For everyone with the slight interest in cryptocurrency, one of the biggest questions is: What currency is going to be the next Bitcoin?
Friends, casual acquaintances and even journalists often ask me about cryptocurrencies. These conversations tend to circle around three main questions:
- What I am investing in and what they should buy before it rockets into the stratosphere
- How they can actually buy those currencies
- And, of course, why invest in the first place.
Here you can find a useful guide to what I believe are two next biggest things in cryptocurrency and how you can get your hands on them. But first, let’s start with the last question.
Why invest in crytocurrencies?
When people ask me why they should own cryptocurrencies, my response is always:
Let’s turn this around; why own fiat? Over the centuries, there have been many attempts at fiat based economies and they have always collapsed; evidence suggests it’s not a case of ‘if’ but ‘when’. Our entire global economy is fiat based, so from this point of view, things don’t look too good.
I think it is crucial that all my friends, acquaintances, indeed everyone in my local and global economy has a fall-back position if the currency they use on a daily basis disintegrates, as in these countries.
As with all investments, the key to a good strategy is diversification. Never have all your money in one space whether that’s fiat, property or even crypto.
So if you have decided you want to put a little money into cryptocurrencies, I will next tell you what I am investing in and how to get in on the action. But, before I reveal my list, here is the boring but essential preamble:
- You could lose all your money. As with any investment, it can be risky. So only put in cash that you can afford to lose.
- I am not a financial advisor, nor recommending you do anything listed in this article. You are responsible for any choices you make, do your own research and form your own ideas.
- Never leave your funds in an exchange for a long period of time. As soon as you’re done trading, it is best practice to withdraw to your own wallet (or bank account in the case of fiat) where you have ultimate control of your funds.
- Always backup your private keys. If you lose them, you lose your cryptocoins forever. Ideally backup onto something eidetic like a paper or a printout, as well as a copy on a data drive.
- This is not a beginners guide. If you need a little more help understanding what cryptocurrencies are in the first place, we recommend Mastering Bitcoin as a technical reference (find it here or here), this developer guide, video lectures from Khan Academy and Princeton, and finally the beginner guides from blockgeeks and kingpassive.
Now that we’ve got the boring disclaimers out the way…
What am I investing in?
Recently there has been a huge spike, likely a bubble, in cryptocurrencies. The very vast majority of cryptocurrencies are overpriced, “me-too” (not technically differentiated) and have dubious use cases or are too complicated to actually be useful.
In this scenario, I believe value investing is the key. So I have focused on cryptocurrencies with the following attributes:
- Highly technically differentiated from other technologies
- Actually useful
Finally, here are the two that I think are smart investments: Particl and MAIDSAFE.
Why invest in Particl?
Still in development, Particl is attempting to build a decentralised eBay. If the developers achieve what they set out to do, it has the chance to completely replace eBay with something that, at a glance, seems to be a technically superior offering.
At its heart, Particl is a blockchain application. It allows its users to post eBay-style listings by paying in the blockchain’s local currency, PART, creating therefore, a demand for PART. Users can bid and pay in any currency the merchant is willing to accept. It is also designed to be self-policing; items that the community find dubious are removed through a voting system. So items such as stolen goods will be removed.
Guide to buying Particl:
Particl is relatively easy to buy.
Remember: Never leave any funds on an exchange for very long as they are technically on loan to someone else and can go missing, and always backup your wallet’s private keys.
Why invest in MAIDSAFE?
MAIDSAFE was conceived completely independently of Bitcoin. It’s design is so different it doesn’t even use a blockchain. Arguably, it was planned before Satoshi even started thinking about Bitcoin and is, therefore, a totally separate technology.
MAIDSAFE attempts to rebuild the internet in a more decentralised, privacy-conscious and scalable way. Many people take a look at MAIDSAFE and dismiss it as just a file storage protocol. But it’s actually a fundamental protocol that can be used to build any internet-based service. If it works, the services that can be built from it will be things like decentralized versions of Google, Facebook and Skype. If MAIDSAFE is able to achieve what its designers have envisaged, it has the potential to replace a lot, if not most of the internet we use today. The proposition is somewhat like being able to invest in the internet as it was in the mid 80’s.
Arguably, one of the reasons MAIDSAFE is so undervalued at the moment is that it is pretty complicated to get a hold of – as you can see from the many steps in my step by step guide below. This will change when the platform launches and the wallet comes into existence. However, the complexity offers an advantage to the canny investor willing to take the time to acquire it now.
Currently, a few proxy MAIDSAFE tokens are available on the market to trade in a pre-launch capacity. These will later be converted to the real tokens at a 1:1 ratio when MAIDSAFE launches.
These proxy tokens have been provided as a type of “coloured coin” called an Omnicoin, which is essentially a token tracking protocol which exists inside the Bitcoin blockchain. When MAIDSAFE is sent, a modified Bitcoin transaction is created with a special field to encapsulate the MAIDSAFE it contains. So you’ll need a special wallet that can speak to this coloured-coin protocol.
For the first part of the sending process – getting your MAIDSAFE off the exchange – the exchange will automatically handle the coloured-coin formatting. So if you send your MAIDSAFE to a new Bitcoin address from the exchange, the transaction will be correctly formatted.
Later on, when you want to redeem your proxy MAIDSAFE tokens – either when the final system launches or to trade them on the exchange again – you will need to send them from a wallet that can understand this coloured-coin protocol. The current recommended wallet for this is Omnicore. Setting up Omnicore can be quite a time intensive process as it requires you to download the entire Bitcoin blockchain (100+ GB). Luckily, to get MAIDSAFE you don’t need Omnicore, you’ll only need it later when you want to send out your MAIDSAFE again.
Below is the process I have devised to buy and hold MAIDSAFE. However, there are other guides available so take a look online and see what other people are recommending.
At the time of writing you can buy MAIDSAFE from the following exchanges:
Guide to buying and storing MAIDSAFE
- Download the Bitcoin Core Wallet.
- In the Bitcoin Core Wallet, create as many addresses as you think you’ll need. You should only send MAIDSAFE to each address once, so if you think you’ll be doing five withdrawals, generate five addresses. 20 withdrawals means you need 20 addresses.
- Backup the wallet file (wallet.dat) to save your private keys. Bitcoin Core does not allow for your wallet seed to be stored as a mnemonic, so ideally you should make multiple copies of the wallet.dat file and store them safely offline. (Please note: if you want to find out more about alternative ways to backup your wallet please take a look online. However, the reason for my suggesting Bitcoin Core is that you can easily export individual public keys later when you want to import them to Omnicore to move your MAIDSAFE).
- Get some bitcoin.
- Sign up to an exchange that sells MAIDSAFE (see above).
- Send the bitcoin to your account at that exchange.
- Execute one or more trades to buy MAIDSAFE with bitcoin.
- Send your MAIDSAFE from the exchange to one of the Bitcoin address you have generated. (Only use each address once, sending to the same address more than once can cause problems later on).
- Your MAIDSAFE will now be stored in addresses for which you hold the private keys, meaning you can move it later when you want to. If you want to check this you can use the online Omniwallet tool to see both the bitcoin and MAIDSAFE coin balance. Using a normal bitcoin wallet will just show the bitcoin balance, not your MAIDSAFE . N.B. Using this web wallet to send your MAIDSAFE later is considered a security risk as you expose your private keys to them to do this. Make sure you use the Omnicore client wallet instead as described below.
Moving MAIDSAFE you already sent to your Bitcoin Core addresses
I recommend using Omnicore – a client wallet that runs locally on your machine – and not the Omniwallet which is a website. This is because Onmicore can keep your keys private, where as the Omniwallet website potentially risks exposing your keys to an outside party who can then steal your MAIDSAFE. If you want to dig deeper, this link explains the difference between Omnicore and Omniwallet.
- Install Omnicore.
- From the Bitcoin Core wallet export the private key from one of your addresses holding the MAIDSAFE you want to move.
- Export the private key from Bitcoin Core.
- Import that private key to Omnicore.
- Omnicore will then allow you to send the MAIDSAFE you have stored in the old transaction to a new address. This could be to claim your actual MAIDSAFE tokens on the live network when it launches, or to simply move it to another address such as an exchange to trade again.
Key points and warnings
- If you do send MAIDSAFE twice to the same address it can cause problems and complicate the recovery of the tokens, therefore only use each address once.
- It may be tempting to buy some MAIDSAFE and leave it on the exchange but I strongly advise against this. Exchanges lose funds and go bust all the time.
- If you try to send your MAIDSAFE from a wallet that does not understand the coloured-coin protocol, it will not preserve formatting and your MAIDSAFE will be lost forever.
- Always backup your wallet’s private keys, if you lose them your MAIDSAFE is gone forever.
There are literally hundreds of cryptocurrencies, so this is by no means a definitive or complete guide. There are probably quite a few cryptocurrencies out there that are underpriced, technically differentiated and actually useful that I have no doubt missed. Sadly I don’t have a crystal ball, but these are two cryptocurrencies I am currently investing in.
I view this as a 5 to 10-year strategy to diversifying my investiments, so it’s not going to be a get rich quick scheme and it’s not something I’d trade in and out of on a weekly or even monthly basis. And remember you may not need to cash out back to fiat when you decide to use your crypto as more and more people are accepting crypto as payment every day.
Disclaimer: at the time of writing I held, MAIDSAFE and Particl.