Advantages of cryptocurrencies

Cryptocurrencies offer several advantages compared to traditional banking, money transfers, and official currencies.

Privacy. Many cryptocurrencies are designed with the privacy of the issuer and receiver of funds in mind. Only cash provides similar anonymity.
Decentralization. Cryptocurrency owners use a wallet to access their currency and receive or send funds from a specific wallet address, using a secret key for access. Some also use crypto exchanges [companies to trade (sell and buy) cryptocurrencies] to store coins, although this practice carries additional risk. The currency register exists on the blockchain with a copy stored at each node, which maintains a local ledger and syncs with other computers online. Your money is not in a single bank, not even in several. The decentralized nature of cryptocurrency ledgers makes them less vulnerable to confiscation or individual risks, such as fire or hardware failure. The data is not only stored off-site but is copied around the world to all existing nodes.
Shortage. Bitcoin has a fixed supply. There is more than 17 million Bitcoin. However, only 21 million Bitcoin will exist in life. It is integrated into the code of the currencies. Fixed supply gives Bitcoin and other cryptocurrencies characteristics similar to gold, silver, or other precious metals historically used as money. Unlike the US dollar, the British pound, or any other official currency, after the total supply is in circulation, it will never grow, devaluing the currency's purchasing power.
Smart contracts. Some cryptocurrencies have a unique feature that cannot be duplicated with official currencies. Ethereum is among the best examples with its strong support for "smart contracts," essentially programs that live on the blockchain and that can be used to handle transactions as well as for many other uses, some of which we may not have imagined yet. For starters, these contracts can be used to replace mediators or escrow services. The smart contract can manage the details of a transaction, releasing the payment only when predefined conditions are met.
Cost of transfers. The cost associated with cryptocurrency transfers can be a pro or a con, depending on the type of currency, the type of transfer, and the transfer speed. Bitcoin, for example, can become prohibitive if you need to make a quick transaction. Costs are less of a problem for less urgent transactions. Other types of cryptocurrencies, such as Ripple, are transferred quickly and cheaply, causing financial institutions to adopt Ripple-based transactions and related technology increasingly.

Disadvantages of cryptocurrencies

Cryptocurrencies come with a list of considerations that can help make investments more secure.

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It’s fair to say that there is no such thing as a safe cryptocurrency at this early stage. But with careful planning, you can build a portfolio that limits risk while offering the opportunity to exit the trade should it be necessary.

Adaptation in the market. Cryptocurrency awareness is growing, but most of the attention has been on Bitcoin. Relatively few retailers accept cryptocurrencies for payment, but quite a few already exist. Overstock.com announced in 2017 that it would accept cryptocurrencies as a means of payment. Payments will be limited to Bitcoin, Ethereum, Litecoin, Dash, and Monero, giving the other 1,500+ cryptocurrencies their back. Pizzaforcoins.com accepts more than 50 cryptocurrencies, allowing cryptocurrency owners to buy pizza at local establishments. The adaptation of the cryptocurrency market for payment has been slow, and options remain limited, but this can change quickly.
Obsolescence. Up to 1,000 cryptocurrencies have already failed, and more will indeed be added. The most common type of failure is in the Initial Coin Offering (ICO). Many coins find a market crowded with coins with similar characteristics to existing ones, causing skepticism among investors. The ICO was just a cash robbery in some other cases, with the founders running away with investor funds. Currently, ICOs are not regulated.
Cryptocurrency projects abandoned. Most of the investment money for cryptocurrencies is focused on a relative pool.

They lamented small coins. Without the interest of investors, projects can be abandoned, leaving investors with worthless digital currencies.
Regulation risk. When it comes to cryptocurrencies, regulatory risk is twofold. In the US, cryptocurrencies are not regulated at the federal level, leaving states the option of introducing rules and regulations about cryptocurrencies or blockchains that serve as the backbone for cryptocurrencies. On the other hand, some investors and finance experts have expressed concern about the future regulation of cryptocurrencies, which could cause a drop in demand or eliminate it.
Liquidity risk. Investors and lesser-known cryptocurrencies may find fewer buyers, which creates difficulties when trying to exit a position.
Volatility risk. Few investment classes can rival cryptocurrencies when it comes to price volatility. Prices can go up or down dramatically in a single day, making or breaking fortunes.
Third-party risk. Mt. Gox, a Japan-based Bitcoin crypto exchange and the world’s leading exchange in 2014, was hacked, resulting in a loss of nearly $ 500 million worth of Bitcoin. In total, an estimated 850,000 Bitcoins belonging to investors disappeared, ultimately driving the exchange into bankruptcy.
Security. Cryptocurrencies are often kept in a digital wallet, secured by an extended code or a long series of words. Unlike your bank or investment account, there is no recovery process available if you lose your password. Without your password, your cryptocurrency wallet and its contents are no longer accessible.

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Characteristics to look for in suitable cryptocurrencies

Adoption rate. Cryptocurrencies are highly speculative investments. The most significant gains are sometimes found among coins that have just been introduced or whose technology has found a market, as with Dogecoin. More cautious investors may choose to focus on the adoption rate, focusing portfolio investment on cryptocurrencies currently used in real-world transactions.
Market capitalization. In many ways, the market capitalization of a given cryptocurrency goes hand in hand with liquidity. Fledgling cryptocurrencies may never find the market, preventing investors from profitably exiting the position.
They promise new technology. Both Ethereum and Polygon owe their stratospheric gains in 2017 to the innovative technology built into their respective platforms, differentiating both cryptocurrencies from the crowded market of often similar offerings.
Security or anonymity features. Technologies like smart contracts, found in Ethereum and other cryptocurrencies, make transactions more secure by allowing a set of rules for each transaction. Some cryptocurrencies, such as Monero, emphasize anonymity, hiding the issuer's identity and recipient of the funds.
Utility for the sector. Ethereum and Polygon are again good examples of cryptocurrencies with utility beyond a simple medium of exchange. Ethereum is the foundation of the decentralized financial revolution, and Polygon is the second layer, level 2, where transactions and smart contracts can function at scale.

Final thoughts on the best cryptocurrencies

Cryptocurrencies and decentralized financial products are still in their formative years. If you are entering the world of cryptocurrencies, you may want to invest only venture capital and build a portfolio of widely traded cryptocurrencies.

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Initial coin offerings can be tempting, mainly because of the usual parabolic spikes in ICOs. Almost as standard is a steep drop after the ICO.

More established coins help avoid some of the volatility and provide better liquidity than that found in newly minted cryptocurrencies.

It is essential to know where a cryptocurrency can be traded and what the market size is for that cryptocurrency.

Many early investors have found themselves without a viable way out of the position. If cryptocurrencies are here to stay, chances are excellent opportunities exist among the most traded currencies while minimizing risk due to abandoned projects or lack of liquidity.
Inspired by Bitcoin, Litecoin was born in 2011 to become its alternative.

Thus, from the beginning, its developers strove to solve various technical and security problems that originated in the old blockchain. So Litecoin can produce four times more units than Bitcoin and with more significant security guarantees.

In addition, it uses the Scrypt function in its PoW, which allows mining many more users since it does not require supercomputers (decentralizing the mining processes).