ELI5 What is the best cryptocurrency?

I’ve seen this asked a lot, so I thought I’d post about it.

What’s the best crypto?

My impulse here is to simply reply “well, duh, there’s no such thing as a best cryptocurrency”.

But then, after a moment of thought, I realize that there is one best cryptocurrency – for a given purpose at a given time. It just depends on what you’re trying to achieve.

Even if you’re just buying some altcoin for the potential short term gains, you’re choosing a “best” crypto for whatever you’re trying to achieve.

So let’s look at the different things you might wanto to achieve using cryptocurrencies and what the best cryptos seem to be in each case.

Value Reserve

If you’re looking for a safe place to store value, then cryptos are unbeatable.

High liquidity: you can sell your crypto for U$, Euro or other cryptos almost instantly.

Secure: if you follow basic practices, your crypto is safe from thieves.

Valuable: if you had stored your savings in Bitcoin 9 years ago you’d likely be a multimillionaire or even billionaire today.

What else can one ask from a value reserve? I don’t think much.

Horses, cattle, paintings, real estate all have drawbacks that crypto does not. Real estate for instance is very low liquidity. It can be tough selling a house or office, especially during bear markets. Crypto on the other hand can be sold nearly instantly – all you need is an internet connection.

Best currency for value store, IMO : None other than Bitcoin itself.

Spending Currency

You may want to actually spend cryptocurrencies. Make payments to countries where it’s not easy to send money, pay for online services and so on.

You could use Bitcoin for this but Bitcoin is a little too slow and expensive for the job. IMO you should look for more “lightweight” transaction cryptos like Ethereum or other ETH-based tokens like BAT. Why? Because they’re dirt cheap to transfer.

You can check out the current Ethereum gas price at this URL.

Looking at the above table you’ll see that to get a confirmation time under 4 minutes you can use a gas price of 1 gwei. 4 minutes can seem like a lot of time in the world of Ethereum where confirmations usually happen in seconds, but 4 minutes is still less than HALF the time of a Bitcoin block! That’s right, Bitcoin blocks take 10 minutes and unless you pay an attractive fee your TX might not even be included in the next block.

So, for everyday payments and currency I’d go with a cheaper crypto like Ethereum, BAT tokens, Ripple or even old school Bitcoin forks like Litecoin or Dogecoin. These are all really really cheap to move around.

Even if your goal is to move Bitcoin itself, the cheapest way to do it is to convert it into one of thease cheap cryptos and then convert it back to BTC.

Investing / Speculation

Speculation means high risk.

Let’s put it this way: the riskiest regulated assets are binary options and similar stuff that can go to zero. Cryptocurrencies are unregulated and the big names are less risky than binary options but the lesser known ones are a LOT riskier than BO’s.

Take Bitconnect for example.

It lost 90% of its value overnight. In one go, it was dumped mercilessly by holders until it was worth nearly nothing.

This is what can happen when you go after easy profits in crypto.

Cryptocurrencies are a novelty among payment systems. But the underlying rules are not different from traditional financial systems. Just the payments part happens in a different way. So cryptocurrency economics must make sense like any other financial system. Easy money does not exist in cryptocurrencies. Either you’re a master trader who is a step ahead of everyone else (that’s where your profit comes from) or you are making cryptos for a profitable business or there’s something wrong. Cryptocurrencies do not appear out of thin air.

Some cryptos leverage the power of smart contracts to print endless amounts of tokens. These are most likely traditional ponzi schemes. The early investors make money while the newer ones must come in exponentially higher numbers to sustain the pyramid.

So if your goal is to speculate using cryptos, remember: cryptocurrencies are simply a different value transfer system. The underlying economics must make sense just like in any other investment. If money seems too easy to make in some system, if it seems too good to be true, then it probably is.

I won’t recommend any particular cryptocurrency for speculation. Do your own research and keep in mind that you’ll only profit if you’ve got something that others don’t. Soon as everyone’s buying the same asset, chances are it’s near the peak. When there’s no one else left to buy, everyone begins to sell at the same time.

Remember the old saying:

“You pay a high price for a cheery consensus” – W. Buffett

Conclusion

So what’s the best crypto?

As you can see there is a best crypto for each application. There are many others I didn’t mention like paying for electricity (POWR) or buying items in videogames (ENJ).

Each niche has “a best” cryptocurrency and no one’s opinion is necessarily the best (or most correct) one. So choose the best crypto for the occasion by doing research into the niche, taking your goals into consideration. If you’re looking to store value for the long run, perhaps buying some Bitcoin and forgetting about it might be the best strategy.

Happy investing!

Links

The 10 Most Important Cryptocurrencies Other Than Bitcoin

Should You Invest in Crypto Now?!

Staking Will Turn Ethereum Into a Functional Store of Value

Which coin is the best store of value, Bitcoin or Ethereum?

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