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Chapter 3 – The top five coins and their use cases

Whereas Bitcoin aimed to be a store of value similar to gold, Ethereum was created to facilitate the immutable transaction.
Contents

This chapter covers cryptocurrencies that could potentially be profitable investments. Many of these coins have already 1000x in value since their inception, but current indicators and the rapid growth of the crypto ecosystem suggest more growth. If you are reading this in 2022, you are still very early. Under each coin are the current price and the projected price that it can potentially hit over the next few years. If you want to know more about my investments, you can read about them here.

Projected Prices: 

Some of these projected prices may sound unbelievable. Then again, buying BTC at $1 in 2009 and hearing it would reach 50k sounded crazy. To make things extremely clear, we must set a frame of reference. Let’s pick Gold: It has a market cap of over 11 trillion dollars. The entire sector of crypto combined only has a 1.5 trillion dollar market cap. Hopefully, this puts into perspective how small crypto is, especially for all the value it brings. If BTC by itself were to reach the market cap of Gold, a single BTC would be roughly $500,000.

Not financial advice

All projected prices and figures mentioned in this chapter are not financial advice. I give numbers to show potential, not real-world value. Cryptocurrencies are highly volatile assets, so invest at your own risk and DYOR before investing. We will talk more about how you can DYOR and avoid potential rug pulls towards the end of this chapter. 

Bitcoin – The king 

Current Price – $42,500

Projected Price – $500,000

Estimated gain – > 1,000%

In 2009, Satoshi Nakamoto, an anonymous figure, created Bitcoin. The creator wanted to demonstrate that decentralized currency, such as BTC, could be used to transact over the internet. Ultimately, Bitcoin aimed to replace inflationary fiat currencies. Bitcoin’s purpose has aged incredibly well as many countries such as Venezuela, Zimbabwe, Argentina, and Iran face hyperinflation. As their currencies become worthless, they now consider adopting Bitcoin as legal tender.

There will only ever be 21 million BTC. As covered earlier, BTC is a proof of work protocol, meaning miners validate transactions to earn Bitcoin. As of 2022, we have mined 18.5 million BTC. Every four years, the amount of Bitcoin mined will halve; thus, we will mine the last BTC in 2140. 

Furthermore, due to people losing access to their wallets, the number of Bitcoin in circulation is even less than the estimated 18.5 million. This makes Bitcoin a very scarce asset—just like Gold, hence the name Gold 2.0. 

Fact: There isn’t enough Bitcoin for every millionaire to own just one. The race is on to buy and hold as many BTC as possible for the lowest prices. Whales, or investors with significant capital, accumulate BTC at every dip. Additionally, whales rapidly take BTC off exchanges and store them in cold wallets, decreasing the circulating supply further. We know the actions of all whales in crypto because of on-chain data. 

On-Chain Data: 

All the data on a blockchain is public information. We can utilize software to track large Bitcoin buying and selling movements. Thus, we can also see how many BTC whales have, when they sell, buy, etc. This data is helpful to the average joe because we can finally see how big institutional players make their moves. We can not hide or manipulate anything on the blockchain without the public knowing. 

Glass Nodes, is a company that aggregates on-chain data into useful metrics. As a trader, these metrics can be handy buy and sell indicators. 

Ethereum — Smart contracts

Current Price – $3,000

Projected price – $10000

Estimated Gain – >230%

In 2013, the teen prodigy Vitalik Buterin came up with the idea for Ethereum. He understood that Bitcoin is a store of value similar to Gold and a means of transaction similar to fiat currency. Bitcoin as a currency is decentralized, but the transactions made with bitcoin are not. He quickly realized that this was a problem and there needed to be a decentralized platform to facilitate immutable transactions. 

Not long after publishing the whitepaper, many people joined the project and helped it launch in mid-2015. These same individuals would later grow weary of the project and branch off to form some of the most significant crypto projects to date, such as Cardano. 

Through the use of smart contracts, Ethereum was able to bring more functionality to blockchain infrastructure. It is now the single biggest platform used to build decentralized applications, known as DAPPs. To complete transactions on DAPPS, users must pay a small fee (gas fee) in Ethereum’s native currency, commonly called ETH. Miners and validators who run the blockchain receive the gas fees.

Ethereum Classic

In 2016, a bug found on a project’s smart contract software was exploited, resulting in a $50 million cyber theft. Ethereum was hard forked to fix the mistake, creating two separate blockchains: The original, now called Ethereum classic, and the new blockchain, now called Ethereum. 

Mining

As it stands now, Ethereum is a proof of work blockchain. Miners (computers) are set up worldwide to maintain the blockchain and validate new transactions. Recently, mining has raised serious environmental concerns because of the amount of energy it uses. Although many clean energy mining solutions are being built, the Ethereum team has decided to shift to proof of work (POW), effectively replacing Ethereum miners with validators and cutting energy consumption significantly. 

Usage

Ethereum in 2022 still dominates as the primary blockchain on which smart contract transactions are made. However, due to the high gas fees (almost $50 bucks for a single transaction), many people are moving away from Ethereum to similar blockchains, promising faster transaction times and lower gas fees. 

Deflationary

Recently Ethereum passed a protocol that started burning ETH at a steady rate. You can track how many tokens are burned daily on “Feel the Burn.”

FACT: Burning tokens is a deflationary pressure that drives the supply of ETH down, thereby driving the price of ETH up. 

Ethereum remains an attractive investment as the team behind it has a lot in the pipeline. Currently, their focus lies in reducing high gas fees and increasing environmental sustainability. Moreover, layer two solutions built on Ethereum significantly boost transaction speed while reducing gas fees to fractions of a penny. 

Avalanche (AVAX)— Very fast and cheap

Current price: $50 

Projected price: $200

Estimated gain: > 400%

Avalanche is an EVM (Ethereum Virtual Machine) compatible blockchain. In simple terms, Ethereum and Avalanche run on the same code; thus, Ethereum DAPPs also can run on the Avalanche blockchain without any limits. 

By making some modifications and optimization, Avalanche’s goal is to become Ethereum 2.0. Here are some numbers backing that claim: Avalanche has a throughput of more than 4,500 transactions per second, finalizes transactions in less than 2 seconds, and around 45 cents a transaction. Ethereum, on the other hand, boasts (sarcastically) 14 transactions per second, finalized transactions in 60 minutes, and costs around 50 bucks per transaction. 

Based on the numbers alone, it is fair to say that Avalanche has a substantial advantage over Ethereum. It hasn’t already replaced Ethereum due to slow adoption and developers slowly migrating their DAPPs onto Avalanche. Unless Ethereum significantly improves, Avalanche or another “Ethereum killer” will likely take over. 

Developers and EVM 

When investing in blockchains, one thing to consider is the ease of creating DAPPs. Ethereum is coded using a language called Solidity on a platform called EVM. As Ethereum became the most popular smart contract blockchain, Solidity became the industry standard. New blockchains were forced to add Solidity support so existing EVM projects could be easily forked (copied and pasted) onto other blockchains. 

Avalanche is an EVM-based blockchain supporting Solidity, thus making it simple for developers on Ethereum to replicate or build new projects on Avalanche. 

Fact: There is a direct, positive correlation between the number of developers and users on a blockchain. 

Solana (SOL): Less decentralized 

Current price: $90 

Projected Price: $1000

Estimated gain: > 1100%

Solana is one of the fastest and cheapest blockchains out there. It claims it can process 30 times more transactions per second than VISA, equating to around 700,000 TPS. The network can handle this because of its Proof of History (POH) consensus protocol, which we will cover below. Solana has yet to prove their wild numbers, claiming its potential is not limited by software but by hardware. Thus as hardware becomes more powerful, so will Solana. 

Team 

One of the many reasons Solana makes an excellent investment is because of the team behind it. Made up of ex Qualcomm, Cisco, and Google Engineers, it’s a safe bet to say that this team knows what they are doing. 

Irony

Solana’s website claims that the network is fully decentralized and unstable, “meaning the network will remain open for applications to run freely and transactions will never be stopped.” Ironically, Solana has been halted numerous times over the last several years. While people scrutinize the lack of decentralization, they have difficulty staying away from it. 

DAPPs 

Since Solana is not an EVM blockchain, developers have to build their DAPPs for the Solana VM specifically. Fortunately, Solana developers have created many great DAPPs and counting. With its fast speeds and low fees, the Solana Network is not only a strong competitor against Ethereum, but it allows for some unique applications that can’t be built on slower blockchains. If you are interested in these DAPPs, we created an entire section going over the best ones. 

Cosmos (ATOM): 1 blockchain for all 

Current Price: $30

Projected price: $100

Estimated gain: > 333%

Cosmos is a layer 0 blockchain that attempts to bring all the blockchains together. This is called blockchain interoperability. It isn’t easy to get our assets from the Ethereum Network to the Solana Network. In the future, layer 0 blockchains, like Cosmos and Polka dot, will allow for the transfer of assets across many blockchains. 

Think of it this way: Imagine if texts from iPhone could only be sent to other iPhones. Texting would be inefficient as people using Samsung, Google, Huawei, and Xiaomi phones won’t get each other’s these texts. As a result, we built the infrastructure for interoperability so that texts from any phone can be sent to any other phone. Thus Cosmos aims to do the same for blockchains, in the sense that data and assets on any blockchain can be forwarded to any other blockchains without even thinking about it. 

Interoperability is a no-brainer, making layer 0 blockchains like Cosmos an attractive investment. 

DYOR 

DYOR, or Do Your Own Research, is a commonly said phrase, but nobody talks about how to go about doing so. With 1000’s crypto projects and counting, getting overwhelmed and blindly investing is common. We suggest picking only a hand full of coins, learning about them to their fullest, before moving on to other currencies. Below is an outline to help you DYOR. 

  1. Start on Coin Market Cap and pick a coin based on market cap. Generally, if you want a safer investment, choose a coin with large market caps. Pick a coin with a smaller market cap if you want a high-risk, high-reward investment.
  2. Go to the official website of the coin you picked and look at these three things: 
    1. Team: are they known to the public or anonymous? Oftentimes, many great crypto projects, such as Bitcoin, had anonymous founders. However, it is better to see publicly verifiable people working on the project.
    2. Problem and solution: what problem does the blockchain try to solve, how do they solve it, and how do they compare to similar blockchains. 
    3. Funding: check to see if the project has raised any capital from a reputable venture capitalist (VC) such as Sequoia, Black Rock, or Y Combinator. This is a good sign if they have received funding from a VC. 
  3. Check out the official social media channels, such as Twitter, telegram, Reddit, and see how active the community members are. Ideally, you want to see at least several thousand people engaging in posts, tweets, etc. Low engagement numbers might indicate a weak project. 

Rug Pull 

Rug pulls, or when developers decide to abandon the project and take the remaining funds, happen more frequently on unverified DAPPs than anything else. If you follow the steps above and DYOR, you will quickly see through rug pull schemes and allocate capital to profitable projects.

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