Cryptocurrencies have been growing more and more prevalent in recent years, attracting a plethora of investors and critics along with it. 2021 alone has shown an incredible amount of growth for cryptocurrencies, with the crypto market hitting an all-time high of $3 trillion in November, from $578 billion in November of 2020.
With this in mind, 2022 is going to be a very interesting year for cryptocurrencies. Either it could be even bigger than 2021, with several promising ventures, or it could end up being a huge flop, with some kind of severe upset in the crypto economy.
If you have faith in the former, you must take the time to get informed and prepared before you get invested. Before anything, decide what you want out of this kind of investment.
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When considering an investment into a cryptocurrency, you should always keep in mind your goal, your ideal outcome. Are you looking for a turnaround in a week or month’s time?
Do you want to dump your savings in a stablecoin and sit on your hands until the number catches your eye? You don’t need a concrete plan when deciding to invest, but the more you know the better. Depending on your aspirations, here are a few suggestions.
Binance Coin is the proprietary cryptocurrency of Binance, currently the largest global platform for cryptocurrency exchange. If you’re looking to invest in their coin, you’re better off using their exchange as well.
The US Binance is blocked in some states, though according to VPNBrains, it can be accessed using a VPN. While Binance Coin was created in 2017 to introduce a discount for trade fees on their platform, it has since gained much more functionality, being accepted for some everyday purchases.
Binance Coin is unique among the top cryptocurrencies in that it uses a Proof of Authority (PoA) system that relies on a limited number of pre-approved validators, hand-selected by Binance.
These validators have to verify their real identities, as well as provide a large enough investment to prove their willingness in a long-term commitment.
The PoA model allows Binance a modicum of control over the blockchain, as they have direct control over who becomes a validator. It can be argued that this makes the Binance Smart Chain more of a centralized financial system, or so far as a private blockchain.
This requires more trust than a decentralized blockchain, in that users have to trust that Binance is acting with the right interests anytime they make a change to their system.
Binance Coin also undergoes quarterly “burns,” where Binance uses one-fifth of its profits to repurchase and permanently destroy Binance Coins in its possession. In April 2021, “Binance burned a total of 1,099,888 BNB, equivalent to $595,314,380 USD worth of tokens.”
As shown from the above practice of burning, they aren’t averse to adopting abstract tactics to make changes to Binance Coin. These facts may sound negative for the investment potential of Binance Coin, but rather they show the dedication Binance has for the success of Binance Coin.
If you believe that Binance has the right intentions and business sense, Binance Coin is your way to tag along with their success.
If you’re looking to stick with your investment for a long time, Ethereum 2.0 is the token of choice. Currently, Ethereum is the second-largest cryptocurrency, just beneath big brother Bitcoin.
Like Bitcoin, it uses a proof of work (PoW) model to validate its transactions. The PoW system relies on users’ powerful computers to keep the chain honest. You’ve probably heard of people “mining” for a cryptocurrency. That’s what keeps the PoW model operating, it incentivizes mining by rewarding miners with a stake in the currency.
For someone to gain control of the network, they would need to provide 51% of the computational power of every miner on the network, to ensure their actions aren’t overwritten by normal users.
This model works great to prevent malicious actors from harming the legitimacy of a decentralized cryptocurrency, but it is very contentious because of the impact it has on the environment.
Bitcoin mining alone consumes roughly 91 TW⋅h of electricity annually, 0.5% of all electricity used globally. That number is only expected to grow with the rise of cryptocurrencies.
Ethereum 2.0 shows so much promise because, in 2022, Ethereum is planning to shift to a proof of stake (PoS) model, which boasts the significant advantage of reducing the environmental impact of Ethereum by 99%.
This model relies on a user’s stake in Ethereum to validate transactions, instead of the power of their hardware. With the PoS model, a validator would need to offer a number of their ETH as collateral, which works as a disincentive for bad behavior, while still rewarding validators for proper behavior.
This change would potentially allow for more validators, and thus a stronger immunity to centralization, given that it doesn’t require an immense amount of processing power. Rather a validator could use something more readily available, like a smartphone, to contribute to the PoS system.
Overall, Ethereum 2.0 is making huge changes in the near future to become more sustainable and secure, to directly deflect crypto’s biggest controversy, with great promise. These improvements could catapult this powerhouse into the next big thing in 2022.
Bitcoin has been around longer than any other cryptocurrency, created in 2009 by a figure or organization under the pseudonym Satoshi Nakamoto, and has outlived many altcoins and digital currencies popping up in its wake.
After all this time, Bitcoin remains the biggest cryptocurrency by market cap by a significant margin, double that of the 2nd biggest, Ethereum, and ten times that of the 3rd biggest, Binance Coin.
The landscape of cryptocurrencies and its decentralized foundation allows for Bitcoin, the titan of crypto, to maintain a great deal of instability. If you’re active on the stock market, or if you’ve simply read the news, you likely recognize the potential in Bitcoin’s volatility. It screams day-trading, with significant ups and downs constantly.
Trading Bitcoin can be very lucrative, but it requires a hands-on approach and a close eye on the stock ticker. 2021 has been a revolutionary year for Bitcoin, breaking its record high multiple times.
From more than $60 thousand in April, down to less than $30 thousand in July, back up to breaking its record high in October with roughly $66 thousand, and another record again in November just over $69 thousand.
Bitcoin’s rises and falls have been disastrous for some, and incredibly profitable for others. Dominating headlines, Bitcoin is at the forefront of people’s minds, more than ever before.
Everyone, from at-home investors to the government of El Salvador is buying into Bitcoin. Just like the stock market, there is plenty of speculation about changes to the price of Bitcoin concerning the events of the world.
Bitcoin can be a golden goose or a white elephant, which it becomes for you is a test of your skill as an investor, with added luck. No matter your aspirations, Bitcoin is something to watch closely.
Written by: Daniel Melana
For more in Crypto:
Why You Need A Plan B
Threats to Your Assets
Global Diversification Planning
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