Should you invest in cryptocurrencies? Which ones to prioritize? Everything you need to know.
At the start of 2023, more than 9% of French people owned cryptocurrencies, according to a survey published by KPMG. The craze has not abated since the spectacular rise of bitcoin in January 2024. How and on which cryptocurrencies should you position yourself? Explanations.
What is a cryptocurrency?
A cryptocurrency or crypto-asset is an electronic currency (digital asset) issued peer-to-peer without the need for a bank or central bank. It is used via a decentralized computer network.
Some reminders about the blockchain
Appearing in 2009 with blockchain, cryptocurrencies use cryptographic technologies and make it possible to issue and settle transactions without using a human intermediary.
Remember that the blockchain is a distributed register, consultable by everyone and listing the actions of the network since the origin. The actors in this network, called nodes, store and verify their own version of the chain. The immutability of the chain is guaranteed by cryptographic hash functions.
To find a solution to the consensus problem that arises when network actors must agree on the same version of the chain and synchronize, there are two methods: proof of work and proof of stake. Proof of work consists of a participant solving a complex cryptographic problem in order to assure other members that they have made a significant computational effort. To make the production of cryptocurrencies less energy-intensive, Ethereum switched in 2022 from the proof-of-work validation method to proof-of-stake. While proof of work requires running hashing algorithms multiple times to confirm transactions, proof of stake requires proving ownership of a certain amount of cryptocurrencies to be able to validate additional blocks and be rewarded.
Focus on the 5 best cryptocurrencies
Do you want to invest in crypto-assets? Here are 5 cryptocurrencies to follow:
Bitcoin (BTC)
Launched in 2009, Bitcoin is now the most recognized and valued of cryptocurrencies. It was invented by Satoshi Nakamoto, a pseudonym that hides a developer or group of developers whose identity has never been revealed.
Bitcoin remains a volatile asset in the short term. In December 2023, its value had more than doubled in one year, an increase which followed a fall of 70% in 2022. In the space of 5 years, however, the cryptocurrency has increased by 1300%.
To summarize, Bitcoin has the advantage of being the most capitalized cryptocurrency on the market and of being recognized on international markets. Among its limitations, we can cite its energy consumption and its fairly limited native evolution capabilities.
Ethereum (ETH)
Ethereum is a software platform that allows the development of decentralized applications (DApps) applying to smart contracts. Instead of using a large company’s server, applications run on a network of many private computers. Thus, they no longer need a central server to be functional. No central authority is necessary.
The launch of this project began in 2013, during which time Vitalik Buterin published a white paper outlining the ideas of his project. In 2014, the project raised its first funding by selling its native cryptocurrency, Ether, for over $18 million. The development of the network was envisaged in four stages, each corresponding to an update and a change of scale: the “Frontier” phase from 2015 to 2016, the “Homestead” phase from 2016 to 2017, the “Metropolis” phase » from 2017 to 2020, the “Serenity” phase from 2020. The last phase, still under development, aims to launch Ethereum 2.0 to resolve the problems encountered by the platform (relatively slow speed of transaction validation and high fees billed by the network in particular).
Ethereum stands out from cryptocurrencies by the fact that it represents the basis of a large part of the blockchain ecosystem as well as by its very active community and its centralized governance.
Solana (SOL)
Created by Anatoly Yakovenko, former developer at Qualcomm, a company specializing in mobile technologies, Solana is a public blockchain whose goal is to revolutionize decentralized finance thanks to the “Proof-of-History” protocol. It is considered one of the main competitors to Ethereum thanks to its remarkable performance and promising smart contract features.
Chainlink (LINK)
Chainlink is used to create a decentralized oracle system that is available and resistant to possible manipulation. There are many use cases (stock price, weather for example). Decentralized applications requiring significant reliability on external data imported into their contracts can benefit from the services offered by Chainlink.
This cryptocurrency has several strong points. First, it is the most widely used blockchain oracle network due to its stability and reliability. Next, Chainlink created multiple partnerships with traditional and blockchain companies. Finally, it contributes to the DeFi ecosystem by delivering accurate and real-time price data.
Celestia (TIA)
The Celestia cryptocurrency defines itself as the world’s “first modular blockchain network”. It has the particularity of separating two fundamental layers of the blockchain: consensus and transaction. More precisely, consensus is based solely on the availability of data. As for transactions, they are carried out outside the blockchain. This architecture offers better scalability and more flexibility to developers. Despite these strong points, Celestia will have to prove itself over time against competitors who have already been present for several years.
Where to buy cryptocurrencies?
Typically, investors turn to an online broker or dedicated platform to purchase cryptocurrencies.
Online brokers provide the ability to buy, trade and sell crypto-assets in addition to stocks, ETFs or commodities. They offer a better user experience and charge relatively low fees.
Cryptocurrency platforms are relatively close to traditional brokers. They differ in that they specialize in the sale and purchase of crypto-assets. Most provide access to a larger number of digital assets than brokers and additional features like staking.
Before investing, be sure to choose an intermediary registered as a digital asset service provider (PSAN) with the Financial Markets Authority (AMF). This registration attests to the integrity and competence of the directors. In addition, recognized PSAN actors are required to comply with regulations relating to the fight against money laundering and the financing of terrorism. Beyond the intermediary you go through to purchase digital currencies, remember that these assets remain very volatile. Therefore, only invest cash that you are sure you will not need immediately.
How to follow the evolution of cryptocurrencies?
Several specialized price referencing sites allow you to follow the evolution of cryptocurrency prices such as Coingecko, Coinmarketcap, Messari, Kaiko and Tradingview.
Bitcoin and crypto-asset sales platforms also offer price visualization and monitoring interfaces.
Author Bio
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