With the recent rise in popularity of cryptocurrencies many investors are now trying to determine how to invest into this new asset class. As with any investment into a new technology there are many factors to consider when assessing their future. In order to make an informed decision one must look at the origins of the technology as well as the potential applications and limitations in the foreseeable future.
What are tokens / cryptocurrency
A token is a script running on top of the Ethereum blockchain, with an associated database keeping track of ether payments. The ERC-20 standard establishes a common set of rules for tokens issued via Ethereum smart contracts, and currently serves as the basis for the many tokens that have been released through initial coin offerings (ICOs). The standard ensures that Ethereum-based tokens perform in a predictable way throughout the ecosystem, such that decentralized applications and smart contracts are interoperable across the platform, and that all tokens follow a fixed standard of security.
Bitcoin v/s Etherium
Bitcoin is the most widely known and used cryptocurrency in the world. The current market capitalization of just over $10 billion (USD) (Crypto-Currency Market Capitalizations, 2016). Bitcoin is a decentralized currency that uses peer-to-peer technology, which enables all functions such as currency issuance, transaction processing and verification to be carried out collectively by the network.
Ethereum’s main point of differentiation is the ability to leverage the application of ‘smart contracts’ within its code. While growing at a much more significant rate over the past year, Ethereum has a total market capitalization of only approximately 10% of Bitcoin (CryptoCurrency Market Capitalizations, 2016). While the underlying currency, Ether, appreciates and depreciates in value, Ethereum’s value is largely driven by its increased utility and ability to eventually eliminate third parties’ involvement in determining contractual obligations. The main benefit of Ethereum can be found in the belief that, as long as it can be coded properly.
Comparison: Where Bitcoin currently has a clearly defined use case in which disruption is possible, the possibilities for Ethereum to enter the market are far less distinct. Ethereum benefits from the possibility of much greater eventual impact. Bitcoin is currently better positioned to leverage and be incorporated into innovations that occur across many industries, whereas Ethereum is trying to drive the innovations.
Should You Invest in Cryptocurrencies?
If you are considering investing in cryptocurrencies, it may be best to treat your “investment” in the same way you would treat any other highly speculative venture. In other words, recognize that you run the risk of losing most of your investment, if not all of it. As stated earlier, a cryptocurrency has no intrinsic value apart from what a buyer is willing to pay for it at a point in time. While opinion continues to be deeply divided about the merits of Bitcoin as an investment — supporters point to its limited supply and growing usage as value drivers, while detractors see it as just another speculative bubble — this is one debate that a conservative investor would do well to avoid.
TWEX Token is Etherium based ERC20 compliant token
After identifying a series of promising companies, TAG World Exchange has launched an ERC-20 Token (TWEX) in order to raise money to lend to these companies. Buyers of TWEX Tokens during the Token Generation Event stage also receive ownership of smart contracts issued by each company traded on the TWEX platform for reimbursement of the borrowed capital by each company and for profit-sharing from each traded company. TWEX Tokens also pay 30% of all profits generated by the platform to each TWEX Token holder on a prorated basis. Each company traded on TWEX also pays 1% of their sale augmentation post funding to the TWEX Ecosystem and 0.5 % to TWEX the company — a portion thereof being redistributed among TWEX Token holders irrespective of ownership of the various smart contracts issued during ICO phase. Each such smart contract can be traded and sold while keeping the TWEX Token. Similarly, new investors can decide to acquire some smart contracts while not owning any TWEX Tokens.
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