If you’re just getting into cryptocurrencies, you’re probably wondering which crypto currency has the largest market cap, which cryptocurrencies are the ones to invest in, what the latest cryptocurrency news is, and what to look out for.

In this article, we’ll give you a quick recap on cryptocurrencies, explain the basic principles of cryptocurrencies, and then walk you through a few of the largest markets in the crypto currency space.

What Are Cryptocurrencies?

If you’re reading this article, you probably already have a good idea about what cryptocurrencies are, but let’s take a second to get everyone else up to speed.

Cryptocurrencies are digital commodities which can trade for goods or services and are managed in a decentralized, peer to peer format using a central protocol and a blockchain. A blockchain is a ledger of all transactions which occur on a given cryptocurrency protocol.

Most cryptocurrencies place a heavy emphasis on maintaining the privacy of the people exchanging or harvesting the currency, thus the “crypto” part of the name.

Mining

Unlike dollars or yen, cryptocurrencies derive their value from the effort expended to solve mathematical equations. When a user’s computer expends effort, eventually it will come up with the correct answer to the equation. Attempts at finding the correct answer are called hashes, and there are many possible correct hashes but an infinite number of incorrect hashes.

Once a user’s computer finds the right hash, they submit it to the cryptocurrency’s blockchain and get the cryptocurrency’s tokens as a result.

Cryptocurrencies vs. Fiat Currencies

Because cryptocurrencies are backed by real expended effort rather, many people claim that cryptocurrencies are distinct from fiat currencies. Fiat currencies are issued by governments or central banks, and generally speaking, are not exchangeable into gold or silver.

If these currencies were exchangeable into gold or silver, they’d link to something which required actual effort expenditure to harvest, like cryptocurrencies.

What Are The Hottest Cryptocurrencies of 2017?

Now that you’re caught up with the concept of cryptocurrencies and have an understanding of why they’re cool let’s take a look at the biggest and hottest cryptocurrencies of the current crop.

Bitcoin

Bitcoin was the very first cryptocurrency and is still by far the largest. Though Bitcoin has a bit of a checkered history at this point, it’s still top dog for a few reasons.

First, Bitcoin has the advantage of time. Since 2009, Bitcoin has remained reasonably stably led by its community and has successfully weathered major hacking scandals, mining power struggles, and massive forks, including the latest to Bitcoin Cash.

Bitcoin is also the most valuable cryptocurrency by far because of the massive number of people mining it. The hash rate of the Bitcoin mining pools has grown exponentially over time to match the increasing difficulty of mining and shows no signs of stopping.

The exchanges which trade Bitcoin have stabilized over the last couple of years, and even Wall St power players are involved in its trade and regulation. Bitcoin isn’t about to go anywhere.

Bitcoin Cash

Bitcoin Cash is a brand new fork of the Bitcoin protocol that offers usability enhancements which its proponents claim make it superior to the default Bitcoin.

Bitcoin Cash made a splash because it was the first sign that a major cryptocurrency (Bitcoin) could survive a huge portion of its user base forking off of its protocol to form their own. What’s more, Bitcoin Cash itself seems very vibrant for the moment, proving that there’s a lot of room in the cryptocurrency space.

It’s theoretically possible that Bitcoin Cash could merge back into the original Bitcoin thread if the steering committee addresses Bitcoin Cash’s complaints about the protocol. Doing so would be another unprecedented move in the cryptocurrency space, so keep your eyes on the cryptocurrency news during this turbulent time.

Ripple

Ripple is a new twist on the cryptocurrency phenomenon. Ripple is entirely peer to peer and seeks to fill the niche of institution to institution cryptocurrency transfers. While extremely ambitious, Ripple’s small market cap means that few financial institutions in the cryptocurrency world or otherwise have opted to implement Ripple in this fashion, but don’t count it out just yet.

Ripple’s primary strength is its nearly limitless liquidity as a system. Funds “ripple” from user to user through the central intermediary pool, and relies on users to mutually co-verify their transactions with each other rather than look to any central blockchain. Think of Ripple as a kind of escrow that operates nearly instantaneously.

Ethereum

Ethereum holds an interesting niche in the cryptocurrency space. Rather than opting to be used as a currency that holds monetary value, Ethereum is for use as a smart contract validation system. Users authorize certain clauses of “ether,” which embeds via software into contracts.

When certain actions have executed that call the contract, the currency is exchanged based on the terms of the contract, allowing for partial fulfillment without the need for further rectification. Many have looked to Ethereum as an enabling technology for other cryptocurrencies or autonomous decentralized corporations.

Litecoin

Litecoin is in many ways, a simple copy of Bitcoin. Litecoin was created in response to escalating Bitcoin mining difficulty as a bit of a soft-fork gambit. The idea was that Bitcoin was too tough to mine using consumer hardware, so it’d peter out—leaving the cryptocurrency space ripe for an easier-to-mine coin to take its place.

Surprisingly, Litecoin didn’t unseat Bitcoin and instead matured into a cryptocurrency of its own over the course of its lifetime. Many people treat the less-valuable and easier-to-mine Litecoin as silver to Bitcoin’s gold. Litecoin is much less volatile than Bitcoin because it’s much less traded, which (ironically, given its original purpose) means that people often flock to it during times of high Bitcoin volatility prompted by high-frequency trading phenomena.

Don’t let Litecoin’s history fool you. Litecoin is now extremely difficult to mine, and just as easy to use elsewhere as Bitcoin. It’s clear that the guardians of the Litecoin protocol see nothing wrong with the status quo of living in Bitcoin’s shadow.

Dogecoin

Dogecoin is a not-so-serious Bitcoin clone spawned from the Doge internet meme. Dogecoin does carry a small amount of real value, but its low rate of mining difficulty increase has kept it relatively cheap. People use Dogecoin to tip each other for making good jokes on the internet, though this seems to have died down along with liquidity.

Despite its start as a joke, Dogecoin has habitually shown shocking valuation, so don’t count it out as a commodity worth investing in.

Namecoin

Namecoin is the first fork of Bitcoin, claiming to have a better proof of work system. Unlike Litecoin, Namecoin hasn’t weathered its subsequent time very well and isn’t necessarily the most profitable coin.

Namecoin is interesting because its relatively small user base leaves it as a laboratory for cryptocurrency concepts, an idea that its founders have embraced. Most of the subsequent cryptocurrencies have taken notes from Namecoin’s implementation of various features, and it’s reasonable to suspect that will continue to be the case.

Cryptocurrency Exchanges

If you’re interested in buying or selling any cryptocurrency, but you don’t have the hardcore hardware required to mine it out yourself, you’ll need to trade your dollars in at an exchange and buy the crypto currency of your choice.

Think of it like buying a stock rather than exchanging your money into a foreign currency. Foreign currencies can buy foreign goods. Cryptocurrencies can’t easily purchase any goods, even after years of market expansion.

Cryptocurrencies aren’t that usable outside of their world, and their value is far more volatile than any actual currency. On your taxes, cryptocurrencies will be commodities like stocks, so plan accordingly. You should also be careful with where you bank your fiat currency derived from cryptocurrency sales—in some jurisdictions; it may be considered dirty money or at minimum untaxed capital gains.

The top cryptocurrency exchanges are reputable, but there have been a few issues in the past.

Exchange Concerns

Certain exchanges of cryptocurrencies like MtGox operated with unethical business practices, and went bankrupt, leaving their users coinless. Most of these weaker or illegal exchanges have been weeded out since roughly 2015, but it’s important to keep your eyes out for a few warnings in the cryptocurrency news which could spell trouble.

In particular, avoid any exchanges where:

  • Withdrawal to a major currency like USD isn’t instantaneous
  • Buying coins requires a hold period at the current price
  • Buying on margin is allowed without any deposit
  • Complicated financial instruments are present with no explanation of how to use them
  • Your bank account information is necessary

If your exchange suddenly meets one of the above criteria after a good history, it’s a surefire sign that you need to get your coins out—or your dollars—rapidly.

What Are The Best Cryptocurrency Exchanges of 2017?

If you’re interested in the overall market capitalizations of all cryptocurrencies, check out Coin Market Cap. Once you’ve figured out what coin you’re interested in trading, check out one of the following exchanges:

  • Bittrex
  • Poloniex
  • Kraken
  • Bitfinex
  • HitBTC
  • BitStamp

Each of these exchanges offers multiple cryptocurrencies, and most allow for crypto currency to crypto currency trading, which opens up quite a few interesting arbitrage opportunities. For instance, if Litecoin is overvalued in Bitcoin, you convert your Litecoins to Bitcoins for a profit.

There are also opportunities for arbitrage between the exchanges, though sometimes moving currency between exchanges can take time. Time matters in the cryptocurrency world; now that high-frequency trading bots roam freely on all of the major and minor exchanges, prices can be extremely volatile, and liquidity crises can develop just as quickly.

It’s a good idea for you to pick an exchange that will be in the same time zone as you are, and offer customer support that speaks the same language that you do. For Westerners, the best exchanges will be Bitfinex, BitStamp, and Bittrex. For those in Europe, Poloniex and Kraken are good bets.

Traders in Asia and elsewhere will be best served by HitBTC, though there are many Chinese exchanges which are too small to mention yet serve the bulk of the aggressive markets there.

Chinese Cryptocurrency

For those not in the know, China is the silent whale in the cryptocurrency space. Cryptocurrencies are banned in China, yet there is still an extremely vibrant trading scene which often intersects with the Western markets in bizarre and volatile ways.

The language barrier between Chinese cryptocurrency traders and the traders in the West make for extreme confusion during characteristic Chinese large scale market entries and exits. Add in a lack of Chinese domestic banks that can accommodate the inevitable cashing out, and you’ll start to understand the reason why the start of daytime in China makes late-night Western cryptocurrency traders sweat.

Initial Coin Offerings And The Future Of Cryptocurrency?

In recent history, the concept of an Initial Coin Offering captures the imaginations of many investors. Initial Coin Offerings are similar to startup funding rounds, where investors buy into a new cryptocurrency before its first block is released and the public gets mining rights.

There are likely going to be winners and losers when it comes to ICOs, so until you understand the market, you should probably steer clear—but expect more of them in the future. Cryptocurrencies aren’t about to go away, and if recent developments like Ethereum and Bitcoin Cash are any indication, Wall St’s interest in cryptocurrencies will be met by increased financialization and perhaps even popular use for their intended purpose of currency.

The best way to start posturing yourself to make money on cryptocurrency markets is to learn everything you can about the history of cryptocurrencies, their technology, and the exchanges which trade them. Don’t charge in blindly to a new currency just because it claims that it’s going to be the new hotness—many a new investor has fallen chasing the moon.