Silver

500 gram silver Johnson Matthey bar.

Silver, regarded as the “poor man’s gold,” is a precious metal that, like gold, has been used as money for thousands of years. Historically, it has fluctuated in value relative to gold, though its price has been 15 times cheaper than gold by weight on average. This is due to the fact that silver is more abundant than gold on the Earth’s crust.

Like gold, silver is a monetary metal due to its unique properties, such as its rarity, durability, divisibility, and malleability. Because silver is more abundant and conductive than gold, it is widely used in industry, particularly for making electronic components. Silver has been used as money since ancient times, when silver coins, such as the denarius in Rome and drachm in Greeece, were used as a means of exchange. Because silver was more affordable than gold, it was more widely used as money than gold among the common people throughout much of history.

Much of the U.S. coinage in circulation up to 1964 was composed of silver. American dollars, half dollars, quarters, and dimes were made of 90 percent silver and 10 percent copper to add sturdiness to the coins. Since then, the U.S. Mint has switched to making coins primarily from copper, nickle, and zinc to reduce costs. However, due to investor and collector demand, the U.S. Mint has been producing Silver Eagles that contain a troy ounce of silver at 99.9 percent purity since 1986.

Because silver is scarce and a finite resource, as well as expensive to mine, it is regarded as a hedge to inflation similar to gold. What this means is that, as paper dollars are printed and lose value due to their increased supply, the value of silver rises relative to the dollar due to its more stable supply. Thus, during periods of high inflation or hyperinflation, silver allows investors to protect their wealth. In India, where precious metals have played an integral role in the culture for millennia, silver is bought as a store of wealth, so that when the rupee, the national currency, loses value, the rise in the value of silver offsets the devaluation of the rupee.

Because gold is over 70 times more valuable than silver by weight — this is referred to as the gold-to-silver ratio — whereas historically this has been about 15, some precious metals analysts believe silver in undervalued. Silver is a much more volatile asset than gold, allowing investors to make better gains than with gold during precious metals bull markets. However, this greater volatility means that silver investors will likely experience greater losses than gold investors during bear markets. Oftentimes, precious metals investors will invest in both for diversification.

IOTA

IOTA has risen to the forefront among cryptocurrencies by distinguishing itself as a non-blockchain cryptocurrency. It operates a ledger in a special category referred to as a directed acyclic graph (DAG), known as the “Tangle.” IOTA aims to provide the basis for the Internet of Things (IOT) given that the system allows transactions without fees and asserts unlimited scalability. Currently, the Tangle requires a central coordinator to validate transactions, though the developers assert that once the network grows big enough, it will truly be decentralized without the need of a coordinator.

The IOTA Tangle is the future of IoT.

Development of IOTA began in early 2015, as the development team sought to product a next-generation distributed ledger. Before founding IOTA, the development team produced Nxt, the first proof-of-stake (POS) cryptocurrency. The developers of IOTA have also set up the non-profit IOTA Foundation, which is based in Germany and houses the development team, in order to promote the Tangle and its implementation in IOT and other use-cases. Outlier Ventures, a venture capital firm, has invested seven figures into the project.

While some skepticism has been expressed regarding the Tangle, major corporations have collaborated or partnered with IOTA, including Microsoft, Bosch, Cisco, and Foxconn. Additionally, IOTA has collaborated with leading universities, such as Imperial College London, University of California at Berkeley, and University College London’s Center for Blockchain Technologies.

IOTA’s vision and its partnerships, along with a thriving community of users and investors, has catapulted the cryptocurrency into the top 10 by market capitalization. While the future remains an open question for IOTA, as it plods its way through the thicket of technological innovation, investors have expressed confidence that the development team is on track to meet its goals. If IOTA succeeds in its ambitions, its market capitalization is sure to rise exponentially from where it is today. Of course, when it comes to technological revolutions, an organization’s standing can be far from certain or assured. Only time will tell where IOTA will stand, and over time this picture is likely to become clearer.

Monero

Monero is an anonymous cryptocurrency that promotes privacy.

Monero is a cryptocurrency released in April 2014 to address privacy concerns among cryptocurrency users. As a result of bitcoin’s public ledger allowing transactions to be tracked, Monero was created as an alternative with a different protocol with features to obfuscate its blockchain. Monero has since risen to become one of the most popular cryptocurrencies and among the largest in market capitalization, ranking consistently in the top 15 throughout 2017. Along with bitcoin, it is used in the darkmarket AlphaBay due to its anonymity.

Monero was originally named BitMonero, though it was quickly shortened to Monero, which means “coin” in Esperanto. It was the first fork of the cryptocurrency Bytecoin. Monero developers worked to improve faulty code that they had found in Bytecoin.

Monero is open-source and uses proof-of-work, and will issue a total of about 18 million coins by 2025, with inflation under one percent afterwards. Any Monero wallet can be restored by using a 25 word mnemonic seed on a system using Monero software. Monero works with Windows, Linux, Mac, and FreeBSD.

In January of 2017, Monero introduced ring confidential transactions, which were developed by bitcoin core developer Gregory Maxwell. Monero also added a privacy feature to prevent those not involved in a transaction from seeing their amounts. The cryptocurrency also uses stealth addresses that are randomly generated for recipients during each transaction, and the Monero sent to this address goes to another address associated with the recipient. Thus, information about transactions cannot be gleaned based on a published address. Monero developers are currently working to add an additional layer of privacy by masking the IP addresses of users.

Due to its focus on privacy, Monero has many potential uses, such as circumventing capital controls, promoting liberty, allowing individuals businesses to keep transactions confidential, and lowering transaction fees by users. Due to the confidentiality of Monero transactions, its users cannot be blacklisted by merchants or governments, thus establishing it as a truly fungible currency.

Monero is better able to scale than bitcoin core due to a lack of restriction on its block size, though too high of a block size triggers a block reward penalty.

Monero (symbol XMR) can be obtained on major exchanges such as Poloniex, Bittrex, Kraken, and Bitfinex. Users can also mine the cryptocurrency, and doing so does not require the expensive equipment that bitcoin currently does.

Due to the focus on privacy among developers and due to a strong community of loyal users, Monero will remain one of the leading cryptocurrencies of the future. A strong community will be key to ensuring the survival and widespread use of a cryptocurrency.

Ethereum

Ethereum logo.

Ethereum is a cryptocurrency inspired by bitcoin that has grown in popularity as an alternative to it. It was proposed in 2013 by Vitalik Buterin, a renowned Russian-Canadian blockchain developer. Development of the cryptocurrency began in 2014 following a crowdsale, and the system went live in 2015.

One of the goals of Ethereum, and a key feature that separates it from bitcoin, is to allow decentralized applications and “smart contracts” to be built on top of it. Decentralized applications allow users to share and use programs that are not controlled by a single entity or organization. Smart contracts are self-executing contracts that do not require trusted third-party intervention once the criteria of the parties in a transaction are met. However, due to the goals to make the Ethereum blockchain a foundation for the development of new applications, the project is more centralized than bitcoin and under the control of a group of programmers to ensure its scalability.

The token used within the Ethereum network is called the “ether” (abbreviated ETH), which is traded among users and used to reward users for completing tasks. Similar to bitcoin, the Ethereum blockchain is a public ledger where all transactions are posted and able to be seen by the public. Likewise, smart contracts built on top of the blockchain are posted publicly. While bitcoin has a theoretical maximum of 21 million units, Ethereum has no such limit, though the inflation rate based on the network’s programming is expected to eventually level out so that as much ether is produced as is consumed annually, with a period of deflation possible. However, future modifications of the software in the future may alter the inflation rate, ideally to zero.

As of December 26, 2017, the market capitalization of Ethereum is over $74 billion, placing it second among cryptocurrencies behind bitcoin. Because of Ethereum’s enhanced capabilities compared to bitcoin, some investors and cryptocurrency experts view it as possibly exceeding bitcoin in market capitalization at some point in the future.

In June 2016, The DAO, a “decentralized autonomous network” and venture capital fund, was hacked, causing about $50 million of ether to be stolen. Fortunately, the contract required a 28-day holding period in a separate account before the ether could be taken due to the hack. Following intense debate within the community, it was decided that Ethereum should be “hard-forked,” thus returning the funds to their rightful investors. A hard-fork is essentially a significant change in the software that causes incompatibility between the new and old software. This hard-fork brought about the creation of two separate cryptocurrencies: Ethereum Classic (the original) and Ethereum (the new). After a hard-fork, owners of the original cryptocurrency are issued both the original and new tokens.

Despite the concerns about the hard-fork undermining confidence in the cryptocurrency, Ethereum has emerged more popular the ever and as a serious contender to potentially overtake bitcoin in the future. It is Ethereum’s resilience in the face of challenges such as the 2016 hack that have impressed investors and users of the cryptocurrency.

Litecoin

Litecoin logo.

Litecoin, abbreviated LTC, developed and released in 2011, is a cryptocurrency based on bitcoin software. As modified from the open-source bitcoin software, it is considered a “fork” from bitcoin with the aim of improving on the shortcomings of the original cryptocurrency. The developer, Charles Lee, is a Chinese-American who formerly worked for Google. Possibly in part due to Lee’s heritage, litecoin has gained popularity in mainland China, where it is openly traded by investors and enthusiasts. Lee has compared bitcoin to gold and litecoin to silver, recognizing the role of bitcoin in paving the way for the widespread adoption of other cryptocurrencies.

Among the modifications by litecoin of the bitcoin software is its significant increase in the maximum number of litecoins that can be created, at 84 million. This is four times the number of bitcoin units that can ever be created, at 21 million. The greater number of litecoins compared to bitcoins makes it more attractive to some investors who feel priced out of bitcoin. Similar to bitcoin, litecoin transactions are published on a public ledger known as a blockchain. Litecoin has gained popularity by making significant improvements on the bitcoin code to facilitate speed and lower transaction fees, such as by implementing Segwit (segregated witness) in 2017.

Following litecoin’s implementation of Segwit, the market capitalization of the cryptocurrency has risen significantly, fortifying its status as one of the top alternative cryptocurrencies (“altcoins”) to bitcoin. As of June 23, 2017, litecoin has a market capitalization of about $2.5 billion, and is ranked fourth overall among all cryptocurrencies.

A block of litecoin is added to the blockchain every 2.5 minutes. Six confirmations for a transaction thus take about 15 minutes, whereas with bitcoin it might take up to an hour or more. Litecoin transactions are therefore confirmed in the network four times faster than bitcoin’s. Transactions among both cryptocurrencies are instant, though the confirmations in the network are necessary to ensure units of the cryptocurrency have been transferred.

Litecoin is traded on a number of major exchanges, such as Bitfinex, 247exchange, BitBay, Kraken, Yacuna, and BTC China.

Bitcoin vs. Gold

There has been increased discussion about the benefits of bitcoin vs. gold since bitcoin has arisen as a store of value in recent years. Bitcoin and gold are both investments that are here to stay in the long run, though each with advantages and disadvantages.

The Advantages of Bitcoin

Bitcoin is the original cryptocurrency. As a cryptocurrency and digital form of money, bitcoin is generated and traded using encryption techniques to prevent theft and promote anonymity, though with limits. Bitcoin transactions are posted on a public ledger known as a “blockchain.” As the first cryptocurrency, it is the most well-established and well-known of hundreds that have since been developed. Bitcoin has a “first mover” advantage and has become a recognizable brand.

Among the advantages of bitcoin over fiat currencies and gold are that it does not require physical space to store, is limited in quantity to a maximum of 21 million units, and is decentralized, allowing users to trade units of bitcoin independent of central bank policies and desires. It is a competitor to traditional forms of money. It can also be used to facilitate transactions online, as an established digital currency. Potentially, the transaction fees of bitcoin are much lower than traditional credit cards and payment processors.

Gold Buddha statue.

The Advantages of Gold

Gold is universally recognized as money due to its unique properties: it is rare, durable, divisible, and malleable. It is a precious metal with a bright yellow luster. It has been used for thousands of years to make jewelry and mint coins, and due to its scarcity countless wars have been fought to obtain it. Gold is also used in industry as a conductive metal, especially for electronics.

Unlike bitcoin and paper money, gold has intrinsic value. Gold is a physical form of money that you can hold in front of you, and though it requires space to store in significant quantities, this is not usually a problem given its high value as compared to silver, which requires significantly more space. Unlike bitcoin, gold cannot be stolen via hacking. Similar to bitcoin, gold can be used as a hedge to the risks inherent with fiat money, which can be printed infinitely. The supply of gold increases steadily at one to two percent annually, preventing spikes of inflation in the price of the precious metal.

Because gold has intrinsic value, it will always be recognized as money universally. No matter where in the world you are, gold can be liquidated for cash or other goods. Though bitcoin is likely to remain the “gold standard” of digital currency as the first major one, there is a risk of a superior, more technologically advanced digital currency taking its place and potentially rendering it obsolete or with significantly reduced value.

However, because gold is a metal of very high value, it is not as good of a medium of exchange in a modern, complex society. Though it is no longer practical to make gold for day to day transactions, gold nonetheless remains an excellent store of value for savers.

Why Bitcoin and Gold Are Good Investments

While gold has a long history as money and will remain a precious metal, the future is digital. Bitcoin represents the evolution of money from tangible (metal or paper) to intangible. Though bitcoin can be replaced with a superior technology, the likelihood of that as of this time appears very slim. Moreover, software developers will continue to make enhancements to bitcoin to maintain its position as the digital currency with the largest market capitalization. As both forms of money can be used to hedge against the uncertainties within fiat currency markets, investors should seriously consider accumulating both forms of money.

Bitcoin: The Original Cryptocurrency

Bitcoin, developed in 2008, is the world’s first cryptocurrency, and as such it has revolutionized how people see and use money. As a cryptocurrency, the coin is mined and traded using complex calculations by computers with specialized mining software connected to the internet. Bitcoin transactions are posted on a public ledger known as a “blockchain.” With transactions confirmed repeatedly by computers at different locations, bitcoin transactions gain trust and become permanent. The person who developed this novel software is known pseudonymously as “Satoshi Nakamoto.” He participated in early discussions about bitcoin online, but has since disappeared, causing speculation as to who this mysterious figure is.

Unlike traditional paper money — known as “fiat” money, as it’s regulated by governments and central banks — bitcoin is decentralized and unregulated. It can be traded anywhere in the world by a person with an internet connection and the means to purchase it. Unlike traditional bank accounts, bitcoin wallets don’t require a name or identity. Due to its anonymity — though with limits, as transactions are posted publicly — it has been used by black market vendors selling illegal goods and services. There are also concerns about the currency’s misuse for other forms of crime, such as money laundering. However, though there is potential misuse of bitcoin for these activities, it also has the potential to facilitate transactions generally and thus benefit humanity.

Bitcoin’s status as the first cryptocurrency has been very advantageous for it, making it a brandable coin with global recognition. Of the hundreds of cryptocurrencies that exist, bitcoin has the highest market share and greatest daily transaction volume (though this may change in the future). Bitcoin is accepted by over 100,000 merchants, and there are even ATMs issuing bitcoins in some cities.

With a theoretical limit of 21 million coins, bitcoin cannot be devalued like fiat currencies by a sudden massive production of new units or coins. This has made bitcoin an attractive alternative to those who worry about massive money printing by central banks. Some investors, including libertarians who are skeptical of central banks, view bitcoin as complementary to a gold investment.

Given the limit of bitcoins that can be made and the high valuation of the currency due to its popularity, it can be broken down into units making it easier to transact. For example, a milli-bitcoin, or mBTC, is .001 or one-thousandth of a bitcoin, and a micro-bitcoin, or μBTC, is .000001 or one-millionth of a bitcoin. A satoshi is .00000001 or one-one-hundred-millionth of a bitcoin.

The Future of Bitcoin

As the original cryptocurrency, bitcoin has a significant lead over competing cryptocurrencies in terms of adoption and familiarity, but the shifting technological landscape means bitcoin’s status as most popular cryptocurrency will constantly be under threat. Given that the currency is decentralized, there is disagreement between miners and users on making fundamental changes to the software to speed up transactions and reduce transaction fees due to network congestion as a result of its popularity, allowing competing cryptocurrencies to gain market share. Concerns about a potential “hard-fork,” which would split the currency into two versions to address scaling concerns, have kept the price of bitcoin somewhat subdued. Additionally, as bitcoin poses a threat to fiat currencies, there is the possibility of governments and central banks colluding to establish laws and regulations to make widespread adoption of the digital currency problematic.

However, some technologists believe the genie is out of the bottle, and that bitcoin and similar technologies can no longer be stopped due to their ability to facilitate trade. So whether or not governments and central banks become hostile to it is irrelevant, as more people use the technology out of convenience and necessity. Given the inevitability of digital currencies becoming mainstream, governments and central banks are likely to eventually embrace them, albeit initially with reluctance and skepticism.