There are three main categories of stablecoins available to users, all of which peg their units in different ways.
Fiat-backed This is the most common form of stablecoin in the market, consisting of crypto assets that are directly backed by a government-issued currency (or commodities such as gold) with a fixed 1:1 ratio. Their value is based on the value of the backing currency.
In this setting, a central issuer or bank holds a certain amount of fiat currency in reserve and issues a proportionate number of tokens. The key requirement is that the amount of backing currency reflects the circulating supply of the stablecoin. For example, the issuer holding $100,000 dollars would equate to 100,000 tokens with the value of $1 each, which can be freely traded between users.
While they are registered with regulatory bodies such as US Securities and Exchange Commission, the off-chain nature of the system – i.e only the issuing financial institutions have complete oversight into the fiat money deposits – necessitates a certain degree of trust. There is no way for a user to be sure whether the issuer actually holds the funds in reserve, so the stability of the stablecoin’s price depends on their trust in the issuer.
Crypto-backed In this case, stablecoins are issued with cryptocurrencies as collateral instead of being backed by fiat currencies. The main idea here is to peg them to a basket of cryptos or a cryptocurrency portfolio. Since everything is done digitally on the blockchain, the system depends on the use of smart contracts to handle the issuance of units, ensure governance and establish trust.
This creates a decentralised ecosystem that is regulated by the users themselves, as opposed to one issuer or third-party regulatory body dictating monetary policy. Users have to trust that all the network participants will act in the best interests of the group as a whole, which is one of the big draws of cryptocurrencies in general.
To acquire crypto-backed stablecoins, users lock their cryptocurrency into a contract, which then issues the token. Stablecoins must then be paid back into the same contract before their collateral can be returned, with price stability achieved through various supplementary instruments and incentives.
Algorithmic Also referred to as non-collaterised stablecoins, these aren’t backed by any fiat currency, commodity or cryptocurrency reserve. Instead, algorithms and smart contracts manage the supply of tokens issued to maintain a stable price, mirroring the monetary policy used by central banks around the world to manage national currencies.
These smart contracts are implemented on a decentralised platform and can run autonomously, reducing or increasing the supply of tokens in circulation based on the price of the stablecoin relative to the price of the fiat currency it tracks. If the price falls below the value of the fiat currency, the token supply is reduced and vice versa.
Although they aren’t collateralised in the same way as fiat and cryptocurrency-backed stablecoins, algorithmic stablecoins may have a pool of collateral in reserve in case of black swan events.
What makes stablecoins different?
In a nutshell, stablecoins are cryptocurrencies that are designed to minimise price volatility relative to a particular “stable” asset or basket of assets. Unlike traditional cryptocurrencies such as Bitcoin, a stablecoin is one that is pegged to a real-world asset like fiat money (e.g. the Euro) or exchange-traded commodities (e.g. gold).
This means they maintain a steady value against a target price, making stablecoins an attractive proposition for investors as well as providing the much-needed stability for merchants looking to participate in the crypto space.
Most importantly, it makes them more viable as an actual currency because they aren’t subject to wild, daily fluctuations in price and are useful for all the things people actually want to use money for. As such, they can enable a number of practical use cases that traditional crypto-assets simply can’t – from insurance and loans, to payments and investments.
They also substantially reduce friction by letting people use something that they’re familiar with – such as the Pound or the Dollar – as well as allowing users to cheaply and quickly transfer value around the globe while maintaining price stability. This will all be key to fostering mass adoption in the future. By increasing confidence that they are stable enough to be used as a daily medium of exchange, consumers will be more likely to trust the technology.
Ultimately, they offer users the best of both worlds: the processing speed and security/privacy of cryptocurrency payments, combined with the volatility-free valuations of fiat currencies.
无论去中心化的支付结算网络如何发展。在很长一段时期内，银行账户体系仍将占据业务主导权。决定了“跨境支付协议”离不开银行的业务开拓。2020年11月，Velo与VISA全球达成合作，以Velo通证为金融解决方案中作为抵押数字资产，共同开发针对亚洲中小微企业贷款的支付解决方案。随后Velo与其生态公司Lightnet宣布与泰国第一家本土银行泰国汇商银行（SCB）合作，为规模高达万亿美金的跨境汇款市场提供跨境汇款服务，并利用区块链技术为东南亚数百万外籍劳工提供汇款服务。2021年1月，Velo与亚洲数字银行（Asia Digital Bank）开始开发跨境业务解决方案。
Mining is the process of creating valid blocks that add transaction records to Bitcoin’s (BTC) public ledger, called a blockchain. It is a crucial component of the Bitcoin network, as it solves the so-called “double-spend problem.”
The double-spend problem refers to the issue of needing to find consensus on a history of transactions. Ownership of Bitcoin can be proven mathematically through public key cryptography, which cannot be broken with today’s technology. However, cryptography alone cannot guarantee that one particular coin hadn’t previously been sent to someone else. In order to form a shared history of transactions, one needs to have an agreed-upon ordering that is based on, for example, the time of creation of each transaction. But any external input can be manipulated by whoever provides it, requiring participants to trust that third party.
Mining (and blockchain in general) leverages economic incentives to provide a reliable and trustless way of ordering data. The third parties ordering transactions are decentralized, and they receive monetary rewards for correct behavior. On the contrary, any misbehavior results in loss of economic resources, at least as long as the majority remains honest.
In the case of Bitcoin mining, this result is achieved by creating a succession of blocks that can be mathematically proven to have been stacked in the correct order with a certain commitment of resources. The process hinges on the mathematical properties of a cryptographic hash — a way to encode data in a standardized manner.
Hashes are a one-way encryption tool, meaning that decrypting them to their input data is near-impossible, unless every possible combination is tested until the result matches the given hash.
This is what Bitcoin miners do: they cycle through trillions of hashes every second until they find one that satisfies a condition called “difficulty.” Both the difficulty and the hash are very large numbers expressed in bits, so the condition simply requires the hash to be lower than the difficulty. Difficulty readjusts every 2016 Bitcoin blocks — or approximately two weeks — to maintain a constant block time, which refers to how long it takes to find each new block.
The hash generated by miners is used as an identifier for any particular block, and is composed of the data found in the block header. The most important components of the hash are the Merkle root — another aggregated hash that encapsulates the signatures of all transactions in that block — and the previous block’s unique hash.
This means that altering even the tiniest component of a block would noticeably change its expected hash — and that of every following block, too. Nodes would instantly reject this incorrect version of the blockchain, protecting the network from tampering.
Through the difficulty requirement, the system guarantees that miners put in real work — the time and electricity spent in hashing through the possible combinations. This is why Bitcoin’s consensus protocol is called “proof-of-work,” to distinguish it from other types of block-creation mechanisms. In order to attack the network, malicious entities have no method other than recreating the entirety of its mining power. For Bitcoin, that would cost billions of dollars.
How Bitcoin miners are paid
The network recognizes the work conducted by miners in the form of providing rewards for generating new blocks. There are two types of rewards: new Bitcoin created with each block, and fees paid by users to transact on the network. The block reward of newly minted Bitcoin, amounting to 6.25 BTC as of May 2020, is the majority of miners’ revenue. This value is programmed to halve at fixed intervals of approximately four years, so that eventually, no more Bitcoin is mined and only transaction fees guarantee the security of the network.
By 2040, the block reward will have reduced to less than 0.2 BTC and only 80,000 Bitcoin out of 21 million will be left up for grabs. Only after 2140 will mining effectively end as the final BTC is slowly mined.
Even though the block reward decreases over time, past halvings have been amply compensated by increases in the Bitcoin price. While this is no guarantee of future results, Bitcoin miners enjoy a relative degree of certainty about their prospects. The community is very supportive of the current mining arrangement, and has no plans to phase it out like Ethereum, another major mineable coin. With the right conditions, individual miners can be confident that the venture will turn a profit.
Though mining is a competitive business, starting out is still relatively easy. In the early years of Bitcoin, hobbyists could simply boot up some software on their computer and get started right away. Those days are long gone, but setting up a dedicated Bitcoin miner is not as hard as it may seem at first.
How to choose hardware for mining
The first thing to note is that for mining Bitcoin, your only option is to buy an Application-Specific Integrated Circuit device, commonly referred to as an ASIC.
These devices can only mine Bitcoin, but they are highly efficient in doing so. In fact, they are so efficient, that their introduction around 2013 made all other types of calculating devices obsolete almost overnight.
If you are looking to mine with common CPUs, GPUs or more advanced FPGAs, you will need to look into other coins. Though these devices can mine Bitcoin, they do so at such a slow pace that it’s just a waste of time and electricity. For reference, the best graphics card available just before the rise of ASICs, the AMD 7970, produced 800 million hashes per second. An average ASIC today produces 100 trillion hashes per second — a 125,000-fold difference.
The number of hashes produced in a second is commonly referred to as the “hash rate” and it is an important performance measurement for mining devices.
There are two other main factors that should be considered when purchasing a mining device. One is the electricity consumption, measured in watts. Between two devices that produce the same number of hashes, the one that uses the least electricity will be more profitable.
The third measure is unit cost for each device. It is pointless to have the most energy-efficient ASIC in the world if it takes 10 years to pay itself back.
Bitcoin has a fairly vibrant ecosystem of ASIC manufacturers, which often differ on these three parameters. Some may produce more efficient but also more expensive ASICs, while others make lower-performing hardware that comes at a cheaper price. Before analyzing which device is best suited for your needs, it is important to understand the other factors influencing profit.
The economics of mining Bitcoin
Like the real estate business, mining is all about location, location, location.
Different places in the world will have a different average price of electricity. Residential electricity in many developed countries is often far too expensive for mining to be financially viable. With the price of electricity often ranging between $0.15 and $0.25 per kilowatt hour, mining in residential areas runs too high a bill to remain consistently profitable.
Professional Bitcoin miners will often place their operations in regions where electricity is very cheap. Some of these include the Sichuan region in China, Iceland, the Irkutsk region in Russia, as well as some areas in the United States and Canada. These regions will usually have some form of cheap local electricity generation such as hydroelectric dams.
The prices enjoyed by these miners will often be below $0.06 per KWh, which is usually low enough to turn a profit even during market downturns.
In general, prices below $0.10 are recommended to maintain a resilient operation. Finding the right location is largely dictated by one’s circumstances. People living in developing countries may not need to go further than their own home, while those in developed countries are likely to have higher barriers to entry.
Aside from the choice of hardware, an individual miner’s profit and revenue depend strongly on market conditions and the presence of other miners. During bull markets, the price of Bitcoin may skyrocket higher, which results in the BTC they mine being worth more on a dollar basis.
However, positive inflows from bull markets are counterbalanced by other miners seeing the increased profits and purchasing more devices to tap into the revenue stream. The result is that each individual miner now generates less BTC than before. Eventually, the revenue generated trends toward an equilibrium point where less efficient miners begin to earn less than they spend on electricity, thus shutting devices off and allowing others to earn more Bitcoin.
Usually, this does not happen instantaneously. There is a certain lag, as ASICs can sometimes not be produced quickly enough to make up for the increase in Bitcoin price.
In a bear market, the opposite principle holds: Revenue is depressed until miners begin to turn off their devices en masse.
To avoid being outcompeted, existing miners must find a winning combination of location and hardware that would allow them to maintain their edge. They must also constantly maintain and reinvest their capital, as more efficient hardware can throttle older miners’ profits completely.
Comparison of mining hardware profitability
There are several calculators online on websites such as AsicMinerValue, CryptoCompare and Nicehash, where the profitability of a mining device can be quickly checked. It’s also possible to estimate profit manually with the following formula:
This is the formula that many of these calculators use, and it simply represents your share of the overall hashrate divided by the network’s total issuance in dollars. The input values required are either fixed parameters (the block time for Bitcoin is 10 minutes, so there are six blocks mined in an hour and 144 in a day), or they can be found on data websites like Blockchain.com or Coinmetrics.
To find the profit, one also needs to subtract the cost of electricity. Thanks to the equivalence between kilowatts and kilowatt hours, this can be as simple as multiplying the device’s power usage by 24 hours in a day and the electricity price per kilowatt hour.
Below is a table illustrating major ASICs on the market today and their payback period — that is, how long it would take for the investment to break even on current revenues. It’s worth noting that a miner’s profit fluctuates wildly over time, and extrapolating a single day into the future can lead to inaccurate results. Nonetheless, it’s a useful metric to understand the relative effectiveness of each device.
As can be seen in the table, none of the ASICs turn a profit at prices of $0.20 per KWh. The relative performance is mostly the same for each of the new-generation ASICs, while older models can be an attractive proposition if electricity is cheap.
For example, the Canaan AvalonMiner 1066 has low energy efficiency but also a very low price, making it fairly competitive at the low electricity price bracket despite being a fairly old model. The Bitmain S17 Pro, a previous-generation ASIC, still holds its ground due to its lower cost, but quickly becomes unattractive when the reference electricity price rate is raised. MicroBT’s devices appear to have the most balanced performance overall.
One final issue to consider is that this table was compiled in a bull market. Profits may be higher than average, though the halving of 2020 is still fresh and may counterbalance the effect with lower Bitcoin issuance.
Buying and setting up the hardware
There are several shops that sell ASICs to retail customers, while some manufacturers also allow direct purchases. Though they are more difficult to source than common graphics cards, it is still possible for anyone to buy an ASIC at an acceptable price. It is worth noting that buying from shops or manufacturers shipping from foreign countries may result in hefty import dues.
Depending on the manufacturer or the shop, ASICs may be offered without a power supply unit, which will then need to be purchased separately. Some ASIC manufacturers sell their own units, but it is also possible to use PSUs built for servers or gaming computers, though they are likely to require special modifications.
ASICs need to be connected to the internet via an ethernet cable, and they can only be configured through a web browser by connecting to the local IP address, similar to a home router.
Before carrying on, it is necessary to set up an account with a mining pool of choice, which will then provide detailed information on how to connect to its servers. From the ASIC’s web panel, you need to insert the pool’s connection endpoints and account information. The miner will then begin working and generating Bitcoin.
Mining through an established pool is strongly advised, as you will be able to generate constant returns by pooling your hardware with others. While your device may not always find the correct hash to create a block, your contribution will still be rewarded.
Considerations and risks of Bitcoin mining
In addition to the financial risk of not turning a profit, there are technical risks involved in managing high-power devices such as ASICs.
Proper ventilation is required to avoid burning out components due to overheating. The entirety of the miner’s electricity consumption is dissipated into its environment as heat, and one ASIC is likely to be the single-most powerful appliance in your home or office.
That also means you need to carefully consider the limits of your electrical grid. Your home’s electricity network is rated up to a maximum level of power, and each socket has its own rating too. Exceeding those limits could easily result in either frequent outages or electrical fires. Consult an expert to determine whether your electrical setup is safe.
Regular maintenance against dust and other environmental factors is also required to keep the devices healthy. While failures are relatively rare, ASICs can go out of commission earlier than expected without proper maintenance.
While single ASICs may fail, the largest threat to their profitability is them becoming obsolete. More efficient miners will eventually crowd out older devices.
Historic generations of miners like the Bitmain S9, released around 2016, lasted approximately four years before becoming unprofitable under any electricity price configuration (except zero). However, the speed of advances in computing technology is largely unpredictable.
Bitcoin mining is no exception to any other venture. There is potential for rewards as well as risks. Hopefully, this guide provided a decent starting point to further evaluate both.
A not so long time ago, in a galaxy not so far away, some smart people invented Bitcoin. In the beginning, there were only a few enthusiasts excited about the new currency, but very soon people started to realize the potential. So, the number of miners and people who hold bitcoins and pay with it became to grow exponentially.
It is a great thing, overall, except for one glaring issue: Bitcoin’s transaction speeds are very slow at around 7 transactions per second. As a comparison, Visa performs around 24,000 transactions per second. In 2017 it was clear that there are already too many transactions to handle and some reform is required in order to allow Bitcoin to scale further.
So, why can’t the volume of transactions just be increased?
That’s a great question. Initially, Bitcoin’s Blocksize limit was 1MB (today it’s 2MB). So, why they can’t make it a larger number, for example 820,100MB?
The answer to this can be explained using a heavy traffic metaphor. For example, say we have a heavy traffic issue, so we decide to change the speed limit to 200 miles per hour. What will happen? First of all, there will be a safety issue because at this speed the chances of crashing and injuries increase. However a potentially bigger problem is that now old and small vehicles will not be eligible for highways, because they can’t move fast enough. So the highway will be full of big people with big strong cars and a regular driver will stay at home or take slower roads to get to where they want to be.
This is exactly what will happen with increasing the limit. More blocks = more data to process for each transaction. So small nodes will not be able to process this increased data and decentralization becomes inevitable.
But there is still a need for more transactions – what is the solution?
The transaction issue has divided the Bitcoin community into two groups. One group claims that Bitcoin was never designed to be a “cup of coffee” payment solution, the other says that it has to scale. As neither group was ready to give up, in August 2017 Bitcoin was basically split using a process called “Hard Fork”, which created a new version of Bitcoin called Bitcoin Cash. Bitcoin Cash uses the same codebase, but with a Blocksize limit of 8Mb. This increased limit makes possible a performance of around two million transactions processed per day.
Bitcoin and Bitcoin Cash in your wallet
Ok, the couple is divorced, but who keeps the children?
What happened to people who had Bitcoins before the fork? The easiest way to solve the issue was to clone the wallets. The last mined block, before the fork, was 478558. So, if you had any Bitcoins before that block, after the fork you’ve will end up having the same amount in Bitcoin Cash. Easy, isn’t it? I wish we could do the same with children. (just kidding, it’s creepy!). Just imagine that you suddenly have 4 kids instead of 2. You are not really sure who is your original son. What about the school, friends, family? Sounds like a nightmare. In the Bitcoin world this nightmare came true in what is known as a “Replay Attack”.
You see, each person after the split has the same bitcoin with the same Private key in two wallets. This means that once you make a transaction, people can use the private key for a transaction in another currency. Instead of paying only from one wallet, the same amount will be deducted from the second too.
Like if you have two apartments and somebody enters and takes a laptop in one of them, he also is able to take the same laptop from another apartment. This doesn’t sound so great, right?
So, all the people now have twice more? Sounds great!
Not really, once the amount has increases, it automatically decreases the overall value of the currency, so nobody has actually become richer from the fork itself.
Another popular question: are the two interchangeable? The answer is: no. They are completely separate now and are able to operate independently of each other – I definitely wish the best of luck to both.
So, you can say it wasn’t confusing enough before, when we needed to choose from Bitcoin, Ripple, Ethereum and others – now we need to choose from two Bitcoins. Which one is better, you ask? In fact, they are just different, with each currency having its pros and cons. Let’s explore some of these below.
1. New Name
Of course the name itself. The word cash in it is not accidental – the creators are intending that the future of the currency is to become a new form of cash.
2. Advantage/Disadvantage
+ Larger Blocksize limit (8MB). As a result – more transactions are able to be processed for a cheaper fee.
– Bitcoin has lots of mining pools, so no one is strong enough and a situation where a single miner has a majority of 51% to rule them all is quite impossible.
Bitcoin Cash, on contrary, is highly centralised. Right now we already have 3 mining pools that make more than 51% together. This can be a dangerous situation because the future of the currency becomes too reliant on these three.
3. Technical difference
Bitcoin Cash is aware of its weaknesses and added protection adjustments to close these gaps and make the new currency safer for all to use.
Feature
Description
Replay and Wipeout Protection
Bitcoin Cash uses a different hash algorithm to the one Bitcoin uses. So, the replay between the two chains is no longer possible.
On-chain scalability
Bitcoin Cash’s technology allows for an increase in the number of blocks. Right now it is 8MB and further increases are possible.
New transaction signatures
Bitcoin Cash has a different transaction signature to verify its distinction from Bitcoin.
Emergency Difficulty Adjustment (EDA)
A new algorithm which ensures normal chain work in case of dramatic changes of the number of miners This provides additional stability to the currency as a whole.
What factors affect BCH price and why did it spike in November?
Bitcoin Cash was announced on August, 2017. But the rocketjump happened on November of the same year. On November 12, the price rose twice in one day and Bitcoin Cash officially took second place, behind Bitcoin.
Bitcoin had a really bad weekend. Due to lowered hashing power there was about 10000 pending transactions in the network. As a result, buyers moved to buy Bitcoin Cash.
Bitcoin Cash came as a solution to the well known speed issues that Bitcoin was suffering from and offered a better solution than Bitcoin’s SegWit2X. Today it is the only technology that offers a scaling solution – which is a killer feature.
Another feature that original Bitcoin doesn’t have is the EDA algorithm – which makes the network more stable during high price periods.
What do smart people say about Bitcoin Cash?
Optimistic opinion
Dan Nathan, the founder of Risk Reversal Advisors, said: “I’ve been buying Bitcoin Cash and Ethereum. Those two seem like ones that have some room to go here, while bitcoin seems to have some technical issues.”
Roger Ver, one of the most known Bitcoin angel investors and evangelists, believes “Bitcoin Cash is the real Bitcoin and will have the larger market cap, trade volume and user base in the future.”
Dr Garrick Hileman, economics historian at the University of Cambridge, says “beyond the financial gains Bitcoin holders may realise from the advent of Bitcoin Cash, there are also potential technical benefits, such as observing how BCH performs with 8MB blocks and what kind of use it attracts.”
Ken Shishido, a Bitcoin Cash evangelist, is sure: “When BCH will get more adopted and people will see that you can actually use it to buy goods and services, the price will go up.”
Pessimistic opinion
Adam Back is a British cryptographer says: “Bitcoin has the edge over Bitcoin Сash regarding long-term scaling because Bitcoin cash lacks the infrastructure to support second layer scaling.”
Michael Graham says the original bitcoin may simply have too much of a lead to be overtaken.“While some have gone so far as to proclaim that Bitcoin Cash will ultimately overtake Bitcoin as ‘the bitcoin,’ the overall consensus appears to be that BTC is unlikely to give up its spot as the #1 cryptoasset anytime soon.”
Neutral opinion
Brian Kelly CEO & Founder BKCM LLC thinks: “I think both Bitcoin and Bitcoin Cash are a great bet. Bitcoin is like the monetary base and Bitcoin Cash is the transactional currency similar to a global M1.”
Altcoins are a form of digital currency, or cryptocurrency, each with its own set of rules
Altcoins are very new and their prices can be very volatile.
How Do Altcoins Work?
Generally speaking, altcoins work much like the original Bitcoin. Using a private key, you can send a payment from your digital wallet to another user’s wallet. In a cryptocurrency such as these, there is a blockchain, or recording ledger, where the transactions are permanently and publicly recorded, so exchanges can’t be altered or denied after the fact.2 The blockchain is secured by mathematics proofs which confirm transactions in blocks.3
Altcoin vs. Bitcoin
Altcoins don’t all follow the same rules as Bitcoin. For example, while Bitcoin will only ever mine, or produce, bitcoins every 10 minutes, an altcoin called Litecoin will produce coins every 2.5 minutes. This makes Litecoin able to process payments faster. Litecoin will also produce 84 million litecoins, whereas Bitcoin will only produce 21 million bitcoins.4
Litecoin also uses a different set of rules for mining than bitcoin. Whereas bitcoins require costly hardware to mine, litecoins can be mined with common computer hardware.
Litecoin is just one of the thousands of altcoins on the market. Some altcoins stand out as popular alternatives to Bitcoin, although they don’t reach Bitcoin’s $100 billion market cap.5 A few examples of altcoins include:
Ethereum
Ripple
Dash
Litecoin
NEM
Monero6
Pros and Cons of Altcoins
Pros
Improve on Bitcoin’s flaws
Provide competition
Low transaction fees
Cons
Value is very volatile
High potential for scams and fraud
Pros explained
Improve on Bitcoin’s flaws: Altcoins are generally designed to address a perceived shortcoming with the Bitcoin framework, whether it’s speed, mining cost, or some other factor.
Provide competition: By tweaking the rules under which Bitcoin operates, altcoin creators make space for new competitors to the Bitcoin system.
Low transaction fees: One of the benefits of using altcoins as a payment method, in addition to secure blockchain technology, is the relatively low transaction fees charged for each transaction.
Cons explained
Value is very volatile: As an investment, altcoins are very new and their value can change drastically.
High potential for scams and fraud: Altcoins, as with Bitcoin, are frequently the subject of scams and other fraudulent schemes.7
Types of Altcoins
Altcoins are sometimes projects from enthusiasts, and sometimes the basis for whole new businesses. They can even be more than coins, developing into entire new frameworks for everything from messaging applications to online marketplaces.
An altcoin will often change Bitcoin’s rules sufficiently to do something uniquely productive and may have a particular application.
Some coins, such as solarcoin, have been designed as a unit of exchange for solar power production. Others, such as namecoin, have formed the basis for a new system of domain names on the Internet.
Consider these different types of altcoins.
Stablecoins
Stablecoins are altcoins that are designed to combat the volatility of cryptocurrency by tying their value to an underlying index, commodity, or security. Tether is one example of a stablecoin; Libra is a stablecoin under development by Facebook.8
Digital tokens
Altcoins that function as digital tokens are supported by an underlying blockchain platform. For example, Tether can also be considered a digital token, as it is built on Ethereum and other blockchains.9
Some investors seek to earn returns by exchanging altcoins with each other, too, but as an investment, it’s risky. Virtual currencies trade on unregulated exchanges, which leave you vulnerable to price manipulation, fraud, and other problems.
