InvestZ Archives | Page 180 of 183

Jun

2021

Bitcoin Mining Software: How to Choose the Right One

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

To mine Bitcoin, a number of things are required. Miners need:

• Mining hardware: Application Specific Integrated Circuits (ASICs) or Graphic Processing Units (GPUs)

• Bitcoin mining software

• A bitcoin mining pool

• Electricity: Bitcoin mining typically consumes a large amount of energy

• A place to set up a mining rig

• In some cases, a way to cool down ASICs/GPUs (the machines tend to generate a lot of heat)

Of all these needed elements, crypto mining software is one of the most vital. Mining rigs can’t mine without the proper software. This program will tell the machines which currency to mine, what pool to participate in, and how fast to run the fans.

Selecting the best software to mine Bitcoin may be confusing to newcomers, but it doesn’t have to be complicated. Perhaps even better, it also doesn’t have to be expensive. While mining Bitcoin can be costly in terms of hardware and electricity, the software to mine Bitcoin usually isn’t. Most Bitcoin mining software is free and open-source, so anyone can download it and see what went into creating it.

Factors to Consider When Choosing Bitcoin Mining Software

Before settling on a specific mining software program, it’s worth considering some key variables.

1. What operating system will you be running the software in?

Make sure the OS is compatible with the software whether it’s Windows, Linux, or Mac OSX. In addition, some software only works with ASIC miners, while others might only work with GPU miners.

2. Are the software and hardware Bitcoin-compatible?

Bitcoin requires ASICs that can run the SHA-256 algorithm. Some altcoins, like Dogecoin and Litecoin, run on the Scrypt algorithm, and need special ASICs designed for that specific purpose.

3. Which wallet and exchange will you be using?

First, you need your own Bitcoin wallet to deposit mined coins into. A desktop hot wallet like Amory, Breadwallet, or Electrum may be a good option since it allows users to hold their own private keys. From there, you will need to move the coins to a crypto exchange to trade the mined coins for fiat currency or a stablecoin. Users who want to hold all of their profits in Bitcoin can skip this last step and instead put their coins into a more secure long-term storage method like cold storage.

Once the above factors have been taken care of, users can move forward with finding the best Bitcoin mining software for their needs.

Top Bitcoin Mining Software in 2021

Here are a few of the top crypto mining software programs on the market in 2021. Depending on a user’s experience with crypto specifically and with tech in general, some software might be more appealing than others.

CGMiner

CGMiner has been one of the most popular mining programs for many years. For those who already know a thing or two about how Bitcoin mining works, this might be their preferred program.

Pros:

• This software comes with features like fan speed control, the ability to access the program remotely, and use with multiple miners.

• It can even be used for CPU mining (although this is not feasible for most coins today, as mentioned earlier).

• The software works with most operating systems.

Cons:

• The user interface is very basic: grey text on a black background.

• The program is run using a command line, meaning users type in commands to tell it what to do. This may not be appealing to new users.

EasyMiner

EasyMiner provides a graphic user interface (GUI) for the CGMiner software. While CGMiner shows little more than lines of text, EasyMiner provides graphs displaying mining activity along with other visual features.

Pros:

• It’s good for new users who prefer a user-friendly GUI.

Cons:

• It’s not compatible with Mac OS X.

BitMinter

This software is also more user-friendly than some of its competitors. BitMinter supports all major operating systems, is easy to use, and automatically points to its own mining pool (also called BitMinter).

Pros:

• It’s easy to set up, including its own mining pool.

• It’s compatible with Windows, Mac OS X, and Linux operating systems.

Cons:

• It has to be used with the BitMinter mining pool, which charges a 1% fee.

MultiMiner

This software simplifies a lot of the set up involved with Bitcoin software and comes with a GUI. Things are displayed and explained in a simple-to-understand way for beginners. Users are even instructed on how to link their miners to the mining pool of their choice. This software is designed for Windows, although additional software add-ons can be used to make things work on other operating systems.

Pros:

• It’s good for beginners.

Cons:

• It needs additional software to be able to run on Mac OS X or Linux.

Bitcoin Mining Software: Commonly Asked Questions

Wondering what to know before investing in crypto through the mining process? These are some of the most frequently asked questions when it comes to crypto mining software.

Can I Mine Bitcoin On My PC?

No, you can’t mine Bitcoin using your PC’s CPU or GPU power. There was a time when that was possible, but today, mining Bitcoin requires more powerful machines known as ASICs. You can, however, use a PC to run the mining software that controls your ASICs and points them toward a specific mining pool.

Can I Mine Bitcoin With My Phone?

Smartphones do not have the processing power necessary to mine Bitcoin. There have been reports of some types of sophisticated mining malware that harvest processing power from many smartphones and combine it to mine an altcoin with lower difficulty. But other than that, phones simply cannot mine crypto.

Recommended: What Is Pi Cryptocurrency? – A unique take on smartphone crypto mining.

Can You Mine Bitcoin for Free?

No. This is like asking if you can mine gold for free. There will always be costs associated with Bitcoin mining, including the hardware and electricity required to do so. This is one reason people believe Bitcoin has value—it can’t be created out of thin air.

How much does it cost to mine 1 Bitcoin?

This varies depending on the rate miners pay for electricity, the power of their machines, and the current mining difficulty (which adjusts upward or downward every two weeks or so).

How Do I Start Mining Bitcoins?

The best place to start is by doing research to determine whether or not mining Bitcoin is right for you. An individual who decides to try their hand at Bitcoin mining would then have to go about securing the necessary hardware, software, and electricity before finally selecting a mining pool to point their rig towards.

What is the Best Way to Mine Bitcoin?

From an energy perspective, the best way to mine Bitcoin might be using some kind of renewable energy source like solar, wind, hydro, or geothermal. There’s a growing trend in the industry toward these types of energy sources because they both increase miner revenues and reduce the carbon footprint of Bitcoin.

The Takeaway

Overall, Bitcoin mining requires a lot of research, knowledge, effort, and investment. Bitcoin mining software is a crucial piece of the prep, since miners can’t run their machines without the right software. Choosing the right software depends on both an array of technical factors for the mining machines, the chosen coin to mine, and the operating system of the computer running the software in question, as well as factors regarding the user experience itself. Once the technical details have been determined, users can make a decision based on what they think might work best for them.

Photo credit: iStock/Eva-Katalin

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.

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.

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.

SOIN0421172

Jun

2021

How is Bitcoin Valued?

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

As a decentralized digital currency, Bitcoin is valued primarily on supply and demand on the exchanges where it’s bought and sold. But there are other variables that come into play, driving up the value of Bitcoin to new heights, and then driving it down at times, too.

What is the Value of 1 Bitcoin?

The price of Bitcoin has risen dramatically since the technology was created in 2009. While at first one bitcoin had essentially zero value, it gradually rose to a fraction of a penny and then underwent several boom and bust cycles (or “bubbles”) over the years before arriving at today’s valuation of around $37,000.

In March of 2020, the price of one bitcoin fell as low as $4,000 or less on some exchanges. The price then rose 10x to over $40,000 in less than a year as massive government stimulus programs coincided with growing adoption by corporations and large institutional investors.

In April of 2021, Bitcoin notched yet another record high in US dollars at over $63,500, according to Coindesk data—and by mid-May, it was down to $37,739.

What Affects the Price of Bitcoin?

There’s no easy answer to the question “how is the price of Bitcoin determined?” Because Bitcoin is decentralized, there isn’t even one single price like there is for commodities like oil or gold. Being a decentralized digital commodity of sorts has allowed Bitcoin to find a price determined mostly by the sum total of buy orders and sell orders across multiple exchanges.

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. Indexing services, like those provided by Coindesk, Coinmarketcap, Messari and others, aggregate data from many sources and approximate an average to come up with a single value.

Of course, many external factors may influence the price at which people are willing to pay for Bitcoin. These variables can shed light on the question, “how is Bitcoin valued?”

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 stock volatility, call-to-put ratios, and the amount of stocks making new highs vs the amount of stocks making new lows.

With Bitcoin, news of increasing adoption or additional capital coming into the asset class tends to drive prices upward. Here are a few examples of headlines that have contributed to Bitcoin’s price performance in 2020 and 2021. Note that positive Bitcoin news doesn’t always have to do with Bitcoin itself, but with the cryptocurrency sector in general:

• “Visa Supports Transaction Settlement With USDC Stablecoin”

• “Paul Tudor Jones reportedly buys bitcoin as an inflation hedge, compares crypto to 70s gold trade”

• “MicroStrategy buys more than $1 billion worth of bitcoin, adding to massive holdings”

• “Tesla Buys 1.5bn in Bitcoin, Pushing Price to New High”

The fact that big names like these (and others) have decided to start investing in bitcoin in just the past 12 months has helped to boost the price. Furthermore, these entities are buying up huge sums of bitcoin with the intent to hold for the long-term, further reducing the overall supply and putting a floor underneath prices.

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 some of their 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 Bitcoin, 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

There’s no single variable that can be pinned down as the main driver of the Bitcoin price. While some factors, like news and sentiment, are universal in the financial world, others like mining and the network effect are more unique to cryptocurrency. When it comes to what to know before investing in crypto, doing more in-depth research on some of the concepts mentioned above could be a good place to start.

For investors ready to start trading crypto, SoFi Invest® makes it simple to get started. Members can trade a range of crypto, from Bitcoin and Ethereum to Litecoin and more—and manage their account right from the SoFi app.

Find out how to get started trading crypto with SoFi Invest.

Photo credit: iStock/akinbostanci

SOIN0421173

Jun

2021

What Is a Token?

By Colin Dodds | Growing Wealth, invest, Investing | Comments Off

Both cryptocurrency and tokens are blockchain-based digital assets—but they are not the same thing. Yet as the public becomes increasingly aware of blockchain technology and more people invest in cryptocurrency, confusion swirls around the difference between the two assets.

What Are Crypto Tokens?

Cryptographic tokens are programmable assets that can be developed and recorded on existing blockchains, as a special-access smart contract.

Tokens operate within a pre-existing blockchain to allow for the creation and execution of unique smart contracts that often deliver ownership of assets outside of the blockchain network. Tokens can represent units of value—including real-world items like electricity, money, points, coins, digital assets, and more—and can be sent and received.

ERC-20 tokens exist on the Ethereum network, NEP-5 tokens are on the NEO cryptocurrency network. The tokens live on the blockchain of those currencies, but are not the same as the coins those currencies use as their denomination.

Those tokens, written into the smart contract of the underlying blockchain of the cryptocurrency, are only accessible by the person with the private key for the token. They allow people to create new assets, whose ownership and scarcity can be verified using blockchain technology.

Crypto Tokens vs. Coins: What is the Difference?

Coins—for example, Bitcoin and Litecoin—are built on their own blockchain and are a store of value, intended as a form of currency. Generally, any blockchain-based cryptocurrency that is not Bitcoin is referred to as an altcoin.

Tokens are built on an existing blockchain and while they aren’t currency they can represent other fungible and non-fungible items of value, like points, coins, or even a piece of artwork. One example of a token is the Basic Attention Token, or BAT.

Because crypto coins are more straightforward—they’re a form of currency—they’re often easier to understand than crypto tokens. Below, we’ll go over what crypto tokens are and how they work.

How Do Crypto Tokens Work?

Blockchain uses a decentralized, or distributed, ledger, which resides on a vast array of independent computers to track transactions. Each node organizes new data into blocks, and chains them together in an “append only” mode. That append-only structure means no one on any node can alter or delete the data from earlier blocks. They can only add to the chain, which is one of the core security features of blockchain.

Cryptocurrency tokens offer the append-only secure record of cryptocurrency, connected with a special-access contract, which can connect to all manner of assets. The special-access contract with the tokens can give users the rights to assets such as cash, crypto coins, rewards points, or even digital media such as music, art, a video clip, or a movie. The tokens create the possibility of owning a blockchain-verified private smart contract connected to that asset.

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Different Types of Crypto Tokens

Currently, there are four main categories of tokens: payment tokens, utility tokens, security tokens, and non-fungible tokens. Below we’ll dive deeper into each one.

Payment Tokens

Most of the best known and most widely used forms of cryptocurrency are payment tokens. These crypto tokens are used to buy and sell, just like the U.S. Dollar or the Euro—except they’re not backed by a specific government.

Payment tokens exist within the blockchain of crypto networks like Bitcoin, Monero, and Ethereum, and represent units of value that can be exchanged for other currencies. There are also third-party custodians or exchanges that convert payment tokens into legal tender currencies such as the dollar.

Increasingly though, people have begun using these tokens to buy goods and services, though the overall number of merchants who accept them is still relatively small.

Utility Tokens

Utility tokens give their owners access to a product or service that either exists or is in development. They’re most commonly used as a fundraising vehicle for ICOs (Initial Coin Offerings), as a placeholder for the crypto coins the purchasers will receive when the new coins eventually go live on the blockchain.

The name for these tokens comes from the fact that they can be used to obtain either a good or service offered by the issuer. Their existence on an existing blockchain means that the owners can be verified, and also that they can be easily exchanged. During the 2017 cryptocurrency boom, when hundreds of crypto firms were planning new ICOs, they issued ERC-20 utility tokens on the Ethereum blockchain as a placeholder for prospective investors in their soon-to-launch coins.

Security Tokens

Security tokens offer rights and obligations to securities like stocks and bonds. Most often, a security token represents a share in the company that issued it. They can represent legal ownership of an asset, or a portion of an asset, like real estate, stocks, ETFs, and so on.

As such, they’re more heavily regulated than other tokens. Companies might issue security tokens instead of traditional shares of stock to raise money cheaply, or because the tokens offer instant settlement and easier cross-border trading.

Non-fungible Tokens

Also known as NFTs, these tokens have made the news lately because of the eye-popping sales prices of single NFTs connected with works of art, individual tweets, and sports memorabilia. They exist on pre-existing crypto networks, with ETH being one of the most popular.

These tokens have private contracts that can be clearly distinguished from any other token in existence. Because of that feature, they are used by athletes, artists, musicians and other creators as a way to connect with collectors, who see them as digital one-of-a-kind assets.

NFTs have opened up new markets for digital art and memorabilia, because while the purchaser can still duplicate the underlying media, they can’t copy, sell or pirate it. Some people have also issued NFTs that confer ownership of unique non-digital assets, such as real estate.

The Takeaway

Blockchain offers a unique way to buy and sell just about everything, as well as new ways to verify ownership of assets. Crypto coins function as the currency on these platforms, and crypto tokens serve a variety of uses—representing a wide range of units of value, with the ability to be securely sent and received.

Photo credit: iStock/jpgfactory

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.

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	Bonus Payout
$50	$99.99	$10
$100	$499.99	$15
$500	$4,999.99	$50
$5,000+		$100

SOIN0421186

Jun

2021

What Does Network Effect Mean?

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

The “network effect” is one of the most powerful ideas in technology and business. The idea is that the more users there are in a network, the more valuable the network becomes.

Network effects are a big deal for both businesses and investors. For companies that have critical masses of users and have established lock-in, it can mean profits that grow and grow and grow. It also means that investors may be willing to have a company they fund lose money for a while if they have a shot at becoming the number one business in a field with network effects.

We can see networks in all sorts of businesses, but especially ones based around the internet, which connects individuals to one another. There are network effects in the internet, in social networks, and in digital products like cryptocurrencies.

What Is a Network Effect?

The basic idea behind network effects comes from a relatively old form of technology: the telephone. Imagine you’re the first person with a landline telephone installed. You can pick it up and listen to a dial tone, but without anyone else with a telephone, it’s merely a sculpture plugged into your wall. If you had to pay for it, the phone is perhaps of negative value, unless you really like how it looks.

But there’s value for the second person getting a phone installed—after all, they can call you up and you can call them. As more phones get installed, the value of the phone network increases. When there are strong network effects, the value of new users rises for existing users as more and more users are added to the network.

How Does the Network Effect Work?

Network effects are crucial for basically any internet-related business, including the web itself. One of the most influential attempts to quantify network effects comes from Robert Metcalfe, the co-inventor of Ethernet. He maintained that the value of a network grew as the square of its number of users.

Following this line of thinking, the value of the network to the customers or users would grow exponentially while the cost of adding new users grows linearly. For businesses that can establish network effects, then, it may make sense to invest very very heavily in user growth, even if it means losing money in the short run.

What are Businesses with Network Effects?

There are a number of modern-day industries that benefit from network effects.

Communications Networks

Network effects apply to parts of communications infrastructure that are not exactly businesses per se. For example, the World Wide Web, which is a platform for all sorts of nonprofit and for-profit activity and is not controlled by any one company, is characterized by network effects.

Marketplaces

Online marketplace eBay is a useful look at how network effects work in marketplace businesses, where a service tries to connect buyers and sellers. One reason eBay was so successful in its early years was that it achieved “lock-in” (the point where it doesn’t make sense to go to other services) for individuals wanting to auction items online. It did this in part by making the service free for sellers in its early days, attracting new users eager to make money off their items.

Social Networks

Perhaps the most prominent example of businesses characterized by network effects are social networks. Facebook, YouTube, Twitter, and other social networks improve for users as more users, usually people they know or are interested in, use them. Once everyone you know is on a social network, it may become harder to avoid and easier to simply succumb to signing up.

Cryptocurrency

If the previous examples of network effects were internet infrastructure or internet businesses, cryptocurrency may be a combination of both. Some cryptocurrencies are incredibly valuable and have built up an ecosystem of service around them.

As more people consider Bitcoin to have value, it creates an incentive for miners to secure the network—the network effect at work. In the case of Ethereum, as more apps are deployed, each one becomes a building block. This drives increased usage, and ultimately more demand for Ethereum.

In both cases network effects are a sign that the cryptocurrency could have staying power: If it does something useful for its holders, it may do something useful for people who buy in.

Granted, many other cryptocurrencies have flamed out. One big question going forward is the extent to which crypto can be characterized as having network effects — driving greater organic usage, rather than people primarily viewing cryptocurrency as an investment.

The Takeaway

A network effect is an idea that as a product or service gets more users, it will inherently attract more users — thus creating a pattern of success. The network effect can be seen most clearly in communication technology, including digital products and services like social media. For investors, it can be smart to keep an eye on the network effect in businesses you’re invested in, or are considering.

For investors just starting out, or established investors looking to expand their holdings, the SoFi Invest® online trading app offers an active investing solution that allows you to choose your investments as well as an automated investing solution that invests your money for you based on your goals and risk.

Find out how to get started with SoFi Invest.

Photo credit: iStock/Eva-Katalin

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.

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.

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.

SOIN0421151

Apr

2021

What Are Altcoins? Guide to Bitcoin Alternatives

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

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.

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.

Bitcoin Mining Software: How to Choose the Right One

Factors to Consider When Choosing Bitcoin Mining Software

1. What operating system will you be running the software in?

2. Are the software and hardware Bitcoin-compatible?

3. Which wallet and exchange will you be using?

Top Bitcoin Mining Software in 2021

CGMiner

Pros:

Cons:

EasyMiner

Pros:

Cons:

BitMinter

Pros:

Cons:

MultiMiner

Pros:

Cons:

Bitcoin Mining Software: Commonly Asked Questions

Can I Mine Bitcoin On My PC?

Can I Mine Bitcoin With My Phone?

Can You Mine Bitcoin for Free?

How much does it cost to mine 1 Bitcoin?

How Do I Start Mining Bitcoins?

What is the Best Way to Mine Bitcoin?

The Takeaway

How is Bitcoin Valued?

What is the Value of 1 Bitcoin?

What Affects the Price of Bitcoin?

1. Sentiment

2. Mining

3. Money Supply

4. The Network Effect

The Takeaway

What Is a Token?

What Are Crypto Tokens?

Crypto Tokens vs. Coins: What is the Difference?

How Do Crypto Tokens Work?

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Different Types of Crypto Tokens

Payment Tokens

Utility Tokens

Security Tokens

Non-fungible Tokens

The Takeaway

What Does Network Effect Mean?

What Is a Network Effect?

How Does the Network Effect Work?

What are Businesses with Network Effects?

Communications Networks

Marketplaces

Social Networks

Cryptocurrency

The Takeaway

What Are Altcoins? Guide to Bitcoin Alternatives

What Are Altcoins?

How do Altcoins Work?

Different Types of Altcoins

Digital currencies

Tokens

Stablecoins

Common Altcoins

Where to Buy Altcoins?

The Takeaway

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