In Part 1 of my Cryptocurrencies Guide, I covered how to open a Coinbase account and buy your first Bitcoin. In Part 2, I'll introduce the other two coins offered on Coinbase – Ethereum & Litecoin.
Note: This is not a recommendation to buy any coins mentioned – I'm just providing an overview of the cryptocurrency scene as I would have liked to have it explained to me when I started.
Part 2: Beyond Bitcoin – Ethereum & Litecoin
Difficulty: Beginner
Bitcoin isn't the only cryptocurrency worth considering. Coinbase also offers Ethereum and Litecoin, and there are hundreds of other coins available on other exchanges. It's up to you to research which coins you think will be the best to invest in.
Bitcoin [BTC]
The original and (currently) biggest. In the early days, it was meant to replace fiat (USD) for everyday purchases like pizza; but as it's grown, it's become increasingly slow & expensive for everyday use. It's not uncommon for a transaction to take several hours to process, and small transactions can have a fee higher than the amount being sent. Because of this, it's increasingly common to refer to Bitcoin as a store of wealth more like gold than cash. But since it's the original and has the most name recognition, and on most sites it's the primary currency for buying other coins, it will likely remain the top dog for the foreseeable future.
Litecoin [LTC]
This was the first major coin to emerge after Bitcoin. It's also a currency, much like Bitcoin, but it's faster & cheaper. Some call it the silver to Bitcoin's gold. Others want it to be the de facto standard replacement for cash. Time will tell.
Ethereum [ETH]
Unlike Bitcoin & Litecoin, Ethereum is not "just a currency." It's a platform capable of implementing smart contracts – programmable computer codes that are self-executing and do not need any third-parties to operate (definition via masterthecrypto). Bundling these smart contracts together, and you get a Decentralized Application, or dapp. These dapps have the potential to disrupt countless industries – they already are. A lot of new coins are built on top of the Ethereum platform, and are already being deployed in projects around the world. Here's a good example: Blockchain-based microgrid gives power to consumers in New York. And another. There's a reason Ethereum is 2nd only to Bitcoin in market cap.
Note: Ethereum is the network; Ether is the coin, and ETH is the currency symbol for the coin; But pretty much everybody just refers to everything as Ethereum.
Those are the 3 coins you can buy on Coinbase right now. They're supposed to be adding Bitcoin Cash [BCH] (a "fork" of Bitcoin, somewhat similar to Litecoin) in early 2018; and they're working on a platform for supporting more coins in the future. If you're interested in investing in any other coins, you'll have to venture beyond Coinbase, into the world of exchanges, which is a bit more complicated than Coinbase. I'll cover that in another post in the future.
For info on the market cap & historical prices of these and pretty much all the other cryptocurrencies, use coinmarketcap.com
One More Thing: How to Avoid Coinbase Fees!
Nobody wants to pay fees. There is a way to avoid paying Coinbase fees, but it involves venturing outside the simplified interface of Coinbase, so it's a little more difficult than simply using Coinbase.
GDAX is Coinbase's more advanced exchange. They're both owned & run by Coinbase, and actually operate on the same Coinbase account. While Coinbase is set up like a simple payment app similar to PayPal, GDAX is set up more like Wall Street day-trader software. It's a little intimidating at first, but once you get the hang of it, it's not that hard.
You can sign right into GDAX with your Coinbase credentials, and transfer USD, BTC, ETH & LTC between the two sites instantly for no fee. When you want to buy or sell a coin, you can place a special kind of order so you don't pay any transaction fees on it. Check out these instructions on how to do it: Tips to Avoid Coinbase Fees?!?
Note: When you transfer anything (USD or coins) between Coinbase & GDAX, it will count against your daily & weekly funding limits. I know, it doesn't make sense since it's the same account, but that's how it is. So be aware you may limit how much USD you can deposit/withdraw when you transfer USD or coins between the two sites.
Ok, One More Thing – Coinbase/GDAX Can Be Frustrating At Times
Coinbase/GDAX is the easiest way to get started w/Crypto, and the fastest & easiest way to get USD into & out of crypto; but it's not without its faults. When markets are really busy, the site often becomes slow to the point of being unusable, and sometimes goes down completely for short periods of time. They're scaling up quickly, but there are so many new users joining every day, sometimes they can't keep up. They may also take a long time to validate a new account or respond to support requests. While I'm not excusing these issues, I think it's important to understand this is part of the growing pains from being at the forefront of a brand new industry that's growing at exponential rates. It's still the best place to start, and to convert USD to & from crypto. I'll introduce some other exchanges in a future post, but most don't allow you to deposit/withdraw USD, and none of them are completely immune from these types of issues, so Coinbase is still the best place to start.
In Part 3, I'll give an overview of how cryptocurrencies work and offer some vocabulary that should be helpful to navigate all this crazy shit.
UPDATE: Coinbase/GDAX has added Bitcoin Cash to its exchange. It was created from a "hard fork" of bitcoin – that is, bitcoin split into 2 different currencies. Bitcoin Cash is faster and cheaper than bitcoin, which is why the Bitcoin Cash team decided to do the hard fork.
Some traders are concerned that Bitcoin Cash doesn't have as strong of a development team, and they consider Bitcoin Cash a "fake" version of bitcoin, and that its value will drop. Bitcoin Cash supporters think it's the true "bitcoin" because it allows the transfer of value for a small fee – as bitcoin's creators originally intended. They think Bitcoin Cash will eventually be more valuable than the original bitcoin.
You'll have to decide for yourself whether you think Bitcoin Cash is a good investment. It could go either way – but then, so could the original bitcoin; or maybe another coin will rise up and beat them both.