Crypto Versus For Digging For Gold

In the middle of the 19th century they discovered gold in California. The California population nearly quadrupled as roughly 300,000 people came to California from the USA and elsewhere in the world. Needless to say, not all of them became rich digging for gold. A saying from that era stays with us in various forms. The gist of it is that when everyone is digging for gold you will make more money selling picks and shovels. If you look at cryptocurrencies not as a novel way to carry out financial transactions free of central controls but rather as a way to get rich quick, the comparison to gold during the gold rush days is instructive.

What Are The Picks and Shovels Of Cryptocurrencies?

The world of cryptocurrency runs on blockchain technology. Opportunities in this world include businesses that use the blockchain efficiently and profitably. Opportunities also include investments in the Metaverse, NFTs, and decentralized finance. In regard to cryptocurrencies themselves there are businesses that mine them and companies that run cryptocurrency exchanges where you can buy and sell. We recently wrote about crypto transaction mixing for those who want an extra measure of privacy for their crypto transactions (or to hide ill-gotten gains).

Crypto Market And Opportunities 2022

Bloomberg offers a useful report about cryptocurrency market size and emerging opportunities in the businesses now in existence and those that will be created to provide services (and make money) in the world of cryptocurrencies. Banks and folks like PayPal are now using cryptocurrencies. Government regulation is evolving so that investments in this arena are more likely to be transparent and safer to evaluate and invest in. According to Bloomberg the major drivers coming to market growth will be distributed ledger technology (blockchain) and investments by venture capitalists. They see the crypto market doubling in the next five years regardless of where specific crypto dollar values stand at that time.

Potential Glitches In Blockchain Investments

An attractive feature of the blockchain is that in a properly designed and managed system information is never erased. Thus, one can track back to see what happened to inventory, confirm the details of an agreement, and more. Things to worry about include the fact that hackers can often get into these systems and get away with substantial amounts of money as we noted in our article about a blockchain DeFi hack. Also, in public systems an outside agent can take majority control of decisions. This is a 51% attack in which miners or other parties can alter the blockchain. This should not happen in private systems but remains a risk. And the programming that is supposed to ensure the stability of a system such as a stablecoin can be faulty as we have seen with stablecoins that rely on algorithms instead of hard cash for their reserves.

All of this having been said, in any field with an evolving technology the first in will not necessarily be the most profitable. Well managed companies with solid business plans, sufficient financing, and the ability to build a brand will commonly outperform the herd over the years and provide lifetime investment opportunities.

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