This article goes over everything you need to know about crypto in 2020.
What is it and Practical Application
Cryptocurrency is a set of different projects like Bitcoin or Ethereum that are decentralized and have billions of dollars tied up in them. They are wildly volatile speculative assets that’s valuation will swing wildly from one moment to the next. However, This article isn’t about how much its worth or how much it will be worth. This is about it’s practical application and how it will change the world we live in. Just by having this knowledge you will be able to profit and be ready for that future.
Practical application of crypto is all over our society today. Many banks are using it, and wealthy individuals are utilizing it. Here are the ways it is used today:
- International Bank transfers (Ripple) - Long wire delays and intermediary banking is becoming a relic of the past. Banks can leverage it to make trustless transfers between banks in seconds around the world.
- International Money Transfers (Bitcoin) - Want to send money to a relative in a different nation? Well using Bitcoin is probably the easiest way to get this done with almost no fees. You could send $1000 for less than $1 fee.
- Banking Replacement (Yield Farming) - Some companies are providing loans and holding crypto while passing along a profits to those holding crypto with them. Think of a savings account on steroids or collateral loans.
- Synthetic Assets (Synthetix) - What to trade Apple stock, gold, or other assets that exist? Sythetic assets are tracked using the blockchain and traded either for the said asset or for the dollar amount the asset is worth.
- Send Private Transactions (Monero) - Send money between two entities completely that is completely private. Please note: Bitcoin and other projects are actively tracked, while some are still privacy oriented, much like physical cash.
- Insurance, Data Backup, and all kinds of data that you will always want a ledger of.
How to Store Crypto
There are two ways of thinking about storing crypto. You can either hold it all yourself or you can use a custodian where you rely on a company to hold it for you, much like a bank. Let’s address both ways:
Storing Crypto in Your Wallet
There are digital wallets where you can safely store your crypto and access it. They come in two types with different pros and cons.
Hot wallets refer to software that runs on your computer with a password that protects the crypto.
- Quick Access
- Fast exchanges
- Security: Computer compromised or Private key theft
- Backups: If you lose your password or misplace your keys/seed… there is no recovery.
- (Desktop & Mobile) Exodus https://www.exodus.io
- Other advanced wallets I’d recommend come from the official projects or opensource on github.com
Cold wallets refer to hardware that hides the keys so the computer never sees them, but you authorize transactions on the device itself.
- Transfers take place on isolated device
- Not as Quick
- If you misplace your device, you can only recover things through a seed (phrase written on paper)
- Backups: If you misplace both the seed and device… everything is gone
Storing Crypto with a Custodian
These are companies that you are sending your money to for safe keeping, much like a bank. They can be insured, but none of them are federally insured like a traditional bank account. I lump these companies into three categories, on and off ramps, exchanges, and yield farmers. Here are my take and recommendations on each of these. Note: I like to use companies in my local country for regulatory reasons and safety
On and Off Ramp Companies
Companies like Coinbase or Gemini are the two I use often. These companies are based in the United States and you can link your bank account to them to transfer Crypto to Dollar directly into your checking account. The fees are high and they should only be used for the purpose. While they do offer other services, it will be at a premium. Please Note: DO NOT use credit cards to purchase crypto! You will have exorbitant fees and it is NOT worth it!
I don’t recommend storing money here, but they do have a good track record. If you only want to hold crypto and do nothing with it, then it is relatively safe with these institutions.
These companies are all over the place. The two I like the most are Bittrex(US) and Binance(Japan). They are the juggernauts in the space and when making crypto to crypto transfers they have the most options with the lowest fees. Many exchanges have been hacked over the years, so I don’t store any money here, but use it to exchange crypto. A good example is using Bittrex to transfer LBC tokens to ETH or BTC.
You don’t have to use a company to exchange crypto, as you can use a decentralized exchange like Uniswap, but the fees are typically more. However, the convenience of not having to register with a form of ID is nice. Other exchange services like Uniswap exist but are centralized, examples are Simpleswap and Shapeshift, but they are starting to require ID (KYC Compliance) as well.
TLDR: Don’t store money here, but use it to exchange out one currency for another
Bittrex Referral Code: 4KR-KYJ-BQG
Binance Referral Link: https://links.christitus.com/Binance
For any assets held here you gain interest or “Yield” much like an APY % from a traditional saving account. However, they gain at much higher rates, from 2% to 20%. There are three large companies in this space, crypto.com, Blockfi, and Celsius.network. These companies are less proven, but do give you return for holding your crypto with them. My personal preference is Celsius as they give in-kind payouts weekly, which means any crypto I hold with them increases slowly overtime. They also don’t lock your crypto with them so I can withdraw at anytime.
Celsius Referral Link: https://links.christitus.com/celsius
Decentralized Finance Projects
This is where all the recent activity has been in the crypto space. I’m a bit skeptical about the longevity of many of these projects. I highly recommend not investing much money in this sector as I think it is a bubble that will pop. That said, there are some bright spots here that could definitely change the world we live in. While the practical application of these aren’t quite as refined as I like it is still worth paying attention to. The concepts here are revolutionary, but I expect some bumps in the road along the way.
- DAI and Compound - Give small yields by holding the coins. Typically between 2-4% returns and these can be done in your wallet like Exodus or with a service like Coinbase.
- Synthetix - This wraps assets like stocks, gold, and other real world assets in a token. It has a lot of promise, but so far it is very limited.
- Uniswap - This is one of the first really successful decentralized exchanges. If you provide Liquidity to its pool you earn a % of the fees charged on the platform.
- Tokensets - Wrapped assets but with a twist. Both Human and Robot ran sets rebalance a portfolio based on market conditions. Still in its early days, but interesting.
Almost all these DeFi projects are causing massive amount of Ethereum transactions which in turn is causing high transaction fees. Solo yield farming requires you to be making $1000+ transactions so your profits don’t get eaten by fees.
Mining Crypto Using a Graphics Card
With the DeFi explosion and transaction fees going sky high we can make a profile with a good graphics card. Ethereum will be transitioning to Proof of Stake which means mining it with a graphics card will not be feasible sometime in 2021. However, until that time if interest stay the same or increases, mining will be profitable. Here is how I recommend mining during this time with just a single or small graphics card setup.
- Check https://ethgasstation.info and if standard GWEI fee is over 100 then chances are you will be profitable
- Check https://whattomine.com and see current daily payouts based on your graphics cards
- Again… Do NOT buy tons of equipment. This will dry up in the next year and will NOT make money
Basic Mining Process:
- Setup a Wallet using Exodus.io
- Setup an account with Mining Pool Hub
- Use a LTC Wallet Address from Exodus and Setup Auto-Exchange to Litecoin in Mining pool hub
- Install PhoenixMiner 5.1c - Forum Post
- Use the string for PhoenixMiner @ https://ethereum.miningpoolhub.com
- LTC will be autoexchange and withdrawn to your Exodus Wallet
Note: Make sure to setup the Auto Withdrawl feature when setting up AutoExchange
Note 2: Litecoin is used for minimal fees and fast transactions
I highly recommend https://minerstat.com for using a dedicated machine for mining. This will ensure maximum uptime and reliability.
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