Bitcoin vs. Other Cryptocurrencies

Last week, I got this email from Robert Hahn, whom I interviewed a few months ago on this podcast. He wrote:

Hey Francis! I listened to your most recent podcast with Rejoice. Afterwards I looked into investing in crypto a bit. I was wondering what your thoughts are on platforms for buying and storing the virtual currency. I was also interested in Nano (for its more environmentally conscious approach) and Monero (better privacy, but that may be a fault because it makes it a favorite for dark money). I'd be curious to hear why you chose Bitcoin...the assumption that widespread adoption will win the race?

Best Crypto Exchanges for US Citizens

For the best platform for buying cryptocurrency, I like Kraken.

The main problem with Kraken is that you can only fund your account with a bank wire transfer, which often costs $30-50. That only makes sense if you buy tens of thousands of crypto dollars.

Kraken used to offer free ACH bank transfers, but chargeback fees were killing them, so they stopped offering ACH.

Coinbase Coinbase also allows free ACH bank transfers. However, ACH transfers take about 2 weeks to complete on Coinbase, so they're bad if you're in a hurry.

CEX.io claims to offer ACH transfers, but when I tried to open an account with them, I found their interface and customer service abysmal. These Brits are not hungry for business. 

Coinbase and other exchanges let you fund your account with a credit card (albeit with high fees). 

Similarly, you can buy Bitcoin via Bitcoin ATMs, which are easy to find in major cities. However, once again, they usually slam you with high fees.  

Where to store your crypto

For storage beyond what you're comfortable losing, Ledger is a great bet.

However, a Ledger costs $60-120, so that doesn't make sense if you're buying less than $1000.

In that case, use a smartphone app and back up your private keys (your 12-24 word seed phrase).

I answered some of his questions in a general way, and I didn't talk too much about the two crypto coins that I mentioned, so I will address them briefly here in the notes.

First, I love to use CoinMarketCap.com to see the market share of the crypto coins.

Nano is ranked #60 (as of April 12, 2020). That's a deal-breaker for me. [May 2024 UPDATE: Nano is now ranked #337, so I made a good call in 2020 to be skeptical about it.]

I would research a top 20 coin and take a good look at a top 10 coin, but if it's not in the top 20, then forget about it. It's insignificant and will probably remain so. It won't change the world, and it will probably fade away.

I'm sure some critics would question its environmentally responsible claims. 

Bitcoin is a power hog, but that's the price we pay for having bulletproof security. So far, more environmentally friendly solutions have their problems. 

Remember, the global banking system requires far more resources than Bitcoin.  

Monero is a fascinating privacy coin that is ranked #14.

As cool as it is, ZCash has slightly better technology and you can create privacy features within Bitcoin via technologies such as: 

• The Lightning Network
• Mimblewimble
• CoinJoin
• Wasabi Wallet

There are MANY efforts researchers are making to improve Bitcoin's privacy. 

I suspect current solutions will satisfy most privacy enthusiasts. 

If they don't, then Bitcoin developers will probably come up with a better solution soon. There are armies of brilliant programmers researching this issue. Other coins lack such development teams.

Confession

In January 2018, I took a good look at many cryptocurrencies.

Like you, I was intrigued by Monero, but I settled on Zcash as a better bet because of its superior technology. 

I was wrong. 

Both privacy coins underperformed Bitcoin in the last year.

I also bought some EOS, IOTA (MIOTA), and ADA (Cardano). They all seemed promising to me just like NANO seems promising to you.

Although EOS and ADA had impressive surges in 2019, both tumbled back and underperformed bitcoin.

That experience taught me to resist the temptation of other cryptocurrencies. 

I'm sure there are some cryptocurrencies that have outperformed Bitcoin over a variety of periods.

But that brings me back to the main point: do they have critical mass? Will they benefit from Metcalfe's law?

If they don't, at some point, the owners of that coin will lose interest in it. Why keep it if they can't do something useful with that coin? That's when the price will collapse.

We will probably have many cryptocurrencies circulating. I'm not suggesting that only bitcoin will remain. 

But just like the US Dollar dominates, bitcoin will dominate in the crypto realm. When someone wants to buy Tanzanian Shillings and have Cameroonian CFA, they must change their money to USD and then to the currency. 

Like the dollar, Bitcoin will be the central hub for many international currency transactions. 

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