Joseph Canayon GEMATHW - EV

Cryptocurrency, the currency of the future?

Background
To give a brief background, cryptocurrencies are digital or virtual currencies underpinned by cryptographic systems. What does that exactly
mean? Cryptocurrency enables one to secure online payments without the use of third-party intermediaries as most of them are in decentralized
networks powered by blockchain technology.

Cryptocurrency is a digital payment system that doesn't rely on banks to verify transactions. It’s a peer-to-peer system that can enable anyone
anywhere to send and receive payments. Instead of being physical money carried around and exchanged in the real world, cryptocurrency
payments exist purely as digital entries to an online database describing specific transactions. When you transfer cryptocurrency funds, the
transactions are recorded in a public ledger. Cryptocurrency is stored in digital wallets.

Cryptocurrency received its name because it uses encryption to verify transactions. This means advanced coding is involved in storing and
transmitting cryptocurrency data between wallets and to public ledgers. The aim of encryption is to provide security and safety.

Importance of Blockchain Technologies

Blockchain technology is key to the attractiveness and functionality of Bitcoin and other cryptocurrencies. Blockchain, as the name implies, is
essentially a collection of linked blocks or an online ledger. Each block comprises a collection of transactions that have been independently
confirmed by each network member. Every new block generated must be validated by each node before being confirmed, making forging
transaction histories nearly impossible. The contents of the online ledger must be agreed upon by the complete network of a single node, or
computer, that keeps a copy of the ledger. The fact that cryptocurrencies are often not issued by any central body makes them potentially
impervious to political meddling or manipulation.
.

How does one acquire Cryptocurrency?

Cryptocurrencies can be acquired in two different ways. First, Cryptocurrencies can be generated by mining. Crypto mining is the competitive
process that verifies and adds new transactions to the blockchain for a cryptocurrency that uses the proof-of-work (PoW) method. The miner that
wins the competition is rewarded with some amount of the currency and/or transaction fees. Second, Cryptocurrencies can be acquired through
trading similar to how stocks are traded in the stock market. Supported crypto trading sites in the country include Coins. ph and Binance.

Multiple Types of Cryptocurrency

Currently, there are thousands of types of cryptocurrency in the market that is available to the public. Each cryptocurrency has a unique function
and specification. Let us explore some of the known types of cryptocurrency.

1) The most popular and valuable cryptocurrency is Bitcoin. Satoshi Nakamoto, an anonymous person, invented it and published it in a
white paper in 2008. Bitcoin, which went public in 2009, is still the most extensively traded and covered cryptocurrency. It is referred to
as digital gold due to its scarcity and its intrinsic value according to its backers. There were about 19 million bitcoins in circulation as of
May 2022, with a total market valuation of around $576 billion. There will only ever be 21 million bitcoins. Bitcoin is a cryptocurrency,
a virtual currency designed to act as money and a form of payment outside the control of any one person, group, or entity, and thus
removing the need for third-party involvement in financial transactions. It is rewarded to blockchain miners for the work done to verify
transactions and can be purchased on several exchanges. Bitcoin was introduced to the public in 2009 by an anonymous developer or
group of developers using the name Satoshi Nakamoto.It has since become the most well-known cryptocurrency in the world. Its
popularity has inspired the development of many other cryptocurrencies. These competitors either attempt to replace it as a payment
system or are used as utility or security tokens in other blockchains and emerging financial technologies.
2) Ethereum is also considered another popular option in the cryptocurrency market. In terms of market capitalization, Ether is second only
to Bitcoin. Ethereum was developed in 2013 by programmer Vitalik Buterin. Ethereum is a decentralized global software platform
powered by blockchain technology. It is most commonly known for its native cryptocurrency, ether, or ETH. Ethereum can be used by
anyone to create any secured digital technology they can think of. It has a token designed for use in the blockchain network, but it can
 also be used by participats as a method to pay for work done on the blockchain. Ethereum is designed to be scalable, programmable,
secure, and decentralized. It is the blockchain of choice for developers and enterprises, who are creating technology based upon it to
change the way many industries operate and the way we go about our daily lives.
3) Ripple Lab's XRP is another form of cryptocurrency used to ease transfers between different locations. The digital currency, XRP, acts as
a bridge currency to other currencies. It does not discriminate between any fiat/cryptocurrency, which makes it easy for any currency to
be exchanged for another.
If River wanted bitcoins as payment for the services rendered to Lawrence, Lawrence does not necessarily have to be in possession of
any bitcoins. He can send the payment to his gateway in Canadian dollars (CAD), and River can receive bitcoins from his gateway. One
gateway is not needed to initiate a complete transaction; multiple gateways can be used, forming a chain of trust rippling across the users.

What are the advantages and disadvantages of Cryptocurrency?

Positive:
● Cryptocurrencies represent a new, decentralized paradigm for money. In this system, centralized intermediaries, such as banks and
monetary institutions, are not necessary to enforce trust and police transactions between two parties. Thus, a system with
cryptocurrencies eliminates the possibility of a single point of failure, such as a large bank, setting off a cascade of crises around the
world, such as the one that was triggered in 2008 by the failure of institutions in the United States.
● Cryptocurrencies promise to make it easier to transfer funds directly between two parties, without the need for a trusted third
party like a bank or a credit card company. Such decentralized transfers are secured by the use of public keys and private keys and
different forms of incentive systems, such as proof of work or proof of stake.11
● Because they do not use third-party intermediaries, cryptocurrency transfers between two transacting parties are faster as
compared to standard money transfers. Flash loans in decentralized finance are a good example of such decentralized transfers. These
loans, which are processed without backing collateral, can be executed within seconds and are used in trading.12
● Cryptocurrency investments can generate profits. Cryptocurrency markets have skyrocketed in value over the past decade, at one
point reaching almost $2 trillion. As of May 2022, Bitcoin was valued at more than $550 billion in crypto markets. 13
● The remittance economy is testing one of cryptocurrency's most prominent use cases. Currently, cryptocurrencies such as Bitcoin serve as
intermediate currencies to streamline money transfers across borders. Thus, a fiat currency is converted to Bitcoin (or another
cryptocurrency), transferred across borders and, subsequently, converted to the destination fiat currency. This method streamlines the
money transfer process and makes it cheaper.
Negative:
● Though they claim to be an anonymous form of transaction, cryptocurrencies are actually pseudonymous. They leave a digital trail
that agencies such as the Federal Bureau of Investigation (FBI) can decipher. This opens up possibilities of governments or federal
authorities tracking the financial transactions of ordinary citizens.14
● Cryptocurrencies have become a popular tool with criminals for nefarious activities such as money laundering and illicit
purchases. The case of Dread Pirate Roberts, who ran a marketplace to sell drugs on the dark web, is already well known.
Cryptocurrencies have also become a favorite of hackers who use them for ransomware activities.15
● In theory, cryptocurrencies are meant to be decentralized, their wealth distributed between many parties on a blockchain. In
reality, ownership is highly concentrated. For example, an MIT study found that just 11,000 investors held roughly 45% of Bitcoin's
surging value.16
● One of the conceits of cryptocurrencies is that anyone can mine them using a computer with an Internet connection. However,
mining popular cryptocurrencies requires considerable energy, sometimes as much energy as entire countries consume. The
expensive energy costs coupled with the unpredictability of mining have concentrated mining among large firms whose revenues running
into the billions of dollars. According to an MIT study, 10% of miners account for 90% of its mining capacity. 16
● Though cryptocurrency blockchains are highly secure, other crypto repositories, such as exchanges and wallets, can be hacked.
Many cryptocurrency exchanges and wallets have been hacked over the years, sometimes resulting in millions of dollars worth of "coins"
stolen.17
● Cryptocurrencies traded in public markets suffer from price volatility. Bitcoin has experienced rapid surges and crashes in its value,
climbing to as high as $17,738 in December 2017 before dropping to $7,575 in the following months.3 Some economists thus consider
cryptocurrencies to be a short-lived fad or speculative bubble.

What are the similarities of cryptocurrency and stock market?

Stock Market Cryptocurrency

In stock trading, one can buy or sell stock directly, or invest in stocks Similarly, when trading in cryptocurrencies, one can buy or sell the
derivatives. crypto itself, or invest in a derivative version of it.
The key difference between them is that when trading stocks, one has This is not the case with crypto trading. It is possible to buy and sell
to do it through intermediaries. One cannot trade in stocks without cryptocurrencies without having to go through an intermediary. That’s
having to go through regulated brokers. not to say that intermediaries don’t have a role in crypto. Centralized
exchanges have made it easy for people to trade in cryptocurrencies.

Market liquidity is another major area where stock and crypto trading By contrast, most cryptos outside of the large-cap ones are illiquid.
differ. Most stocks, especially in the major indices such as the FTSE
100 and the FTSE 250, are highly liquid.

The two markets also differ in terms of security. Since the stock On the other hand, due to the unregulated nature of the
market is highly regulated, you can always be sure that the stock they cryptocurrency market, it is very easy for one to buy into scam
are buying into is legit. projects.

The crypto market runs 24/7. The stock market operates from Monday to Friday and is not open on
public holidays.

Volatility is high because it’s a new market. The volatility is lower since it’s a highly regulated market.

There are no guarantees but the potential profits are very high. Since stocks pay dividends, it acts as a cushion to investors.

Crypto trading is dependent on the location. In some countries, crypto Stocks trading is universal as pretty much all countries have a stock
trading is banned. exchange.

In crypto, the key sources of profits are staking, trading, In the stock markets, the key sources of profits are trading and
micro-tasking, and mining. dividends.
Conclusion:

Cryptocurrency has its similarities to the stock market but is a completely different financial instrument. It is an entirely different frontier that is
yet to fully be explored by the general public. It has many strengths and weaknesses. A crypto investor must be cautious in purchasing
cryptocurrencies.

References:

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Boukhalfa, S. (2019, December 19). What are the disadvantages of cryptocurrencies? PreScouter.

https://www.prescouter.com/2019/11/disadvantages-of-cryptocurrencies/

CBS News. (2022a, April 22). What are cryptocurrencies, and how do they work?

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CBS News. (2022b, April 22). What are cryptocurrencies, and how do they work?

https://www.cbsnews.com/news/what-is-cryptocurrency-bitcoin-ethereum-blockchain/

Conyers. (2021a, November 15). Why is Crypto so important and should I care?

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0important%20and,Fraud%20is%2C%20actually%2C%20minimized.
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Cryptocurrency vs. Stocks: Understanding the Difference. (2021, November 19). Maryville Online.

https://online.maryville.edu/blog/cryptocurrency-vs-stocks/#:%7E:text=Stocks%20provide%20stability.,rewards%2C%20but%20at%20h

igher%20risk.

Daniel, W. (2022, May 31). An uncanny chart from JPMorgan shows Bitcoin acting a lot like gold. Fortune.

https://fortune.com/2022/05/27/bitcoin-gold-institutional-investment-jpmorgan-shocking-chart/

The future of cryptocurrency: what’s next for this craze? (n.d.). GWI.

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20estimate%20that%20the%20global%20cryptocurrency%20market%20will%20more%20than,seem%20to%20escape%20paradoxes%2

0anywhere.

Kaspersky. (2022, February 9). What is cryptocurrency and how does it work? Www.Kaspersky.Com.

https://www.kaspersky.com/resource-center/definitions/what-is-cryptocurrency

Monrat, A. A., Schelen, O., & Andersson, K. (2019). A Survey of Blockchain From the Perspectives of Applications, Challenges, and

Opportunities. IEEE Access, 7, 117134–117151. https://doi.org/10.1109/access.2019.2936094

N26. (2022, January 17). The pros and cons of cryptocurrency: A guide for new investors.

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NI Business Info. (n.d.). Advantages and disadvantages of using cryptocurrency | nibusinessinfo.co.uk.

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ess,currency%20and%2For%20transaction%20fees

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What Is Ethereum? (2022, May 13). Investopedia.

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%2C%20and%20decentralized.
 Script of Presentation

Page 1 We all know that Cryptocurrency has been the latest craze all over the
internet but do we really understand what it is? Good day, I am Joseph
Canayon and today I will be discussing about Cryptocurrency. In this
discussion, we will be talking about the intricacies of Cryptocurrency such
as its what makes it unique, its uses, its advantages and disadvantages.
Likewise, we will also be discussing about its comparison to another
financial vehicle, the stock market.

Page 2 So to begin, what is a Cryptocurrency? It is is a digital payment system that

doesn't rely on banks to verify transactions. It’s a peer-to-peer system that
can enable anyone anywhere to send and receive payments. Instead of being
physical money carried around and exchanged in the real world,
cryptocurrency payments exist purely as digital entries to an online database
describing specific transactions.

When you transfer cryptocurrency funds, the transactions are recorded in a

public ledger. Cryptocurrency is stored in digital wallets.

So Cryptocurrency received its name because it uses encryption to verify

transactions. This means advanced coding is involved in storing and
transmitting cryptocurrency data between wallets and to public ledgers. The
aim of encryption is to provide security and safety.
Page 3
But one might ask, what is the thing that encrypts cryptocurrency? That is
actually a good question. Cryptocurrency is encrypted through the
Blockchain technology.

It is key to the attractiveness and functionality of cryptocurrencies.

Blockchain, as the name implies, is essentially a collection of linked blocks
or an online ledger. Each block comprises a collection of transactions that
have been independently confirmed by each network member. Every new
block generated must be validated by each node before being confirmed,
making forging transaction histories nearly impossible. The contents of the
online ledger must be agreed upon by the complete network of a single
node, or computer, that keeps a copy of the ledger. The fact that
cryptocurrencies are often not issued by any central body makes them
potentially impervious to political meddling or manipulation.

Page 4
To make things simple, I have provided a diagram to explain how
blockchain functions.

The blockchain process is started through a transaction, when it is

requisition. Then the transaction is represented by a specific block that was
created for the specific transaction.

Whenever a blockchain is introduced to a new blockchain transaction or any

new block is to be added to the blockchain, in general, numerous nodes
within the same blockchain implementation are required to execute
algorithms to evaluate, verify and process the history of the blockchain
block. If most of the nodes authenticate the history and signature of the
block, then the new block of blockchain transaction is accepted into the
 ledger and the new block containing data is added to the blockchain. If a
consensus is not achieved, the block is denied being added to the
blockchain. This distributed consensus model allows blockchains to
function as a distributed ledger without requiring any central or unifying
authority to validate the blockchain transactions. Thus, the blockchain
transaction is extremely secure.

Page 5 Now, that we’ve understood what a cryptocurrency is and what makes it
secure. Let us dive in the methods of how one can acquire cryptocurrency.

Cryptocurrencies can be acquired in two different ways. First,

Cryptocurrencies can be generated by mining. Crypto mining is the
competitive process that verifies and adds new transactions to the
blockchain for a cryptocurrency that uses the proof-of-work (PoW) method.
The miner that wins the competition is rewarded with some amount of the
currency and/or transaction fees. Second, Cryptocurrencies can be acquired
through trading similar to how stocks are traded in the stock market.
Supported crypto trading sites in the country include Coins. ph and Binance

Page 6 Now that we’ve discussed how one can acquire cryptocurrencies. Let’s get
into the most interesting part of cryptocurrency. The forms of
cryptocurrencies that exist in the market.

Currently, there are thousands of types of cryptocurrency in the market that

is available to the public. Each cryptocurrency has a unique function and
specification. We’ve noted three prominent forms of cryptocurrency. These
are Bitcoin, Ethereum, and XRP.
So to start, the most popular and valuable cryptocurrency is Bitcoin. It is a
virtual currency designed to act as money and a form of payment outside the
control of any one person, group, or entity, and thus removing the need for
third-party involvement in financial transactions. It is rewarded to
blockchain miners for the work done to verify transactions and can be
purchased on several exchanges. Satoshi Nakamoto, an anonymous person ,
invented it and published it in a white paper in 2008. It is the most
extensively traded and covered cryptocurrency. It is referred to as digital
gold due to its scarcity and its intrinsic value according to its backers. There
were about 19 million bitcoins in circulation as of May 2022, with a total
market valuation of around $576 billion. There will only ever be 21 million
bitcoins.

Next would be Ethereum. It is also considered another popular option in the

cryptocurrency market. I Ethereum is a decentralized global software
platform powered by blockchain technology. It is most commonly known
for its native cryptocurrency, ether, or ETH. Ethereum can be used by
anyone to create any secured digital technology they can think of. It has a
token designed for use in the blockchain network, but it can also be used by
participats as a method to pay for work done on the blockchain. Ethereum is
designed to be scalable, programmable, secure, and decentralized. It is the
blockchain of choice for developers and enterprises, who are creating
technology based upon it to change the way many industries operate and the
way we go about our daily lives.

In terms of market capitalization, Ether is second only to Bitcoin. Ethereum

was developed in 2013 by programmer Vitalik Buterin.

Lastly, we have XRP created by Ripple Lab. It is another form of

cryptocurrency used to ease transfers between different locations. The
 digital currency, XRP, acts as a bridge currency to other currencies. It does
not discriminate between any cryptocurrency, which makes it easy for any
currency to be exchanged for another.

Page 7 Now that we’ve discussed examples of available cryptocurrency in the

market, let us understand why do people keep using it through its
advantages and disadvantages.

Cryptocurrencies represent a new, decentralized paradigm for money.

In this system, centralized intermediaries, such as banks and monetary
institutions, are not necessary to enforce trust and police transactions
between two parties. Thus, a system with cryptocurrencies eliminates the
possibility of a single point of failure, such as a large bank, setting off a
cascade of crises around the world, such as the one that was triggered in
2008 by the failure of institutions in the United States.

Because they do not use third-party intermediaries, cryptocurrency

transfers between two transacting parties are faster as compared to
standard money transfers. Flash loans in decentralized finance are a good
example of such decentralized transfers. These loans, which are processed
without backing collateral, can be executed within seconds and are used in
trading.

Every cryptocurrency transaction is recorded in a blockchain,

guaranteeing its safety. This makes it possible to trace the history of
cryptocurrency tokens to stop people from spending coins they do not own,
making copies or undoing transactions. Once an invidiual makes an entry in
the blockchain, it can never be erased. And with the blockchain stored
decentrally across multiple computers, no hacker can access the entire chain
in one go; any information stored in it is safe for good.
 Cryptocurrency investments are high risks high potential . Prices are
driven primarily by the supply of coins from miners and the demand for
them by purchasers. And these supply-demand dynamics can result in hefty
returns. Cryptocurrency has been proven to generate profits for
cryptocurrency investors over the years. It is because cryptocurrency
markets have skyrocketed in value over the past decade, at one point
reaching almost $2 trillion. As of May 2022, Bitcoin was valued at more
than $550 billion in crypto markets. Another example would be the price of
Ethereum which roughly doubled from July 2021 to December 2021.

Page 8 As for the drawbacks of cryptocurrency,

It is unregulated, meaning that the cryptocurrency market is not regulated

by the Financial Conduct Authority (FCA) so there are no rules in place to
protect your business. If companies or consumers move to a new
cryptocurrency from you or stop using digital currencies entirely, it could
lose value and become worthless.

Cryptocurrencies might not have the risks that come with using central
intermediaries, but that doesn’t mean they’re completely free from
security issues. Cryptocurrency providers themselves admit that cyber
attacks can be an issue, with the people behind Ethereum saying that the
blockchain has reached “certain capacity limitations” that slow the rate at
which transactions can be processed. Many cryptocurrency exchanges and
wallets have been hacked over the years, sometimes resulting in millions of
dollars worth of "coins" stolen.

Cryptocurrencies have become a popular tool with criminals for

nefarious activities such as money laundering and illicit purchases. The
case of Dread Pirate Roberts and the Silk Road, who ran a marketplace to
 sell drugs on the dark web, is already well known. Cryptocurrencies have
also become a favorite of hackers who use them for ransomware activities.

Though they claim to be an anonymous form of transaction,

cryptocurrencies are actually pseudonymous. They leave a digital trail
that agencies such as the Federal Bureau of Investigation (FBI) can
decipher. This opens up possibilities of governments or federal authorities
tracking the financial transactions of ordinary citizens.

While the price of a cryptocurrency can spike to dizzying highs (with

associated benefits for investors!) they can also crash to terrifying lows just
as quickly. So if you’re looking to make stable returns, this might not be the
best bet. The cryptocurrency market fundamentally thrives on speculation,
and its relatively small size makes it more vulnerable to price fluctuations.
That in turn can wreak havoc with the value of coins— which is one of the
major disadvantages of cryptocurrency.

Energy Intensive - Crypto mining has been proven to use extraneous

amounts of energy to mine tokens. To verify transactions, Bitcoin requires
computers to solve ever more complex math problems. This proof of work
consensus mechanism is drastically more energy-intensive than many
people realize.

Page 9 Now that we’ve discussed the advantages and disadvantages of

cryptocurrency, let is compare it to another financial instrument used by the
general public, the stock market.
In terms of ownership, cryptocurrency is known for its anonymity/perceived
pseudonimity. No one needs to know who the crypto buyer is. A crypto
owner holds assets in a virtual wallet or on a storage device, such as a USB
drive. The downside of anonymity is that responsibility for security falls on
the owner, who has to keep track of where the crypto is and remember a
password of at least 16 characters. Owners have little recourse if hackers
clean out their crypto wallets.

On the otherhand in the stock market , for an individual to buy and keep
stock, they usually has to open an account at a brokerage. The brokerage
makes trades and holds stock in the buyer’s name. A buyer also has to
disclose personal information, such as their Social Security number and
street address. Going through a brokerage provides a level of security.

As for exchanges, Exchanges for buying and selling cryptocurrency are

newer. Dozens, if not scores, of crypto exchanges exist. Two of the largest
are Binance and Coinbase. Some exchanges work with third parties to
smoothly exchange conventional currencies, such as the U.S. dollar, for
crypto.

On the contrary, Stocks are traded on accredited exchanges throughout the

world. They offer stock buyers security, stability, and transparency and are
built to handle large trading volumes every day. Exchanges are strictly
regulated (although specifics vary by country), providing protections to
buyers and sellers.

In regards for volatility, One thing cryptocurrencies have been known for is
their volatility. Ethereum, for example, started 2021 at about $730 and rose
to $4,080 at the end of May. It dropped to about $1,786 in July, before rising
to $4,082 in late October.

As for the volatility of stocks, Sudden and rapid changes in stock values are
as old as stock exchanges. A piece of good news can launch a stock higher,
just as bad news can send it lower. As the terms “Black Friday” and “Black
 Monday” attest, stock markets can plunge in a day. Usually, there’s an
explanation, either economic or technical (such as a program-driven
sell-off). Investors might see the value of their portfolios tumble, but total
losses are rare.

In terms of Regulation, cryptocurrencies remain largely unregulated, which,

for some crypto investors, is a mark in crypto’s favor. Crypto markets know
no borders and are beholden to no governments. However, it leaves crypto
buyers with no protection if something goes wrong with their investment.

By contrast, various countries all over the world have their own regulating
body for the stock market. Companies are required to disclose all
information that can have an impact on their stock value. Investors and their
financial advisors have a good deal of information on which to base their
investment decisions.

Lastly, in terms of stategeic complements, Cryptocurrency is the riskier

investment. It offers the chance for big rewards, but at higher risk. Stocks on
the otherhand, provide stability. They’ve been the go-to investment to build
wealth for individuals and organizations for most of the 20th century and
into the 21st century.

To conclude between the forms of investing instruments, One must be

reminded that investing isn’t an either-or proposition. It pays to have diverse
investments that balance safer bets with investments that bear a greater
chance of loss. By the same token, investors don’t have to decide between
cryptocurrency vs. stocks — they can pursue both cryptocurrency and
stocks, as long as they’re comfortable with an element of risk in their
portfolio.

Page 10 It is an entirely different frontier that is yet to fully be explored by the

general public. It has many strengths and weaknesses but one thing is for
sure, cryptocurrencies and the blockchain technology will be here to stay.
They offer too many of the advantages that consumers seek in a currency
today; decentralization, transparency, and flexibility being chief among
these.

This is a brand new technology which has already illustrated its ability to
fundamentally disrupt the global financial system.

However, as investors we must be cautious in investing on them similar to

how one researchs stocks. These forms of investment can lead to
exponential gains and loses.

That is all, once again I am Joseph Canayon, I hope that you have learned
alot from this discussion about Cryptocurrency.