Although Bitcoin still accounts for much of the value of the cryptocurrency market, thousands of altcoins are now available to investors outside of it. Currently, all digital money built on blockchain technology can be listed here except Bitcoin. Altcoins are also needed because many of these currencies are experimenting with revolutionary technologies that are worth supporting.
Bitcoin uses a so-called proof-of-work (PoW) protocol, which is used to authenticate transactions that take place in the blockchain. In this system, the block containing the given transactions is validated by the participant who first manages to find the missing value and run an algorithm that requires complex computational capacity. Proof-of-stake (PoS), on the other hand, is a relatively new consensus-based algorithm already used by more and more cryptocurrencies. We asked Gábor Pataki, the founder of CoinBroker.hu, about the peculiarities of the method and the investment opportunities of alternative cryptocurrencies.
– Are different altcoins considered more sustainable better investments than Bitcoin?
– It is not the PoS or PoW method alone that determines whether it is a better investment at the moment. It must be taken into account that if it works with some proof-of-work method, we can only share in the network traffic if we contribute to the maintenance of the decentralized network in an energy-wasting way. If, on the other hand, it works with the proof-of-stake method, we get a modern-day return – perhaps we can also call it interest -. This allows a share of network traffic for those who anchor their cryptocurrency to network validation nodes, so they agree not to sell it. On the one hand, they stabilize prices and, on the other hand, achieve an annual yield of 6-8 percent. As a result, they are equally exposed to exchange rate fluctuations, but they can earn passive income. In terms of energy management, the difference between the two is primarily that PoS actually consumes a fraction. In addition, in the case of PoS, those who tie their cryptocurrency to validation nodes can earn income.
In the case of Bitcoin, it is true that it consumes Finland’s annual energy needs, but it is also very important that it is worth mining if we get cheap electricity, which is typically from renewable energy sources. For example, these mining farms are located next to hydropower plants.
– A third solution, Proof of Space and Time, has also appeared on the market. Such is the new cryptocurrency of Chia Network, what do you think about this? As a new entrant, how much do you believe in it from an investor perspective?
“I’ll start thinking from an investor’s perspective in a cryptocurrency when its capital value reaches $ 1-2 billion and it is listed on the world’s largest stock exchanges. Until then, I won’t really deal with it, because out of 10,000 currencies, it is not possible to select the ten or twenty from which we can remain profitable with sufficient efficiency.
– So how do you choose which altcoin to invest in?
“If one wants to put together a portfolio of cryptocurrencies today, one must think of liquid, high-capital-value cryptocurrencies worth more than $ 2 billion. Of this, the market has approx. 50 pieces, of which it is worth paying attention to those where at least 3-5 percent of the capital value has a daily turnover. It has also been introduced to, say, the Binance stock exchange, which is the largest cryptocurrency stock exchange with validated turnover in the world and has a fundamentals behind it.
I also think that we live in a world of smart contracts, which will revolutionize financial accounting and the insurance sector, and that the bloc chain will also play a key role in the renewable energy sector and accounting. Preference should be given to altcoins that provide a link between the block chain network and the real world.
And there are several of these that are already much more advanced than Bitcoin. What I used to say is that it is an outdated cryptocurrency with good PR. In addition to the most popular Ethereum altocin, Cardano, Polkadot and ChainLink should now be mentioned. All of them can be used in everyday business, and although in my opinion Polkadot and Cardano are also much cheaper than Ethereum. This year, Ethereum is expected to switch to the PoS network mode, which will allow for much cheaper operation and lower energy consumption.
– Are these cryptocurrencies more predictable than Bitcoin?
– There is no such. It is not possible to talk about predictability in the cryptocurrency market. 10-30 percent exchange rate fluctuations are completely included in the deck. We have developed an investment methodology, and I believe that we need to continue investing in these volatile products with high exchange rate fluctuations, while constantly protecting our invested capital as well as our profits.
– How does the high regulation of cryptocurrencies affect altcoins?
– The exchange rate of all cryptocurrencies will be affected by the news, but regulation will be very positive in the long run because more and more masses will turn to cryptocurrencies as this is an investment in the “technology of the future”. The blockchain is also called the Internet of Values, and while money is printing in the world, which brings with it an inflationary environment. For example, 25 percent more of the dollar is now in circulation than it was a few years ago, and in this situation, investment products that are inflation-resistant that are low in price because we are talking about volatile products must be included in the portfolio.
It is essentially completely resistant to inflation because it has a certain number of cryptocurrencies out of it. We know exactly about Bitcoin that it will be 21 million by 2140, and the higher the demand, the more its price will go up. I wouldn’t be surprised if Bitcoin rises to a price level of between $ 70,000 and $ 90,000 this year, and I’m absolutely sure, so at age 46, that I’ll still have a $ 400-500,000 bitcoin exchange rate in my life. But I’m not sure it won’t fall 20 percent today or even over the weekend.
I’m not saying you can’t fail, but with a long-term (3-5 years), broad cryptocurrency portfolio, a strategy like this for capital protection and profit protection, I think you can invest profitably.
– Which altcoin is a good investment in terms of sustainability?
– There is no such thing as which one and what is the right time. We need to diversify, we need to share the risk by building a wider portfolio. I would advise you not to invest less than 5 percent in a given cryptocurrency because it is no more annoying that we have invested 1 percent of our money and, of course, that its value increases a hundredfold that day. The other is not to put more than 25 percent into anything. So we will have 4 or 20 cryptocurrencies. If we buy cryptocurrencies continuously from this top 20 category (like a home fund) and maximize the loss, so to speak, by discarding our assets bought at the wrong time, we can achieve an overall positive result without stress.
But one thing is for sure, this stock market, as it is a 24-hour trade, makes people exponentially addicted. We live in a serious digital addiction anyway, and the cryptocurrency is especially dangerous for addicts. I say it very seriously because I see it in my surroundings and in myself.
Source: Napi.hu by www.napi.hu.
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