A critical look at the investment objects
At the latest, a glance at advertising television makes one certain: cryptocurrencies have arrived in the mainstream. Investing in crypto assets is also being made palatable to the broad masses, causing the market to expand rapidly and strongly. The first choice is often Bitcoin, but ETH, XRP, SOL or other coins are also on the shopping list. Valuation is primarily based on market capitalisation, and investors often lack the necessary background knowledge to make an informed decision. Let’s make things easier for them and give them some information.
Ethereum or Bitcoin?
In the wake of the significant rise in the price of ETH, there has been constant talk of “flippening” in recent years: People were convinced that Ethereum would soon have a higher market capital than Bitcoin. ETH was compared to BTC and weighed more according to taste than facts – yet the different cryptocurrencies are often designed for different use cases.
ETH, for example, impresses with the possibilities of smart contracts, with which decentralised applications are possible on a blockchain in addition to automated processes, which can be observed during their processing. The open source idea meets open execution, so to speak. The smart contracts idea has expanded the classic blockchain technology immensely, making significantly more use cases conceivable than a peer-to-peer currency. Against this backdrop, one might think that ETH is better than BTC, given the many possible applications, but caution is advised: Ethereum is not in a competitive situation with Bitcoin, but complements the ecosystem of blockchain technology – instead of competition, coexistence is the key to understanding.
Coin or token
We speak of a cryptocurrency when it has its own blockchain or a blockchain-like data structure. Even if the underlying protocol may be based on another cryptocurrency, it merely serves as a model. An example: Litecoin or Bitcoin Cash are based on Bitcoin, but can exist independently of it. In contrast, tokens cannot exist without an underlying cryptocurrency because, for example, they only exist on the Ethereum blockchain and cannot exist independently of it. Tokens, because they do not need a new infrastructure with their own nodes and miners, are much easier to generate than cryptocurrencies.
Paying with cryptos?
Another possible application of cryptocurrencies that is easy to grasp, even for newcomers, is as a payment method. In El Salvador, for example, you can pay with Bitcoin, in Colorado you will soon be able to pay your taxes with cryptos and Honduras could also use BTC as a legal means of payment, according to the latest rumours. Against this background and the tangible, old-fashioned use of Bitcoin as a means of payment, one should not write it off so soon…