Which Cryptocurrency Is Best For Your Company?
There’s a lot of uncertainty to be found in the world of cryptocurrencies. The future is definitely still bright for alternative currencies, but the bubble that formed around Bitcoin made a lot of people nervous about the extent to which speculation will continue to disrupt the steady growth of decentralized payment systems.
Of course, what many don’t realize is that Bitcoin is far from the only viable cryptocurrency out there. Not only are there fresh rivals popping up with each day that passes, but they also vary significantly in the purposes they serve and the corresponding systems that back them. In fact, since the underlying blockchain architecture has long been vetted through real-world use, minimizing risk in embracing cryptocurrency is mostly about the currency you choose.
In this article, we’re going to consider how you can choose the right cryptocurrency for your company, and cover some of the leading contenders in the process. Let’s get to it.
Identifying the strengths of cryptocurrencies
While there are countless cryptocurrencies on the market that were created solely to piggyback off the skyrocketing value of Bitcoin, those aren’t the currencies that you should be looking at — and not only because they’re unlikely to stick around for very long, but also because there’s nothing to set any one of them apart. They’re identikit options.
The cryptocurrencies worth considering are those that seek to solve specific problems and/or service specific functions. As the trailblazer, Bitcoin was the first to achieve mainstream awareness, and its rise to success can be attributed to that positioning rather than the advantages Bitcoin holds over other online payment networks.
It’s worth asking the following questions about any prospective selection:
- What’s the cap on supply? As with traditional currencies, supply is incredibly significant for valuation. Cryptocurrencies with effectively-uncapped quantities are vulnerable to inflation (Ether, for instance), while those with limited qualities will thus have limited practical use because people who can’t get hold of any may simply reject it entirely. When the Bitcoin supply was essentially doubled, its value actually went up, but that’s likely to prove anomalous in the long run.
- How fast are the transactions? If you’re simply investing in a cryptocurrency as part of a larger portfolio, transaction speed may not matter that much, but if you’re looking to run your company on a cryptocurrency (handling all day-to-day operations) then transaction speed will be important. This depends not only on the design of a cryptocurrency but also how many people are using it.
- How sustainable is the model? The Bitcoin mining model is going to need to change sooner or later, because it’s currently heading for a disastrous level of energy use. The system of incentivizing people to mine through providing Bitcoin rewards leads people to set up power-hungry systems, but that’s not the only way to do it — blockchain modifications such as IOTA use mutually-verified transactions.
- What are the associated networks? When you invest in a cryptocurrency, you’re also investing in the associated networks and architecture. For instance, Ripple is a cryptocurrency that underpins bank transactions, making it an interesting mixture of old and new approaches — but that association may deter companies that want to steer clear of traditional banking altogether.
- What other companies are using it? What are the pioneering businesses in your industry doing about cryptocurrencies? If the industry leader is investing in one in particular, investigate why that is. You may find that there’s some aspect you’ve overlooked. And if you can only find highly-questionable companies investing in cryptocurrencies that seem promising, proceed with great caution (if at all).
By answering these questions about every cryptocurrency you look at, you’ll be able to identify their individual strengths and weaknesses, accruing information you can use to make a good investment choice.
How cryptocurrency purposes vary
As noted, investment in a specific cryptocurrency is also an investment in the architecture, but that’s still not everything — it’s also an investment in the surrounding community and attached entities, and that’s as much about the future prospects as it is about the current situation. This is because many cryptocurrencies serve larger purposes and are irrevocably linked to other entities. Let’s look at some examples.
Firstly, there’s the matter of ICOs, or Initial Coin Offerings. By creating a cryptocurrency, a fledgling company can offer that cryptocurrency in lieu of stocks or shares, tying the value of that cryptocurrency to the fortunes of the company. Any cryptocurrency provided through an ICO will be very unlikely to gather value beyond that of the company itself. ICO options are thus more niche, but can be very valuable if chosen carefully, just as with stocks.
Secondly, there’s the use of blockchain technology for socially conscious and nonprofit movements. Cryptocurrencies can be created and intended to be used in small purpose-driven communities (see CryptoSolarTech, for instance) to keep value within the system. Depending on the nature of your business, such a cryptocurrency may be of real interest to you.
Thirdly, there’s the basic matter of fiscal responsibility. If you intend to use a cryptocurrency for the foreseeable future, you’ll want to avoid something with wildly-fluctuating value and go for something more solid. We’re increasingly seeing the development of asset-backed tokens (often known as stablecoins) that mimic traditional currency systems in having their value determined by real-world materials that can’t easily be duplicated and inflated.
Why you should consider diversifying
Answering the basic question of which cryptocurrency is best for your company is extremely difficult, because everything is still so up in the air that it will be years still before things are sufficiently settled to thoroughly assess the landscape.
As such, if you’re looking specifically to investment and you’ve been through everything we’ve looked at but you’re still left with a set of cryptocurrency options and no clear reason to choose one over the others, you should use conventional investment wisdom and diversify your portfolio. By spreading your commitment across various coins, you’ll minimize the damage incurred should any one of them completely fail.
If you’re not looking to invest, though, and you need to pick one, then you have two choices: go for whichever cryptocurrency seems fit for purpose, or create your own. If you can’t find a standout candidate for the former, the latter may be worth considering. You’d essentially be betting on yourself — does your company have what it takes?
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(Source: www.microstartups.org )