By now, everyone’s heard of the fabled £10 to £100,000 cryptocurrency miracle. The guy who bought Bitcoin to order some dark web weed eight years ago, forgot about it and now owns two Lambos and one of those soulless Patrick Bateman ghoul apartments in Canary Wharf.
With Bitcoin hitting another all-time-high on Wednesday, of just over £47,000 per “$BTC”, you’re probably wondering how you can get in on the cryptocurrency boom. But wait! Before you buy a “shitcoin” because you like the picture of the astronaut on its logo, let’s take a step back: there are more than 4,000 cryptocurrencies out there – and none are born equal.
Some have real life uses, like hedging against inflation or transferring large amounts of money. Others are incredibly speculative, or essentially just memes. Here, I’m going to give you a primer on four of the most popular cryptocurrencies on the market. Importantly, though, this is just that: a primer. Before you even start to think about exchanging any cash for crypto, do your research. Look at a coin’s fundamentals, get to grips with technical analysis, don’t just jump in two-footed because some Twitter guru told you to.
I look forward to hearing from you a month from now, when you’ve given yourself a stress migraine from trying to understand the minutiae of how a blockchain works. For now, here are those coins.
What is it: Bitcoin is a form of decentralised digital cash, meaning it’s not controlled by a central bank or authority. Instead, it’s run by thousands of computers around the world. Launched in 2008, the world’s first ever cryptocurrency was presented as an alternative financial system after the economic crisis.
What does it do: Bitcoin’s main function is to send money anywhere in the world without going through a bank or a third party, meaning large transactions that would usually take days can be sent in less time than it takes to microwave a pizza.
While governments keep printing cash to keep their economies afloat, Bitcoin believers say the scarcity of the coin makes it a hedge against inflation. Compared to physical money, there are – and will only ever be – 21 million Bitcoins in existence. Having fewer coins in circulation theoretically means those coins will have more value, hence Bitcoin being nicknamed “digital gold”.
What is it: Ether, or $ETH, is the second largest cryptocurrency by market cap behind Bitcoin. Like its older brother, this coin allows users to transfer digital money and can be used to store wealth.
So, how is it different: Let’s talk about blockchains. These are sophisticated, decentralised databases which store transactions and are immutable, meaning they can’t be messed around with. Ethereum is a blockchain-based software platform, and Ether is its currency.
What does it do: Ethereum is programmable, meaning you can build apps on its ecosystem. Think of it like the foundations of a house: once the ground has been reinforced, you can build all sorts of structures on top.
Right now, there are hundreds of apps available on the Ethereum network. Also known as dApps – or decentralised applications – these include marketplaces to buy and sell digital art (known as NFTs), cloud storage solutions and music streaming services. Compared to iPhone and Android apps, the operation of dApps are completely transparent because their data is stored on the blockchain, which is accessible to anyone and everyone.
Ether, the cryptocurrency, helps to fuel the operation of the Ethereum network.
What is it: Remember the meme of a stoned-looking Shiba Inu? That’s where Dogecoin gets it name from.
What does it do: Unlike other cryptocurrencies, Dogecoin began explicitly as a joke. Australian entrepreneur Jackson Palmer launched the coin back in 2013, as a tongue-in-cheek cryptocurrency parody.
It’s had several uses since then – like being used as a (since discontinued) tipping service on Reddit – but it’s mostly referred to as a “memecoin” because it has less inherent value than Ether or Bitcoin.
Despite (or perhaps because of) this, Elon Musk loves pumping the coin’s popularity; the price surged by over 47 percent after the Tesla chief promoted the crypto on his Twitter page in February of this year. It’s also popular among TikTok users: trading volumes spiked by 683 percent in July of 2020 after users of the app rallied together to raise the coin’s price. Snoop Dogg, it turns out, is also a fan.
What is it: ADA is the cryptocurrency for a blockchain called Cardano.
What does it do: If you’re talking to Cardano fanboys, absolutely everything. Of course, the reality is a little more muted. Called the “third generation of blockchain” by founder Charles Hoskins, Cardano’s fans say it’s more sophisticated than its competitors.
Like Ethereum, Cardano is programmable. The difference, however, is that Cardano is a few steps behind, and there are currently very few apps available on their blockchain. To some, this is a positive – there’s room to grow and to build on mistakes that other blockchains may have made.
ADA, the cryptocurrency that runs the Cardano network, is also currently much cheaper than Ether. Earlier this year, KISS frontman Gene Simmons announced he bought $300,000 worth, so there’s that.
SHITCOINS AND ALL THE REST
There are literally thousands of coins out there. Some have real world uses – Binance Coin, the fourth most popular cryptocurrency at the time of writing, is used for buying other cryptocurrencies on the Binance trading platform, while Tether, another popular coin, is pegged to the price of the US dollar.
Others are what those in the crypto community refer to as “shitcoins”.
These are characterised by short-term price rises and steep dips. These coins usually don’t have any real use, beyond making some people extremely rich. They often take their names from memeable-sounding objects, food or animals to help draw unsuspecting investors in, and can be found littered all over Pump and Dump Telegram groups that promise to “take you to the moon [rocket emoji]!!!!”.
Investing in crypto is like investing in stocks, only far more stressful. Before you invest, do your research (DYOR) and don’t invest what you can’t afford to lose.
See you a couple of years from now, when you’re either a millionaire or completely and utterly broke.