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Evergreen Newsletter 5 (Understanding Crypto Terminology)

Evergreen Newsletter 5 (Understanding Crypto Terminology)

💬 Understanding Crypto Terminology

May 01, 2023

Howdy, fellow DailyCoiners,In today’s newsletter, we're going to cover some of the most thrown-around, but least understood, crypto terminology.

Without further ado, let’s uncover what they mean.

🔬 DYOR (Do You Own Research)
🔺 The Blockchain Trilemma
💵 Dollar-Cost Averaging

How to Do Your Own Research (DYOR): The Basics

Understanding the Market

The first thing to do when researching a cryptocurrency is to do some background research to understand it better.

Let's look at each of the most important data points in turn:

The Price: Current and Historical price and changes in price.
Market Cap: What is the potential for growth?
Sector: Smart Contract, Privacy, Fan, Gaming, Oracles, etc.
Blockchain Type: Layer-1, Layer-2, Side Chain, etc.
Supported Exchanges: Is it on well-known exchanges like Binance, Coinbase, etc?
Trading Volume: How much is being traded per day?

The above data can be found on websites like CoinMarketCap and CoinGecko.

Understanding the Economics

Now we know a bit more about the project in question, it’s time to delve a bit deeper into the economics of our target crypto. 🎯

You can find a lot of this data on websites like Binance Research.

Market Sector:
- Is the sector large enough for continued growth (also, look at how many other projects are in its sector)?
Unique Features:
- Is it doing anything different from others in the same sector that would make it more likely to succeed?
Potential Market: How big is the potential market?
- A fan token for a globally recognized sports team or celebrity will have a bigger potential market than one for a small online game.
Competitors:
- How many like-for-like projects are there? Are any of them already very successful?
Team: Who is behind the project? What have they done before?
Investors: Who has invested money in the project?
- Venture capital funds, angel investors, hedge funds, etc., and how much have they invested? They will always be looking to get their money back!
- What percentage is owned by owners and investors compared to how much is owned by the public? Public ownership should outweigh private ownership.
Potential for Growth: Is it compatible with other blockchains?
- Being so can increase the growth potential, e.g., If it is Ethereum compatible. (can use the EVM (Ethereum Virtual Machine)), there is a huge potential for growth as the value from one chain can be transferred to another.

Remember, these are the most basic research 🔬 topics you should be doing before making any investment, and, as always, this is not financial advice.

This Newsletter is brought to you by

LonghornFX: Deposits

Users can deposit to trading accounts through Bitcoin, bank wire transfers, and credit/debit cards.

There is no minimum deposit requirement to open a LonghornFX live account, though it is advised to transfer at least $10.It is also worth noting that there are minimum deposit amounts for specific payment methods ($10 for BTC and $50 for credit/debit cards).

LonghornFX does not charge deposit or withdrawal fees, though third-party charges, including blockchain network fees, may apply.

Processing times vary by method. Credit/debit cards often provide instant funding. Cryptocurrency payments are subject to network confirmation times.

What Is the Blockchain Trilemma?

To understand what the Blockchain trilemma 🔺 is, you need to be aware of three different elements that are desirable in a blockchain:

Decentralization
Security
Scalability

The blockchain trilemma refers to the idea that it’s hard for blockchains to achieve optimal levels of all three properties simultaneously. It is usually possible to have a high level of two of the factors, but this comes at the expense of the third.

So here lies the trilemma: How do you maintain a high level of all three factors?

Given the connection between the desired properties of decentralization and security, the fundamental design of how blockchain works makes it hard to scale.

Dollar-Cost Averaging

There are many investment strategies, but time and time again, Dollar Cost Averaging (DCA) comes out as the most risk-averse.

In this section, I will go over what it is and how it is done, but this is not financial advice; please consult a professional before making any investments you are unsure of.Dollar-cost averaging is a strategy to minimize risk by building your position over time. When you dollar-cost average, you invest equal amounts in an asset regularly. Rather than attempting to time the market, you buy in at various prices.Like with most investment strategies, dollar-cost averaging is not for everyone, and sometimes it works better than others. But it can be a powerful tool for removing some emotional investment barriers. Dollar-cost averaging works because it removes some of the emotional stress of investing. By committing to a set schedule, you don't have to worry about whether a stock is about to move higher or lower.

A Downside to DCAing

If most of your money is out of the market and you only buy in a bit at a time, you may avoid short-term volatility, but that also means a portion of your cash is on the sidelines and not working to build your net worth.