If you have not yet heard of Bitcoins or Cryptocurrencies, you may have been stucked somewhere where there is no access to the internet in the last three or so years. Albeit cryptos are still in the a relative infantile stage, it has entered the main stream of consciousness by so many and it is now a multi-billion industry.

So what is cryptocurrency? Wikipedia says “A cryptocurrency, crypto-currency, or crypto is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of a computerized database using strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership. Cryptocurrency does not exist in physical form (like paper money) and is typically not issued by a central authority. Cryptocurrencies typically use decentralized control as opposed to a central bank digital currency (CBDC). When a cryptocurrency is minted or created prior to issuance or issued by a single issuer, it is generally considered centralized. When implemented with decentralized control, each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database. Bitcoin, first released as open-source software in 2009, is the first decentralized cryptocurrency. Since the release of bitcoin, many other cryptocurrencies have been created.”

Investopedia.com has a more in-depth definition about cryptos and you can read it HERE

Should you be investing in cryptocurrencies? Well the answer is yes and no. Yes if you believe that blockchains and the whole crypto ideas is the future and you have some extra funds that you are willing to lock in for at least a few years as I said earlier that the whole crypto scene is still relatively in the infantile stage. No if you are not sure about the future of blockchains and crypto and you are not used to wild volatilities in your investments — increase and decrease of 50 to 80% (or more) are not entirely uncommon in the crypto world. If you think you are ready, I highly recommend you study further.

One of the best videos I watched that will make you understand Cryptos better is from a guy named Arun on his Youtube channel:

I also recorded 2 videos about Crypto investing with TAP founder and Crypto advocate Tony Herbosa:

You may watch my in-depth discussions on personal finance at my Youtube channel. Please subscribe to my channel by clicking HERE.

Happy Investing!

Blockchain and cryptocurrencies has been a hot topic lately. So what are they really?

According to Investopedia.com…

“A blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions. Constantly growing as ‘completed’ blocks (the most recent transactions) are recorded and added to it in chronological order, it allows market participants to keep track of digital currency transactions without central record-keeping. Each node (a computer connected to the network) gets a copy of the blockchain, which is downloaded automatically.”

“Originally developed as the accounting method for the virtual currency Bitcoin, blockchains – which use what’s known as distributed ledger technology (DLT) – are appearing in a variety of commercial applications today. Currently, the technology is primarily used to verify transactions, within digital currencies though it is possible to digitize, code and insert practically any document into the blockchain. Doing so creates an indelible record that cannot be changed; furthermore, the record’s authenticity can be verified by the entire community using the blockchain instead of a single centralized authority.”

If you were like me, it would still be difficult to understand what blockchain really is even with Investopedia’s definition. Fortunately, BBC came up with a simple to understand video about it…

Just a friendly reminder… remember the golden rule in investing — never invest in something you do not understand!

As many cryptocurrency enthusiasts know, bitcoin started at less than $1 in 2009. By 2012, it was a little over $6. Between 10 to 12 April 2013, it dropped 83% to $45. By early January 2014, it exceeded $880. At the start of 2017, it stood at about $985. It grew to $17,500 in December 2017. Today, it is hovering under $10,000.

Despite the stomach-wrenching rise and fall of prices, many remain attracted to cryptocurrencies, bitcoin being only one of the 1,500-plus digital currencies and assets in circulation. I am using bitcoin as an example here because it is one of the most popular digital coins and has the highest market capitalization of its kind at around $155 billion.

If the world will eventually turn cashless and transition to a crypto-ready economy, should we start investing in cryptocurrencies now, despite price volatilities? If Yes, how do we pick the potential winners?

Crypto What?

Let me backtrack a bit by explaining cryptocurrencies in contrast to the money we keep in our pockets. Cryptocurrencies, because they are virtual, only exist in digital form. There are no physical banknotes or coins, unlike our traditional money.

We also know that traditional money is issued by a central bank, the one body that has the authority to create the currency or remove it from circulation. On the other hand, most cryptocurrencies similar to bitcoin are not controlled by any central body, but the technology behind—called blockchain—allows secure transacting among parties, where the network of peers (computers) are the ones that record and validate every transaction in a public ledger. These transactions are cryptographically secured. Bitcoin is thus considered the first “decentralized” cryptocurrency.

The blockchain technology is partly the basis for how cryptocurrencies are classified: There are the altcoins, which could be either those using bitcoin-derived blockchain such as litecoin, or those using native blockchain such as ethereum and ripple; and then there are the tokens. Tokens, unlike altcoins, reside on top of another blockchain.

The Rise of Tokens

Although classified in many reports as cryptocurrencies, some tokens are not currencies by definition because they do not function as stores of value nor mediums of exchange. Those that are not purely cryptocurrencies may instead be classified as security tokens.

The third type of tokens is used as a payment method on a specific platform or a means to access the features of a network/service (much like how arcade tokens work). These are called utility tokens.

Today, we find a slew of tokens and coins being introduced in the market via initial coin offerings (ICOs) or crowdsale events. Unfortunately, some ICOs can be exit scams or will never make some traction after their crowdsale, leaving investors in a daze, at the very least.

 Reason People Put Their Money On Utility Tokens

The “pump-and-dump” investors aside, the serious utility token investors put their money on issuer-companies with the best potential to scale due to what Skillshare founder Michael Karnjanaprakorn calls the “token network effects”*. It goes like this:” As the network grows, the token adds value to the platform and accelerates network effects.” Thus, the value of the token increases as the utility of the project/network increases.

Finding those gems from among the token issuers requires, like any other investment, some research. Before joining ICOs and crowdsale, there are a few things to keep in mind:

Think About Your Investment Objective: Think about why you want to invest in cryptocurrencies, what your timeframe is, and if you and your pockets can handle the price swings.

Do Your Due Diligence. With so many shiny coins and tokens being offered, how does one evaluate them? According to Ann Cuisia-Lindayag, CEO of Traxion.Tech, there are seven proofs to look for in tokens. I have reclassified these into three:

• Mechanics – what are the systems in place that validate the identity of crypto token buyers? How strict is its whitelisting process? Does the company aim to comply with the regulations in its location? Does it specify its governance framework? How does it secure its network?
• Token Metrics – Does the white paper indicate the purpose or utility of the token? What will be the pricing, soft and hard caps, supply, token sale allocation, lockup periods? Is the whitepaper clear on what the company will do with the unsold tokens? Token metrics relevant as they can influence the rise in your token’s value after the sale.
• Milestones – Clearly, issuers that already have some of their infrastructure in place are way ahead of the ICOs that are yet to start working on their proof of concept. Ideally, whitepapers should show the company’s roadmap, which must include timeframes and completed milestones.

Check Who Runs the Team and Its Network. Cuisia also identified the competence of the team—or its proof of capability—as an important factor to assess, and I cannot stress this enough myself. The whitepaper should be able to tell you if the executive team members have the track records, and domain expertise in the industry and technologies of their product. Likewise, a check on partners and clients can give you an idea on how much traction the company has made.

Know the Difference between IPOs and ICOs, crowdsale versus crowdfunding. Token crowdsale and ICOs are not a sale of shares in a company, but in its coins or tokens, which entitles holders to join the issuer’s project or system. This being the case, do manage your expectations.

Know Your Risk Tolerance: Can you stomach potential price volatilities? That is, can you still sleep soundly if prices drop in the double-digits? Investing in coins and tokens can bring good returns, Yes. However, because the world of cryptocurrencies is new, it is not for the faint-hearted. Investing in crypto can be categorized as highly speculative.

Know How to Secure Your Tokens:. The blockchain in itself is generally secure. Like any other forms of investments, there are risks of fraud in cryptocurrencies outside of the blockchain. Scams can be in the form of cell phone identity theft, and fake digital wallets, for example. Know that scammers too have become tech savvy.

Go By the Age-old Rule: The time-worn advice commonly attributed to writer Miguel Cervantes still applies to this day: Do not put all your eggs in one basket. Hedge if you must.

Here’s a cardinal investing rule that I want to reiterate: “Never invest in something you do not understand.”

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