Harry Hamburg – Exponential Investor (United Kingdom) –
Today, we’re continuing my guide investing in crypto.
In parts one and two I talked about how you can make more money by investing less money, and covered platform and currency cryptos.
Today, it’s all about utility cryptos.
But before I get started, I have some big news about one of the cryptocurrencies I covered in part two: RaiBlocks.
RaiBlocks is now Nano
The rumours I wrote about proved true, and on Wednesday RaiBlocks rebranded to Nano.
This led, as it usually does when a crypto rebrands, to a big jump in its price. By 4pm Wednesday it was up 34% on the previous day’s price. At time of writing it has settled down somewhat, but it could be way up or down by the time you read this.
I’ll be referring to RaiBlocks as Nano from now on to save confusion.
With the rebrand came bigger exchange listings and a whole lot of publicity. Nano is now listed on OKEX, the world’s biggest exchange, which mostly caters to Asian markets.
It also won the community vote last month to list on Binance – a very big and trusted exchange. But, as many suspected, the listing couldn’t go through until after the rebrand.
I expect Nano to be listed on Binance in the next couple of days. It may already be listed by the time you’re reading this.
Listings on big exchanges usually bring big price changes. Sometimes way up, sometimes way down. A lot of investors don’t trust the smaller exchanges – for good reason – and so wait until a crypto is listed somewhere more reputable to buy in.
The Binance and OKEX listings will likely bring a whole wave of new investors to Nano. I guess we’ll have to wait and see what happens to its price.
- Nano’s website is now: org/en
- Its Reddit is now: com/r/nanocurrency
- And its white paper is now here: org/en/whitepaper
It’s probably also worth reading its FAQ, which is very easy to read and sets out what makes Nano different to other cryptos. You can read it here.
If you’re already quite clued up on crypto and are looking to get into Nano right now, you can get it on kucoin.com. I’ve used Kucoin myself many times and have never had any issues. It’s probably wiser just to wait for the Binance listing, but it’s up to you.
Do not, under any circumstances, buy on BitGrail. That exchange is in a whole world of trouble.
I’ll be covering how to use exchanges next week. So don’t worry if you don’t know how they work yet. All will become clear.
Now back to the guide.
The world of utility cryptos is vast.
It covers all kinds of cryptos serving all kinds of purposes. The main thing they have in common is they get their value from their use in a wider system.
If platform cryptos are like land, utility cryptos are the businesses that build on that land.
However, just because a utility crypto is popular, it doesn’t mean it has a use case. What I mean by that is a lot of utility cryptos don’t serve a function.
Many are just used by businesses as a way of getting funding. This is the issue with a lot of initial coin offerings (ICOs). You’re buying a crypto, but it doesn’t serve any purpose other than to say you gave its creators money.
The key with utility cryptos is to look very closely at their proposed use case, and why that would or wouldn’t make them valuable.
Most utility cryptos are tokens. This means they don’t have their own blockchain or DAG and are created on top of one of the platform cryptos, like Ethereum or NEO.
As of January 2018, 91% of all tokens are Ethereum ERC20 tokens. (You can see how this was worked out here, if you’re interested.) It’s easy to see why so many people back Ethereum to take over as the number one crypto when so much is hinged on its success.
All the utility cryptos I’ll talk about today are Ethereum ERC20 tokens. This means, they can also be stored on your Ethereum wallet. Not an exchange wallet or a Coinbase wallet. Only a proper Ethereum wallet, which you own the private key to.
A word on wallets
I’ve already written about how to store your cryptos and the different types of wallets you can use here.
In summary, get a hardware wallet. A Ledger Nano S, or a Trezor.
Both Ledger Nano S and Trezor wallets are around £100 from their official sites. Don’t be tempted to pay the premium some sellers are asking.
Trezor wallets are available on Amazon, which makes them super easy to buy.
You can get Ledger Nano S wallets on Ledger’s website ledgerwallet.com, but there’s a long waiting list, unfortunately.
Neither wallet supports all cryptos, but they both support bitcoin, Ethereum and all ERC20 tokens.
Here is a list of what each wallet supports:
Just pick whichever one supports more of the cryptos you have, or get both.
The top utility cryptos
As I said, the world of utility cryptos is massive. I spend countless hours researching and writing about cryptos, day in day out, and I’m still not up to speed on most of them.
The following are some of my favourite utility cryptos. If you like the sound of any, I’ll give you the resources to research them more deeply yourself.
Remember, you don’t want to dedicate as much of your portfolio to utility cryptos as you do to platform ones. As I said, we want to own the land the businesses are built on, not just the businesses themselves.
The land has a much longer lifespan and many different businesses will be built on it over the years. Some will succeed, some will fail. But as long as you own the land they are built on, you’re laughing either way.
Basic Attention Token (BAT)
This is a great example of a utility crypto with a solid, valuable, use case.
It is trying to make advertising less crappy and help creatives get paid more fairly. If BAT succeeds, the internet will become a much better pace to browse.
It also has some big deals with YouTube stars and a lot of partnerships with big brands.
The main hurdle it has to overcome is adoption. To use it, you need to use its Brave browser instead of your usual one. However, it is working on integration into the other major browsers.
From everything I’ve heard, the Brave browser is actually very, very good. Especially if you’re using a smartphone. By the end of last year, it has over 1 million active monthly users, so it must be doing something right. I haven’t had chance to try it myself yet though.
Identity is one if the major problems cryptos aim to solve.
Almost any in-depth article you can find, will at some point touch on the problem of identity and how cryptos will one day solve it.
I covered this in on Monday in my report from London Blockchain Week.
Civic’s vision is to solve this problem. It aims to give people control over their own identity and let them prove they are who they say they are, without the need for third parties.
As you can gather by now, doing away with third parties is a key theme of all crypto.
Civic aims to be like a login, password, driving licence and passport – all in one. There are many contenders to this identity crypto throne, but Civic currently has the biggest market share and an actual working product.
How does Civic derive value? The idea is the platform is free for ordinary people to use, but businesses will need to pay in Civic tokens to verify customers.
The idea is as the platform becomes more widely adopted, more and more businesses will need to buy Civic tokens to verify customers. It’s not the strongest value case, but it does make sense.
Gambling is a huge business. It’s human nature to gamble and it makes the companies that run casinos an awful lot of money.
The problem with online gambling is trust. Many people don’t play online because they don’t trust the sites. How do you know they are giving you the odds they claim?
That’s where FunFair comes in. It has built a platform that online gambling sites can run on top of. All of its games are provably fair because they run on the blockchain.
The global gaming market is worth $46 billion. If FunFair could become the go-to system all these games run on, its value would be massive. At least, that’s the theory.
FunFair tokens have a very straightforward use and value case. They are used in online casinos, just like chips are used in real ones. Any site that bases its games on FunFair’s software will use FUN tokens as its native currency.
One of the fundamental rules of crypto is you don’t leave your crypto on an exchange. The reason for this is simple, exchanges get hacked. And it happens all the time.
This January one of the world’s major crypto exchanges got hacked. The hacker stole over $400 million of NEM. The exchange has promised to pay back anyone that was affected. But this hack still highlights a big problem.
Some exchanges are also not to be trusted at all. Sometimes they withhold your funds for no apparent reason. Sometimes they close down or get shut down by governments. If an exchange currently holds your cryptos, you don’t. It’s as simple as that.
So what’s the solution? Decentralised exchanges.
The idea of a decentralised exchange is that the people trading never hand over their cryptos to the exchange. They simply trade with each other, using smart contracts so no one gets scammed.
Since the exchange itself never holds any funds, it doesn’t matter if it gets hackled. There are no cryptos there to hack.
The main player in decentralised exchanges right now is 0x. Just as with FunFair, it’s not a site or end product in itself. It is merely the software the decentralised exchanges need to run on.
It’s been getting a lot of good publicity of late because of a number of high-profile hacks. With every hack or exchange shenanigan, the case for 0x gains strength.
Exchanges that use the 0x platform will collect their fees in 0x tokens. And 0x tokens also give you voting weight on the protocol itself.
If you’re a big decentralised exchange it makes sense to hold on to 0x instead of just swapping it out yourself so you can vote on how it will work in the future. Again, at least, that’s the theory.
Utility tokens resources
Basic Attention Token
Another key area for utility tokens is decentralised storage. In a previous essay, I covered some of the big players in this area, and why it will be such a big deal. You can find it here if you want to know more.
Bonus sub-category: hybrids
Okay, this is already getting quite long, so this section will be shorter. But I couldn’t write a guide to cryptos without mentioning hybrids.
I think it’s important to talk about them because hybrids make up some of the most promising projects in crypto.
You could argue hybrids are also platform cryptos. But that’s not really their main purpose.
They are like a cross between platform, currency and utility cryptos. They are a hybrid.
Some of the best examples are:
Currently an ERC20 token, but moving to its own blockchain soon. It plans to be a universal platform for exchanging any currency and any crypto with any other.
Think 0x, but for use with normal currencies and cryptos combined. And it aims to be used at point of sale.
So, in theory, you could walk into a shop in Japan and pay for something with any crypto you choose. A point of sale machine running OmiseGo would then instantly covert your crypto to Japanese yen.
For this service OmiseGo would take a small percentage of the sale as a fee and spread that fee to holders of the OmiseGo token.
This would all happen in milliseconds and give you the best exchange rate available.
You could also use it the other way around: pay a shop with yen and they receive the crypto of their choice.
And you could also use it to swap one fiat currency for another, for example dollars to pounds.
It’s a big vision. But it is already a very established company, has deals with big businesses like McDonald’s and has the creator of Ethereum, Vitalik Buterin, as one of its key advisers.
In a world of cryptos competing to take the top spot and crush all competition, Ark takes a different view.
Ark aims to be like the Google of cryptos.
Its main aim is to build “SmartBridges” between all the major cryptos. These SmartBridges will let any crypto do what any other crypto does.
It’s already completed its first SmartBridge with bitcoin and is now working on others. For a good explanation of how this all works, you can read Ark’s excellent article on SmartBridges here.
Ark is also a delegated proof-of-stake crypto, which means you can get around 10% a year interest just by holding it.
Hybrid crypto resources
Right, that’s all the core types of cryptos covered.
When structuring your portfolio, for all the reasons I’ve stated, I’d recommend around 70% in platforms and the other 30% split between currencies and utilities.
Of course, as I’ve said all along, it’s entirely up to you though. Just remember to do your own research before you decide anything. Use the resources I’ve given you and only invest money you’re fine with throwing away.
Next week, we’ll move on to actually buying these cryptos. I’ll cover how to get in in the first place, how to use exchanges and how to cash out.
And if you’re not in the market yet, you’re in luck. This is fast becoming a great time to buy. We’re reaching peak FUD in the FOMO vs FUD cycle.
If crypto prices have you on edge right now, I’d recommend you take a look at the above link to better understand what’s happening.
Until next time,
Editor, Exponential Investor