
opened position.
Trailing stop orders are often attached to some pips below

the prevailing market price. This means that when the price
rises in an open position and your profits accumulate, the
trailing stop also rises along with it. When the trend changes
and the market adopts a bearish trend, your position will be
close when the market price reaches the trailing stop level.
For an open short position, the trailing stop is placed specific

points above the market price. As the downtrend continues,
the trailing stop will continue moving downwards. This
ensures that your profits are secured if the market reverses
into a bullish trend.
The techniques we have discussed above are implemented

after a trade has been executed. However, risk management
techniques can also be extended to cover positions that you
haven't opened yet. These techniques involve the use of
pending orders. Here are some of the most common
pending orders you may use:
Limit Orders
These are orders to execute a particular trade at a specified
price or better. However, due to market fluctuations, the
specified price may not be attained, meaning that the order
may not be filled. If the specified price is reached, the order
will always be filled better than expected by the trader. This
is one of the main advantages of limit orders. It helps traders
avoid slippages and have their trades executed at specific
prices or, better, enhancing profits.
Limit orders are further categorized into buy limit and sell
limit orders.
Buy limit order: This is an order to execute a long trade

when the price of an asset reaches a specified level that is
lower than the current market price.
Sell limit order: It is the opposite of the buy limit order.

Using this order instructs your broker to sell a particular
currency pair when its price reaches a specified level that is
higher than the current market price.
Stop Orders
These are pending orders which instruct your broker to buy

or sell a particular currency pair when its price reaches a
specified level. The difference between limit orders and stop
orders is that your trade will be executed at the exact
specified price or a better one with limit orders. Your trade
is executed at the best available price for stop orders once
the asset hits the target price. This is the similarity between
stop orders and market orders – they are both filled at the
best available price, which could be a little lower or higher
than the specified price. You could say that the stop order
becomes a market order once the pre-determined price is
reached.
Stop orders are categorized into buy stop orders and sell stop
orders.
Buy stop orders: this is an instruction for your broker to

buy a particular currency pair once the price of an asset
reaches a specified price higher than the current market
price. This means that when the price of the currency pair
hits the pre-determined price, a long trade will be executed
at the best available price. The target price is called the buy
stop price.
Sell stop order: this is the opposite of the buy stop order.
It is an instruction for your broker to short sell a particular
currency pair when its price reaches a target price that is
lower than the current market price. Once the sell stop price
is reached, the sell order will be executed at the best available
price.
Take profit limit orders
These are a modification to the take profit order. They are

used to close an open position at the specified take profit
level and trigger a limit order simultaneously. Therefore, it
involves closing one position and opening another.
The take profit limit order has two sets of prices. Firstly, the
profit price is used to close a position when the currency
pair touches it. Secondly, it has a limit price, which is used to
trigger the limit order. Remember that a limit order is often
executed at the limit price or better.
The take profit limit orders are further subdivided into two
categories – buy take profit limit orders and sell take profit
limit orders.
Buy take profit limit order: This order often

corresponds with closing out a short position. As we
discussed above, a buy limit order is an order to execute a
long trade when the price of an asset reaches a specified level
that is lower than the current market price.
When setting the take profit order for a short position, the
target price is set lower than the market price since you
expect the price of the currency pair to drop when you open
a short position.
Sell take profit limit order: This order corresponds to

closing a long position. We mentioned earlier that a sell
limit order instructs your broker to sell a particular currency
pair when its price reaches a specified level that is higher
than the current market price.
For a long position, the take profit level is set above the
current market price. This is because when buying a
currency pair, you do so, hoping the price will increase.
Trailing Stop Limit orders
You can also use the trailing stop to set a trigger price or a
limit order. In this case, the trailing stop limit orders will
combine the characteristics of the trailing stop and the stop
limit. Remember that you can have it trail the market price
by a percentage or a fixed dollar amount when setting the
trailing stop. Thus, when the market trend reverses and hits
the trailing stop price, the trailing stop limit order will be
triggered.
When setting up the trailing stop limit order, three inputs

are necessary:
The trailing stop amount or percentage

The stop price, which when hit by the market, will
trigger the trailing stop limit order
The limit price which your order will be executed
at.
7.2 BASIC RISK MANAGEMENT
TECHNIQUES YOU MUST KNOW
Adjust your Portfolio as Needed
Cryptos do have a significant amount of momentum playing

into the performance. Sometimes, it’s smart to play the
momentum by keeping the investment moving in the
direction where the momentum is currently going. It won’t
last forever, but it can provide some short-term
improvement. To take advantage of this, use the portfolio to
safely play momentum. Let’s say you have decided to take a
10% stake in XRP. Suddenly, after a year of investing, XRP
starts to show significant gains, jumping 30% over ten days.
This momentum continues for the next month, as it shows
signs of interest from financial firms. What should you do?
If you want to capture more of this momentum, increase the

percentage of the portfolio that is dedicated to XRP. Say you
increase the percent you want exposed to XRP from 10% to
15%. That’s not going to get you in trouble, since the XRP
gains will likely have moved it close to 15% anyway. You just
don’t need to rebalance as quickly as you would otherwise
expect. This will allow you to increase your exposure,
playing the momentum, without overleveraging to one coin.
Be careful with these decisions. You don’t want to go from

10% to, say, 75% of your portfolio in XRP, just because of a
few good months. You’re still trying to time the market, but
by going this route, you’re doing so within the confines of
your portfolio.
Regularly Re-evaluate Your Investing

Assumptions
When you begin to research crypto names and dive into

what separates one from the other, you will undoubtedly
begin to form opinions and assumptions about each one.
Some you will begin to embrace, cheer for, and support.
Others you will doubt, turn your back on, or call a fraud.
This will form the basis of your earliest investments, and it’s
a sign of a growing understanding of the crypto space.
Remember, though, that you’ll have to re-evaluate these

assumptions as time goes on. You may, in the beginning,
believe financial institutions will never use XRP in everyday
transactions. But after six months, if more firms are signing
up, then you’ll need to re-evaluate that assumption. You may
believe that ether will overtake Bitcoin as a currency of
choice among mainstream crypto users. But if a year later,
ether has lost track with Bitcoin, you’ll need to return to that
original hypothesis and determine if you still stand by the
opinion or have changed your mind. As you do, you can
change your portfolio structure to reflect your views.
Again, since this isn’t the money that you’re relying on, it’s
best to have intellectual intrigue, and embrace the research
and findings. It’s the only way you’ll feel as if you have a
stake in the game, besides putting a few dollars down to try
and take advantage of the trend.
Do not use too much leverage
Leverage is a credit facility extended to you by your broker,

which helps you increase your exposure to a particular asset.
For example, if you take leverage of 100x, you will open a
position that is 100x the size of your account deposit. Say
you have a $1000 deposit in your account. With a leverage
of 100x, you can open a position worth $100,000. Note that
leverage can only be used when trading derivatives. It
significantly increases your potential profits but also makes
the downside huge.
In this example, someone with $1000 using the leverage of

100x profits equally from the market as someone with
$100000 who isn't using leverage. The risk here is that a
slight 1% market shift on the opposite side will wipe out
your $1000 account balance. Compared with someone using
the leverage of 10x, the market will have to move at least
10% against them for their $1000 account balance to be
wiped out. This is the risk of using excessive leverage.
As a risk management technique, traders are often

encouraged to use small leverage, or if possible, avoid using
leverage.
VIII
ALTERNATIVE CRYPTO
INCOME STREAMS
8.1 CRYPTO STAKING
With the mainstream explosion of DeFi, crypto users have

been given unlimited opportunities for alternative income
streams. By alternative income streams we mean income
that crypto holders can make passively without the need to
actively trade in the markets. this saves them the hustle of
analyzing the markets and constantly monitoring their
trades. Some of the most prominent alternative income
streams for crypto holders are staking and lending.
Staking was made popular by Ethereum’s decision to shift

from Proof-of-Work consensus mechanism to the Proof-of-
Stake consensus mechanism in December 2020. Although
staking has been around for much longer, investors and
traders started paying a close attention when Ethereum
made the switch.
What is Staking?
Staking involves locking your cryptos in wallets or

exchanges for a specified period to support the operations of
a blockchain network. Note that during this period, you
cannot spend or transfer the cryptos you have staked. In
return, you will earn rewards from staking your cryptos.
With crypto staking, you can generate a passive income.

Here you hold back the cryptocurrency and receive a
corresponding reward for it. The reward is received from
the network because it contributes to the operation and
maintains the network's security.
It is a good way to compare it to a savings book or a daily

money account. If you deposit your money at a bank, you
will receive interest in your daily money account balance.
The bank uses your capital to issue loans and makes money
with it. The same applies to the staking of cryptocurrencies.
The same applies to crypto staking. The coins you "invested"
or withheld are used to grant loans to others.
Since you don't get interested in balances at a bank these

days, the staking is on the rise at the moment and is
becoming more and more attractive to many investors.
The staking of cryptocurrencies is not possible with every

crypto. However, there are quite a handful of coins that can
be used to generate a passive income.
However, it is not possible to stake BTC since it uses the
PoW consensus mechanism. Crypto staking is only possible
for cryptos that use the PoS consensus mechanism.
The Difference Between Proof of Work & Proof of

Stake
In Bitcoin, which uses PoW, computers constantly work to

create new blocks for the blockchain as quickly as possible.
During staking, the validators are selected by the network.
The more cryptocurrencies a staker has deposited, the more
it will be involved in producing the new crypto blocks. This
method is called Proof of Stake. Consensus mechanism.
Risks of Crypto Staking
This is still new territory because staking is still a

new concept. Compared to a relatively transparent
investment on the savings book at a bank, the
possibility of earning interest with cryptocurrencies
is relatively complex. Also, in the crypto market,
the motto applies, the higher the possible yield, the
riskier your investment is usually.
Another risk is with scams. Whenever new
business models emerge, fraudsters are never that
far behind. They aim to take advantage of the fact
that there is little knowledge in the market. So, you
should make sure you don't sit fall for such. More
importantly, only stake with mainstream and well-
known crypto brokers and exchanges and ignore
offers from unknown providers promise high
returns.
Attacks on the network or a crypto exchange itself
can also pose a risk. Even the best security measures
do not always protect against criminal attacks. But
you also have this risk with a "normal" investment
in digital assets.
8.2 WHAT IS OFFLINE STAKING?
Offline staking allows users to deposit their cryptocurrency

in an offline wallet, thereby earning staking rewards. These
are cold storage wallet, meaning they are not connected to
the internet.
Staking rewards offer users the opportunity to earn interest

in cryptocurrencies. As with Ethereum 2.0 staking, users do
not need to run a verification node under the PoS consensus
model in this type of staking.
Offline staking works differently than the online staking

models, which typically require the owner to transfer their
cryptocurrency to a specific group of validators. Anyone can
be a "Super Staker" and staking even for their friends
without transferring their crypto.
For those who choose to run a super staking node, offline
staking offers another unique opportunity: the ability to
provide verified crowdsourcing and earn a fee paid directly
from the block reward.
Benefits of Offline Staking
Offline staking has several benefits. It allows owners to

choose to invest their crypto in a node operator rather than
meeting all the technical requirements of setting up a node
themselves. The barriers to participation are even less
because users do not need to transfer custody of their funds
to an external party. Users can easily stake their crypto using
an offline storage wallet, such as wallets like Trezor or
Ledger. The only requirement is that the wallet supports
staking authorization functionality.
Offline staking benefits the cryptocurrency ecosystem in

general because it means that their crypto can be distributed
to a wider user base who want to take advantage of offline
stalking. This means that liquidity will be increased in the
crypto market instead of cryptos being locked and lying
away idly.
Offline staking reduces its dependence on whales, increasing

the crypto volatility significantly when transacting large
amounts of cryptocurrencies in exchanges. This also means
that voter density is distributed to many more users,
eliminating the possibility that whales will affect the
network and the price of a cryptocurrency.
In addition, users who participate in staking are more likely

to feel closer to this network because they are invested and
rewarded for their efforts. This results in a stronger
community around cryptocurrency.
Offline staking also eliminates many of the risks associated

with other interest-generating applications of
cryptocurrency. For example, the emergence of
decentralized financing has seen users encouraged to "yield
farming" through staking and credit platforms.
However, due to the lack of maturity in the DeFi market,

users may face significant risks. One of the risks is smart
contract errors, which have become more common this year
with increased interest in DeFi. Vitalik Buterin said he
believes users continue to underestimate the risks inherent
in blockchain-based smart contracts.
Risks of Offline Staking
Offline staking carries far less risk than using online staking
or DeFi lending apps. There are no long-term
cryptocurrency crashes and cutting risks with offline
staking, and they are very user-friendly.
Therefore, the main risks are general considerations
regarding the use of cryptocurrency in wallets. Users need to
protect their hardware wallet from theft and that make sure
their keys are properly backed up in a secure place. If the
backup and wallet are lost, all the money in the wallet,
including staking cryptocurrencies, are lost.
Similarly, if users store their hardware wallet passwords or

access codes in a place where a malicious third-party can
access their wallet, they risk losing their money.
In general, offline cryptocurrency storage is considered one

of the safest ways to hold and stake cryptocurrencies.
How Does Offline Staking Work?
There are several ways to stake offline. As with any public

blockchain, a user may decide to join the network as a
validator called "Super Staker" or verified to a validator. In
the case of Super Staker, one node accepts staking
transferred from other cryptocurrency owners.
If some users don't want to run a node, the alternative is to

put their cryptocurrency at an address where they will
transfer it to a Super Staker or a larger staking pool.
This can be configured through the user interface of the

staking network using the wallet address of their offline
wallet. No matter which option the user chooses, they can
win staking rewards and deposit them into their wallet
address. This means that they continue to enjoy all the
benefits of offline staking at any time without risking taking
their money online.
8.3 STAKING ON ZILLIQA
Through a series of strategic partnerships, $ZIL token enjoy

various options to enjoy annual returns of 6% or more with
non-custodial staking returns on their investments as they
hodl them.
When users stake on Zilliqa, they open up access to manage

Zilliqa seed nodes to Zilliqa's ecosystem of miners, token
holders, and developers and create more utility for $ZIL.
What is Zilliqa (ZIL)?
Zilliqa is a platform that offers the most promising solution

with high processing capacity, built to process thousands of
transactions per second. Zilliqa has been hailed as the most
ideal platform for crypto staking in the past couple of weeks.
In this section, we will review Zilliqa and establish exactly
how and why it is revolutionizing the world of crypto
staking.
Researchers at the National University of Singapore have

launched an initiative called Zilliqa coin to address this
problem. This new blockchain technology used "Sharding"
technology, and it was revealed in the first tests that the
technology exceeded Visa and Mastercard's average
processing capacity of 4000 transactions per second.
The Beginning of Zilliqa
When CryptoKitties was released in November 2018, it led

to unexpected developments in the cryptocurrency industry.
It has become widespread enough and accounted for about
11% of all transactions on the Ethereum blockchain network
through which it was built. Weeks after it was released, the
game began to cause some strain on the Ethereum network
The network was clogged with density, causing transactions

to be slow and delay, and the blockchain unexpectedly
increased the price users pay per transaction. Some might
say that an app like CryptoKitties that doesn't have anything
to do with ETH and is unnecessary for the Ethereum
network.
So instead of asking, "What is an application like

CryptoKitties doing on a public blockchain?" We need to ask
the question, "Shouldn't a public blockchain be more
scalable?"
The fact is that as of today, the ability of a blockchain to

scale is limited. This is the main reason why Zilliqa was
created – to ensure scalability.
Can the Zilliqa blockchain solve the scaling

problem?
The approval protocol on open blockchain platforms

(Ethereum, Bitcoin, Neo, Ripple, etc.) requires critical
requirements for a transaction to take effect. Each node
(processor in the approval mechanism) on the network must
save all transactions in order, save them in the registry, and
store the ledger in which all transactions are registered in
each node. This requirement reveals the key feature of the
blockchain – Decentralization.
However, as the number of transactions performed on the

network increases (as blockchain becomes more widespread)
in such a decentralized system, the number of nodes
required to perform and record transactions increases. As
the number of nodes connected to a network increases, so
does the distance required for a process's data to be accepted
and stored throughout the network and become fully valid.
Therefore, as the number of nodes in a network increases,

the latency between nodes increases logarithmically, so the
network cannot scale to increase nodes. Conversely, as the
number of nodes on the blockchain increases,
decentralization and security increase, but its scaling
decreases.
What is the Zilliqa blockchain used for?
Zilliqa is a next-generation blockchain and a project that

offers infrastructure, scalability, and security. It uses
Sharding technology to facilitate the consensus process to
host distributed applications of Ethereum and other
blockchains or enable them to perform fast trading.
Today, more than 1,000 distributed applications have been

built on the Ethereum network. The Ethereum network
approves transactions with a capacity of up to 15
transactions per second.
Ethereum is only capable of delivering the current trading

volume. Therefore, for wider use, it must significantly
increase the processing capacity. When it comes to Bitcoin,
we are faced with a much worse situation. A speed contrary
to the values promised by the blockchain, which takes from
1 hour to 1 day for 4-7 transactions per second and approval
of a transaction. The same story more or less applies to all
blockchains.
While some may be a little more scalable than others, a

network that gives full confidence to remove a widespread
use has so far not emerged. This is the point of contraction
of blockchain technology today and the biggest obstacle to
general use.
Researchers at the National University of Singapore have

launched an initiative called Zilliqa coin to address this
problem. This new blockchain technology used "Sharding"
technology, and it was revealed in the first tests that the
technology exceeded Visa and Mastercard's average
processing capacity of 4000 transactions per second.
What does Zilliqa blockchain change?
Zilliqa is the most promising platform with a high trading

capacity built to process thousands of transactions per
second. This feature is claimed to be the only platform in the
world with a structure suitable for general use. Here's why:
Features of Zilliqa coin blockchain
Zilliqa coin (ZIL) can be scaled linearly
Linear scaling means that as the number of nodes joining a

network increases, transaction output increases in parallel.
This statement may sound a little intuitive, but on most
blockchain networks, it's the opposite. Because as the
number of nodes joining the network increases on other
blockchain networks, the time it takes to approve a
transaction and register it on all nodes increases, limiting
transaction output. Therefore, many solutions to increase
transaction output speed focus on reducing the number of
approver nodes on the network. This naturally means
sacrificing the concept of decentralization.
Zilliqa (ZIL) uses Scilla Software Language
Zilliqa used the highest technology when designing and was

designed with scilla software language in technology.
Compared to Ethereum, Zilliqa can trade more. Scilla dApps
(decentralized application) is a software language that will
affect the future of its projects. This software language
allows thousands of transactions per second on the Zilliqa
platform and has the potential to eliminate the security
challenges Ethereum faces.
Zilliqa is the first open blockchain to implement

coin Sharding
Sharding is a long-standing concept for distributed systems.

It has been talked about for years that this solution will
increase scaling, performance, and I/O bandwidth.
However, the concept has never been used on any open

blockchain. Sharding is a process execution mechanism in
which nodes in a network are automatically broken into
pieces of parallel chains. Each shard performs part of all
operations connected, producing a micro block of each
shard.
These micro blocks are then connected and added to the
blockchain network. After the successful results of Zilliqa
coin as the first practitioner of this mechanism attracted
attention, the Ethereum team started working on adding the
Sharding mechanism to the network to solve its problem.
In October 2017, Zilliqa reached 2488 processing capacity

per second in tests with 3600 nodes and six shards. That's
already 250 times Ethereum. Zilliqa's main net.
Zilliqa coin uses the PoW approval mechanism

only to create mining identities, which greatly
reduces the energy usage rate.
This is a different situation from other PoW networks. In

Bitcoin, for example, PoW is used to process all blocks,
which makes the mining business an energy-intensive
transaction.
Zilliqa uses the Practical Byzantine Fault

Tolerance (pBFT) approval protocol optimized for
termination of operations
In other words, unlike the PoW approval mechanism,

where many approvals are required, pBFT does not need a
temporary fork for the approval protocol. In Zilliqa, if a
block is provisioned to a blockchain network, another
block cannot be provided to replace it. Therefore, this
block cannot be imitated, so no block confirmation is
required.
Zilliqa coin pBFT-based approval mechanism

enables efficient storage needs management
Due to the termination process, not all transaction history

needs to be stored on the blockchain network. Instead, it is
enough to keep the final situation. However, the need for
storage in smart contracts increases significantly.
Zilliqa's smart contract language is much easier

and closed to coding errors
Unlike Ethereum, the Zilliqa coin is based on non-Turing,

not a Turing-based smart contract language. This makes it
easy to use, easy to understand, and more attractive for
method-based approval.
Zilliqa coin is the only blockchain protocol that

can scale without sacrificing security and
decentralization
There are many blockchain protocols out there that claim to

offer high transaction volume. Yes, they could be doing that.
But how is it? Either by restricting the number of nodes to
join the network, which makes the network more
centralized, making the blockchain more vulnerable to
attack and reducing the security of the blockchain.
Competitors and Advantages of Zilliqa
Here we use the term competitor as a concept, and we want

to compare them. This information is based on information
provided by the Zilliqa team to the community.
Zilliqa vs Bitcoin
The Bitcoin network can trade between 4 and 7

transactions per second. Zilliqa has already doubled
that to 500.
Bitcoin is based on each node using PoW separately
for each block, making Bitcoin mining an energy-
intensive trade. Zilliqa, on the other hand, uses the
pBFT approval protocol to create blocks that use
PoW only to create the identities of miners. This
causes Zilliqa not to need much energy for block
approval.
Unlike Bitcoin's approval mechanism, Zilliqa
terminates transactions with pBFT, which does not
require any approval and therefore, does not
require data storage.
Unlike Bitcoin, Zilliqa has smart contract
functionality, and dApps applications can be built
on the platform.
Zilliqa Coin vs Ethereum

Like Bitcoin, Ethereum uses the PoW approval
mechanism. Therefore, the Zilliqa pBFT approval
mechanism is much more energy-efficient.
The Ethereum PoW-based approval protocol
forces it to temporarily forks, which causes a
certain number of approvals to approve a
transaction. In Zilliqa, termination of transactions
is done with pBFT, so no confirmation is needed.
This eliminates the need for data storage.
Unlike Ethereum, Zilliqa uses a non-Turing-based
language for smart contracts. This makes it more
resistant to code errors and more acceptable for
formal method-based approval.
Ethereum is already working to integrate PoS and
Sharding into its system as an alternative to its
current structure. But Zilliqa has already been
working on Sharding for two years and has built his
entire system accordingly. He's solved the scaling
problem as of now. Therefore, Zilliqa has the
advantage of being the first to solve the scaling
problem.
Zilliqa coin vs NEO
It uses NEO delegated BFT (dBFT) as its approval

mechanism. This means that sub-nodes, called
book-holding nodes, are needed to provide
consensus on behalf of the entire network. These
ledger-keeping sub-nodes need a great deal of
collateral for storage and locking.
The disadvantage of this approach is that if these
nodes are too wide, there will be a significant
reduction in circulation liquidity due to tokens
stored as collateral. If this number of nodes is small,
this means sacrificing the decentralization feature
of the blockchain, which makes the network
vulnerable to attack. In Zilliqa, the consensus
protocol does not reduce liquidity and does not
create a shortage of centrality or security.
Neo faces scaling due to the dBFT mechanism, and
to overcome it, it must sacrifice decentralization
and security. Zilliqa, on the other hand, does not
deal with these problems thanks to the fact that
micro blocks formed by sharding and parallel chain
mechanisms then form the final block. Zil coin is
fully scalable and does not need to compromise
decentralization and security.
Zilliqa vs EOS
EOS delegated PoS (dPoS) uses consensus protocol.

For this, it needs 21 sub-nodes that work as block
manufacturers. This provides EOS with a complete
output that will provide scaling. But it presents a
serious security and centralization problem that
puts the entire network at risk. Zilliqa, on the other
hand, does these risks without the need to
determine any specific nodes.
While EOS cannot guarantee termination of
transactions with dPOS, Zilliqa guarantees
termination with pBFT
8.4 CRYPTO LENDING
As the cryptocurrency market continues to develop, so do

how investors can make gains. One of these methods is
lending. Crypto lending involves giving out your cryptos as
loans. Lending allows those HODLing cryptos to earn
interest on their portfolio. It also serves to increase liquidity
in the crypto market by freeing up cryptos held in cold
storages.
Crypto lending can occur on centralized or decentralized

platforms.
What Does Lending Mean?
Lending can be defined as a system that allows

cryptocurrencies to be rented and passively profited from. It
is a method of making a profit that has emerged as an
alternative to selling horses or saving in wallets, which many
of the investors use.
Smart contracts allow lenders to pool their cryptos together

and automatically distributes the loans to borrowers. It has
the terms of these loans codified into the contract, which
also autonomously distributes interest to the lenders.
Typically, borrowers deposit funds to a smart contract, often
in fiat, for more than the amount of crypto loan they wish to
take. This is called collateralization, and some platforms
require borrowers to collateralize their loans by a minimum
of 150%.
What Does Lending Do?
Thanks to the Lending system, users can gain passively by

going to leasing the cryptocurrencies they have. The biggest
plus is that these gains can be achieved without constantly
monitoring the markets.
How to Earn with Crypto Lending?
Lending and borrowing without requiring a bank: There

have been a big boom in DeFi coins. The majority of them
are available on financial platforms that enable users to earn
some interest by lending their coins. Such platforms bring
lenders and borrowers together via a smart contract, mostly
running on the Ethereum network. Participants are not
required to provide personal information like their financial
history – all that's required to get the loan as collateral.
Examples of such platforms include Aave and Compound.
Sometimes, crypto enthusiasts refer to DeFi as "Lego

money", and this is because people can stack dApps together
to maximize their returns. Participants can purchase a
stablecoin such as Dai and earn interest by lending it on
Compound via their smartphone. The truth is that
presently, many dApps are niche; however, future
applications could significantly transform our lives. Some
examples of these transformative DeFi projects include
Ampleforth, which we discussed earlier, and Chainlink.
Also, projects such as 0x (pronounced "zero X"), Maker,
Yearn Finance, and several others are popular in the DeFi
space.
FINAL WORDS
There are some talks out there about the crypto market
getting saturated, and I find them to be extremely foolish.
We are just experiencing the second bull run of the crypto
market in its 12-year life span. There is so much more
potential, and I have made a small infographic below to
explain the same.
352 | FINAL WORDS
We can see how early we are in this space when we compare

the Crypto market cap with other significant financial
markets in the world. By entering this space now and by
being a crypto investor, you can have a great advantage of
being an early adopter. All the Best!

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CRYPTOCURRENCY &

BITCOIN INVESTING FOR

DIGITAL INVESTOR HUB

The invention and the rise of the crypto market is arguably

In just about 12 years since their inception, the progress

volume, the crypto market has made an unignorable impact

More assets and high trading volume translate to numerous

What does this book cover?

I have curated a specific chronology and drafted the table of

This book is curated by professional authors who have a lot of experience

The content contained within this book may not be reproduced,

Under no circumstances will any blame or legal responsibility be held

Please note the information contained within this document is for

Final Words 351

B y definition, a cryptocurrency is, “a digital currency

Cryptocurrency often called crypto, is a fusion of two words

Cryptocurrencies are categorized into four primary groups,

There are many different kinds of cryptocurrency. It’s easiest

Coins, on the other hand, are native to their own

Now that we’ve established the difference between a token

Sometimes called ‘Blockchain economies’ these

These altcoins are the most similar to Bitcoin since they

These are altcoins which are typically issued in an initial

Privacy coins are true to their name, with a clear emphasis

As described above, platforms like Ethereum allow for the

Token (BAT) which is used to literally pay for the attention

Stablecoins are coins that are pegged 1:1 to the dollar,

Since cryptos are inherently volatile, stablecoins are

Cryptocurrency collateralized stablecoins. Their

value is pegged on other cryptocurrencies.

Now we have reviewed the different functional types of

I t all started with Bitcoin! Although Bitcoin is widely

Bitcoin is a cryptocurrency, the first cryptocurrency and was

The idea of Bitcoin is simple, but some of the details are

How is Bitcoin Created?

Bitcoin is created through a process called ‘mining’. In

an ever-growing chain, hence the origin of the term

Blockchain effectively ensures that the network is both safe

What is Double Spending?

How does Bitcoin have value?

This is a less technical but equally complicated question,

Markets create value for things, and Bitcoin has a robust

network. On the Bitcoin network you can send Bitcoin to

So now we’ve tackled two of the most important questions

So how does Bitcoin distinguish itself from gold and fiat

The Origin Story

The origin story of cryptocurrencies started with Bitcoin.

Reading these narratives will be a first step in recognizing

The Origin of Bitcoin

released the opportunity to mine and buy the digital coin,

The History of Bitcoin

The community of digital coin enthusiasts, libertarians, and

Since criminals dominated the early transactions, it unfairly

It wasn’t until the Bitcoin Market was developed as the first

Since these initial hurdles of allowing people to use Bitcoin

Venture capitalists jumped into the scene, providing start-

W hile cryptos are massively popular right now, it

We described above the double-spending problem, and how

One of crypto’s greatest strengths is the ‘self-governance’

bank. It is outside the control of any specific nation or

Bitcoin fundamentally ushered in the era of smarter form of

One specific example of the flexibility of Bitcoin and other

This technology means that within the monetary medium