Available Digital Assets
Late 2008 marked the beginning of the Great Recession – the worst financial crisis America has seen in decades. It was caused by subprime mortgages – extremely high-risk loans – being collected and then sold by one financial institution to another.
When many of these mortgages defaulted, the United States economy was devastated. This prompted mass foreclosures, layoffs, huge losses in the stock market, the collapse of major financial institutions including Lehman Brothers, who filed for Chapter 11 Bankruptcy, and a subsequent, ongoing debt crisis throughout Europe.
At the core of this crisis was one issue: trust. Individuals who were sold risky loans believed that the institutions selling them, as well as the people working for them, worked to help grow their money and protect them. However, the financial crisis reinforced that many investors were predators acting solely in their interest, and massive bailouts provided by the federal government did nothing to help rebuild this broken trust.
In response to this total institutional breakdown, Satoshi Nakamoto wrote a nine-page whitepaper entitled “A Peer-To-Peer Electronic Cash System.” In this whitepaper, he essentially proposed the computational and mathematical foundations of Bitcoin. As ecommerce became increasingly prevalent – and payments processors like Visa holding almost all of the authority in this realm – many people, more fearful than ever before, felt uncomfortable with how many third parties they needed to interact with to do business. There was no true electronic equivalent of cash, and there were also increasingly serious problems with so-called “fiat currencies,” like the Euro, Bolivar, and US Dollar.
These currencies, controlled by central authorities, were subject to significant – and arbitrary – inflation, which could cut their value – and one’s overall net worth – dramatically. In countries like Venezuela, notorious for its unstable economy, citizens make money operating shady currency exchanges and relying on potentially dangerous third parties for transactions such as buying a home.
Thus, there was a serious problem – and a need. Cash gives its owners significant control, and can be used anonymous and privately. Digital currency, on the other hand, was much easier to use to pay people instantly, do international business, or transfer from person-to-person. Unfortunately, digital currency came with high fees for domestic and international transfers, as well as conversion from one currency to another, reducing access for people of lower incomes or residents of emerging countries. Because citizens are effectively forced to use companies like Moneygram and Western Union to make transfers, they can charge exorbitant fees.
Satoshi Nakamoto set out to solve a major issue with previous forms of digital currency: “double spending.” In the past, attempted digital currencies, like any files, were duplicated when they were sent. Compare this to making a cash transaction, where you give someone a dollar bill – and then don’t have it anymore, or credit card transactions, where it’s possible to complain and get a chargeback from your credit provider.
Nakamoto’s solution to this problem was the blockchain. The blockchain solves this problem by creating a peer-verified timestamp, which serves as proof of transactions and when they happened. The blockchain is encrypted in such a way that it can be viewed and verified publicly but still protects its users. It is called the blockchain because each “block” is viewable and accepted by a consensus. Around every ten minutes, a block is confirmed by the majority of computers on the blockchain, and at that point, the transaction can’t be reversed, charged back, or altered in any way.
Blockchain transactions consist of sending Bitcoin (or other digital currency) from one “address” to another. However, each individual who sends Bitcoin needs to know their private keys in order to access their accounts and funds. Anyone who uses Bitcoin can see a wallet, as well as how much Bitcoin is inside of it, but they cannot see who owns it.
Each Bitcoin is “mined” in order to reward the computers that complete the complex computing equations that keep the blockchain secure. Unlike fiat currency, there is a hard total number of Bitcoin built into the protocol – just like gold. This ensures that Bitcoin is secure and scarce – and will continue to increase in value as the network continues to grow.
As Bitcoin has grown in popularity, it has become easier and easier to use. While the process to purchase or spend Bitcoin was once convoluted and required many different steps, using a service like Coinbase, anyone with a computer or phone with access to the internet can purchase cryptocurrency using a bank account or credit card.
Blockchain has inspired countless technological innovations, including many new apps, browsers, networks, and tools. We are in the midst of a technological revolution in how we network and compute – and blockchain is at the center.
Furthermore, Bitcoin has proven to be an increasingly powerful investment, with coins jumping in value from $1,000 USD to over $10,000 USD over the course of 2017. Bitcoin is the standard bearer for cryptocurrency and what all other coins are measured against. Regulation around digital currency, however, is still changing. Right now, Bitcoin and other digital currencies are seen by the Securities and Exchange Commission as commodities – and, like a commodity, Bitcoin undergoes daily price fluctuations and has a fixed supply.
The key to Bitcoin’s long-term success is its scarcity. As time passes, the amount of Bitcoin released as a reward for mining goes down, and the final Bitcoin is expected to be awarded in 2140. At that point, one Bitcoin may be worth hundreds of thousands of dollars. The last several years have shown Bitcoin making strong upward growth – and continuing to do so.
Because Bitcoin and blockchain technology have proven themselves to be secure over time, it has been adopted not just by hobbyists but by traders, investors, and many new applications pushing its value to new highs. There has been a significant amount of speculation surrounding the best opportunities to purchase or sell Bitcoin, but individuals who have held Bitcoin for long periods of time have made the most significant gains. Bitcoin is approaching critical mass and adoption by people and businesses worldwide, making it clear that the cryptocurrency revolution is just getting started.
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Ethereum is a public blockchain-based network. It is a software platform based on the blockchain used by developers to create and deploy applications through decentralized smart contracts. A crypto token called Ether is used to power the Ethereum network, and it can be used to pay transaction fees or for services on the network – or traded as a cryptocurrency, making it a viable addition to your digital currency portfolio.
The primary difference between Ethereum and other coins is the Ethereum Virtual Machine – software that lets users run software programs, regardless of the language used to program them. It makes it very easy to create new applications that use the blockchain – as well as to decentralize any centralized computing service.
One can also use Ethereum to create Decentralized Autonomous Organizations, which allow large numbers of computers to execute complex tasks using smart contracts through distributed ledgers.
- The cryptocurrency that powers Ehtereum is called Ether (ETH) – this currency is used to pay transaction fees and for computing power from the distributed Ethereum computing network. It can also be bought and sold, just like Bitcoin and other alternative coins (altcoins).
- Each part of the Ethereum network is running the EVM – Each system on the Ethereum network completes computing tasks instructed using smart contracts, which send instructions to a computer, then record them as completed in the blockchain.
- Ethereum Classic is a separate currency – Because of a hacking incident revolving around The DAO – a decentralized autonomous organization that ran on top of the Ethereum network (which itself was not compromised), Ethereum performed a hard fork that led to the creation of Ethereum Classic, a separate blockchain with its own tokens.
- Many are speculating that Ethereum may overtake Bitcoin in value at some point in the future – and it may currently be one of the best digital currency investments you can make as part of your retirement portfolio.
XRP is an alternative coin (altcoin) used on the Ripple payment network. Ripple is designed to connect payment providers, banks, and asset exchanges using RippleNet to make it easier than ever to send money globally. It relies on blockchain technology to create a distributed public database used to handle payments, currency exchanges, and remittances.
There is a major difference between Ripple (XRP) and other digital currencies, however: Ripple is intended to provide increased support for the established financial system around the globe. It serves to be the cheapest and easiest way to make foreign currency exchanges, making it easier than ever to keep money flowing.
Ripple (XRP) is secure, fast, and compatible with a number of different networks, allowing it to connect many different payments systems to facilitate transactions.
Like other digital currencies, there are a fixed number of XRP coins, XRP can be transferred between users without the assistance of a third party, and the blockchain provides you with security and protection from counterfeit, false, or duplicate coins.
- Ripple and XRP are different – Many people say “Ripple” when referring to the currency XRP. However, Ripple is the network (and the company that created XRP), and XRP is the currency.
- XRP works with fiat currency – XRP is designed to facilitate speedier and more affordable currency exchanges.
- XRP is not mined – Ripple, the company that created XRP, made every unit of XRP that exists. Individuals cannot mine XRP.
- XRP is faster and bigger than Bitcoin – Improvements to blockchain technology make it easy for the XRP ledger to process over 1,000 transactions per second, compared to Bitcoin’s 7 transactions per second.
- XRP will be the de facto standard for international transactions in the future – because the Ripple network is fast, cheap, and secure, more and more financial institutions are adopting XRP, all but ensuring its status as the best way to make international payments.
Ripple keeps adding new customers to its network, including major financial institutions, payments providers, and even smaller banks. XRP is an asset that is quickly growing in value, and its increasing adoption is quickly positioning it to revolutionize how we send money across the globe. Because of this, it has the potential to be a highly valuable part of your retirement portfolio.
Litecoin is a digital currency designed to allow individuals to send payments instantly to anyone in the world using an open source network.
Litecoin is considered to be a complement to Bitcoin – not necessarily competition. It was created by Charlie Lee, a Google engineer who created an improved, faster version of Bitcoin’s blockchain technology.
Bitcoin is the oldest digital currency – and the blockchain technology that powers Bitcoin processes blocks slowly. This means that a transaction can take up to 10 minutes – and a different digital currency, called Bitcoin Cash, was also created to help address this issue. Litecoin, however, processes blocks four times faster than Bitcoin, and new blocks are produced every 2.5 minutes.
Litecoin also uses a different algorithm than Bitcoin. Litecoin relies on an algorithm called Scrypt, which makes it even more secure against custom attacks and requires a large amount of RAM to possibly solve. Litecoin has also grown steadily, making it a solid addition to your IRA.
- Litecoin transactions are fast – the Litecoin blockchain processes new blocks every 2.4 minutes – this is 400% faster than the blockchain technology that powers Bitcoin.
- The hard limit on Litecoin is 84 million – Litecoin miners receive 25 new Litecoins for every block they mine. This amount goes down by 50% every 4 years, and no new coins will be mined after 84 million.
- Litecoin is decentralized – there is no central authority that manages Litecoin, meaning that its value is determined by its users and investors.
- Litecoin adds SegWit to blockchain technology – this increases its capacity.
- The Scrypt algorithm powers Litecoin – this algorithm ensures faster, more memory-intensive transactions, allowing the Litecoin blockchain to perform at high speed and with high security.
The founder of Litecoin, Charlie Lee, is an active participant in Litecoin’s community and has upgraded Litecoin since its inception. He implemented SegWit in 2017, and plans on continuing to add new innovations to the Litecoin blockchain in the future. By implementing SegWit on the network, Lee has set Litecoin up to also feature other signatures and fully confidential transactions. Litecoin’s algorithmic innovations set it apart early on – and ensure it will continue to grow, develop, and flourish in the future.
In August 2017, Bitcoin underwent a hardfork – this means that the Bitcoin currency was split, with a new blockchain and a new digital currency created in the process. Both coins are peer-to-peer cryptocurrencies – but Bitcoin Cash offers several innovations.
The biggest problem with Bitcoin is the fact that it can only process 7 transactions in one second – and this means that one transaction can take as long as 10 minutes to process at times. Compare this to credit cards, which can typically process 1,000 transactions a second.
Members of the Bitcoin community wanted to speed up transactions by implementing SegWit2X, which reduces the amount of data necessary to verify blocks – and speeds up the verification process. Because the community could not come to consensus, Bitcoin Cash was created in the split.
Bitcoin Cash uses a different protocol than Bitcoin, allowing for approximately 2 million transactions to process daily at a greater speed and at lower cost than Bitcoin.
- Bitcoin Cash (BCH) is a fork of BTC – Because the Bitcoin community could not come to consensus over a lack of updates and the limitations of Bitcoin’s blockchain, a fork occurred.
- BCH transactions are faster – Bitcoin Cash has a block size of 8MB, making transactions significantly faster than on the Bitcoin network.
- BCH does not implement SegWit2X – Bitcoin’s block size increased to 2MB when SegWit2X was implemented in the blockchain. However, because Bitcoin Cash has a block size of 8MB, it does not use SegWit2X.
After the hardfork, Bitcoin grew at an unprecedented rate. Bitcoin Cash should be thought of as a new digital asset with tremendous potential. Although its current value is less than Bitcoin, its blockchain technology is considered extremely valuable and many investors see Bitcoin Cash as a ground floor opportunity with serious upside potential.
Ethereum Classic – like Ethereum – is a decentralized, public, and secure platform used to run and execute smart contracts. It was created when Ethereum (ETC) split into two separate coins.
This happened because of an attempt at creating a decentralized venture capital fund known as the Decentralized Autonomous Organization – the DAO. To become part of the DAO, you could purchase DAO tokens using Ether.
However, the DAO was hacked by someone who saw a loophole in its network, then stole $50 million in funds. Note that this was caused by a loophole within the DAO – not the Ethereum network itself, which remained secure. In order to return the stolen funds, Ethereum Classic was created.
In many other ways, Ethereum and Ethereum Classic are similar – they both allow users to create and deploy smart contracts, and they have the same average block size, time, and reward.
- ETC was created because of a hard fork – ETC was created in response to the DAO hack – and in order to return $50 million dollars in stolen funds to their owners.
- ETC is open source – anyone can contribute to the development of ETC, as well as become a part of the conversation surrounding how the token will develop.
- ETC is more than just currency – like Ethereum, this currency is also used to run smart contracts using a blockchain ledger. They can run decentralized applications and have a number of other uses.
- ETC is a decentralized currency – no third party or central authority oversees Ethereum Classic.
Ethereum Classic is currently available at a lower price than Ethereum. It has has found value with developers and a variety of industries. Many experts believe that Ethereum Classic will stay relevant and continue to grow in the future, making it worth considering as part of your Digital Currency IRA.