Three Points of Analysis for Any Cryptocurrency
When it comes to deciding whether or not you want to invest in a cryptocurrency, there are three basic questions you may want to ask yourself about the project.
Who is leading the project
Why is this project unique
How does the token work
These three questions will end up revealing a lot about the nature of your investment, and whether or not it is a good one. These aren’t all of the questions you may want to ask, but they are a good start. It is certainly enough to get acquainted with the project to know whether or not you would like to invest. In Episode 9 of the Go Full Crypto podcast Mrugakshee and Keegan talk go through three projects and discuss the answers to to these questions. Those three projects are Bitcoin, Tether, and the Basic Attention Token (BAT).
The Three Factors
The answer to the questions you ask actually matter. The viability of your investment depends on the answer to these questions. In general, you want your money to be safe across time, and ideally grow in value. These two outcomes are actually what investing is all about. If you want your money to be safe, then who is leading the project is an entirely relevant question to ask. You do not want a centralized entity to have the ability to take away your money. The best case scenario is having decentralized control, and sufficiently decentralized ownership over the currency supply.
Bitcoin
There is a reason why Bitcoin is the number one cryptocurrency in the world. It does certain things better than every other cryptocurrency out there. One of the reasons why people like bitcoin, is because of the lack of central control. The system will continue to work as expected, and no one can tamper with that. This ability to not be affected by controlling parties is called censorship resistance. In the early days, Bitcoin was led by Satoshi Nakamoto, the anonymous creator. Satoshi oversaw the development of the project for the first few years of the life of Bitcoin. Eventually, they stepped away from the world stage, effectively handing over the reigns to the people. So who is leading Bitcoin? The people are.
Bitcoin is unique for a number of reasons, the first of which has everything to do with the lack of centralized leadership. Perhaps more interestingly, Bitcoin has managed to leverage the network effect. If you walk up to most people on the streets, anywhere in the world, they have heard of Bitcoin. Not necessarily cryptocurrency, but Bitcoin specifically. It has an amazing amount of name recognition around the world. Bitcoin’s first mover’s advantages has allowed it to establish a place in our minds that is symbiotic with cryptocurrency. They are essentially one and the same. Bitcoin ends up receiving billions of dollars of free advertising every single year. As a result, millions of people are using it, and billions of people know about it.
None of the above would matter if Bitcoin was not well designed at its technical and economic levels. Bitcoin is built with a static supply set at 21 million, a number that will never change. This hard cap at 21 million is digitally enforced scarcity, which is one of the core innovations that makes Bitcoin a better form of money. It is also what people within the Bitcoin movement typically refer to when describing Bitcoin as digital gold. Bitcoin has a deflationary supply curve, which means that less and less Bitcoin are minted as time goes on. In other words, Bitcoin becomes more scarce as time progresses. If demand increases alongside this, then Bitcoin is basically programmatically designed to increase in value over time. If you’re interested in learning more about how bitcoin works economically, check out Episode 5, How Bitcoin Mining Works.
Tether
Tether is a Stablecoin, this means that it is a cryptocurrency that holds its value over time. This kind of cryptocurrency doesn’t increase in value over time, but it also doesn’t decrease. In this way, it acts most like the currencies we are all familiar with; Dollars. Tether is actually backed by USD, which is exactly why it is able to hold its value across time. There is a centrally controlling party behind Tether, even though it is built on decentralized technology. Ultimately this means that there is an entity behind Tether that have levers that the users do not have.
Listen to the episode to hear more about Tether (USDT).
Basic Attention Token (BAT)
The basic attention token is a fantastic and fun project in the cryptocurrency space. Go Full Crypto decided to highlight the basic attention token because we believe that they’ve created something special, and unique. There are three basic types of cryptocurrencies, the first is a true cryptocurrency like Bitcoin. The second is a stablecoin like Tether. The third is a Utility Token like BAT. Tokens are integrated into applications, and typically only have value within the context of the technical ecosystem it is built upon. The easiest way to think about this, is it is like AirMiles that you can sell for dollars. The Basic Attention Token project is led by Brendon Eich from Brave Software Inc. Their flagship product is the Brave Browser.
The entire mission of Brave is for users to get paid for their attention. The current advertising model does not include the user in the model for who gets the cut of the dollars that went into paying for the advertisement. In other words, consumers of advertisements are having their attention monetized, with zero compensation being delivered back to the user. Brave aims to change this paradigm by giving a percentage of the ad dollars back to the user in the form of the Basic Attention Token.
Listen to the episode to hear more about the Basic Attention Token (BAT).