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Investing beyond Bitcoin -- a brief intro to alternative coins (Alt-coins)

Bitcoin is a great new technology, and in an investment class of its own. But there are far better opportunities as well if you care to do the research.

By

Skyler Vondra

on

May 28, 2021

Historically, bitcoin has been a great investment. In fact, over the past 10 years that it's been around, Bitcoin has averaged a 408% annualized return (as of this writing on February 12th 2021). Now that's a pretty stellar return, but it's just the tip of the iceberg. Bitcoin is the trojan horse for an entirely new breed of technology -- blockchain. Blockchain technology is disrupting many traditional industries as we speak, and I'm going to explain a few of them in the hopes that you can see the opportunity as clearly as I can, and hopefully we can make good money together.

Ethereum

Created in 2015 by Vitalik Buterin and Gavin Wood, Ethereum can best be described as a decentralized computer. In the same way that Bitcoin democratizes finance, Ethereum democratizes computing.

Computing is a big subject. A calculator is a computer and this computer is made of marbles. What's important to understand is that a computer is just a machine that's designed to perform some type of action, based on some type of input, and logic. When you type 2+2 the computer is told to add those figures together. Even the marble computer can spit out an output when you roll the marbles around.

Ethereum is special because it allows this to occur without a central authority. For example, Microsoft is the central authority for Windows, and Apple is the central authority for iOS. You're not able to participate in these computing systems without first the permission of Microsoft or Apple.

This isn't a problem for most people, after you've purchased your computer you don't have to interact with those central authorities for anything other than updates. That's great. But the truth is that not everyone on the planet has the same access to those companies.

1. Because not everyone has the funds to buy a Windows or iOS enabled computer.
2. Microsoft and Apple aren't providing their product in every country around the world.
3. If Microsoft or Apple decided that they don't want you to use their product, you'd have no choice but to find another provider.

While for most people these problems haven't reared their ugly head, they are still weak points in our global computing system.

That's where Ethereum comes in. Ethereum is a platform that allows anyone to create a dapp (decentralized application) using smart contracts on their global open-source computing system. These applications allow anyone with a computing device to participate.

If you live in the United States, or any country with free access to the internet, there aren't many places on the web that you're not able to access. But in many developing and authoritarian countries this isn't the case. These are exactly the places where Ethereum and DeFi are making the biggest difference.

Decentralized Finance (DeFi)

Decentralized Finance, or DeFi, is a rapidly developing form of finance that does not rely on financial intermediaries like banks, exchanges, or brokerages to operate. Instead of being operated by those traditional middlemen, Defi relies on the power of smart contracts to perform these transactions. The main provider of smart contracts currently is Ethereum.

"The goal of DeFi is to reconstruct the banking system for the whole world in this open, permissionless way,” says Alex Pack, managing partner at Dragonfly Capital, a $100 million crypto fund. “You only get that shot every 50 years."

DeFi has already carved out a corner of the banking industry by securing deposits and issuing loans on platforms like Aave, Celsius, Yearn Finance, Compound, and more with over $41 billion in total value locked (Defi ranks 45th of largest US banks by deposit volume).

In a world where 31% of the population doesn't even have access to a bank account, this is a huge step to helping these people escape poverty. In places where an ID and proof of residence are required to open a bank account, Defi fills the gaps. For the 31% of the population that doesn't have a bank account, gaining access to interest with deposits and having instant access to loans creates a strong infrastructure for the developing world to start building wealth.

For the already developed part of the world that's already using a bank account, this access lets you get around the inconveniences of working through a middleman. Think about how much banks spend each year paying for the salaries of their thousands of employees, heating their buildings, and advertising to try and get more customers ... All of those expenses are gone with Defi. This system gives all of the profit back to the user, in the form of higher deposit rates (think 100x more) and much lower interest rates on loans.

Others

Bitcoin and DeFi are just the tip of the iceberg. But for now they're also the flashiest part of the iceberg. There are several more interesting technologies coming out alongside Bitcoin with the innovative blockchain technology, but for many, they're not quite ready for the market.

Summary

Bitcoin is a great innovation that will help encourage financial freedom and empowerment for the world. But there are several other technologies growing right along side it that show just as much promise and potential. I implore you read more articles on https://www.convert2crypto.com to inform and educate yourself on these opportunities, so you too will have access to this life-changing wealth.

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