Mar
22
2023
What Is a Bitcoin Faucet? How Bitcoin Faucets Work

Guide to Bitcoin and Crypto Faucets

By | Growing Wealth, invest, Investing | Comments Off on Guide to Bitcoin and Crypto Faucets

What Are Crypto Faucets?

A crypto faucet allows crypto users and investors to earn small cryptocurrency rewards — basically free – for completing small or simple tasks. Investors generally do not need to make a purchase or put up any additional assets in exchange. The term “faucet” comes from the fact that the rewards are very small — like drops of water dripping from a faucet.

The idea of earning free crypto may sound intriguing, but know that crypto faucets have been used in scams in years past. However, when used wisely they can be a way to increase your crypto holdings over the long term.

There are numerous types of crypto faucets, like Bitcoin faucets. A Bitcoin faucet, for example, sends small amounts of free or earned Satoshis or “sats” (the smallest unit of Bitcoin) to a user’s wallet. To claim these rewards, users typically have to perform a task such as:

•   Watching product videos

•   Viewing or clicking on advertisements

•   Completing a Captcha

•   Solving a puzzle

•   Playing a game

As payment for these tasks, users could receive a single Satoshi, which is one millionth of one Bitcoin (0.00000001 BTC). While that may sound like a very small drop in the bucket indeed, Bitcoin is still the oldest cryptocurrency (and by far the largest) on the market, and its value could increase over time. (Remember that past performance doesn’t guarantee future results.)

How Do Crypto Faucets Work?

Most crypto faucets are relatively easy to use. Sometimes, using one can be as simple as entering a public key address for your crypto wallet, clicking a few buttons, and receiving the coins or tokens. In general, the more complex the tasks required, the higher the rewards.

Keep in mind that some faucets tend to give out very small rewards — and it is unlikely that users will amass a large amount of crypto from them.

Faucets often have a web-hosted crypto wallet, which stores coins for users up until a certain threshold. To avoid transaction fees eating up most or all of the rewards, many crypto faucets have a minimum threshold that users must reach before they can withdraw the coins to their own wallet.

What Is the Point of Crypto Faucets?

A bit of context is required to fully understand why crypto faucets are a part of the crypto universe.

During the first few years after the creation of Bitcoin 2009, few people had heard of virtual currencies, let alone used them. And those who had couldn’t do much with their coins, as businesses did not accept Bitcoin for payment, and there were no opportunities for trading, because modern crypto exchanges didn’t exist yet.

Gavin Andresen, an early Bitcoin adopter, believed in the future of Bitcoin and devised a way for more people to learn about cryptocurrency. He offered free Bitcoins in exchange for completing Captchas.

In 2010, the first Bitcoin faucet ever created paid out 5 BTC in exchange for the simple task of clicking on images. This was, at a time, when one Bitcoin was worth less than a penny. Today, 5 BTC would be worth well into the six-figures.

As crypto and crypto faucets became more popular, the rewards fell to the smallest denominations possible. Faucets became an integral part of cryptocurrency history, as they helped get crypto into more people’s hands.

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Pros and Cons of Crypto Faucets

Crypto faucets have both benefits and drawbacks that investors should make note of:

Pros

 Cons
Free crypto Some faucets could be scams
Easy way to get started learning about crypto Small rewards
Anyone can use faucets Mindless tasks required

Pros of Crypto Faucets

•   The biggest pro of crypto faucets might be the free crypto. There aren’t many other ways to get crypto simply handed to you. Crypto airdrops also involve users receiving free crypto, but those are usually distributed to select users based on certain eligibility requirements.

•   Faucets are an easy way to get started with Bitcoin or other cryptocurrencies. There’s no real investment required beyond getting a crypto wallet and the time required to complete the task in question.

•   Faucets don’t require much knowledge or know-how to get started. Anyone can use them — you don’t need to know how to trade crypto to use a faucet.

Cons of Crypto Faucets

•   The amount of crypto earned is very small. As mentioned earlier, the reward could be as little as one Satoshi from a Bitcoin faucet, which is worth only a tiny fraction of a cent.

•   The tasks that a Bitcoin faucet will require can quickly get monotonous. How long will someone be willing to sit there and repeatedly complete a Captcha, after all?

•   The general risks associated with crypto also apply to faucets. Some can be types of crypto scams, phishing attempts, or ways to steal a user’s funds or identity. Some faucets could infect users’ devices with malware.

The lure of free money can be an effective way for hackers to compromise the devices or identity of potential users. The website or app might be phishing for information or download malware to a user’s device after having them click a link or download a file. Here are a few red flags that a crypto faucet is a scam:

◦   The rewards are too good to be true. If the rewards seem significantly higher than other faucet rewards, they are likely not legitimate.

◦   You’ve received an unsolicited offer. If you’ve received a faucet offer via email or message without asking for it, it could be from a scammer.

◦   Error-heavy messages. Multiple grammatical errors and misspellings could indicate the email is fraudulent.

Bitcoin Faucets

As noted, Bitcoin faucets were the original crypto faucet, as Bitcoin itself was the original cryptocurrency. As such, Bitcoin faucets are likely the most common on the market. Also as mentioned, Bitcoin faucets distribute BTC to users who are willing and able to complete certain tasks or activities.

Other Types of Crypto Faucets

It all began with a Bitcoin faucet many years ago, but today, there are crypto faucets for all types of different cryptocurrencies. Some of the most popular include Litecoin faucets, Ethereum faucets, and Dogecoin faucets.

Litecoin Faucets

A Litecoin faucet functions in the same manner as a Bitcoin faucet. The only difference is that the faucet distributes Litecoin (LTC) rather than Bitcoin (BTC).

To use Litecoin faucets, users will have to first set up a Litecoin wallet. Then it’s just a matter of choosing the highest-paying Litecoin faucet. Some faucets could pay up to 1,000 litoshis (the smallest units of Litecoin).

Ethereum Faucets

An Ethereum faucet is one that distributes ETH, the native token of the Ethereum network.

Ethereum faucets, like some other faucets, may also have referral bonuses. Users who refer their friends could get an extra faucet drip without having to do anything more.

When trying to withdraw funds, however, users could run into an issue: The Ethereum network tends to have very high transaction fees, known as gas fees. So, to send $2 worth of ETH to another wallet could easily cost more than the transaction itself.

Dogecoin Faucets

Dogecoin faucets have been popular since the meme cryptocurrency was first invented back in 2014. These faucets distribute Dogecoin (DOGE). Because DOGE has such a low value, larger portions of coins can come out of faucets.

When one DOGE was worth a fraction of a penny, faucets would distribute between one and five DOGE at a time. Today’s Dogecoin faucets mostly distribute anywhere from 0.1 to 1 DOGE at a time.

The Future of Crypto Faucets

The future of crypto faucets probably looks a lot like the past. These are basically fun apps for people who are new to crypto (as long as you’re careful). It gives individuals a way to get started learning how to interact with the cryptocurrency ecosystem without having to make an initial investment. Some modern or current crypto faucets even allow users to play games, making it a bit more fun to earn rewards.

But, keep in mind: No one keeps clicking on a faucet all day hoping to cash in on big rewards. In terms of today’s value, the typical crypto faucet pays out a tiny fraction of a cent each time, and there are often limits on the number of payouts a user can receive in a given timeframe.

Are There Any Real Crypto Faucets?

Yes, there are numerous real crypto faucets, but it may take a little time for users to do some research to make sure they’re not falling for a scam or some sort of fake faucet. A simple internet search for a desired, certain cryptocurrency faucet is likely to yield a list of results.

But again: It’s up to you, the user, to take a little time and make sure you don’t see any red flags that could indicate a faucet is a scam.

Other Ways to Make Money With Crypto

Crypto faucets are an option for earning crypto, or adding additional holdings to your portfolio. But, as mentioned, it’s a slow, tedious process. Here are some other ways to make money with crypto.

Investing

Investing is likely the most common or popular way that people make money with crypto, which more or less entails buying at one price, and selling it at a higher price. There are numerous ways to invest in crypto, however (even through retirement accounts), and the risks involved are significant — even more significant than investing in stocks.

Mining/Staking

You can also mine certain cryptocurrencies, like Bitcoin, or stake others, to earn even more crypto. Whether you can mine or stake crypto will depend on the specific cryptocurrency, but know that an increasing number of cryptos are moving to a proof-of-stake system (which allows for staking), as it’s generally more efficient and less resource-intensive.

Play to Earn

You can also try your hand at any number of play-to-earn crypto games, of which there are many. These games reward players or participants with tokens or NFTs for playing, which may or may not have value — they allow the player to participate in the in-game economy, though.

If any of these methods don’t strike your fancy, there are numerous ways to earn passive crypto income, too, such as lending, cloud mining, and running lightning nodes.

Buying Crypto With SoFi

Crypto faucets can give new users their first foray into the crypto world. They reward users with small amounts of crypto, though the actual amounts are often miniscule. Crypto faucets take advantage of the divisibility of cryptocurrencies, or their ability to be divided into many smaller units — and the potential for growth over time (although with crypto there is also considerable volatility).

There are numerous types of crypto faucets, such as Bitcoin faucets or Litecoin faucets. There are also many scams out there using the guise of crypto faucets in order to take advantage of unsuspecting users — which is important to keep in mind.

FAQ

Are there any crypto faucets?

Yes, there are many crypto faucets out there. You should be able to find them through simple internet searches, but you’ll want to make sure you’re finding a faucet for the specific cryptocurrency you hope to accumulate through rewards.

Are crypto faucets legit?

Many crypto faucets are legit, but there are numerous scams out there — so, faucet users should proceed with caution.

Is using a crypto faucet profitable?

Crypto faucets are not really profitable. Though they do offer users “free” rewards in the form of tiny amounts of crypto, those amounts are often so tiny that they carry next to no value.

How can I get 1 Bitcoin for free?

It’s not likely that you’ll find anyone or anywhere that’s willing to give you a free Bitcoin as of 2023, given that a single Bitcoin’s value is more than $20,000, as of March 14, 2023.

Photo credit: iStock/Fabian19

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Mar
06
2023
What Is a Houseboat? Pros & Cons of Owning a Houseboat

Guide to Houseboats: Definition and Key Characteristics

By | Family Finances, Home Ownership, mortgage | Comments Off on Guide to Houseboats: Definition and Key Characteristics

If you’re interested in living on a houseboat or just pleasure cruising, you’ll want to know the advantages and disadvantages of owning a houseboat.

Here’s a deep dive into the world of houseboats to help you understand what they are, how they work, and whether buying one is the right choice for you.

What Is a Houseboat?

A houseboat is a vessel built or modified to function primarily as a dwelling rather than just transportation.
When comparing houseboats to traditional boats, you can expect houseboats to have the features of a home, including one or more bathrooms, sleeping quarters, and a kitchen.

Houseboats, among the common types of homes, are distinguished by their intended use as a dwelling.

Depending on how large the houseboat is and how much the owner is willing to invest, houseboats can range from barebones to luxurious.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Characteristics of a Houseboat

A houseboat stands out in the fleet of traditional boats.

Houseboats Regular boats
Built or modified to function primarily as a residence Built primarily for transportation or recreational purposes
Intended to function as a permanent shelter Generally designed for transport or temporary accommodations
Less maneuverable than regular boats Maneuverable and self-propelled in most cases

Expect houseboats to be less seaworthy than boats specifically designed for transportation. The vast majority of houseboats are intended to be confined to lakes, rivers, and small bodies of water, not the open seas.

Houseboat vs Floating Home

A houseboat and a “floating home” are different. Floating homes are meant to stay in one place, lacking an engine or navigation system. They usually have a floating concrete foundation.They’re generally much bigger than houseboats and cost more.

Even though some houseboats also dock in one place, most can motor to another location when needed or desired.

Houseboat Design

Houseboats may stretch from 20 feet to over 90 feet. A veranda or flybridge may help occupants make the most of outdoor views.

Hull design and materials vary. Here are some styles.

Pontoon: Flat-bottomed boat that’s supported by two to three floats, or pontoons, for buoyancy. This is common houseboat construction.

Full hull: Conventional boat hull with a large bilge that sits partly in the water and offers more space below deck.

Planing hull: Similar design to full hull but is designed to glide on top of the water at speed.

Catamaran hull: Parallel twin-hulled design that joins two hulls of equal size with a solid frame. The wide beam gives it better stability and handling.

Barge: Large flat-bottomed boat designed to handle heavy loads and operate in rivers and canals.

When researching the type of houseboat you want, you’ll want to make an informed choice when weighing livability and seaworthiness.

Pros and Cons of a Houseboat

It takes a special type of person to live on a houseboat. Here are some of the pros and cons of houseboat living to help you decide if you fall into this category.

Pros

•   Reduced living costs: The lack of land to maintain means you won’t have to worry about shoveling snow or mowing the lawn. You can also expect lower utility costs due to the square footage, which could be enticing to people wanting to downsize their home.

•   Nice views: You can’t get closer to waterfront living. Houseboat living offers the possibility of gorgeous lakeside or riverside views every day you wake up and go to bed.

•   Water activities: Depending on the season and local ordinances, you may be able to fish, canoe, and enjoy all the perks of life on the water without having to take extra time off for a vacation.

•   Lower rent or mortgage: Compared with the average stand-alone house, a houseboat may cost less to buy or rent.

•   Possible tax advantages: Houseboat owners may not have to pay property taxes (although a deeded slip in some areas is considered real property), but they may live in a state, county, or city that imposes personal-property taxes. Also, the IRS says a boat can be your main or secondary residence, entitling you to take advantage of the same tax deductions as the owner of a typical house.

Cons

•   Reduced living space: A modest houseboat may be smaller than most traditional homes.

•   Marina or HOA fees: If you want to remain moored and plugged into the grid, you’ll need to pay slip fees or homeowners association fees.

•   Maintenance: Expect to trade land maintenance expenses for boat maintenance costs. In some cases, you’ll need to find a contractor for repairs or an inspection.

•   Lack of permanence: If you intend to sail from dock to dock, you’ll need to make compromises when it comes to having a permanent mailing address or regular friends and neighbors.

How to Finance a Houseboat

Used houseboats start at a few thousand dollars. New houseboats may range from $250,000 to $750,000.

Can you get a mortgage loan for a houseboat? No. But you may be able to get another kind of loan if you have a credit score in at least the “good” range on the FICO® credit rating scale and meet other lender criteria.

Some banks, credit unions, and online lenders offer boat loans.

A personal loan is another option. Personal loans of up to $100,000 are offered by a few lenders. Most are unsecured, meaning no collateral is needed.

A marine loan broker can help you find and negotiate financing, but the broker fee is often 10% or more of the houseboat purchase price. The loan might require 10% to 20% down.

If mortgage rates are ebbing, a cash-out refinance can work for some homeowners.

Other homeowners with sufficient home equity can apply for a home equity line of credit (HELOC) or home equity loan and use that money to buy a houseboat. The rate will typically be lower for an equity product using your home as collateral than that of an unsecured personal loan.

What if your credit isn’t good? So-called bad credit boat loans are afloat out there. They come with a high interest rate.

Just as you would shop around for the best mortgage loan offer, you will want to compare a number of houseboat financing options.

Finding a Houseboat to Buy vs Building One

Just as the cost of buying vs building a house depends on size, location, the cost of labor and materials, and your taste, the same holds true of houseboats.

Clearly, buying a used houseboat is almost always quicker and more convenient than trying to build one from scratch. However, if you have the knowhow to build your own houseboat, you’ll have much more freedom when it comes to how you want to design things.

If you’re deciding whether to buy or build a houseboat, you’ll want to consider your budget, time, availability, expertise, facilities, and tools.

Also consider how you would transport the houseboat from land to water when it’s done.

As for the question of time, most custom houseboat builds take months, if not years, to complete. It’ll be much faster and easier to jump into houseboat living with an existing houseboat.

The Takeaway

Houseboats are a novel option for water lovers, including downsizers, retirees, and free spirits. Living on a houseboat can be cheaper than in a traditional home, but you’ll want to make sure you understand the advantages and disadvantages of living on a houseboat before committing.

If you are ready to take the plunge, SoFi may be able to finance your houseboat. SoFi personal loans have no fees and provide fast cash.

And a generous SoFi-brokered HELOC may unlock the door to a houseboat that you can create memories on and in. Access up to 95%, or $500,000, of your home equity.

Climb aboard that houseboat you’ve always wanted.

FAQ

Can you live on a houseboat year-round?

Yes, but you’ll need to compensate for changes in the weather, particularly if the waters where you’re docked tend to freeze during the winter months. This includes ensuring that your houseboat is insulated and heated through the winter.

How long does it take to build a houseboat?

Construction could take 12 to 18 months to complete, depending on whether you’re building a custom houseboat on your own or enlisting the help of professionals.

Can you get a loan for a houseboat?

Yes, but not a traditional mortgage. Options include a boat loan, a personal loan, a home equity loan, and a HELOC.

How does a toilet work on a houseboat?

A marine toilet usually empties into a black-water holding tank until the boat reaches a marina pumping station, or the tank treats the waste and it’s eventually released in a designated discharge area. Noncruising houseboats usually have a hookup that takes out waste through a sewage line.

Photo credit: iStock/wayra

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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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Mar
01
2023
Bitcoin Price History: Price of Bitcoin 2009 - 2021

Bitcoin Price History: 2009 – 2023

By | Cryptocurrency, Growing Wealth, invest, Investing | Comments Off on Bitcoin Price History: 2009 – 2023

With Bitcoin’s price holding steady above the $20,000 mark for most of early 2023, there are hopes that the crypto winter of 2022 is thawing, and that BTC — as well as crypto prices in general — may recover some lost ground.

Bitcoin’s price has been on a wild ride since it launched over 14 years ago, on January 3, 2009. While that’s similar to most cryptocurrencies, BTC has been particularly volatile owing to the price surges of 2021, quickly followed by the dramatic declines during the so-called crypto winter of 2022.

In other words, those who bought Bitcoin (BTC) early and held onto it have typically seen phenomenal returns, but the fluctuations in Bitcoin’s price — as with all forms of crypto — have also led to considerable losses.

For crypto fans and investors curious about this space, the volatile price history of the world’s oldest and most widely embraced cryptocurrency can also be viewed as a much broader saga. Bitcoin’s story reflects the rise of decentralized finance (DeFi), the emergence of blockchain technology, and countless innovations that are changing how investors think of commerce as well as what the future of crypto might hold.

Bitcoin Price History

Bitcoin price history chart

While some enjoy comparing Bitcoin’s price history to past speculative manias like Beanie Babies circa 1995 (or the infamous tulip bubble circa 1636), speculation is only one factor in any given Bitcoin price fluctuation.

Over the years, a fairly reliable pattern has emerged in Bitcoin’s prices. Every four years, the network undergoes a change called “the halving,” where the supply of new BTC rewarded to Bitcoin miners gets cut in half. This has happened three times so far. The first Bitcoin halving occurred in 2012, from 50 BTC to 25 BTC, the second in 2016, from 25 to 12.5, and the third in 2020.

As of July 15, 2022, the current reward for Bitcoin mining stands at 6.25 BTC.

In each instance, the price of BTC reached new record highs in the year or so following each halving event. This was typically followed by a Bitcoin bear market. After a period of consolidation, the price then moved upwards again in anticipation of the next halving, beginning a new Bitcoin bull market.

While the price of BTC can hardly be considered predictable, it’s useful to view the chapters in the Bitcoin price history and what it may mean for investors.

Bitcoin Price History by Year

Bitcoin Price History by Year (2014-2022)
Year High Low
2014 $457.09 $289.30
2015 $495.56 $171.51
2016 $979.40 $354.91
2017 $20,089.00 $755.76
2018 $17,712.40 $3,191.30
2019 $13,796.49 $3,391.02
2020 $29,244.88 $4,106.98
2021 $68,789.63 $28,722.76
2022 $48,086.84 $15,599.05
2023 $16,674 $24,895

Source: Yahoo Finance

Bitcoin Price in 2009: The Start

Price of 1 Bitcoin in 2009: $0

On October 31, 2008, the pseudonymous person or group known as Satoshi Nakamoto published the Bitcoin white paper. This paper introduced a peer-to-peer digital cash system based on a new form of distributed ledger technology called blockchain.

Then, on January 3, 2009, the Bitcoin network went live with the mining of the genesis block, which allowed the first group of transactions to begin a blockchain. This block contained a text note that read: “Chancellor on Brink of Second Bailout for Banks.” This referenced an article in The London Times about the financial crisis of 2008 – 2009, when commercial banks received trillions in bailout money from central banks and governments. This event helped mark Bitcoin’s original price at $0.

For this reason and others, many suspect that Nakamoto created Bitcoin, at least in part, in response to the way the events of those years played out.

Bitcoin Price in 2011: The Surge Pt. 1

Price of 1 Bitcoin in 2011: $1 – $30

The Bitcoin price in 2009 was barely above zero. Real adoption of Bitcoin began to take place about two years later, and a major Bitcoin price surge happened for the first time.

In 2011, the Electronic Frontier Foundation (EFF) accepted BTC for donations for a few months, but quickly backtracked due to a lack of a legal framework for virtual currencies.

In February of 2011, BTC reached $1.00 for the first time, achieving parity with the U.S. dollar. Months later, the price of BTC reached $10 and then quickly soared to $30 on the Mt. Gox exchange. Bitcoin had risen 100x from the year’s starting price of about $0.30.

By year’s end, though, the price of Bitcoin was under $5. No one can say for sure exactly why the price behaved as it did, especially back when the technology was so new. It could be that 2011 marked the launch of Litecoin, a fork of the Bitcoin blockchain — and other forms of crypto began to emerge as well — signaling greater competition.

In 2012, of course, Bitcoin saw its first halving, from a 50-coin reward for mining BTC to 25 coins. This set the stage for its precipitous growth. But the pattern of an 80% – 90% correction from record highs would continue to repeat itself going forward, even as much more Bitcoin liquidity would come into being.

Bitcoin Price in 2013: The Decisive Year

Price of 1 Bitcoin in 2013: $13- $1,100

In 2013, the EFF began accepting Bitcoin again, and this was the strongest year in Bitcoin price history in terms of percentage gains. The cryptocurrency saw gains of 6,600%.

Starting at $13 in the beginning of the year, the price of Bitcoin rose to almost $250 in April before correcting downward over 50%. The price consolidated for about six months until another historic rally in November and December of that year, when the price peaked out at $1,100.

This bull run saw Bitcoin’s market cap exceed $1 billion for the first time ever. The world’s first Bitcoin ATM was also installed in Vancouver, allowing people to convert cash into crypto.

It would be over three years before the Bitcoin price would reach $1,000 again. The Bitcoin price in 2013 bottomed out at -85% off its record high.

Amidst this volatility was a surge in crypto interest, with Dogecoin being one of the more notable coins to emerge at that time. Though considered a meme coin, Dogecoin still exists.

Bitcoin Price in 2014 – 2016: The Fallow Period

While the cryptoverse quietly exploded in this time period, with technological innovations that permitted a move away from proof-of-work to the less onerous proof-of-stake, as well as the emergence of smart contracts, and the real foundations of decentralized finance — Bitcoin was relatively quiet.

The price held steady in the $200 to $400 range for much of this time, but began to climb with the second halving in 2016 — and quickly reached five digits within the year after the halving, peaking at nearly $20,000 in December of 2017. Let’s take a closer look.

Bitcoin Price in 2017-2019: The Surge Pt. 2

Price of 1 Bitcoin in 2017-2019: $1,100 – $20,000

The Bitcoin price in 2017 breached the $1,100 mark in January, a new record high at the time — following the Bitcoin halving in July of 2016. By December, the price had soared to nearly $20,000. That’s a 20x rise in less than 12 months, and it was followed predictably by a decline through 2018 and 2019. Bitcoin wouldn’t see the other side of $20,000 until late 2020.

Like the 2013 price surge, the 2017 rally occurred about one year after the halving. What made this time different was that for the first time ever, the general public became more aware of cryptocurrency. Mainstream news outlets began covering stories relating to Bitcoin and other cryptocurrencies. This price rise largely reflected retail investors entering the market for the first time.

Opinions on Bitcoin ranged from thinking it was a scam to believing it was the greatest thing ever. For the believers, this was an opportunity to learn how to invest in Bitcoin for the first time, but there’s little doubt that the influx of retail interest in the crypto markets contributed heavily to volatility across the board.

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Bitcoin Price in 2020: After the 3rd Halving

The crypto feeding frenzy was well underway by the end of 2019, with hundreds of new coins on the market. By January 3, 2020, Bitcoin’s price was $7,347.49 and it steadily rose as the halving in May of 2020 approached, shooting north of $9,100 that month, nearly a 25% increase in just a few months.

But that was just the start of a meteoric rise — and fall — for BTC that few will forget, and a phase of Bitcoin’s story that many tie to the pandemic. With millions of people worldwide confined at home from 2020 through 2021 (in some cases longer), online speculation became a widespread phenomenon. One offshoot of that may have been the biggest Bitcoin bull market to date.

Bitcoin Price Chart in 2021: An Epic Rise and Fall

In August 2021, the price of Bitcoin was hovering around $46,000, and by November 2021 BTC hit its all-time high of over $68,500.

bitcoin price chart 2021

Toward the end of 2021, however, the Bitcoin hash rate, a factor thought to have some correlation to the Bitcoin price, plummeted to around $47,000 — a loss of close 30%.

The price drop occurred partly as a result of China requiring its citizens to shut down Bitcoin mining operations. The country previously housed a significant portion of the network’s mining nodes. As a result, these computers had to go offline. Many believe this reduction in mining capacity was a key factor weighing on the Bitcoin price.

In addition, politicians and regulators raised concerns about the future of crypto laws and regulations, adding to the general mood that crypto mavens refer to as FUD (fear, uncertainty, doubt) — one of many crypto slang terms now in wider use.

But as 2021 shifted into 2022, the specter of inflation — in addition to the global energy crisis and geopolitical turmoil thanks to Russia’s war on Ukraine — put a drag on the price of BTC and just about every other major crypto.

Bitcoin Price in 2022: Onset of the Crypto Winter

From January 2022 through May, Bitcoin’s price continued to sag as the Crypto Winter officially took hold. By May, BTC dipped under $30,000 for the first time since July of 2021.

What Is a Crypto Winter?

Unlike a bear market, a crypto winter doesn’t have specific parameters or criteria. But, similar to a bear market, it does mark a period of steady and sometimes precipitous losses that pervade the crypto markets as a whole.

Crypto Struggles in the Face of Crises

This downward trend proved to be the case as crypto prices overall declined through Q2 — partly affected by the collapse of stablecoins like TerraUSD and Luna. In June, Bitcoin fell below $23,000.

Crypto prices struggled through Q3 of 2022, and took another hit in November 2022, thanks to the sudden failure of crypto exchange FTX.

The exchange crashed amid a liquidity crunch and allegations of misused funds by its CEO, Sam Blankman Fried. A bailout by Binance was possible, but the deal fell through because of FTX’s troubled finances and implications of fraud.

The rapid downfall of FTX shocked the financial industry, and the crash had a massive ripple effect throughout the crypto market, affecting investor confidence. Widespread worries about inflation, as well as steady interest rate hikes, affected broader markets. Bitcoin’s price continued to be a barometer of crypto health in many ways, plunging below $20,000 by the end of December, 2022.

Bitcoin in 2023: Hopes for a Steady Recovery

As of February 27, 2023, Bitcoin’s slow but steady price increase to about $23,300 sparked hopes that the crypto winter had begun to thaw, with other cryptocurrencies showing similar price patterns in Q1.

Also, Bitcoin mining has reached a new high as February draws to a close. This signals interest from miners, which some traders are taking as a bullish indicator.

Although inflation has yet to be tamed in the wider markets, there is a sense that some of the measures the Fed has taken may encourage a soft landing.

What Factors Affect Bitcoin’s Price?

Bitcoin trades constantly on many different exchanges. The price is discovered through buyers and sellers agreeing on prices at which to settle trades. It can be said that “the market” determines the price of Bitcoin.

Of course, many external factors may influence the price at which people are willing to pay for Bitcoin.

1. Sentiment

With any asset, general market sentiment can influence present and future price action. This tends to occur in cycles.

It often happens that as more and more people grow increasingly bullish on something, the price keeps rising until everyone thinks it will never go down again. Then at some point, things change, and sentiment starts shifting the other way. Once most people think the price will never go up again, that usually indicates that prices have come close to bottoming.

This is why CNN has something called the “Fear and Greed Index”. The index measures sentiment across financial markets at large using seven broad indicators. These indicators measure things like Bitcoin stock price volatility, call-to-put ratios, and the amount of stocks making new highs vs the amount of stocks making new lows.

2. Mining

Bitcoin mining also impacts the price of Bitcoin. Miners are powerful computers that process transactions for the network, and they’re the source of newly minted bitcoins.

Because miners create and accumulate new coins, what they tend to do as a whole can make a big difference in market prices. Miners have to sell Bitcoin to cover electricity and maintenance costs. But what they choose to do with their remaining coin can impact prices.

For example, when miners anticipate the future price of Bitcoin to be higher than it is right now, they could choose to hold most of their coins, reducing overall supply on exchanges. This would create support for prices.

On the other hand, if miners think the price of Bitcoin will fall, or they need cash today for some reason, they could sell their coins, increasing the supply and potentially driving prices lower.

3. Money Supply

Some may argue that the number one factor affecting the price of Bitcoin is the growth in money supply. When central banks print more money, the price of Bitcoin tends to rise in almost direct proportion to the amount of new currency created.

This is part of the supply-and-demand element in Bitcoin’s price. More and more dollars (or Euros, Yen, Pesos, etc.) wind up chasing an ever-dwindling supply of bitcoin. The new supply of fiat currency keeps growing while the new supply of bitcoin gets cut in half every 4 years (a process known as Bitcoin halving).

4. The Network Effect

Some say Bitcoin’s true value lies in the Bitcoin network. In other words, how many people are using Bitcoin.

A rough analogy would be social media networks. We tend to measure the value of a social network by its number of users and how active they are on the platform. Facebook and Instagram both have over a billion users each, with at least half of them logging in everyday in the case of Instagram. This is the main reason people think these networks have value.

With the Bitcoin evolution, the more people who create cryptocurrency wallets, convert fiat currency to Bitcoin, and spend or store those coins, the more valuable Bitcoin could become. And as the price of Bitcoin rises, more people tend to join in the network, potentially creating a positive feedback loop.

The Takeaway

As of February 27, 2023, Bitcoin seems to be regaining some of the luster it lost during the crippling crypto winter of 2022, holding fairly steady above the $20,000 mark (but far off its November 2021 peak of about $68,000).

Nonetheless, the bigger story of Bitcoin’s price history is far more impressive. As the oldest and still the largest form of crypto, BTC has gone from being worth a fraction of a penny to about $23,000 today — with a staggering range of price highs and lows in between.

If Bitcoin continues to grow at even a fraction of the rate it has over the past 14 years, the gains for long-term crypto investors would outpace that of most other asset classes. However, past performance doesn’t guarantee future results.

Photo credit: iStock/simarik

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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.
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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.

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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2023
What is Ethereum Classic (ETC)? ETC vs ETH

Ethereum Classic vs Ethereum 2.0: What’s the Difference?

By | Growing Wealth, invest, Investing | Comments Off on Ethereum Classic vs Ethereum 2.0: What’s the Difference?

Ethereum 2.0 is the new and improved version of the original Ethereum project, while Ethereum Classic is a smaller, less well-known fork from the original Ethereum blockchain, dating back to 2016. The native coin of Ethereum 2.0 is ETH, unchanged from the original Ethereum project. The native coin of Ethereum Classic is ETC.

Ethereum 2.0 features a series of innovations and upgrades that became known as The Merge, when the project shifted from a proof-of-work system to a more efficient proof-of-stake algorithm in September 2022.

Ethereum Classic, meanwhile, still exists, but ETC has a much smaller market cap and lower price compared with ETH.

What Is Ethereum 2.0 (ETH)?

Although Ethereum is the second-largest crypto by market cap, the road to Ethereum 2.0 has been long and complicated.

History of Ethereum 2.0 and Ethereum Classic

It helps to think of Ethereum as evolving in three stages:

•   The original Ethereum project and crypto (ETH) were created by Vitalik Buterin and launched in 2015 as the first programmable blockchain.

•   In 2016, a hacking incident resulted in a hard fork of that original blockchain, which divided the Ethereum project in two. Users loyal to the original blockchain became part of Ethereum Classic — essentially the original Ethereum, untouched — creating a new coin ETC.

   Those who favored the upgrade, which reconfigured the blockchain to address the hack and cyber theft, built a version known simply as Ethereum, which kept ETH as its native coin. Call it Ethereum 1.0.

•   Then in late 2022 the Ethereum 1.0 blockchain completed a major shift from its legacy proof-of-work system, migrating to proof-of-stake. This more efficient blockchain is sometimes called Ethereum 2.0 — but that moniker is fading now that some of the major changes are in place.

So when people talk about Ethereum 2.0, they are referring to the latest upgrade to the far more energy-efficient, proof-of-stake consensus mechanism. But Ethereum 2.0 is really the same big crypto competitor that has been #2 in size and scope to Bitcoin’s #1 for years.

What Is Ethereum Classic (ETC)?

Ethereum Classic was created from a hard fork of the original Ethereum blockchain, and ETC is its native token. The hard fork was an effort to cope with a cyber attack in which $50 million was stolen.

ETH and ETC shared the same blockchain record prior to the hard fork. Since they both stem from the same project, Ethereum Classic has many of the same features as Ethereum 2.0. But owing to the substantial technological differences between the two chains, Ethereum Classic wasn’t able to support the kinds of innovations that have built Ethereum into the DeFi powerhouse it is today.

Ethereum is best known as one of the most successful programmable blockchain platforms, with the capacity to support smart contracts, dApps (decentralized apps), non-fungible tokens (NFTs), and other DeFi projects. For these and other reasons, Ethereum remains a crypto industry leader, pointing to some of the reasons investors may consider crypto.

As of February 7, 2023, ETC was the #23 largest cryptocurrency, with a price of $22 and a market cap of just over $3.1 billion. By comparison, Ethereum (ETH) is the second-largest cryptocurrency with a price of $1,638 and a market cap of about $200 billion. Both tokens can be traded as speculative assets and both are listed on many of the most popular crypto exchanges.

Bitcoin remains the oldest and still the largest cryptocurrency, with a market cap of $442 billion, as of February 7, 2023.

What Is a Smart Contract?

A smart contract is an agreement between two parties written in code. The blockchain will execute the terms of the contract automatically, when certain conditions agreed upon by the two parties are met.

Because blockchain technology is also immutable (a blockchain’s records cannot be changed, at least in theory), smart contracts create many opportunities for businesses to do things faster, more efficiently, and in a way that doesn’t require the time and money costs of third-party oversight.

Smart contracts are a critical part of how crypto works. Many different types of cryptocurrencies can use smart contracts, but Ethereum was the first and remains the most prominent leader in the space.

How Ethereum Classic Works

Ethereum Classic is the original Ethereum, and still adheres to the rules and functions of the original Ethereum blockchain. As such, the upgrades that have been implemented over time, leading to Ethereum’s current incarnation (Ethereum 2.0), are not compatible with Ethereum Classic.

Accordingly, Ethereum Classic retains a proof-of-work consensus mechanism, in which miners can generate additional ETC through crypto mining.

Ethereum Classic also doesn’t adhere to the ERC20 token standard. The primary purpose of ERC20 tokens is to work with smart contracts and define a common list of rules that all tokens on the Ethereum blockchain abide by.

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Ethereum Classic History

The history of Ethereum Classic is complicated and technical. A simplified summary of the altcoin might go something like this:

•   Developers created the DAO, or decentralized autonomous organization, on Ethereum with the goal of funding future development of decentralized applications.

•   The DAO had its own tokens that were interchangeable with ETH tokens and executed contracts using proof-of-work.

•   In 2016, after hackers took advantage of a flaw in the DAO smart contract and stole $50 million worth of ETH, the community decided that the network would create a hard fork to solve its security challenges.

•   The new blockchain, created as a result of the fork, would be called Ethereum. Ethereum began a bigger evolution in 2021 and shifted to proof-of-stake consensus algorithm in 2022. The old blockchain is called Ethereum Classic.

Difference Between Ethereum 2.0 and Ethereum Classic

If you’re looking to build a well-balanced crypto portfolio, you probably want to choose one but not both Ethereum and Ethereum Classic.

While the Ethereum 2.0 and Ethereum Classic networks allow software developers to use smart contracts to build applications, one advantage of Ethereum 2.0 is that it has a larger market cap and user base than Ethereum Classic. This may make ETH less volatile overall. Certainly the token has higher liquidity, and is more popular on exchanges.

ETH also has the added use case of being fuel or “gas” for decentralized applications (dApps). Many developers build decentralized finance (DeFi) protocols on top of Ethereum.

To use those kinds of apps, users need ETH tokens. Sometimes ETH is the only token that users can exchange for other tokens necessary for participating in the platform. Other times, dApps require small amounts of ETH to perform certain functions.

For example, Crypto Kitties was one of the first big decentralized applications, or dApps. The game allowed users to buy, sell, and trade virtual cats that could be “bred” with one another, creating new, unique virtual cats. To participate in the game, users needed ETH tokens.

Ethereum 2.0 also has stronger support from something called the Enterprise Ethereum Alliance, which counts many large companies among its members.

Choosing Which Ethereum to Invest in

If you want to invest in one of the two Ethereums — Ethereum 2.0 or Ethereum Classic — the decision will ultimately come down to your personal preferences and goals as an investor. As discussed, the two are similar, but there are some stark differences that may make one more attractive than the other.

For the average crypto investor, though, it may make sense to stick to the larger cryptocurrency, which is Ethereum 2.0. It has more liquidity and a larger market cap, which might make it a more attractive choice. On the other hand, if you’re interested in being able to mine crypto, Ethereum Classic may be more suited to your tastes.

Price of Ethereum Classic vs Ethereum 2.0

In terms of price or value, Ethereum 2.0 (ETH) is more valuable than Ethereum Classic (ETC). As noted above, Ethereum 2.0 tokens were trading for roughly $1,638 each as of Feb. 7, 2023. That is down significantly from its all-time high of more than $4,600 in the fall of 2021.

Ethereum Classic, conversely, trades for around $22. That, too, is far off its all-time high, which was around $120 in the spring of 2021.

Recommended: Top 30 Cryptocurrencies Based on Market Cap

The Future of Ethereum Classic

What is the future of Ethereum Classic? It’s hard to say.

Looking at Ethereum Classic vs. Ethereum 2.0, it’s not hard to see that Ethereum appears to have better prospects for the future. For instance, there’s more trust in the ETH network, it has more backing, and it has a much larger market cap when compared to the Ethereum Classic value. There are also a lot of DeFi platforms and other dApps built on Ethereum 2.0 — more so than on any other smart contract platform.

To make matters worse, the Ethereum Classic network has suffered several 51% attacks. This can happen when attackers gain enough hashing power to control the majority of the network. Then they can alter the blockchain, leading to potential problems like double spent transactions, where users can send the same coins more than once.

The Takeaway

Ethereum Classic is the original version of Ethereum, which itself has undergone several upgrades and is now Ethereum 2.0. The two are similar, and have their roots on the same Ethereum blockchain, but now are two different cryptocurrencies entirely, operating on their own blockchains.

Ethereum Classic still adheres to the original Ethereum’s standards and protocols, including its proof-of-work consensus mechanism. Ethereum 2.0, on the other hand, has adopted new and improved standards, including a proof-of-stake model. It’s also vastly more popular and valuable.

FAQ

Is Ethereum Classic the same as Ethereum?

No, Ethereum Classic is its own project on a separate blockchain network, that adheres to the original Ethereum’s standards and protocols. It’s more accurate to say that Ethereum 2.0 is the “original” Ethereum, as it is the old Ethereum having undergone upgrades and updates.

Which is better: Ethereum 2.0 or Ethereum Classic?

It’s impossible to say which is better, as that’s a subjective call. But Ethereum 2.0 has many advantages over Ethereum Classic, since it’s bigger, more widely used, and more valuable. But prospective miners may give Ethereum Classic the edge.

Is there a future for Ethereum Classic?

Ethereum 2.0 appears to be winning over more investors and market participants. Ethereum Classic is still one of the largest crypto, however, so it’s not time to rule it out.

Photo credit: iStock/MStudioImages

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.

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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Feb
03
2023
What Is Ethereum 2.0 and When Will it Be Released?

Guide to Ethereum 2.0

By | Growing Wealth, invest, Investing | Comments Off on Guide to Ethereum 2.0

Ethereum 2.0 is the latest upgrade to the Ethereum blockchain network, shifting it from a proof-of-work to a more efficient proof-of-stake consensus mechanism.

As Ethereum gained widespread recognition and adoption within the crypto space in recent years — it’s the second-largest crypto project after Bitcoin — some elements of the network required upgrades. As one of the most innovative blockchains in the DeFi space, Ethereum struggled with transaction times and scalability, among other issues.

The move from a proof-of-work consensus system to a less energy-intensive, more efficient proof-of-stake model aims to address those challenges. This massive overhaul has been termed The Merge.

What Is Ethereum 2.0?

To understand Ethereum 2.0 and its upgrades, you must have a basic understanding of what Ethereum is.

What Is Ethereum?

Ethereum is a form of crypto, of course, but Ethereum is best known as one of the most successful programmable blockchain platforms, with the capacity to support smart contracts, dApps (decentralized apps), non-fungible tokens (NFTs), and other DeFi projects.

The Ethereum native token is the Ether (ETH), and it’s used to fuel operations on the blockchain.

The Ethereum platform launched in 2015, and it’s now the second largest form of crypto next to Bitcoin (BTC), with a market capitalization of about $193 billion, as of Jan. 30, 2023.

Ethereum’s History of DeFi Innovation

The larger idea for Ethereum was to create a programmable blockchain that would enable a sort of free market environment, where developers could create decentralized applications (dApps), smart contract, and other DeFi programs without any control or interference from a third party.

Historically, Ethereum relied on a proof-of-work (PoW) consensus mechanism in order for miners to validate transactions and earn Ether (ETH) or gwei, a denomination of ETH used to pay for DeFi goods and services on the network.

In proof-of-work mining, high-powered computers solve complex mathematical puzzles needed to validate blocks of data or transactions.

Ethereum users can also create code used to build dApps and smart contracts. Smart contracts can execute transactions without a middleman, like a bank or regulator, once certain conditions are met. This innovation set Ethereum apart from other crypto projects, and it has inspired other crypto platforms to launch similar features.

Limitations of Ethereum

Because the Ethereum network has long attracted developers and other innovators, it has experienced growing pains, so to say, that have limited its ability to scale efficiently. In particular, Ethereum has been criticized for long transaction times and high fees.

Ethereum 2.0, or The Merge,”aims “to improve the network’s scalability, security, and sustainability,” according to its creators. As such, it’s hoped that improvements in those areas will be the primary ETH merge impact.

Those goals address several of the network’s key limitations: It needs to be faster, less vulnerable to threats, and eat up fewer resources. Of course, there are challenges to put these changes in place. Programmers have spent many years working on Ethereum 2.0, and though some changes have already been implemented, others will be phased in over the coming years.

How ETH 2.0 Solves Some Limitations

The most critical element of the move to Ethereum 2.0 is the transition from a proof-of-work algorithm that allows the network to be more nimble and efficient. While the proof-of-work system is still used by other crypto networks (most notably Bitcoin), many others are adopting alternatives.

The move to a proof-of-stake consensus mechanism eliminates the need for miners, which reduces the amount of resources required to keep the network’s integrity in check.

While the discussion about proof-of-work versus proof-of-stake algorithms is worthy of a conversation in and of itself (see below), the adoption of a the proof-of-stake system by Ethereum helps solve many of the issues (again, scalability, security, and sustainability) that the network previously experienced.

When Was Ethereum 2.0 Released?

The upgrades to the Ethereum network are being implemented in phases, and many features of the new network were established by late 2022.

The transition began with the introduction of the Beacon Chain in December 2020. During 2022, other upgrades were phased in, including a merge with Ethereum’s mainnet with the proof-of-stake Beacon Chain. The next phase will include a blockchain management strategy known as sharding sometime in 2023 or 2024.

What Are the Upgrades to Ethereum?

As noted above, the move toward Ethereum 2.0, or the Merge, has been accomplished in stages.

The Beacon Chain

The Beacon Chain introduced a new staking concept (proof-of-stake) to the platform. It launched before many other upgrade components because it’s a cornerstone to Ethereum 2.0’s system and needed to be in place for other components to work on top of it. The Ethereum merge date was in September 2022.

The Ethereum Mainnet Merge

The merge concerns the marriage of the existing Ethereum mainnet (Ethereum’s main network) with the Beacon Chain’s proof-of-stake protocol, as discussed.

This change is now live, and as a result, crypto mining is no longer needed to generate ETH, and instead, the network uses a staking system in order to create additional Ethereum tokens. This change has reduced the network’s energy consumption by more than 99.9%.

These two steps — the launch of the Beacon Chain, and the mainnet merge — paved the way for the next part of the transition: The introduction of shard chains.

Shard Chains

By introducing shard chains, which is scheduled to happen within the next year or two, the Ethereum network will have more capacity and speed, giving it the ability to handle more traffic.

“Sharding” is a bit technical, but it basically means that a database will split up to disperse the load of transactions on the network. Sharding reduces congestion and speeds up transactions, allowing the network to store and process more data in a shorter amount of time. Plus, more people will be able to participate on the network after it is sharded.

Ethereum 2.0 Staking

Remember: Ethereum 2.0 represents a full transition to a proof-of-stake protocol from a hybrid system that uses both proof-of-stake and proof-of-work.

Staking, in general, is the process of locking up cryptocurrencies to earn rewards. It’s like putting your cash in a savings account and accruing interest. Staking is a process used to validate data and transactions in a blockchain network, which is why and how Ethereum uses it.

Recommended: What Is Crypto Staking?

Understanding Proof-of-Stake

With a proof-of-stake system, users validate block transactions based on the number of coins they hold. Basically, the more ether a user has, the more mining power they possess. As discussed, mining isn’t necessary under a proof-of-stake algorithm (not the case for proof-of-work).

That means that the process requires less energy and mining power — fewer resources overall — to keep the network running.

The Difference Between Proof-of-Stake and Proof-of-Work

Proof-of-work, conversely, is the original algorithm used by blockchain networks. On this protocol, users “mine” new coins, as they would on the Bitcoin blockchain, to earn rewards.

Mining is extremely energy intensive, which is one reason Ethereum 2.0 is moving to proof-of-stake.

Recommended: Is Crypto Mining Still Profitable in 2023?

A proof-of-stake algorithm will also bring less risk onto the network, has stronger support for sharding, and is more efficient — all upgrades over the proof-of-work system.

Summary: Ethereum vs Ethereum 2.0

To wrap it all up, Ethereum 2.0’s rollout is designed to make some significant improvement over the old Ethereum network, and make it more secure, sustainable, and increase its scalability. Here’s a brief rundown of the major differences, as they relate to crypto investors:

Ethereum vs. Ethereum 2.0
Ethereum

 Ethereum 2.0
Proof-of-work algorithm Proof-of-stake algorithm
Required mining to generate ETH Users stake tokens to earn ETH rewards
Slower and more resource-intensive More secure and energy-efficient

What Will Happen to My ETH?

There is no immediate impact to ETH holders as a result of the rollout of the Ethereum 2.0 project. While the network is getting upgrades, there’s no change to ETH itself, and investors shouldn’t need to do anything. Be suspicious of anyone who says otherwise, as crypto scammers may try to take advantage of the transition.

As for how the rollout has impacted prices for Ethereum? It’s hard to say for sure, as there are numerous factors affecting crypto prices at any given time. You can, however, check the ETH price now to get a sense of the value of your Ethereum holdings.

The Takeaway

Ethereum 2.0 is a series of upgrades to the Ethereum network, which introduces a new proof-of-stake system that makes the network, as a whole, more efficient and secure. While the multi-year rollout of the upgrade has begun, hopes are that Ethereum will become bigger and safer over time, while reducing its environmental impact, setting it apart from other types of cryptocurrency.

FAQ

Has Ethereum 2.0 come out yet?

Ethereum 2.0 is a series of upgrades that are being rolled out in phases, some of which have come out, or have gone live. The process is not complete, though, and likely will finish within the next couple of years.

Did Ethereum 2.0 replace Ethereum?

Yes and no. Ethereum and Ethereum 2.0 are still more or less the same as they were, but the network has changed or been replaced, in a sense. Ethereum 2.0 isn’t so much a replacement for Ethereum, as it is an upgrade to its system.

How are Ethereum and Ethereum 2.0 different?

The most impactful difference between Ethereum and Ethereum 2.0 is the introduction of a proof-of-stake consensus system, which makes the network faster, more secure, and more scalable, while reducing the amount of resources needed to generate new ETH.

Photo credit: iStock/Pekic

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.

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.

First Trade Amount Bonus Payout
Low High
$50 $99.99 $10
$100 $499.99 $15
$500 $4,999.99 $50
$5,000+ $100

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