Apr
13
2021
What Are Altcoins? Guide to Bitcoin Alternatives

What Are Altcoins? Guide to Bitcoin Alternatives

By | Growing Wealth, invest, Investing | Comments Off on What Are Altcoins? Guide to Bitcoin Alternatives

There are many alternative investments available for people who hope to grow their money—from age-old collectibles like baseball cards, to new and somewhat confusing assets, like NFTs. Another alternative investment is cryptocurrency—and within that category falls another “alt”: alt coins, better known as altcoins.

Altcoins are crypto coins that are an alternative to Bitcoin, the original cryptocurrency and reigning crypto leader. There are many different altcoins—different types, and within those categories, different specific products.

This article covers everything you need to know about altcoins, including what they are, where to buy them, and examples of the more popular coins on the market. Familiarize yourself with altcoins here, then check out the top things you should know before investing in any cryptocurrency.

What Are Altcoins?

Bitcoin is just one of the myriad coins and tokens that comprise the cryptocurrency space. You’ve likely heard some of their names—such as Ethereum, Ripple, and Litecoin. These coins and cryptos are, in effect, alternatives to bitcoin.

“Altcoin” is a catch-all term for alternative cryptocurrencies to bitcoin. They’re altcoins. It’s that simple. Currently, there are more than 9,000 cryptocurrencies in existence. That’s a lot of altcoins.

💡 Recommended: Bitcoin vs Altcoins: Differences and Similarities, Explored

How do Altcoins Work?

Like Bitcoin, altcoins rely on blockchain technology, which allows for secure, peer-to-peer transactions. But each altcoin operates independently from the rest, and each has its own sets of rules and uses. For example, cryptocurrencies like Bitcoin and Ethereum are mineable, whereas Ripple and Stellar are not.

That said, in general, most altcoins operate in much the same way: They’re traded among investors, with transactions recorded via blockchain in a distributed ledger.

Different Types of Altcoins

Most altcoins can be slotted into a few different categories, which can help potential crypto investors get a better grasp of the field. This is not an exhaustive list, as categories and subtypes are always changing. But here are some of the most prevalent types of altcoins:

Digital currencies

The digital currency category comprises most of the cryptocurrencies that investors are familiar with, including Bitcoin. They’re exactly what they sound like: currency in digital form. They can be acquired as a form of payment, through trading on an exchange, or through mining (when applicable), and are generally used to conduct transactions.

Tokens

Unlike crypto like Bitcoin or Ethereum, which can be used on any platform, tokens are tied to their parent platform. For example, Tether and Golem are tokens used only on the Ethereum platform.

A utility token provides holders with some sort of service. BAT (Basic Attention Token) is an example of a utility token, meant to be used specifically as a method of payment on the Brave open-source browser.

Stablecoins

Stablecoins are built to be stable—they are pegged to an existing asset like the Euro or the U.S. dollar. The logic is that by pegging the asset to an existing one, it should help stabilize value and reduce volatility.

In contrast, consider Bitcoin: while its value has risen substantially in recent years, its price is highly volatile. Values have dropped to less than $6,000 per coin to more than $60,000—all within a couple of years. Stablecoins are designed to help investors avoid fluctuations.

Common Altcoins

There are seemingly more and more altcoins hitting the market every day. Here are a few of the more common altcoins:

Ripple: Also known as “XRP,” this altcoin is used primarily on its namesake, the Ripple currency exchange system. It was designed for use by businesses and organizations, rather than individuals, as it’s most often used to move large amounts of money around the world.

Ethereum: Ethereum is a programmable internet platform used to build decentralized programs and applications, and its native currency, Ether (ETH), is the altcoin in question that can be traded by investors.

Litecoin: Litecoin is another popular altcoin, which is often referred to as “Bitcoin lite,” hence the moniker. It’s one of the largest cryptocurrencies on the market, and operates in a very similar way to Bitcoin.

Dogecoin: There are a bunch of “joke” altcoins that are on the market, and Dogecoin is perhaps the most recognizable right now. Dogecoin started as a joke (its genesis is actually an internet meme), although it has gained value in recent months.

Where to Buy Altcoins?

Looking to buy altcoins? They’re available on most any cryptocurrency exchange, like Coinbase or Binance. Not all altcoins may be available on every platform, so interested investors should do their research before choosing an exchange.

In terms of actually trading for coins, the process can be as simple as depositing money into an account on your preferred exchange, and then trading either dollars or crypto for a targeted altcoin.

The Takeaway

Altcoin is a catchall term for cryptocurrency other than Bitcoin, the original crypto. There are a variety of different altcoins—from tokens to stablecoins—but many are available for interested investors.

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.

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.

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Apr
09
2021
A Brief History of Cryptography

A Brief History of Cryptography

By | Financial Independence, Growing Wealth, Investing, Terminology | Comments Off on A Brief History of Cryptography

Who doesn’t love a good secret code? Cryptography is the science of secret codes—of creating a language or code that can’t be cracked unless one knows exactly how to decode it.

Today, cryptography is used for everything from internet cybersecurity to blockchain technology and cryptocurrency investing. It has evolved and advanced over time along with technology, but it got its start in ancient times, with hieroglyphs and cuneiforms.

Let’s look back at the history of cryptography and how it has evolved over the years to serve different functions with the same goal—securing information.

What is Cryptography?

Cryptography is the process of securing information by changing it into a form that people can’t understand unless they know how it was encoded. The original information is known as plaintext, and the encoded version of the information is known as ciphertext. The calculation or code used to change plaintext into ciphertext is called an algorithm and the process is called encryption. The opposite of encryption is decryption—turning ciphertext back into plaintext, or another readable form.

In order for someone to decode the information, they need to know how to read it or change it back into its plaintext form. Usually decryption involves both the algorithm and a key. Generally this key is a number.

Ancient History of Cryptography

The history of encryption dates back thousands of years. The earliest known use of cryptography was over 5600 years ago in Sumeria and Egypt. Cuneiform and hieroglyphics were created to record transactions. These were not necessarily intended to be secret, but were forms of writing down information that someone wouldn’t know how to read unless they understood the language system. It took hundreds of years for these early forms of writing to be deciphered by other societies.

Early forms of encryption all used a key that had to be given to the recipient in order for them to be able to decipher it. This is known as symmetric encryption, because the same key is used for encryption and decryption. The following are several examples of ciphers that use symmetric encryption.

Caesar Box

Julius Caesar used cryptography around 100 BC to send messages to his military generals, encrypted to be protected from opponents who might intercept it. The “Caesar Box,” or “Caesar Cipher,” was easily decrypted by those who knew how, but it protected messages from unintended eyes.

The Caesar Cipher is what is known as a “substitution cipher” or “shift cipher.” It works by changing each letter within a message three letters, to the right. For example, an A in a message would become a D, and a B would be written as an E. The number of letter places that get shifted is called the key. In this case the key is three.

Since there are only 26 letters in the English alphabet, shift ciphers like the Caesar Box are easy to figure out and not very secure forms of cryptography. Once mathematicians figured out that certain letters are more commonly used than others in a language, they understood that people trying to crack the code could start to recognize patterns and figure it out.

Scytale Cipher

The Spartans developed a different type of encryption known as the Scytale Cipher. It was made by wrapping parchment around a pole then writing on the pole length-wise. When the paper is removed from the pole, the message is encrypted. To decipher it, one needs to know the pole’s diameter. The Scytale is less easy to decipher using patterns like the Caesar Box, but it can be possible to read some of the words on the pole.

Vigenère Cipher

The Vigenère Cipher was created by an Italian named Giovan Battista Bellaso in the 16th century. It uses a key as part of the decryption process. The key can be any combination of letters or a word of the message writer’s choosing. The key is matched to the plaintext and used in the process of decrypting the secret message. It’s much more difficult than the Caesar Box because each letter of the message has its own shift value. Therefore, even solving one word in the message won’t reveal the entire message.

Using a key adds an extra layer of security to a cryptographic message. The cipher wasn’t solved until 1863, and became known as le chiffre indechiffrable, or “the indecipherable cipher.”

Vernam Cipher

The only cipher that has been mathematically proven to be unbreakable is the Vernam Cipher, otherwise known as a one-time pad (OTP). It’s similar to a Vigenere Cipher but the key changes with each use. The Vernam Cipher isn’t used widely today due to the challenges of distributing the keys, but it is useful for emergency situations in which there is no electronic option.

Enigma

The Enigma is a type of cryptography using rotary encryption, which was developed by Arthur Scherbius in Germany during WWII. Similar to other cryptography, it was created using disks that were put into a machine in a certain order. If they were inserted in the correct order, the machine would decode the message.

An early computer developed by British cryptanalyst Alan Turing and his colleagues helped to crack the Enigma code. It’s estimated that their work helped save as many as 21 million people.

Asymmetric Encryption and Modern Cryptography

The advent of computers made it essential to develop more advanced forms of cryptography in order to keep data and information safe. This was especially the case as financial transactions began to move to computer networks. Everything from email to ecommerce sites to phone apps use encryption today.

The world of cryptography is also getting more complex due to its use by terrorists and criminals, as well as legal structures which protect individuals’ data. The U.S. Government and tech companies like Apple have been in legal battles for years to determine the ethics around data and privacy.

Most modern cryptography uses asymmetric encryption, or public-key encryption, in which there is a separate lock and key. This allows people to share public keys openly while keeping the private keys secure.

Here are some examples of asymmetric encryption.

Morse Code

Samuel F. Morse developed the Morse Code to transmit messages through telegraph machines in 1835.

The Zimmerman Telegram

The U.S. entered WWII with the decryption of a message solved by the British Intelligence Agency. The Zimmerman Telegram was sent from the German Foreign Office in the U.S. to the German Ambassador to Mexico and proposed a military alliance between Germany and Mexico.

Lucifer/DES

IBM developed a system called Lucifer in the 1960s, which was ultimately adopted by the U.S. National Bureau of Standards and is also known as the Data Encryption Standard (DES).

RSA

The RSA encryption system created in the 1970s was one of the first uses of asymmetric encryption.

Salt

One tactic used in encryption is called salting. This is where a random string of alphanumeric characters gets added to the end of the password before it’s encrypted. Salting adds extra security because even after the password gets decrypted, the “salt” has to be subtracted before it can be used. Even very obvious and common passwords can be difficult to figure out when they are salted.

Advanced Encryption Standard (AES)

Today’s default encryption mechanism used by the U.S. government is the Advanced Encryption Standard, or AES. It uses a 256-bit key and multiple rounds of encryption, known as substitution-permutation networking. AES has mostly replaced the formerly used Data Encryption Standard, or DES, which is now considered to be less secure.

Other Forms of Encryption

There are countless other forms of encryption. Some of the commonly used ones are:

•  Triple DES
•  Blowfish
•  Twofish
•  ElGamal
•  Hash Functions
•  Diffie-Hellman Key Exchange

Cryptocurrency and Cryptography

Cryptography is an integral part of blockchain technology and cryptocurrencies. Transactions and balances are tracked on a ledger and encrypted using complicated algorithms. This helps with security, transparency, and tracking. Crypto wallets also rely on cryptography for security.

Each type of digital asset or cryptocurrency has its own form of cryptography, making some more secure or popular than others and providing different use cases. Before investing in cryptocurrencies, it’s important to have at least a basic understanding of the way the technology works, especially the use of public and private keys. This could help decide which cryptocurrency to invest in and ensure that the transaction and digital asset storage is done securely.

The Future of Cryptography

As time goes on, it gets more and more challenging to maintain secure encryption of information. Computers and hackers get more sophisticated, and even the most impenetrable codes can be cracked using psychological tactics and social engineering.

Two tools that help increase security are two-factor authentication (2FA) and Honeypots. Each of them works slightly differently, though with the same goal.

•  With 2FA, the user must input a code retrieved from a text message or app on their phone in addition to their password. This means that an account can’t be accessed without access to the individual’s phone.
•  Honeypots trick attackers by creating false data that looks real and then alerting organizations when the attackers attempt to do a hack.

A newer form of cryptography is called homomorphic encryption. This attempts to solve one of today’s major cryptographic problems: the fact that data cannot be processed while it’s encrypted. This means that data has to be encrypted before it can be used for anything, making it vulnerable during that processing time. Homomorphic encryption allows users to process data while it’s encrypted, and then simply decrypt the final result.

The next wave of encryption will likely involve the use of quantum computers and post-quantum cryptography. These add layers of encryption beyond today’s capabilities. However, this technology is still in development.

The Takeaway

The history of cryptography is long and fascinating, and the technology has gotten more essential and complex over time. In today’s world, cryptography underpins everything from social media to financial transactions. That’s why it’s so important to make sure you keep your data and information safe using strong passwords, two-factor authentication, and other tools.

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.

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.

SOIN21087

Read more
Apr
06
2021
What is DeFi? Decentralized Finance, Explained

What Is DeFi? Decentralized Finance, Explained

By | Growing Wealth, invest, Investing | Comments Off on What Is DeFi? Decentralized Finance, Explained

DeFi, short for decentralized finance, is more than just a popular buzzword in the cryptocurrency sphere. It’s a concept that is disrupting the centralized financial services model, equalizing access and bringing more control to users across the globe.

In this article, we will cover everything a consumer might want to know about DeFi, including:

•   What is DeFi?
•   How does DeFi work?
•   How DeFi is disrupting traditional financial services
•   What’s a DApp?
•   Examples of DeFi DApps

What is DeFi?

DeFi is a blanket term referring to trustless and transparent protocols that don’t require intermediaries to operate. Traditionally, financial services and products have relied on centralized authorities such as banks, financial advisors, and clearinghouses. DeFi has reengineered this power dynamic to provide the same financial services programmatically without a central authority, thus reducing fees and making financial services and products more accessible to more people everywhere.

One way to better understand this concept is to look at the two parts of the term separately.

”De” = Decentralized

DeFi’s “de” stands for “decentralized,” or distributed control. By removing power from the hands of a few central authorities and distributing it across programmatic and autonomous code, DeFi transforms a previously centralized governance model into a decentralized one controlled by no one.

”Fi” = Finance

DeFi’s “Fi” is an abbreviation for “finance”—and more specifically, it refers to financial services. DeFi has disrupted traditional finance by transforming popular and long-standing financial services into decentralized versions without any central authority. DeFi offers an alternative to traditional financial services like the following:

•   Borrowing
•   Lending
•   Investing
•   Trading
•   Saving
•   Insurance
•   Crowdfunding
•   Crowdraising

DeFi has also enabled the creation of new financial products:

•   Cryptographic tokens: There are a number of these digital assets, one of the most common tokens is a “utility token,” which serves a specific function within a digital ecosystem. One example is the Basic Attention Token (BAT), which is used as payment for advertisers, users, and content creators on the Brave browser.

•   Non-Fungible Tokens (NFTs): These tokens transform digital images (for example, works of art, a tweet, a video clip, a GIF) into unique assets that can be traded on a blockchain.

How Does DeFi Work?

With DeFi, services and products are not subject to approval by a small group of decision makers but rather by smart contracts. Like traditional contracts, smart contracts contain information and terms regarding transactions between parties, but they are completely digital. They function like a small computer program stored inside of a distributed ledger known as a blockchain, a permanent and ever-growing record of information and transactions stored in individual blocks.

DeFi shares many aspects with cryptocurrencies, including the following:

Permissionless/Borderless

DeFi applications are permissionless—completely free of charge and available to anyone who wants to use them, the only requirement being an internet-connected smartphone or computer. Unlike traditional financial services, DApps don’t require lengthy applications to create an account, as users interact directly with smart contracts from their crypto wallet.

DeFi applications are also borderless, meaning they are country-agnostic and do not discriminate against users based on citizenship, geographic location, or government standing. Anyone can access funds on a DeFi app in one country, travel to another, and access their funds abroad without any restrictions whatsoever.

Transparent

DeFi applications are built on a blockchain network, a distributed ledger composed of smart contracts that stores transaction details as they occur and builds on top of them. Transaction activities become permanently cemented into the blockchain’s history of transactions across the entire network, while constantly updating it with new ones.

Because smart contracts and blockchain technology are designed to be permanent and publicly visible, transaction records cannot be hidden or altered thereafter. This allows all transaction activities to be visible to all market participants without violating privacy, because addresses are not directly tied to personal identities. It also allows anyone to audit the code and find bugs.

Trustless

DeFi recognizes and circumvents the trust problem of traditional finance by minimizing the need for third parties, banks, and clearinghouses. For most DeFi apps, users interact with self-executing smart contracts based on conditions being met, as opposed to waiting on approval from overseeing stakeholders.

Interoperable

Different DeFi applications (DApps) are designed to be compatible with each other, allowing DApps to be built or composed by combining DeFi products. This interoperability enables simple blockchain operation and a scalable ecosystem.

How DeFi is Disrupting Traditional Financial Services

Financial services such as borrowing, lending, and investing have traditionally been areas with a high barrier to entry, typically preventing people with little money or financial expertise from gaining access to these services. Though traditional banking is common in first world countries, there are over 1.7 billion people who are unbanked globally , representing over 30% of the human population, according to the most recent World Bank Global Findex report.

Domestically, 22% of US adults are underbanked or unbanked , according to the Federal Reserve’s most recent Report on the Economic Well-Being of U.S. Households. “Underbanked” means they have at least one account at an insured institution but also obtain financial services outside of the banking system such as money orders, check-cashing stores, payday loans, pawn shops, and more. The FDIC found in its 2019 “How America Banks” survey that 5.4% of US adults are unbanked entirely , having no accounts with any financial institution.

With the advent of DeFi, previously inaccessible financial services such as borrowing, saving, investing, and international payments are now accessible to anyone with access to the internet regardless of age, income, nationality, financial background, or credit score. To date, there are currently 3,809 DApps, with 140.59k daily active users.

What’s a DApp?

A DApp, or decentralized application, is a digital program that runs on a decentralized blockchain network without the control of a single authority. DApps are open-source and the basis for any cryptocurrency project; Bitcoin is considered the first DApp.

While the actual DApps themselves are typically ‘unownable’ services, DApps sometimes distribute underlying tokens that allow users to buy crypto.

DeFi applications can be built on any decentralized protocol but are primarily built on Ethereum, the premier decentralized blockchain network used for building new DApps which is powered by smart contracts and its native digital currency Ether. Ethereum enables developers to write smart contracts on the Ethereum blockchain which automatically execute when certain conditions are met. Smart contracts are then stored and executed across every node on the Ethereum network, making them decentralized applications.

The Ethereum DApps enable developers to build far more advanced technology than just trading cryptocurrency. Instead of needing to develop a new blockchain for every application, Ethereum created a secure platform for DApps to be built and deployed. Ethereum is one of the most popular blockchain networks and its native Ether token is the second-largest cryptocurrency behind Bitcoin.

DApps are similar to centralized applications but benefit from the features of existing on a decentralized blockchain network. Because they don’t have a single point of failure, they are thought to be more secure against cyberattacks. A distributed network of nodes maintains the network and prevents any system downtime common among centralized applications. DApps aren’t owned by anyone and aren’t subject to owner malfeasance such as embezzlement.

Examples of DeFi DApps

DeFi is a new space that only started to see the launch of live products in 2017 or so. Here are a few of the most popular types of DApps that emerged in 2020:

Borrowing and Lending Platforms

Securing a traditional loan typically involves submitting an application at a financial institution with ample personal information, agreeing to a credit check, pledging collateral (if necessary), and waiting for interest to be factored in by the intermediary for facilitating the loan that’s sourced by a federal institution. With DeFi, smart contracts connect interested lenders and borrowers, impose terms of loans, and impose interest without a third party. Lending DApps typically require collateral to be pledged in the form of crypto or stablecoins as a measure of insuring risk taken on by the lender. Through smart contract automation and elimination of a third-party intermediary, DApp lending platforms have formed loans with interest sometimes below 10 percent .

Decentralized Exchange (DEX)

A decentralized exchange (DEX) is an exchange that uses smart contracts to enforce trading rules, execute trades, and securely handle funds if necessary. Unlike centralized exchanges, DEXs don’t have an exchange operator nor do they require account creation, identity verification, or impose exchange fees. Because DEX’s are unique and don’t have a centralized authority, it is debated whether or not some or all DEX’s are subject to the crypto regulations enforced on centralized exchanges. Further, many DEX’s do not custody users’ funds at any point during trading, adding additional uncertainty as to the application of regulations. However, like any exchange, they do require liquidity to be able to match buyers and sellers.

Betting Platform

DeFi disrupts one of the most restricted and heavily centralized industries in existence: Gambling. In addition to an intensive and exclusive registration process, users of traditional online gambling platforms are subject to getting their betting limits lowered and accounts closed. With a decentralized peer-to-peer platform, this is not possible.

Several betting DApps have been launched as global betting platforms with no limits, allowing users to bet on traditional sports events as well as real-world events such as economics, elections, pop culture, and m
ore. Users can place bets using digital currencies and get rewarded in them upon winning a bet. Users buy or sell on a particular outcome of an event, with the DApp showing the current odds based on active user bets.

NFT Marketplace

An innovative DeFi development has been the launch of marketplaces for exchanging non-fungible tokens , or NFTs. NFTs are unique cryptographic tokens that represent digital goods such as online gaming goods and also tokenize real-world assets such as art, collectibles, company equity, and commodities. An NFT marketplace allows users to freely buy, sell, and trade NFTs representing otherwise non-fungible assets.

The Takeaway

DeFi is a term for the decentralized finance model that’s reengineering traditional financial services and products. By reallocating decision-making from central authorities to executable code within smart contracts, many financial services are becoming cheaper and easier to access for anyone.

Photo credit: iStock/akinbostanci

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.

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.

SOIN21024

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Apr
06
2021
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How To Buy Bitcoin Cash (BCH) 5 Steps To Buy BCH

By | Growing Wealth, invest, Investing | Comments Off on How To Buy Bitcoin Cash (BCH) 5 Steps To Buy BCH

While there are hundreds of cryptocurrencies, a few of them make up a substantial portion of the total value of the asset class. The most prominent is, of course, Bitcoin, which kicked off the whole phenomenon of cryptocurrency and is worth nearly $1 trillion.

And then there’s Bitcoin Cash, an offshoot of the original Bitcoin, that itself is worth just over $9.5 billion as of late March 2021, according to CoinDesk, and is one of the ten most valuable cryptocurrencies.

What is Bitcoin Cash and How Did it Start?

If you want to know what Bitcoin Cash is, you should first ask, what is Bitcoin?

Bitcoin is the foundational cryptocurrency, the first to utilize blockchain technologies that generate unique entries on a “ledger” and can then be exchanged between users without an intermediary or third party. While there are now hundreds of types of cryptocurrencies, coins, and tokens, Bitcoin is one of just a handful of cryptos, including Ethereum, that make up the bulk of the cryptocurrency economy.

Bitcoin Cash (BHC) was launched in 2017, eight years after the original Bitcoin. It is what’s known as a Bitcoin “fork”—a new branch in the technology that was designed with the intent of easier and more efficient transactions on its blockchain. Bitcoin Cash proponents argued that the size of Bitcoin “blocks”—one megabyte or less—was too small, and designed Bitcoin Cash to have eight megabyte blocks in order to drive the cost of processing payments on the blockchain down. Since then the Bitcoin Cash block size has gone up even more, to 32 megabytes.

When Bitcoin forked to Bitcoin Cash, everyone who owned Bitcoin on that date received the same amount of Bitcoin Cash, deposited into their wallet (the software used for storing cryptocurrency).

Bitcoin Cash (BCH) Price

As of this writing in March 2021, the price of Bitcoin Cash (BCH) is $547.24. That’s up from a record low in November of 2020, when it dropped to 241.13.

But Bitcoin Cash’s all-time high to date occurred 5 months after its 2017 launch, in December 2017. At that time, BCH hit $3,556.

5 Steps to Buying Bitcoin Cash

Buying Bitcoin Cash is not that different from buying Bitcoin or other well known and popular cryptocurrencies.

Before investing in crypto, it can be helpful to do some reading. In fact, we’ve put together a list of 6 things you should know before investing in crypto. Additionally, while the exchange you ultimately choose to buy crypto will have its own extensive guidelines and rules, it’s a good idea to familiarize yourself with basic cryptocurrency regulations beforehand.

Then you can buy Bitcoin Cash in 5 simple steps:

1. Sign Up for an Exchange to Buy BCH

Most investors exchange “fiat money” (aka the currency you use in everyday life to pay bills, taxes, etc) for cryptocurrency through a consumer-facing exchange. When choosing between the many crypto exchanges available, there are a few things to consider. Safety and security is paramount, but things like fee structure and ease of use are also important. Some common exchanges you might come across include Coinbase, Gemini, CoinEx, or Kraken.

2. Choose an Account to Fund Your Crypto Investments

Although one promise of cryptocurrencies like Bitcoin and Bitcoin Cash is freedom from the traditional financial system, you typically need a bank account to use a mainstream cryptocurrency exchange. Coinbase, for instance, takes payment through ACH transfer, wire transfers, debit cards, and PayPal. These different methods have different times to clear, so you may not be able to buy Bitcoin Cash immediately if you’re using an exchange for the first time.

3. Be Prepared to Verify Your Identity

While crypto is identified with cryptographic keys and is thus “pseudonymous,” to actually make a financial transaction like buying BCH, you will most likely have to verify your identity.

Generally, like virtually all US financial institutions, cryptocurrency exchanges have to abide by so-called “Know Your Customer” and money laundering rules which require identity verification. After verifying ID, you’ll be able to do a bank transfer or debit card payment and fund your account.

4. Download a Crypto Wallet

While anytime you own a cryptocurrency that uses blockchain technology, you have a “public” key, you also have a “private” key that needs to be secured. Many mainstream crypto exchanges, like Coinbase or Gemini, also offer wallets which keep private keys secure. You can also download your own stand-alone wallet software or even store your private key on paper or on standalone hardware systems.

5. Buy Bitcoin Cash

At this point you can actually buy BBCH and then decide to hold onto it, sell, or whatever you like depending on your risk tolerance and preferences. In general, it’s a good idea to look up the price of Bitcoin Cash before buying, although you can sometimes buy fractions of cryptocurrency that will cost less than the value of a single unit of cryptocurrency. Typically, investors can buy Bitcoin Cash using either fiat money (dollars) or other cryptocurrencies if the exchange offers crypto-for-Bitcoin-Cash trades.

Remember to Pay Crypto Taxes

If you’re buying Bitcoin Cash as an investment with an eye to selling it in the future, keep in mind your tax situation. Just because Bitcoin and other cryptocurrencies are not fiat currency, that doesn’t mean they can’t entail tax obligations when they’re bought and sold: you have to pay your crypto taxes. In most cases the IRS currently taxes crypto as property, not income. So it can be helpful to learn the rules and regulations before selling.

The Takeaway

Bitcoin Cash is a fork of Bitcoin, the OG of cryptocurrency. Buying Bitcoin Cash is much like buying any other cryptocurrency—investors can get set up with an exchange, a wallet, and everything else they need to buy, sell, and hold Bitcoin Cash in just 5 easy steps.


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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Apr
05
2021
What is digital currency?

Different Types of Crypto Airdrops and How to Find Them

By | Growing Wealth, invest, Investing | Comments Off on Different Types of Crypto Airdrops and How to Find Them

A crypto airdrop is sort of like receiving a coupon to get a sample of something for free. New shops or restaurants sometimes offer a free drink or small item to first-time customers, for example. The hope is that the people who receive free items or coupons will enjoy the service, tell their friends, and become long-time customers.

When a company airdrops crypto to users, they aim to accomplish something similar. By depositing free coins into the wallets of users, the company is betting that the users might spread word of the new project and its potential use cases.

Of course, as with anything crypto-related, there’s more to it than just getting a simple “freebie” out of nowhere. This article offers answers to the most common questions regarding crypto airdrops, including:

•   What is a Crypto Airdrop?
•   What Are the Different Types of Airdrops?
•   How Do I Get Airdrops from Crypto?
•   Are Crypto Airdrops Worth It?
•   Are Crypto Airdrops Safe?

What is a Crypto Airdrop?

In a crypto airdrop, a new crypto project gives cryptocurrency to new users for free, or in exchange for a simple task like sharing a social media post. This practice became popular during the initial coin offering (ICO) craze of 2017 and 2018. Many crypto projects used airdrops to promote their ICOs and spark enthusiasm about their new digital asset.

In addition to regular coins, governance tokens are also sometimes airdropped, giving early adopters a larger say in how a project will develop going forward.

For users, the appeal is simple: Crypto airdrops allow people to obtain tokens without having to buy cryptocurrency. And for the companies, the benefit is clear: People who otherwise would never have known about the project could wind up becoming investors, or at the very least, provide free advertising for the company.

What Are the Different Types of Airdrops?

Airdrops can happen several different ways. The term is most often used to apply to free tokens being deposited to a user’s wallet in exchange for nothing more than registering with an email address. But that’s not the only type of crypto airdrop.

Standard Airdrop

This is the type of airdrop just mentioned, where users receive free tokens just for signing up for a newsletter or something similar.

Bounty Airdrop

Bounty airdrops require users to perform a simple task to receive the airdropped tokens. Most often this involves re-tweeting something about the project, creating an Instagram post and tagging a few friends, or joining a Telegram group.

Exclusive Airdrops

Airdrops of this type are designated exclusively for people who have an established history with a particular project, website, or community. For example, Uniswap gave its loyal users 2500 UNI tokens in September 2020. This equaled about $1,200 at the time, and there were no strings attached.

Hard Fork Airdrop

This one is a little different. When a coin hard forks from its original blockchain, a new coin gets created, and those who held the original coin will receive an equal amount of the new tokens in their wallets. The most well-known example of this would be the Bitcoin Cash (BCH) hard fork that occurred in 2017: Bitcoin users who held BTC received an equal amount of BCH automatically.

Holder Airdrop

These airdrops are similar to hard forks in that users who already hold certain tokens will receive new ones. EOS and Ethereum, for example, have sometimes offered users free tokens when a new project was created on one of their blockchains. These are not hard forks of the original coins, but rather entirely new projects created on top of the EOS or Ethereum protocol.

All these types of airdrops have one thing in common—the distribution of new coins.

How Do I Get Airdrops From Crypto?

The easiest way to find crypto airdrops might be to simply search for “crypto airdrops” or “what is a crypto airdrop.”

Since these events are designed for marketing and project promotion, they tend to make themselves relatively easy to find. There are even some websites exclusively devoted to listing upcoming airdrops, like Coin Airdrops .

However, scams abound in the cryptocurrency world, and users would do well to safeguard their information wherever possible. When searching for airdrops, it’s possible to encounter someone claiming to offer an airdrop when they’re actually just engaging in a phishing attempt (trying to steal information).

If an alleged airdrop were to ask for something like your login credentials to a website or bank account, the private keys to a cryptocurrency wallet, or any other personal details, it might be a scam. Requests to download “special” software or clicking links found in emails could also be phishing attempts designed to expose your device to malware or steal sensitive information.

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Is it Even Worth the Effort?

When considering that airdrops provide something for nothing, some people might say they are worth it.

At the same time, when a new project decides to airdrop crypto, this leads to a supply glut that can drive prices to tank later on. Because a lot of users end up receiving coins, a lot of them tend to cash out at the earliest opportunity. It’s not uncommon for airdropped coins to lose most or all of their value over time.

One good example of this involves the Auroracoin (AUR) airdrop. AUR was a cryptocurrency designated for citizens of Iceland in March 2014. All residents of the country were eligible to register for free receipt of 31.8 AUR, which was worth roughly $380 at the time.

At the time of writing, one AUR was worth about $0.10, meaning the 2014 airdrop would be worth little more than $3 in 2021. Auroracoin can only be traded on two smaller crypto exchanges as well, meaning there is very little liquidity in the market and holders might find it difficult to sell.

This demonstrates the degree to which airdropped coins can become almost worthless over time.

Are Crypto Airdrops Safe?

Some users have also fallen victim to fraudulent airdrops in the past. During the ICO craze of 2017 and 2018, there were many fake crypto startups that were actually frauds.

Amid an industry with much more hype than regulation, some savvy scammers devised a way to attract investment funds without actually creating anything. They would create a coin or say they were planning on creating a coin, and then claim to have plans to airdrop crypto.

Sometimes the companies would require small fees to be eligible for the alleged airdrop, or other speculators would make investments believing that the airdrop itself would lead to a successful project.

While these types of scams might be less common today than they were three or four years ago, investors would still do well to be wary when it comes to crypto airdrops.

Looking at the idea of “safe” from another perspective, few would argue that the coins received in an airdrop could be considered a safe investment. Altcoins in general can be highly speculative, and that goes double for any new coin that has been airdropped.

As we saw in the Auroracoin example, airdropped crypto can lose nearly all of its value.

Many people who sign up for or become eligible for airdrops are aware of the situation, and could likely to take profits as soon as possible. The few airdrop recipients who happen to receive a coin of significant value at a time when there is a liquid market for it might make some money. Others may be left holding a bag of worthless coins later on.

The Takeaway

Crypto airdrops involve users receiving something for virtually nothing—an email address, or some social media promotion. But while some recipients have gotten lucky enough to be the first movers in an airdrop that actually had value, many others have also fallen victim to lofty promises of the “next big thing” in crypto.


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.

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.

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2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.
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