Alternate Currencies for Enforced Savings and Risk Diversification
Many here on Bitlanders convert their Bitcoin savings right away. There are important advantages for this practice. First, you can use the money to pay your bills, which may be the reason you got into Bitcoin in the first place. If you can pay some of your bills this way, more power to you! Second, you may need the current spending power of the Bitcoin. Since the value of Bitcoin goes up and down, converting Bitcoin now ensures that you will not hold onto any more Bitcoin than you can afford to lose. Third, the microexpenditure of small amounts of bitcoin for expenditures creates precisely the kind of velocity ("speed"/ "turnover") as bitcoin needs to continue to increase it function as a currency.
However, not saving Bitcoin has downsides. Since the value of the currency sometimes goes up, you lose the possibility of a windfall which might have lifted you completely up and out of your current bad situation. Such appreciation would increase the spending value of the income at the rate you earn now, but you cannot guarantee that the person who currently pays your... Bitlanders, or otherwise, will not decrease the face value of your earnings so as to match the current spending power. I've seen this done elsewhere. Savings, as opposed to earnings, do a better job of preserving the upside potential of your Bitcoin.
Also, what happens as you become older, or too sick to earn Bitcoin. What happens if you temporarily lose access to a computer or an internet connection. The reasons for wanting to achieve Bitcoin savings goes beyond the merely preserving its upside potential.
What are some problem in achieving Bitcoin savings? First, there is the problem of non-segregation. Bitcoin mixes well with other Bitcoin. As you earn more Bitcoin, there is a tendency of viewing new expenses as subject to the new earning. In real life, this might get you past one time emergency expenses, but it risks your becoming dependent upon the newly acquired earnings as part of regular budget. As a result, you work harder, and still do not save anything. For this reason, you want to have structural separate of new earnings from current ones. In this article, I discuss the possibility of using different alternate currencies for savings. By their very nature, these alternates are self-segregating.
The second problem is, as we already discussed, the risk of the fall of bitcoin value. The relationship between the value of Bitcoin, and countercurrencies is very complicated, but there is, among that complexity, a certain countercyclindrical tendency of the value of alternate currencies to that of Bitcoin. To the extent that the currency traders view the value of Bitcoin as complementary to that of alternate currencies, a rise in the price of Bitcoin will also result in a rise in the price of alternate currencies. However, currency traders often view the value of Bitcoin as competitive to that of the alternative currencies. In other words, when Bitcoin does poorly, they look to buy (and increase the value of) alternate currencies. When Bitcoin does well, they look to sell (and decrease the value of) alternate currencies). Saving alternate currencies is a way of making sure that you have some currency that sells at a good price at the exact time you need to sell it.
The third problem is diminishing returns. You have probably selected the method for earning bitcoins which is easiest- or at least the most enjoyable- for you. As you seek to earn more Bitcoin, you may well have to move towards methods which you find difficult or less enjoyable. Earning other currencies will allow you to consider whether any of these other currencies can be earned by methods you find easier or more pleasant than the methods which remain for you to earn bitcoin.
Segregation
You can achieve different levels of segregation to suit your circumstance. At the very simplest, segregation occurs when you separate earnings into two different revenue streams, which you send to two different wallet addresses, with the intent to afford the different streams with different treatment. As previously suggested, sending bitcoin allocations to two different addresses in the same wallet provides very little segregation in that you will great temptation to turn to your segregated savings the next time you have an emergency. By selecting a completely different wallet for each stream, you not reduce that temptation, but you also decrease the likelihood of losing all of your saving at one time to predation (theft/fraud etc.). Using just two wallets instead of one decreases your risk dramatically. As your savings increase, it is better to spread your savings over even more wallets, each with its own security codes.
Each cryptocurrency has its own addresses, and wallets. Your initial decision to save a currency other than bitcoin forces you, given the structural constraints of cryptocurrencies, to segregate as to both address and wallet. Even if you defeat the separate security code features, by selecting different wallets in a multi-wallet provider, or an exchange, the necessary specificity implied by fundamentally different cryptocurrencies provides an added measure of security. For example, a hacker who breaks into a multi-wallet provider to steal bitcoin might not take the time to steal bitcoin might not steal some,or all, of the other currencies, given the need for a separate wallet for each currency.
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I recommend setting up a completely different wallet for a different currency, observing the wallet thoroughly for a short time to make sure it properly receives and stores the currency, and then sending currency to it frequently, but checking it only once a month. Having a different currency in a different wallet, for which you have done no research as to how to sell for cash, likely will help you to stay the course of treating the contents of the segregated account as long term savings.
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Risk Diversification
You achieve risk diversification by choosing (1) a currency which is likely to remain viable, and (2) a currency which is countercyclical (tends to go up when bitcoin goes down), and (3) features independently strong security measures. At this times, conventional wisdom holds that a "second tier" of viable currencies includes dogecoin, litecoin, dash (also known as darkcoin), blackcoin, primecoin, and peercoin (in that order). (If you don't agree with my list, don't hate me... write your own article about the slighted currency). There is also a "third tier", which I do not list here as too speculative for any notion of risk management. After that, there is a "fourth tier", the contents of which are all either garbage or gold, with the two being indistinguishable. A "Conservative" cryptocurrency investor would not waste any time on these "fourth tier" cryptocurrency, but may shrewdly treat a "third tier" currency as if "second tier" if the price is right, and you have done your research. I personally like a coin being developed by the group Anonymous because I think the group has the expertise to make the coin succeed, and the motivation not to let it fail. You probably don't have a Shadow of an idea as to what coin I am talking about, so you can't quote me on that.
This third tier coin does not warrant treatment in this article... but I like it anyway. There is no referral for this... the only place you can get this free is cryptospout.
Another factor in determining the viability of the currencies include the amount of current use of the coin. For example, dogecoin seeks alot of actual use for transactions. By contrast, Litecoin seems to have alot of fanatic hoarders. Yet another factor consists of any intrinsic feature of the coin. For example, primecoin blockchain procedures create an inherently useful product, which may have its own commercial purposes. As a last note, dogecoin has some market features which render it relatively stable, which makes it attractive for risk diversification purposes.
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Some experts think this coin is a real sleeper because, unlike the blockchain work for other cryptocurrencies, this work has potential real world applications the nature of which we don't really yet know.
Of the listed second tier candidates, they all have a countercyclical tendency to that of Bitcoin. Bitcoin's market capitalization is huge by contrast to that of all of its competitors put together. It would take only the slightest percentage of any capital flight from Bitcoin to an alternate currency to provide you with at least some protection from the fall. Of course the amount of protection would depend on the amount of alternate currencies you hold. The most conservative strategy would involve holding some of each of these currencies, but in practice I would start with just one or two.
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Diminishing returns
Diminishing returns refers to the ease, or lack of ease, with which you can obtain a currency. Of course, you can always convert bitcoin into a different currency on a cryptocurrency exchange in which case the measure of ease consists entirely of determining the ratio of the value of the cryptocurrency to fiat currency, by comparison to the same value for bitcoin. Personally, I like the alternate that run in the range of $3- $4 a coin because it is easy to conceptualize the fiat value of the trade. One day we will all understand value without translating through an the fiat intermediary, but until then currencies for which one can readily ascertain having aggregated a few cents (pesetas) in value will remain a mental benchmark. Of course, our goal consisted of saving, so trading for alternate currencies on the exchanges would seem to run counter to that purpose. We don't want to off load bitcoin. We want to keep bitcoin, but add something else. Trading might help with risk diversification aspect, but does not help with the diminishing returns problem in obtaining bitcoin which does not, as yet, exist.
Like its mascot, Dogecoin proves to be a faithful friend, maintaining value consistently when other currencies do not. Many people use Dogecoin. Link for the good moon dogecoin faucet is at the bottom of the page.
The issue of the ease of obtaining an alternative comes down to a simple question. How many gigs pay in the currency? To be sure, nothing comes close to bitcoin in this regard. However, the easy second place favorite is litecoin. For all of the other "second tiers", there is noticeably a finite knowable universe of sources. The more resourceful crypocurrency enthusiast might focus all attention on this limited universe. Personally, I like faucetbox and cryptospout, both of which feature dogecoin, litecoin, primecoin, peercoin, and dash. Cryptospout also features blackcoin and my own Shadowy third tier favorite.
Separate Peercoin Wallets are available at http://peercoin.net/
So, what is the best place for earning litecoin? I am just an average Crypto-Joe, so feel free to write your own articles about better ways to earn litcoin, which I will surely read, and happily adopt any better ideas. But for my time... I like moon litecoin. Moon litecoin has two distinct advantages. First, it features a very respectable rate of earning, with a relatively flexible method for collection. Several session a day of a few minutes each will sustain a noticeable litecoins savings. Second, the moon litecoin site overlaps the moon bitcoin and moon dogecoin sites, each of which, on its own merits, has a decent yield rate. It is possible therefore, to collect a very decent bitcoin yield (100 to 150 satoshis a week*), while collect litecoin almost as a footnote. For such a little additional effort, the long term effect of putting a way a few lites and a few doges could turn out to be the decisive factor**.
To check out moon litecoin: http://moonliteco.in/?ref=f4fb58668f78
To check out moon dogecoin: http://moondoge.co.in/?ref=a6de93cd2505
To check out moon bitcoin*: http://moonbit.co.in/?ref=c2b814e59496
* My reference to a yield of 100 to 150 satoshis is a representation by myself as a consumer as to what I have actually received. It does not constitute a representation by the owners of the site, and it does not constitute a representation as to what you will receive if you go to the site. The site features loyalty bonuses and mystery bonuses which I uses to improve my yield. Although I personally believe you can obtain similar yields, nothing I have written should be construed as a guarantee as to future earnings.
**Using the attached links will function as a referral from which the author could receive earnings. Although the author suggest this as a method for saving litecoins, you are free to investigate other methods for doing so. Although the author believes the moon coin sites to provide a safe method for obtaining a relatively high yield for your time, the reader will also want to consider that the author is using the article to try to receive referrals.
