More broadly, though, it helps to understand what blockchain technology is, how competing products are using it and which ones have a shot at success. In addition, there’s a lot of hype around cryptocurrencies, which means investors should have their eyes open for red flags.
“This industry is riddled with coins that have no use case and in many cases are actual outright scams, meaning that they’re just people that are out to get your money,” says Greenspan, who’s based in Tel Aviv, Israel. The trick, he says, is to find the true innovators.
While you might not need a background in coding, it’s worth the effort to look into how a cryptocurrency can be used. One way to do this is to read the white paper, an often technical document laying out how a network will operate.
Bitcoin, for instance, is built to be actual digital money used as payment for goods and services.
Ether, the second-most valuable cryptocurrency, can also be used as payment or to compensate users who help run the Ethereum network. The network is built to execute “smart contracts” that can be settled automatically when certain conditions are met.