Cryptocurrency is a budding avenue for investment in the disruptive fintech world. The cryptographic technology is being used to decentralise transactions through peer-to-peer exchange mechanisms, which are stored in a distributed digital ledger if the blockchain network is public. In the case of private networks, the access and visibility of the transactions stored on the blockchain are limited. The private networks may make the network centralised because of the controlling and regulating protocols in place.
There are certain pathways to getting involved in the crypto world. The ones that are most renowned and attract the most liquidity are illustrated below:
- ICO – Initial coin offering is a process similar to an IPO in the stock market, wherein a new cryptocurrency is launched and offered to the public for the first time. The process is based on a philosophy called free launch. Free launch protocol depends on the investment of legal tender in exchange for issued tokens to provide liquidity in the market. The process helps in attracting trade volume to the market as the purchase is made on the spot market value in the spot market.
- STO – Security token offerings represent the ownership of physical assets in a digital form through tokenisation. It serves the purpose of transparency despite it being regulated by central banks. This is a significant step forward in bringing central bank digital currencies into circulation, built on blockchain technology.
- Free Lunch – This protocol allows for token distribution as a part of the reward mechanism, where everyone is on the same status and have an equal opportunity to earn rewards. The catch is to do something to get tokens in exchange. You might be offered to view some ads, play a game or fill up a survey, which earns you rewards. These rewards have a minimum threshold, beyond which they can be encashed or exchanged for other cryptos.
- Futures Trading – The best features in crypto trading can be availed through trading futures markets. The leverages are as high as 125x, making the profit margins exorbitant and the loss untenable. It is crucial to define and judiciously use the stop-loss functionality if you are trading with such high leverages. There are also certain other features such as isolated margins, cross margins and funding charges.
What is the Best Way to Buy Crypto?
Cryptocurrency can be bought and sold online through various media. Depending on their anonymity and confidentiality protocols, these can also be stored and stacked in wallets with different security levels. The multiple modes of dealing with crypto are discussed below.
- Agents/brokers – These are the people or companies who act as intermediaries for people who are not tech-savvy enough so as to manage or directly indulge in the act of crypto trading. The caveat is that the investor cannot be sure of the wallet or platform where their crypto is being stored or even their invested crypto. Unestablished brokers may benefit from such blind faith to scam people off their investment for their personal gains. Trade investments are subject to market risk anyway, so there needs to be some PoA signed between the agreeing parties to resolve dubious situations.
- Exchange – These are online platforms similar to stock exchanges. The crypto pairs are listed on these exchanges, which a user can directly trade in once they have a KYC authenticated account. Payment can be easily made by linking a bank account or card with the wallet embedded in the exchange account. These platforms enlist all the features, as previously discussed, to facilitate trading. Some of the best crypto exchanges in the world are Binance, Bittrex and Kraken.
- Wallets – Cryptocurrencies, especially bitcoin, run on a very safe algorithm, almost impossible to hack. But the fear is not of the vulnerability of blockchain but that you’re holding in the wallet, as these are all connected to the internet and can be accessed through the exchanges, which can be prone to attacks. So, there are hot and cold wallets that can be used to store crypto securely. The former is an online wallet, therefore still vulnerable to hacks. The latter is a hardware wallet, such as a pen drive, which is most unsusceptible to compromise. Transfer of crypto from exchange to wallets is subject to a nominal transaction fee.
- SuperApps – Many payment apps also provide the option of buying crypto, and many of these offer their wallets to store the same. An example could be PayPal.
- Entertainment Platforms – There is an evolving trend of rewarding crypto by games and other lifestyle apps to promote free lunch philosophy, as discussed in the previous section.
should You Invest in SafeMoon?
For a currency to be called as such, it needs to serve some purpose out of the golden rules of money. Contrary to it, many crypto tokens are being launched, which are only speculative, and support no underlying cause. These are also popularly being referred to as meme coins.
The story of SafeMoon is similar, as the only identifiable purpose of the coin is to create wealth for its initial investors and promoters. This can be gauged by the fact that there is a transaction fee charged on its exchange, part of which is redirected to the holders and promoters. This rerouting has led to people comparing it to a Ponzi scheme. Although the token is relatively new, with over three billion subscribers and price of $0.000003, investors are advised to beware of updates from owners of this centralised DeFi. It’s also important to note here that SafeMoon has been rated well by multiple safety, transparency and audit firms