The evolution of cryptocurrency

in #investing5 years ago

The evolution of cryptocurrency

The world of investments is very broad and diverse, and within the spectrum of investments is cryptocurrency. Cryptocurrency is a small, but complicated niche in the investment world. In this article I describe briefly the original investments miners for mining coins like Bitcoin and Litecoin, then Staking in Wallets, then Masternodes.

The Evolution of Cryptocurrency
Cryptocurrency is an industry built on the promise of anonymous ownership of stores of wealth called “cryptocurrency coins”, anonymous transactions, untraceable transfers of wealth and decentralized financial institutions. The cryptocurrency environment is also one where simple possession of the cryptocurrency denotes ownership regardless of the method used to obtain them. This riskiness of the cryptocurrency environment gives investors good reasons to avoid it. But the potential for large financial rewards, the promise of security from banks, security from governments and a wealth preserving quality in inflationary times similar to gold are all reasons people invest in cryptocurrencies, despite its inherent risks. Finally, it is due to the rapidly increasing popularity of cryptocurrency investing, that the evolution of cryptocurrency as an investment has been very rapid. This article is a brief look at the evolution of the “passive investment” vehicles which are used in cryptocurrency to create and magnify wealth.

Proof of Work:
Talented people invest time, money and knowledge into machines (specialized computers) to mine Cryptocurrency and provide security and confirmation of the block chain.

Proof of Stake:
Talented people invest time, money and knowledge into software installed on their computer to mine Cryptocurrency and provide security and confirmation of the block chain without expensive equipment and high energy costs.

Master nodes
Talented people invest time, money and knowledge into installing special software on their computer, figure out how to set-up computer servers in the” virtual space” of the internet and provide security and confirmation of the block chain without expensive equipment and high energy costs, and provide specialized services like more rapid transactions, anonymous transactions secure messaging and other specialized function. This is a highly technical undertaking requiring some ability to understand computer code or a trusted friend who does. Once this is set-up it continues to require some technical computer and software coding skills to monitor the master node and trouble shoot the software when it goes down, plus install regular software updates. The financial rewards are generally better than either Proof of Stake or Proof of Work. This also gives the investor the chance to participate in the governance of the coin.

Trusted Masternodes
This investment vehicle is for people who don’t want to invest time, money and knowledge into installing special software on their computer. And who don’t want to figure out how to set-up computer servers in the” virtual space” of the internet, but who still want to participate in this passive investment called master nodes. The people who want to invest in this trusted master node buy all the coins needed to set-up a single master node. These people send their coins to the people who are talented enough to do all the above and then trust them not to steal their coins. Remember in cryptocurrency possession can mean ownership. In trusted master nodes the investor is depending on the honesty of the people running the trusted master node and their desire to continue to run a business. The investor in the trusted master node has their entire investment at risk with no real hope of recovery should the people who run the master node decide to steal their coins. This is a precarious position. But because relatively few people have the of technical expertise to build the master node, but many people have the great desire to obtain the financial rewards of the master node this is a flourishing business.

Trustless master nodes- 1st generation
If you have read this far, you probably can anticipate the next evolution in cryptocurrency evolution, which is the trustless master node. In a trustless master node you need some limited technical expertise to install software on your computer and store your cryptocurrency there. Then you pay someone to install all the master node software on a virtual server on the internet. This server has a virtual connection to the software on your desktop and now you have a master node, complete control of your coins and the rewards financial rewards from the master node can also be paid directly to you. This still requires some technical skills, but very few compared to large amount of skill and effort required to build and maintain a master node. The second and biggest big advantage of this type of master node is that your cryptocurrency never leaves your computer and you don’t have to trust anyone with your money.

Trustless Master nodes- 2nd generation
In the trustless master node 2nd generation, you need only basic computer skills to run a master node. To begin you download the software into which you will store your cryptocurrency coins called a wallet. You buy the cryptocurrency and store it in this wallet on your computer. You open your web browser and navigate to the webpage for a second generation trustless master node provider. You scroll through the pages of different cryptocurrencies for which this service provides trustless master nodes, you check a box, fill in your credit card information, check another box and the software does everything else to set up the master node including installing the needed software on your desktop, creating the virtual server ion the internet and it then monitors your master node and fixes it when it breaks. The service does all the software updates, the service monitors the virtual server for you and you just collect the money. This is a truly passive investment.

Conclusion:
Cryptocurrency is an industry built on the promise of anonymous ownership of stores of wealth called “cryptocurrency coins”, anonymous transactions, untraceable transfers of wealth and decentralized financial institutions. The cryptocurrency environment is also one where simple possession of the cryptocurrency denotes ownership regardless of the method used to obtain them. This riskiness of the cryptocurrency environment gives investors good reasons to avoid it. But the potential for large financial rewards, the promise of security from banks, security from governments and a wealth preserving quality in inflationary times similar to gold are all reasons people invest in cryptocurrencies, despite its inherent risks. Finally, it is due to the rapidly increasing popularity of cryptocurrency investing, that the evolution of cryptocurrency as an investment has been very rapid. It started with Proof of Work, then we saw Proof of Stake, Master nodes and then we saw trusted Masternodes and soon thereafter trustless masternodes. The next evolution is unknown, but I anticipate this space will keep evolving, so keep educating yourself so you can pick the safest and most lucrative investments in this investment sector.

✍🏼 by Shortsegments

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What I find interesting — and perhaps a little sad — is that a good bit of the original intent behind cryptocurrencies was particularly to offer alternate currencies for conducting business... and yet it seems like the "make lots of money!" approach has hijacked 95% of the attention. Not saying that's necessarily a BAD thing, just a departure from the original intent...

=^..^=

I agree that’s an interesting point. I know that when a friend first introduced me to cryptocurrency it was an investment in miners, to make money. It wasn’t until later that I started studying cryptocurrency that I realized that cryptocurrency wasn’t about making money, it was about replacing money.

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