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Q: What is Decentraland (MANA)?

MANA is the currency that is used in Decentraland. Decentraland is made up of LAND, non-fungible digital plots of virtual space (or land) that make up the game.

Q: How Does the MANA Coin Work?

The MANA coin works as a token on the Ethereum blockchain. Once you exchange Ether for MANA, you can then use MANA to purchase items within Decentraland, including parcels of land.

Sep

2021

What is MANA (Decentraland Coin)? How to Buy MANA

By Matthew Zeitlin | Growing Wealth, invest, Investing | Comments Off

There are layers to cryptocurrency. Services, products, even nascent legal systems can be built on top of and within blockchains. For example, a whole range of cryptocurrency types are built on Ethereum and its blockchain, including something that combines services, products, and legal system — in fact, it’s a whole virtual world.

That’s the idea behind LAND, a non-fungible token (NFT) that’s the basis of the “land” in Decentraland, a virtual game world built on cryptocurrency. To get LAND you need MANA, the cryptocurrency of Decentraland — and quite literally the coin of the realm. Except this realm is governed by…well not by any one person exactly. After all, it’s Decentraland, not Centraland.

What is Decentraland (MANA)?

MANA is the currency that is used in Decentraland . Decentraland is made up of LAND, non-fungible digital plots of virtual space (or land) that make up the game. The developers of Decentraland created a fixed amount of land, encouraging users to “develop” what they have and thereby creating a market for the currency used to transact with it, MANA. Also, because LAND is a type of NFT, any individual parcel can not be replicated or duplicated. LAND first went up for sale in December, 2017 and since January the land has been owned by “participants” in Decentraland.

LAND isn’t the only asset available within the Decentraland universe — one can also buy virtual goods using MANA in the Decentraland Marketplace. These include “wearables” like virtual clothing as well as names that are unique within Decentraland.

MANA Price

As of late September 2021 the price of MANA was around 70 cents.

Like many cryptocurrencies, the value of MANA is quite volatile, with the price changing substantially over time. Anticipating and dealing with the rapid and extreme change in prices is one of the basics of investing in crypto.

According to CoinMarketCap , MANA is the 78th most valuable cryptocurrency with a “market cap” or total value of just under $1.2 billion. Like many cryptocurrencies, MANA shot up in price earlier this year, jumping from 25 cents to just over a dollar in less than a month starting in late February. It fell and rose again, getting as high as $1.57 in early May.

History of Decentraland

The Decentraland white paper — the official founding document of the cryptocurrency that explains its purpose and the technical specifications for it — was published in early 2017, several months before the virtual universe and its MANA cryptocurrency came into being.

The main idea behind Decentraland is that thanks to the proliferation of cell phones and computers, many people are in a kind of “virtual world” most of the time anyway. Decentraland positions itself as a 3D as opposed to 2D interface.

True to the ethos of cryptocurrency that animates everything from how Bitcoin mining works to the skepticism around some crypto regulations, let alone crypto taxes, another animating concept behind Decentraland was that as opposed to other virtual worlds — think Second Life, World of Warcraft, Fortnite — there would be no central authority in charge of it.

The group behind the white paper got started in 2015 and started working on a 2D grid that they referred to as Decentraland’s “Stone Age”. Another prototype was the “Bronze Age” and the public launch would be its “Iron Age”. Soon after the white paper, Decentraland was able to raise over $20 million in an initial coin offering.

A total of 2.8 billion MANA tokens have been in circulation since September 2017. There’s a maximum total supply of about 2.2 billion MANA coins; this, combined with the fixed amount of LAND tokens, is designed to avoid runaway or unpredictable devaluation of the assets within Decentraland, as can be an issue with other “currencies” like airline miles, for example. Instead of devaluation through inflation, there’s actually been some increased valuation of MANA through deflation.

How Does the MANA Coin Work?

The MANA coin works as a token on the Ethereum blockchain. This means that the Decentraland token MANA requires Ethereum and its token, Ether, to be purchased and exchanged.

To do this, the first step is connecting your crypto wallet holding Ether to the Decentralized marketplace . Once you exchange Ether for MANA, you can then use MANA to purchase items within Decentraland, including parcels of land.

How and Where to Buy MANA Crypto

There are a few different ways to buy MANA — both of which will be familiar to anyone who’s looked into investing in most other types of crypto.

Centralized Exchange

On a central exchange, you can swap your fiat currency like U.S. dollars for a crypto coin, which is then stored using a crypto wallet. The following exchanges offer MANA:

• Coinbase

• Gemini

• Binance

• Kraken

• Gate.io

Decentralized Exchange

You could also purchase MANA by purchasing Ether tokens through brokers or exchanges and then swapping for MANA. It’s possible to buy MANA in this way from:

• SoFi Invest

• Kyber

The Takeaway

Decentraland has created an entire virtual world where participants can use the cryptocurrency MANA to buy parcels of LAND, an NFT that represents actual land in that world. One can also use MANA to buy and sell goods and services within Decentraland — like virtual clothing — on the Decentraland marketplace.

For investors looking to trade crypto, SoFi Invest® offers a range of cryptocurrencies including Ethereum, Bitcoin, Litecoin, Cardano, Dogecoin, and more.

Find out how to start trading crypto with SoFi Invest.

Photo credit: iStock/RichVintage

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOIN0521217

Sep

2021

Should I Invest if I Still Have Debt?

By Susan Guillory | Budgeting & Goals, Fresh Out of School, Growing Wealth, invest, Investing, Student Loans | No Comments

As you start to establish yourself financially, you may come to a crossroads: should you pay off debt or invest in your future? It can be confusing to know what to do in this situation, especially if you have multiple financial goals you’re saving toward.

The first step is to look at the numbers, then to consider your preferences. There is no one “right” answer to this question. Let’s start by taking a look at the numbers around major financial milestones like your student loan, buying a home, and saving for retirement.

Let’s say your student loan is $75,000. Buying a new home might cost $350,000, and you might plan to need $2,000,000 for a comfortable retirement. Everyone’s numbers will look a bit different, so feel free to take some time to calculate yours.

Once you’ve put your estimated numbers on a page, what jumps out at you? It’s hard not to notice that retirement is quite a bit more expensive than the others. This isn’t too much of a surprise if you consider what retirement is: living for decades with no salary.

While you might be tempted to put all your extra income immediately into your retirement fund, it’s not necessarily the winning decision when it comes to whether to pay off loans or invest. Let’s look deeper.

How Important is Paying Off Your Student Loans?

If you’re like the average student, you’ve borrowed $30,000 or more to pursue a bachelor’s degree . If you went on to graduate school, your student loan debt may be even higher.

Most federal student loans have a repayment period of 10 to 30 years. You may opt to make the minimum payment each month for the duration of your loan repayment plan, or you might decide to pay yours off early.

One benefit to paying off a student loan early is that you reduce your debt to income ratio (that’s how much debt you have compared to how much income you have). This might raise your credit score and help you qualify for other financial solutions.

Or, you might decide to continue paying your student loan while investing in other areas of your life, like retirement or buying a home.

Know Your Student Loan Interest Rates

Before you can decide whether to pay off student loans or save for other things, look at what you’re paying in interest for your student loans. If the rate you locked in when you took out your loan is higher than current rates, you might consider student loan refinancing. If you have multiple student loans, you could potentially consolidate and refinance them for a lower interest rate.

Of course, it’s important to keep in mind that refinancing federal student loans means you’re no longer eligible for federal benefits and protections, like income-driven repayment or loan forgiveness programs, so it makes sense to weigh the potential benefits and risks of refinancing before taking the plunge.

Comparing interest rates is an exercise in opportunity cost. Any decision to pursue one goal means you’re missing out on something else, but ideally, we look to minimize opportunity costs when assessing financial trade-offs. In this instance, the opportunity cost is leaving potential investment earnings on the table.

Let’s say you recently refinanced your student loan from 5% to 3.5%. Given the competitive rate on your newly refinanced student loan, you could consider continuing to make the monthly payment on your loan and allocating the extra cash flow elsewhere — like investing for retirement or buying a home.

Remember, we want to think about interest rates in terms of opportunity cost. What would it look like if you paid off your loan early? Your student loan costs you 3.5% annually, and that’s what you’ll “save” if you accelerate your payoff by $500 per month.

Once you paid off the loan early, you could invest your money in an asset class — such as the stock market — with the potential to earn a rate of return that’s higher than 3.5%. Historically, the stock market has returned an average of 10%. This investing can be done within a retirement account, whether a 401(k) or an IRA.

That said, stock market returns are erratic, and the annualized return figures you often hear quoted are just that — an average. Investing is risky, and there is always a chance that returns over the next five, 10, or 20 years will not outpace the interest that you are currently making on your student loan payment.

No one, not even a financial planner, has a crystal ball and can see into the future. This is why we also need to take into account your personal preferences.

If you feel like you are truly missing out on investing in an IRA or saving for a home, then investing in those things might be the right path for you. If your student debt makes you feel burdened and miserable, you could focus on that instead.

Paying Off Student Loans vs. Investing

“So, should I pay off student loans or invest,” you ask.

The answer is…it’s complicated.

Student loans often come with low interest rates, which means you’re not paying a huge amount of extra money over the years (like you would with a credit card, for example). So it’s low-cost debt. That means that if you want to invest in other areas of your life, such as saving for retirement or to buy a house, you may be able to do both.

Contributing to a Retirement Account

Many Americans are vastly under-saving for retirement, and with so many employers offering a 401(k) matching program, not contributing is like throwing money down the drain.

There is no standard for match programs — they can range from meager to generous. Between your contributions and your employer’s, it is often recommended that you save between 15% and 20% of your salary for retirement. You can do this by contributing the full allowable amount to your 401(k), which is $19,500 in 2021.

If you don’t have access to a 401(k) — perhaps you’re self-employed — you can save for retirement with other investment accounts like an online IRA or a brokerage account. No matter which account you use, you might want to consider putting that money to work with a long-term investment strategy. For example, you might choose to deploy a strategy of low-cost mutual funds that invests in stocks and bonds.

Buying a Home

Financial planners don’t all agree on whether a home is a good investment. That is not to say that a home is not a good financial goal; if it’s a priority to you, then it’s great. This is simply a commentary on whether a home produces a good return on investment.

Although a house may not have as high an investment return as other asset classes, such as the stock market, a house provides something that a stock or bond cannot — immediate utility. You cannot sleep and eat inside a stock or a bond.

While home values do typically grow over time, you must also take into consideration the costs of buying and owning a home, such as the interest paid on the mortgage, property taxes, and repairs and maintenance. That said, homeownership can be rewarding, and can pay major dividends down the line. One big benefit is having no monthly housing expenses (like rent or a mortgage) in retirement.

The Takeaway

There is no hard and fast rule when it comes to investing while juggling debt. Undoubtedly, the biggest ticket item you’ll need to invest for is retirement — but whether you invest in retirement before or after paying down debt depends on your personal preferences and situation.

One thing to remember: Financial tradeoff decisions don’t always have to be all-or-nothing. You might choose to split the difference by putting a little here and a little there. For example, you might contribute $300 per month to your 401(k) and $200 to a high-yield savings account for your down payment for a house, all while paying off student loans.

With SoFi Invest®, you can invest in traditional and Roth IRAs, crypto, or ETFs, with hands-on active investing or automated investing. The choice is yours — based on your personal situation, goals, and preferences.

Find out how to invest for your future with SoFi Invest.

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected]. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

WM17116B

Sep

2021

Pros and Cons of Investing in Crypto Exchanges

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

Crypto exchanges provide a platform for people to buy and sell cryptocurrencies with their fiat currency or to trade different cryptocurrencies for one another. These companies take a small fee with each transaction. Given the increasing popularity of crypto, exchanges with a lot of customers and high trading volume can wind up becoming very profitable businesses.

Some crypto exchanges become so profitable that they issue shares of equity in their company on a public stock exchange. This happened for the first time in 2021, when one of the oldest crypto exchanges was the first in the industry to become a publicly traded company.

Why would someone invest in crypto exchange companies? What might be some of the potential benefits and drawbacks to such an investment? We’ll answer questions like these, and more.

A Word on IPOs

First, investors should be aware of the fact that many initial public offerings (IPOs) create a lot of fanfare and buzz. But they don’t always deliver right away.

It’s not uncommon for companies to make their debut on the stock market at valuations that far exceed their true market value. It’s common for IPO stocks to see their prices tank shortly after going public.

While this doesn’t have to dissuade investors from a company they would otherwise remain bullish about, it’s an important thing to keep in mind.

Private investors like venture capital funds can get in on the action before the public, so they don’t care as much about what happens to share prices post-IPO. But for retail investors, buying a lot of shares on the day a stock goes public has quite often proven to be a mistake, at least in the near-term.

Pros of Investing in a Crypto Exchange

Some of the pros of investing in crypto exchanges include potentially taking advantage of rapid growth, owning a piece of crypto infrastructure in a regulated way, and holding a security that can be subjected to more traditional valuation methods than a cryptocurrency.

Rapid Growth

The growth seen in the crypto industry has been unparalleled. In 2015, the entire cryptocurrency market cap was about $7 billion. Today that market cap has risen to over $1 trillion, peaking at over $2 trillion in early 2021.

Bitcoin was only just invented twelve years ago in 2009. To put that into context, it took companies like Apple, Google, and Amazon an average of 20 years or more to reach a valuation in excess of $1 trillion.

If this growth continues at even a fraction of its current rate, then there is a chance that broad investments in the sector like crypto exchange stocks could see substantial returns on a 5-, 10-, or 20-year timeframe. (But as with anything having to do with investing, past performance is no guarantee of future results.)

Indirect Exposure to the Crypto Market

Investing in the stocks of crypto exchanges provides a proxy for investing in cryptocurrency itself. In other words, investors can gain indirect exposure to the crypto market, without exposing themselves to the potential volatility of crypto itself. Investors who aren’t sure about cryptocurrency as an asset class, or who would rather not learn how to own and hold cryptocurrency tokens on their own, might find these stocks appealing.

Buying shares of a crypto exchange lets investors hold a piece of the infrastructure that keeps the cryptocurrency world functioning. Most exchanges also have value beyond simply being brokerages for the buying and selling of cryptocurrencies.

• Exchange-hosted wallets allow users to send crypto off-platform.

• Some exchanges have begun providing staking services, where users who hold proof-of-stake coins can earn what amounts to a crypto dividend by holding those coins in their exchange wallet.

• Exchanges are even beginning to get into borrowing and lending services, letting users lend out their crypto to earn interest or take out a loan using their crypto as collateral.

More Traditional Valuation Methods

The shares are an investment in a real company with cash flow, earnings, a board of directors, and all the things that traditional investors are familiar with. This makes it easier for some investors to grasp than cryptocurrency itself. Crypto exchange stocks can be treated as any other equity in a portfolio. They can also be scrutinized in the same way, using valuation models like the discounted cash flow model, the dividend discount model, and others.

While it seems likely that crypto exchange stocks will have some correlation to the price action and value of Bitcoin and other cryptocurrencies, the relationship might not be 1:1. Traditional company metrics like quarterly earnings will likely also impact share prices.

Cons of Investing in Crypto Exchanges

Some of the cons of investing in crypto exchanges include the potential for speculation, regulatory concerns, a lack of historical precedent, the business models involved.

Potential for Speculation

While crypto markets are often criticized as being speculative, stock markets also have their fair share of speculators. And when crypto markets rally, it’s feasible that some investors could get overly bullish on crypto exchange stocks, creating a mania that ends in a crash. This might be the exact type of thing investors are hoping to avoid by choosing to invest in crypto exchanges rather than actual cryptocurrencies.

Then again, it’s also possible that crypto exchange stocks weather the storm of a crypto market downturn better than the crypto market itself. The phenomenon of exchanges being publicly-traded securities is too new to tell for sure yet.

Lack of Historical Precedent

2021 is the first year that any crypto exchange has been made publicly tradable on a stock exchange. No one knows exactly what will happen, how the securities will trade, what will impact their prices, and so on. Much of the outlook is conjecture at this point.

The future of blockchain technology itself, which powers cryptocurrency, is only 12 years old and also has a degree of uncertainty behind it.

Regulatory Concerns

It’s widely suspected that financial regulators will tighten the noose around cryptocurrencies at some point. What form that might take, and what the impact could be, is largely unknown. Some say that greater regulatory clarity would be a good thing, as larger investors would feel more comfortable entering the space with significant amounts of capital. Others believe over-regulation could cripple the industry and the asset class as a whole. Again, this is somewhat of an unknown.

Fee-Based Business Model

Typically, most of an exchange’s revenue comes from transaction fees. It has been noted that over time, fees like these tend to see downward pressure due to competition. In the world of stock brokerages, for example, trading fees on most platforms have fallen to zero in recent years.

While this could be a possibility, others have argued against it, saying that crypto isn’t analogous to stocks in this respect. Users are also paying for additional services like custody services, or holding crypto, which is an important factor to consider. An exchange-hosted wallet also lets users send and receive crypto transactions without having to create and manage a wallet of their own.

The Takeaway

Investing in crypto exchanges isn’t that different from investing in other companies. And as always, investors should educate themselves about what they’re buying and why. An investigation into the company’s activities, management, history and earnings reports would be warranted regardless of which company an investor chooses.

Photo credit: iStock/valiantsin suprunovich

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN0721297

Sep

2021

How Does a Bitcoin Transaction Work?

By Samuel Becker | Growing Wealth, invest, Investing | Comments Off

It’s something that is among the basics of investing in crypto: Learning how Bitcoin transactions work. It may sound a little silly, but many traders and investors don’t really know what happens behind the scenes to get cryptocurrency into the buyer’s possession.

It’s always worth reviewing how a Bitcoin transaction works. While this may be covered in almost any guide to cryptocurrency, it’s a good thing to keep in mind before you start buying Bitcoin.

Read on to find out how Bitcoin transactions work, how long they take, and the verification processes that ensure they’re safe and secure.

Bitcoin Basics

Before getting into the nitty-gritty details of Bitcoin transactions, it’s worth revisiting the foundational cryptocurrency of Bitcoin itself.

Bitcoin is a digital currency. In essence, bitcoins are simply just small pieces of computer code. The currency has no physical manifestation — you can’t hold it in your hands, or stick it in an envelope — but can be used as a medium for transactions. That is, you can use it to buy or sell things, as long as the party on the other end of the transaction is willing to accept it.

Bitcoin is also a decentralized currency, meaning that it has no regulatory authority like a bank. Its value is dictated by the market, much like a stock. Bitcoin dates back to 2009, when it first became available to the public as the initial cryptocurrency.

Also worth noting: Bitcoin is built on something called “blockchain” technology. Read on for a quick primer on blockchain, and how blockchain works.

Blockchain

Blockchain technology is, in its most basic form, a chain of blocks containing data. The blockchain itself is decentralized — not controlled by a single entity. Instead, a blockchain network is spread across the globe, with hundreds, or even thousands of users participating in it.

Blockchain enables cryptocurrency transactions. It keeps a record of those transactions — storing the data in blocks — using a sort of distributed ledger. Imagine an Excel spreadsheet saved on thousands of different hard drives, all of which reference each other to validate the data’s accuracy.

Blockchain allows for faster, more secure (but not 100% secure) transactions. That’s why blockchain and Bitcoin are so often mentioned in the same sentence.

Crypto Exchanges

As for actually executing a Bitcoin transaction, most of the time this will take place on a cryptocurrency exchange. (Unless you’re into Bitcoin mining, which is a different story altogether.)

How do cryptocurrency exchanges work? More or less like any other financial exchange.

Crypto exchanges are where cryptocurrencies are exchanged between parties. They’re similar to a stock market, in that traders or investors can buy or sell cryptocurrencies, usually in exchange for dollars or other fiat currencies. There are different crypto exchanges, often with different rules and offerings.

Traders sign up on the exchange, create an account, fund that account, and then execute a transaction for bitcoin or any other cryptocurrency they’re looking to add to their portfolio.

Given that these exchanges are typically where Bitcoin transactions go down, let’s run through an example of what that might actually look like.

How Bitcoin Transactions Work (with Example)

Here’s an example of a Bitcoin transaction: Imagine you want to send a bitcoin to your friend, Ted.

You know where the bitcoin is now: in your wallet. And where it needs to go: Ted’s wallet. So, we have point A, and point B. Here are the steps to get there:

1. Consider your crypto storage. There are a couple of ways to store crypto: “Hot wallets” which is typically another word for “online,” and “cold wallets,” which means your crypto is being stored offline, and thus, more securely. If you want to transact, though, you’ll need to get your holdings out of any crypto cold wallets and into hot ones, so that the transaction can commence.

Recommended: Hot Wallet vs. Cold Wallet: Choosing the Right Crypto Storage

2. Enact the transaction. To do this, send a message to the network with all of the details, including

a. Which bitcoin you want to send. This is called an input, and it’s the record of the bitcoin’s address and history.

b. The amount, or value of bitcoin to be transacted.

c. Where it’s going. That’s the output, or verification address.

So, to get your bitcoin to Ted, the network references the coin’s address, verifies that you want to send one bitcoin, and then verifies Ted’s public key, or Bitcoin address.

3. Wait for verification and confirmation. Once the network verifies the transaction, and that Ted is able to receive the bitcoin based on the message you sent. A confirmation process takes place — this is what we often refer to as “mining,” as the data in blocks is verified by other users — and the transaction is enacted.

Each bitcoin has its history written into the blockchain. You can trace each transaction back to each coin’s original creation by following its record over time. That’s how we know that each individual bitcoin exists, and that it belongs to (or is in possession of) the entity that claims it.

Yes, it’s a little abstract, and not as simple as handing Ted a $20 to cover your lunch tab. The thing to remember is that there are a lot of things taking place in the background during a Bitcoin transaction.

Transaction Confirmations

It often takes a little bit of time for the network to verify or confirm Bitcoin transactions. That’s because miners need to get to work, and as such, a transaction won’t be confirmed until a new block has been added to the blockchain.

Miners are rewarded with new bitcoins for creating new blocks on the blockchain. That process involves confirming and verifying data in the blocks. So there’s an incentive for the network to constantly confirm and verify the data on the network, including transaction information.

Until the network creates a new block and verifies the transaction data, the transaction will remain unconfirmed.

Transaction Speeds

Just how long a transaction can take typically depends on a few factors, such as the value or amount of bitcoin being transacted. Much of the delay has to do with the structure of the Bitcoin network itself — a new block is created roughly every 10 minutes, on average.

There is also often a queue to get your transaction confirmed. In some cases, you may have the choice of paying higher fees to get priority treatment.

Bitcoin Transaction Fees

Because “block demand” exists in the Bitcoin network, with users that want to confirm their transactions and thus have the data written into new blocks, there can be backups. Higher demand leads to higher prices, or fees, to confirm a transaction. Essentially, traders are paying a “miner’s fee” to have a transaction processed and confirmed on the blockchain, and the busier the network, the higher the tolls.

For example, fees skyrocketed during late April of 2021 as the crypto bull rush hit its heights. Average fees were around $60. But during calmer times on the network, the costs are typically much more reasonable, at less than $5.

It really comes down to supply and demand. The more demand on the network at a given time, the higher the transaction costs.

The Takeaway

A Bitcoin transaction relies heavily on the blockchain network, but at its heart it’s as simple as transferring one or more bitcoins from your account to someone else’s. Variables like transaction speed and transaction fees can vary based on demand.

Photo credit: iStock/Olemedia

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOIN0721302

Sep

2021

Ethereum (ETH) Fork: History & Definition

Ethereum Fork Guide

By Matthew Zeitlin | Growing Wealth, invest, Investing | Comments Off

Ethereum isn’t just the second most valuable cryptocurrency, it’s also perhaps the most active cryptocurrency ecosystem. While Bitcoin and its associated blockchain support a highly volatile but highly valuable currency that is obtaining more and more mainstream adoption, Ethereum underlies a wide range of applications, services, and ambitious plans that include financial systems based on smart contracts, virtual real estate, other coins and tokens, and more.

At less than 10 years old, Ethereum is in a constant state of flux. The cryptocurrency has gone through several “hard” forks, and may be having another one soon. Knowing what a hard fork is and how past ones have affected the Ethereum ecosystem is important before investing in Ethereum or working in the Ethereum space.

Recommended: What Is Ethereum and How Does It Work?

What Is a Crypto Fork?

The first thing to understand about cryptocurrencies is that they are code. Computer code defines the protocols that blockchains run on. Code governs how crypto works at the deepest level. And these are open source projects, meaning that, generally, anyone can copy the code, distribute the code, or make suggestions for how to improve it.

That also means anyone can make a different version of it.

And that’s what a hard fork is. Blockchains are records of transactions and databases of who has “blocks” on the network. This database is maintained not by a central computer or user like in a bank, but by all the users who support it. A hard fork happens when this entire database is copied and the underlying code is altered such that it operates going forward in a different way.

After a hard fork, there are two different blockchains, two different networks, and two different cryptocurrencies. Typically holders of the original crypto get tokens in the new one and then they operate totally separately going forward.

Hard forks differ from soft forks. Think of a soft fork more like an upgrade — everyone accepts it, the status of the network and blockchain remains the same, and it operates going forward in much the same way as it did previously.

What Are Ethereum Hard Forks?

Ethereum hard forks are the result of developers wanting a version of Ethereum that either operates more effectively or has features that the original Ethereum doesn’t have. In the debate of Ethereum vs Bitcoin, Ethereum’s ability to function more as a platform for different applications and services beyond just a currency or store of value also means there’s a lot of development activity around it. And that means many hard forks that create a new version of the network — with older versions often abandoned.

How Do Ethereum Hard Forks Work?

Ethereum hard forks happen when the Ethereum community (the miners) reaches consensus on a proposal to change the Ethereum blockchain. Consider, for example, the most controversial and noteworthy hard fork, the so-called DAO fork which created the split between Ethereum and Ethereum Classic. That fork went through after 97% of Ethereum users voted in favor of it.

History of Ethereum Hard Forks

Ethereum has had several hard forks. While it’s important to understand the technology and concept behind Ethereum forks, knowing more about these hard forks and why they happened is essential to getting a grasp on the wider crypto currency landscape.

Ethereum Classic Fork

The Decentralized Autonomous Organization (DAO) fork was one of the most ambitious projects in the history of cryptocurrency, let alone in the then-short history of Ethereum.

The DAO was a roughly $160 million fund (in Ether) for cryptocurrency projects that was launched in 2016. It was governed by a set of smart contracts, code that’s executable on a blockchain that supposedly removes the need for trusted third parties to enforce a deal. But this structure contained a vulnerability: if there was a security hole in the code that could be exploited by a hacker, the hacker could drain away tens of millions of dollars and there would be nothing The DAO could do about it.

And that’s exactly what happened — more than $50 million was stolen. This was not only a huge loss for the investors, but also a potentially fatal blow to Ethereum itself, which had just launched publicly the year before.

In response, Ethereum developers executed a controversial hard fork of the Ethereum blockchain to roll back the transactions caused by the hack — essentially resetting the blockchain to its pre-hack state. While the vast majority of Ethereum users supported this hard fork, it left behind a second blockchain, now called Ethereum Classic.

Recommended: How Safe is Blockchain?

Ether Zero Fork

The Ether Zero (ETZ) fork was a hard fork executed in 2019 with the promise of faster and cheaper transactions. Although millions of ETZ, the new cryptocurrency, were given to holders of ETH, the project appears to have largely floundered. By June 2021 the ETZ coin was the 1890th ranked coin on CoinMarketCap and individual tokens were worth less than one one thousandth of a cent.

Metropolis Fork

Metropolis was part of a large-scale fork planned by Ethereum developers for general maintenance, rather than a rival or rebel project. It was so substantial that it was executed in several named steps, including Byzantium and Constantinople. The first parts of it went live in 2017, and overall changes included technical but substantial shifts in how smart contracts written on the Ethereum blockchain operated.

Serenity Fork

Serenity is a long planned and major overhaul of the network that’s also known as “Ethereum 2.0”.

The first part, Beacon, went live late last year. This updated blockchain is intended to process transactions faster.

Further Serenity updates are scheduled for 2021 and 2022. The goals of the updates include a reduction in the energy used for Ethereum mining, through use of “proof of stake” as opposed to “proof of work” technology.

The latter, which famously underlies Bitcoin, relies on computers to essentially solve math problems in order to maintain the network and generate new Bitcoin. This constant computer power expends huge amounts of energy — a drain on individual resources as well as environmental ones.

Proof of stake technology, on the other hand, allows users to validate the network by “staking” their own ETH tokens, i.e. putting enough ETH into a pool from which random users are selected to carry out the tasks previously done by miners.

The Takeaway

In less than 10 years, Ethereum has experienced a number of notable hard forks — some controversial, some not, but all aimed at improving the cryptocurrency and its functionality.

The decisions around Ethereum hard forks are often highly technical and are largely guided by a small group of developers. But Ether holders are invited to vote on community decisions and participate directly in the maintenance of the network through staking.

Photo credit: iStock/matdesign24

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOIN0621263

What is MANA (Decentraland Coin)? How to Buy MANA

What is Decentraland (MANA)?

MANA Price

History of Decentraland

How Does the MANA Coin Work?

How and Where to Buy MANA Crypto

Centralized Exchange

Decentralized Exchange

The Takeaway

Should I Invest if I Still Have Debt?

How Important is Paying Off Your Student Loans?

Know Your Student Loan Interest Rates

Paying Off Student Loans vs. Investing

Contributing to a Retirement Account

Buying a Home

The Takeaway

Pros and Cons of Investing in Crypto Exchanges

A Word on IPOs

Pros of Investing in a Crypto Exchange

Rapid Growth

Indirect Exposure to the Crypto Market

More Traditional Valuation Methods

Cons of Investing in Crypto Exchanges

Potential for Speculation

Lack of Historical Precedent

Regulatory Concerns

Fee-Based Business Model

The Takeaway

How Does a Bitcoin Transaction Work?

Bitcoin Basics

Blockchain

Crypto Exchanges

How Bitcoin Transactions Work (with Example)

Transaction Confirmations

Transaction Speeds

Bitcoin Transaction Fees

The Takeaway

Ethereum Fork Guide

What Is a Crypto Fork?

What Are Ethereum Hard Forks?

How Do Ethereum Hard Forks Work?

History of Ethereum Hard Forks

Ethereum Classic Fork

Ether Zero Fork

Metropolis Fork

Serenity Fork

The Takeaway

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