4 things to know before adding any cryptocurrency

Today’s cryptocurrency world is getting bigger, wider and weirder; it is almost becoming confusing for ordinary users to navigate. There are about 2168 cryptocurrencies listed on the Coinmarketcap exchange, including familiar names like Bitcoin, Ethereum, Litecoin as well as unfamiliar and sometimes weird ones like Lambda, Elastos, Fetch, and PLATINCOIN among many others.

There is also no shortage of exchanges offering different cryptocurrencies at various attractive rates. In Nigeria and Africa the number of exchanges is growing rapidly. There are about twelve cryptocurrency exchanges in Nigeria as at 2018 that offer services in buying and selling of different cryptocurrencies.

Whilst some exchanges allow their users trade in up to 6 cryptocurrencies, an exchange like Luno, for instance, only give access to two namely Bitcoin and Ethereum.

With the high level of volatility in the cryptocurrency market it is critical to consider four things before making the decision to start transacting with any new coin.

 

Clear and unique cases

Almost every newbie in the market start off with Bitcoin and depending on how serious they get with trading, could decide he or she want to venture into other coins. When you do, one of the first things to bear in mind is whether the coin has a clear and unique use case, in other words does a working solution already exist? One of the ways to find out is by searching and going through the Whitepaper – an informational document, usually issued by a company or not-for-profit organisation, to promote and highlight the features of a solution, product, or service.

Use case and value propositions show the different problems or market opportunities a coin is addressing. Similarly, the level of success of a cryptocurrency project’s use case is dependent on its uniqueness, which is a function of how innovative and efficient (in terms of transaction fees and speed of execution of transaction) it is able to solve the problem it was created to address.

For instance, although Bitcoin had the ‘first movers’ advantage, it has a clear and unique use case nonetheless that continue to encourage people to adopt it into their daily lives. In the same vein, Ethereum enables the verification of data in an open and transparent way, which means it could be used to pioneer the creation of a digital identification system among other things.

 

Large community willing to adopt solution

A coin’s value is often determined by the number of people willing to adopt it. While having a great use case is important, you need to ask yourself “Is the world ready for it?” As long as there are many people willing to use it in their day-to-day transaction the value of the coin is bound to grow. This is the reason Bitcoin and Ethereum has remained the biggest cryptocurrencies in terms of valuation and volume trading. It is also why exchanges like Luno are careful about rushing to add another cryptocurrency.

For instance, following it’s nearly four months run to $5000 at the beginning of April 2019, Bitcoin hit 350,000 transactions per day at around 15,000 transactions every hour, which was about four a second according to a Forbes report. Meanwhile the average number of bitcoin transactions per block hit an all-time high of over 2,700 transactions late last month, meaning the bitcoin network is processing more transactions each time a new block is mined.

 

Is it decentralised?

The decentralisation of cryptocurrencies means they do not rely on a central point of control which removes the need for powerful central authorities and instead gives control back to the individual user. It is one of the critical features of cryptocurrencies, however not every crypto has the same level of decentralisation. Some have more than others, and many crypto experts are critical of coins like Ripple and JPM Coin that have a more centralised approach. It is believed that the lack of a single authority makes the system fairer and considerably more secure.

 

Know the People behind the cryptocurrency

A cryptocurrency backed by people that have no identity or with little or no experience is often a red flag. All the 2168 altcoins listed on the Coinmarketcap have great ambitions to solve a societal problem or improve an already existing solution but without the right developers and administrative team, the success of that cryptocurrency becomes doubtful.