Right now coins are starting to split up into three major categories:
1.Currency
2.Platform
3.Utility
There is a fourth kind of coin: a security token. In a year or two, people will be overrun with companies putting their shares on the block-chain. But that can’t happen until regulators get out of fear mode and start putting together the right rules for it. Delaware, the business center of the known universe, already gave us model legislation, so count on it at the federal level too. They just move slower.
Unfortunately, there are no security tokens to trade right now so we’ll have to revisit that in a year.
Let’s start with the currencies:
These are the simplest coins. They’re programmable money. They’re looking to become a medium of exchange for goods and services. Either that or they’re a store of value like gold or silver. Some are deflationary, some inflationary. Some are meant to move fast and others are meant to hold so you can buy things with it later.
Right now coins are starting to split up into three major categories:
1.Currency
2.Platform
3.Utility
There is a fourth kind of coin: a security token. In a year or two, people will be overrun with companies putting their shares on the blockchain. But that can’t happen until regulators get out of fear mode and start putting together the right rules for it. Delaware, the business center of the known universe, already gave us model legislation, so count on it at the federal level too. They just move slower.
Unfortunately, there are no security tokens to trade right now so we’ll have to revisit that in a year.
Let’s start with the currencies.
These are the simplest coins. They’re programmable money. They’re looking to become a medium of exchange for goods and services. Either that or they’re a store of value like gold or silver. Some are deflationary, some inflationary. Some are meant to move fast and others are meant to hold so you can buy things with it later.
The granddaddy of them all is Bitcoin.
That’s got to be a part of any stack. Period.
It has first mover advantage and a huge lead on the others. It’s also the most expensive and maybe the least innovative.
It’s dark horse rival is Bitcoin Cash, a fork of the original project that has its adherents and haters. But regardless of how you feel about this coin, feelings ain’t got nothing to do with it. This is trading and we’re betting on everyone who could pull out a win here, not pretending we can predict the future perfectly. That means Bitcoin Cash should go into your pile as well.
Other coins like Dash have good momentum. Dash tends to thrive when Bitcoin is plunging. It steadily gains market and mind share. There’s also long time favorite Litecoin, the “silver” to Bitcoin’s gold. Decred is not a bad bet either, as it has a good distribution model and community.
Privacy coins are essential. These work a lot like a digital version of cash, anonymous and agnostic. Monero, Zcash, and Zcoin are good examples, as is PIVX another underappreciated dark horse that started as a fork of DASH but has evolved into its own system and incorporates the Zero Coin protocol. These are all strong contenders to become the cash of the future in a cashless society.
Let’s move on to the platforms. This is where things get really interesting.
Platform coins are looking to do things that are the sole domain of servers and clouds right now. They want to power decentralized applications, run smart contracts as law and power everything from identities to storage to voting.
The platforms have the longest way to go. They have to solve incredibly challenging scaling problems, maintain security, create whole new programming languages and deliver a fantastic user experience.
None of this is easy. It will take time. But these platforms are the foundation of the decentralized internet of the future.
The biggest and baddest so far is Ethereum. I had a chance to meet with one of the top VCs in the country last week, an early investor in this space, and he told me that 90% of his crypto holdings are in Ethereum. That’s because he sees it as the best chance to become the platform, the one platform to rule them all. They have tremendous momentum, incredible devs and they rapidly incorporate new changes into the system. Ethereum is a must hold for any stack.
But they’re not the only contender for the throne. New platforms are coming out every day. There’s bound to be one on a whiteboard somewhere that will blow us all away. But for now we go with what we have here and now.
The other major platform choices are QTUM and NEO out of China, MaidSafe, Waves, IOTA, Tezos (which isn’t trading yet and may never if they don’t survive their lawsuits but which you should definitely own if they ever get out of the gate.) Personally I think these idiots should stop suing, because the project is brilliant and these fools are only proving that they’re too stupid to invest and need the nanny state to protect them but I digress.
Lastly, there’s EOS, probably the biggest ICO in history. They have a good pitch and they’ve put out a steady stream of code. Not a bad one for your bag. I sold them way too early.
Others will certainly join the fold.
The last choices are utility coins. These are the hardest to pick.
The problem with most utility coins is they have no utility.
You’re supposed to use these coins to consume services like identity lookups or decentralized DNS lookups but there is no platform to use these coins yet, so they’re some of the riskiest because they have to survive long enough to service the dominant platforms. By the time that happens those services might already be incorporated into the platforms or get up and running for free. This should be the smallest portion of your bag. Expect utility coins to make up a significant portion of the post dot-com crypto bubble burst list.
However one style of utility coin is here to stay: Fintech coins. These are coins that are designed to move money around the world for major institutions like banks.
Ripple is the big one here. I don’t love their closed source model and their patents (patents are poison in this space) but their tech appears to work well and it keeps a very steady value, something essential when moving money because you don’t want that money experiencing crazy volatility swings like Bitcoin. If you put $1 million dollars on the wire it should come out a million dollars on the other side not $650,000 or $1.2 million.
The only question about Ripple is how much it actually rises in value over time. Hard to say but good to hold onto anyway.
A better choice to me is Stellar Lumens which has a fantastic team. They partnered with IBM to provide service to banks and they have some incredible advisors on board, as well as a lot of transparency. They’re also powering the two reward coins that have a good shot at becoming universal reward coins, Kik and MobileCoin, the second in development by the founder of Signal.
Omise Go has Ethereum founder Vitalik Buterin as an adviser and they’re looking to do much of the same thing that Stellar and Ripple can do but in a more open fashion so they have my vote.
All of those coins are buy and holds in any strong portfolio.
Outside of Fintech, there are a few choices that are riskier but interesting.
PAY is a good bet, if they can get their partnerships with the major credit card creators off the ground. That is a big if because the Visas and Mastercards of the world will likely do their own crypto at one point in an attempt to maintain monopoly control over the credit card terminals.
I’d also look for coins that disintermediate businesses like an energy coin or Populous that deals with payroll and carving out costs there, something that will deliver tremendous ROI for companies.
SALT is incredibly interesting as well. They propose to do blockchain backed loans, another industry ripe for the picking and something that the IMF will love for micro-loans in third world countries.
Last up in Metal. They fit my ultimate pattern for building a universal reward coin and I like what I see out of them.
There are a bunch more I could list here but this isn’t about buying every coin on the top 100. This is about understanding who has a real shot at surviving.
This is my list. Don’t follow it blindly!
Do your own homework. Make your own decisions.
It’s your money and you have to live and die with your choices.
