The most crucial thing to understand about blue-chip cryptocurrencies is that they are neither securities nor investments. Cryptocurrencies are digital assets used as mediums of exchange for goods and services or for other currencies or assets (e.g., gold). They may also be called “crypto assets” or “cryptographic currencies.
They are different from fiat money because any government entity does not control them; instead, cryptocurrencies rely on decentralized consensus mechanisms such as proof-of-work (PoW), proof-of-stake (PoS), or both combined together depending on how secure the network needs to be.
So why does everyone react strongly to the word “crypto”?
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It’s because you’re thinking about them as an investment, but they aren’t. Cryptocurrencies are not really like stocks or bonds; they’re much more akin to commodities. In fact, many think cryptocurrencies constitute a brand-new asset class that might compete with many existing investment types in terms of risk and value. And while there’s still plenty of uncertainty about how this will play out over time.
This may sound strange at first: Why would someone invest in something they can’t touch? But consider this: If your friend has been telling you all along that he thinks gold is going up again soon, and now he’s telling you about his latest purchase, you might want to ask him where he got his gold coins from (or maybe even pull out your own wallet). Just because something hasn’t happened yet doesn’t mean it won’t happen later down the road!
Some people say it’s because of scam coins. Others predict the future of cryptocurrencies and hope for the best. Scam coins are not real; they are completely false and can’t be trusted. They might be good at producing money, but since all they have to offer is hype-generating conjecture, they won’t last long in the market.
If you want to invest in something that will give you value, look no further than blue-chip cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH).
An unknown person in 2009 using the alias Satoshi Nakamoto the cryptocurrency Bitcoin was created. It is currently the most popular cryptocurrency on earth and has a market cap of over $75 billion.
Bitcoin is decentralized, meaning there is no central authority that issues new currency units, nor is there any central server that stores this currency. Instead, it relies on a peer-to-peer network to transfer bitcoins between users.
Bitcoin uses blockchain technology to record transactions. The blockchain is a public ledger of all bitcoin transactions, which has led some to refer to it as “the digital equivalent of cash.” Transactions are verified by network nodes through cryptography and recorded in the blockchain.
Ethereum is a cryptocurrency that uses blockchain technology, which means it is decentralized and has no central authority to issue new units. It’s also built on a smart contract platform that allows for creating applications that run on top of its blockchain. The
Ethereum network is designed to allow for the creation of custom applications that can be used by anyone, anywhere in the world. The network uses a Proof-of-Work (PoW) consensus algorithm to secure the blockchain.
There are two types of blue-chip cryptocurrencies: those backed by fiat money and those not.
Fiat money refers to currency issued by governments, such as the dollar, euro, or pound. It’s backed by nothing but faith in the government behind it. This is why you can use fiat currencies at any store. The store knows it has your money because you give it to them; they don’t have anything else backing up its currency other than trust in its government’s ability to pay back its debts (or at least not default).
Cryptocurrencies aren’t backed by anything except themselves. They’re self-contained systems with no real-world counterpart like gold or dollars do.
The two blue chip cryptocurrencies are some of the most popular blockchain cryptocurrencies due to their ability to handle a large number of transactions for relatively very low fees. It’s no wonder that these two are among the hottest candidates for investing during this bear market.