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An Exercise in Due Diligence Part 1: $GUSD, $ETH, and $BTC

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Phil
@phul
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Taking a look at my portfolio, I wasn't able to easily answer the question: why was I convinced to purchase this coin?

To remedy that, I decided to go ahead and take a look at my portfolio, and try to justify my ownership in each of my holdings. This will be a multi-part series that covers everything I own.

A fair warning; I am new to the cryptocurrency scene, and I've noticed that it's easy to get excited and instantly go and purchase some random coin that probably does nothing. While I've tried to avoid the FOMO and a lot of the hype, I've clearly managed to get sucked in as I own over 15 coins at this point. I've realized I need to slow down with the quantity, and focus on the quality of specific projects that make sense to invest in. I hope these posts become a discussion, perhaps you could tell me something new about a project I mention, whether it's something good or bad. I'm always up for learning something new.

With me trying to make myself feel better about buying a bunch of random coins out of the way, let's get to it.

Gemini USD ($GUSD)

Oddly enough, $GUSD was something that across my radar a few weeks prior to really getting interested in cryptocurrency and the blockchain. I saw a random Reddit comment about BlockFi and their 8.6% APY on GUSD deposits and 8.6% interest is more than impressive. The gains aren't what I could potentially see from investing in cryptocurrencies that can appreciate in value, but $GUSD has it's benefits:

  • Gemini is a regulated US entity,
  • $GUSD is backed, dollar for dollar, by USD balances that Gemini holds at State Street,
  • Gemini has $GUSD and their USD balances independently audited monthly.

Unfortunately, I didn't jump into cryptocurrency when I first learned about Gemini. I think I'd be up a couple hundreds of a percent across everything if I had! Still, it seems like a stable way to be exposed to cryptocurrency and reap some solid interest rewards that I can directly withdraw back out to USD, with no fees. They also offer interest on $BTC (6%) and $ETH (5.25%) that I've taken advantage of. While having coins on an exchange long-term can be stressful, gaining some interest on your long-term holdings is nice.

Ethereum ($ETH)

I am not entirely sure if there's much to say about Ethereum that people don't already know. To summarize: Ethereum is a blockchain that allows for smart contract functionality. A smart contract is designed to execute after specific events occur, based on the terms of the contract. Ethereum has also found itself as the home for many other cryptocurrencies through the ERC-20 Token Standard. The main issue facing ETH today is its popularity, as network congestion is causing incredibly high gas fees to be incurred for miners to process transactions on the network. The introduction of Ethereum 2.0, and a conversion to a proof-of-stake instead of proof-of-work should result in gas fees dropping significantly. Ethereum is racing against the clock to complete the upgrade to 2.0 before other blockchains gain relevancy with the promise to do what Ethereum 2.0 promises to do.

In the short-term, Optimism.io looks to alleviate the high network congestion by offering an L2 solution. Safe to say that this is currently beyond my understanding, and it's something I should learn more about soon.

I believe that the future in crypto would include Ethereum. The name provides recognition, the applications and cryptocurrencies built on its network provide relevance, and their attitude to improving the network with Ethereum 2.0 shows a commitment to the future.

Bitcoin ($BTC)

The Alpha.

Bitcoin no longer appears to be something that people will engage with as an actual currency, and instead exists solely as a store of value. Bitcoin's name recognition, and market capitalization mean it won't be going anywhere anytime soon. There are still issues with the blockchain that people like to bring up, including the difficulty associated with mining which results in long transaction times, high transaction costs, and large amount of electricity wasted. Digiconomist estimates that a single BTC transaction utilizes the same amount of power as one U.S. household for 23 days. Annually, Bitcoin consumes a similar level of power as Chile, which has over 18 million people in it. Like Ethereum, Bitcoin reaches consensus within the network through proof-of-work. However, the value of Bitcoin draws a lot more competition, and the difficulty in mining increases as more and more blocks are mined.

I think Bitcoin will be around for the future, but it will exist solely as something that is held onto for its scarcity.

Anyway, that's about it for the first part of the series. If you have anything you'd like to share about $GUSD, $ETH, or $BTC, feel free to comment it down below!

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