This is a follow-up to my Bitcoin FAQ article. You need to understand bitcoin first before diving into other types of cryptocurrencies. If you have not read that, you might find this confusing, so read that first.
This article looks at cryptocurrency and altcoins from a more ‘investor’, rather than ‘tech’ point of view. If any info here is wrong or outdated, please let me know by commenting.
What is the difference between cryptocurrency and altcoins?
Cryptocurrency refers to all digital currencies that use cryptographic techniques to produce its output, like transaction details. So basically all, if not most of blockchain-based digital currencies are cryptocurrencies.
Altcoins – short for ‘alternative coins’. An umbrella term that generally refers to any digital currencies that is NOT bitcoin. Altcoins are not just ‘currency’, they may have wider applications.
- Bitcoin – clear-cut ‘currency’
- Altcoins – may be tech platforms, payment network,’bitcoin 2.0′, scams, social media, marketplaces, jokes, basically it can be 1001 things because the underlying technology (blockchain) can be applied in so many ways
What should I know about cryptocurrencies before I get them?
You should know that..
A – They are diverse.
- Some are straightforward ‘currencies’ too, like bitcoin. The Bitcoin network’s data ledger records the amount, time, sender address and receiver address. There are many cryptocurrencies marketed as ‘Bitcoin 2.0’ – Litecoin, Dash, and similar. They are designed to be faster, cheaper and more scalable than bitcoin.
- Other cryptocurrencies are created as part of blockchain tech platforms. They have their own defining features and value prepositions, usually super high tech blockchain stuff. For example, Ethereum has Ether; the platform is known for its smart contract. Augur is known for its decentralised prediction marketplace and Golem promises decentralised supercomputer. This category has the most exciting developments, tech geeks are having fun 🙂
- Some overlap with #2, but some platforms allow you to create your own dapps (decentralised apps). Some examples include Ethereum, Nem, Lisk, MaidSafe, and more. You can build blockchain tech platform with its own cryptocurrency on top of another blockchain tech platform that has its own cryptocurrency; ie Augur ($REP) was built on the Ethereum platform ($ETH/$ETC). If you are a coder, definitely check them out.
- Some are kind of just for novelty. Like Dogecoin, based after the Shiba Inu meme. Created as a joke but surprisingly resilient. Such coin, very wow. Novelty coins are not particularly interesting beyond the fun factor.
- Privacy-centric cryptocurrencies like ZCash, Monero and Zcoin promises anonymity, something bitcoin does not offer.
- A few are created as part of social media platform, like Steem. In this platform, content creators who get upvotes are rewarded with $STEEM.
- Some are community or fan-based. There’s a singer who created her own cryptocurrency and uses it to reward her fans. The value is determined by the community and used as an expression of loyalty.
- Some countries have begun to experiment with cryptocurrencies, digital currencies and blockchain. Some I know includes Sweden, Senegal and Singapore. I have no idea why they all start with ‘S’.
- Theeeen there are what we call shitcoins, which are ‘cryptocurrencies’ that use the name to scam people. One popular example is OneCoin. Apparently their ‘blockchain’ is little more than an Excel sheet lol. If you know how to spot Ponzi/MLM schemes, you’ll know how to spot these. They’ll say stuff like, ‘Our coin has the potential to be like bitcoin!’ but has no real technology to back it up.
This guide very helpful in explaining the description, pros and cons of some popular cryptocurrencies. The ones I mentioned above are some names you should know and be familiar with.
B – They are way riskier than bitcoin
If bitcoin is considered a high-risk investment, I’d consider altcoins as super high risk.
Why? Bitcoin benefits from the ideology behind it – it was inspired after the 2008 financial collapse caused by financial institutions (recommended movie to watch: The Big Short (2015). It has ‘for the greater good’ connotation; the person/group who created it remains anonymous to this day. For better or for worse, bitcoin politics and governance is messy as no one entity can claim they ‘own’ it.
Altcoins, in contrast, are mostly created by private companies and institutions. There are now self-interest involved, whether it’s for financial gain and/or to push a particular agenda/technology. Also, words like ‘blockchain’ and ‘cryptocurrency’ doesn’t mean anything if the implementation is shit. Therefore, I would say that any particular altcoin is only as good as the team behind it, just like any other startup. And you know the high failure rate of startups.
C – The altcoins world is full of rumors, speculations and pump-and-dumps
I’ll be honest – I think many altcoins rise in value because people get rich via bitcoin and they seek to diversify to other cryptocurrencies, sometimes without a strong enough reason. There is a lot of herd mentality, even more than bitcoin (which at least is affected by world events). I’ve seen crazy rise and fall in value on day-to-day basis. Once, this one altcoin’s value reduced by 70+% in one day.
Altcoins tend to rise in value when bitcoins rise in value, but this observation is not consistent enough to be fool-proof.
D – New altcoins are created all the time
And sometimes they are offered early to investors, even though the tech startup behind it have not done much work on it beyond a website and a white paper (a document that explains the technology they’re working on, the potential and how it can be used). This is called ICOs – Initial Coin Offerings – and many times you can only buy them with Ether. ICOs can get millions of dollars in funding in hours, sometimes even seconds, but my opinion is ICOs is a hype. I don’t think that putting your money in a buzzword is a healthy way to invest. Sometimes it’s literally, “Hey guys, we’re doing X, we need to raise X million through ICO, the sale is open from [date] to [date]. No we don’t have a working prototype, that’s what the money is for. Kthanks”.
Without actual work put into it, it’s a bit too close to gambling for my taste, but hey.
Where to buy cryptocurrencies like Ether in Malaysia?
As of now, you cannot buy altcoins directly with MYR. There are no cryptocurrency exchanges operating in Malaysia that sell other than bitcoin, although that may change in the future. So to buy altcoins, you have to (1) buy bitcoin first from bitcoin exchanges then (2) convert/exchange them though Poloniex, Bitfinex or Shapeshift. The next section will cover the ‘how to buy’.
Here are places to buy bitcoin in Malaysia:
- Buying with MYR (bank transfer to sellers) – Localbitcoin. Make sure to pick a seller with good track record. (note: referral link)
- Buying with MYR (bank transfer to sellers) – Remitano. Make sure to pick a seller with good track record. (note: referral link)
- Buying with MYR (bank transfer) – Luno (note: referral link; Get RM5 if buy/sell more than RM250)
- Buying with MYR (bank transfer) – XbitAsia. I’ve not used this option.
- Buying with MYR (via bitcoin ATM) – Pinkexc Malaysia in Ipoh
- Buying with Paypal – Wirex (note: referral link; get 25% off plastic cards). Get a virtual card (the first one is free), verify account, then transfer money from Paypal into the card to buy bitcoin
- Buying with debit/credit card – Cex.io (note: referral link)
How to buy cryptocurrencies like Ether in Malaysia?
This is as simplified as I can make it:
- Step 0: Research about the cryptocurrency you want to buy. Have a good reason beyond ‘because people tell me it will rise in value’ (nope, not always)
- Step 1: Have bitcoin. If you don’t have it, buy them first
- Step 2: Transfer bitcoin to Poloniex or Bitfinex
- Step 3: Select the currency you wish to get. Make the exchange from BTC
- Step 4: Transaction complete; your altcoin wallet in Poloniex or Bitfinex will hold the amount
- Step 5: Guard it until you plan to sell it
In Poloniex, the interface looks like this:
What should I know about buying cryptocurrencies, especially altcoins?
I’m not going to repeat what I’ve said in the Bitcoin FAQ article, so again please read that if you haven’t.
Specific to altcoins, you should know that:
- Similar to bitcoin, altcoins are kept in specialised wallets. Bitcoin wallets CANNOT be used for altcoins – sending altcoin X to a non-X wallet may cause you to lose your funds.
- Poloniex and Bitfinex are trading platforms. Best for people who are familiar with trading, but easy enough to navigate.
- Shapeshift is a simple coin conversion tool, and the fees are generally higher than Poloniex and Bitfinex. You need to sort out your own altcoin wallets if you want to use this option.
- Some altcoins are listed in Poloniex, some in Bitfinex, some both. Shapeshift have less selection, but they cover all the popular altcoins.
- Like bitcoin, the security of your altcoins is only as good as the digital security you place on it. The same advice applies – set up 2FA, strong passwords, spread your money across exchanges, keep it offline if you can, etc.
- Many altcoins are traded against BTC. You’ll see BTC/ETH, BTC/LTC, BTC/XEM rather than USD/Altcoin
- Reminder that it’s SUPER HIGH RISK
Which altcoins should I buy?
The one that you think has the potential to grow in value. Seriously, treat them like a startup and find out (1) the team behind it, (2) the strength of their working product (not just white paper), and (3) their growth plan.
A good way to find out if the altcoin is good and worth buying is if the community works on the tech development side of it rather than just talk about the investment potential side of it. Too many times you just hear about the latter.
Where can I find more information on altcoins?
For general discussions on cryptocurrencies, the Cryptocurrency Collectors Club on Facebook is great, as well as r/cryptocurrency and related subs on Reddit. Just mind the groupthink mentality there – negative (read: realist) sentiment on popular cryptocurrencies get downvoted or bashed a lot. We also have some discussions about altcoins in the Bitcoin Malaysia #1 Group (Open) Facebook page.
There are specific altcoin advocates for some currencies here in Malaysia. This section will be updated once they give me the OK to post their contact.
Which cryptocurrencies are popular?
It depends on which timeframe you look at. Bitcoin is the most popular and will probably continue to be the No 1 cryptocurrency for now. The rest of the altcoins compete for No 2 onwards. Nowadays, Ethereum is almost always No 2, except for that one time Ripple took over briefly.
Some altcoins have serious staying power, while the rest maybe will appear at the top of CoinMarketCap‘s or CoinGecko’s list for a short time before overtaken by other altcoins a few days or weeks later. As of time of writing (6 June 2017, see screenshot image from CoinMarketCap), the top 10 cryptocurrencies sorted by their market cap are:
- Ethereum Classic
But in the last 1.5 years of watching the market, altcoins such as Dogecoin, MaidSafeCoin, Lisk, Storj and Stella Lumens have all made appearances in the top 10. I have no doubt that the top 10 list will change again and again.
Why are there two Ethereums? What is the difference?
The short answer is Ethereum Foundation decided to implement something called a ‘hard fork’ to solve a community problem. Basically last time there was this thing called the DAO (decentralised autonomous organisation) and it collected a bunch of money and someone ‘hacked’ it (depends on who you ask) and gave themselves a significant portion of that money.
So Ethereum split into two: Ethereum and Ethereum Classic. They are two sets of data ledgers with the same ancestry – one version returned to the point where the hacking never happened while the other version continued on.
On the actual difference between Ethereum and Ethereum Classic? Not much, it’s more ideological* than anything. They’re both tradable. From an investor POV, both has potential.
*Why I say it’s ideological: People who choose Ethereum over Ethereum Classic believes that the hacking is unethical and the funds from DAO were stolen, thus it should be returned. The people who choose Ethereum Classic over Ethereum believes that the hacker fairly exploited the smart contract feature in the DAO through his/her/their own cleverness, thus that makes it rightfully theirs.
Can I mine altcoins?
First of all, different altcoins use different terminologies. Some use ‘mining’, some use ‘harvesting’, some use other terms. But for all intents and purposes, let’s just use mining for now to refer to all the ways to earn altcoins without buying them.
The short answer is yes you can mine some altcoins. I don’t mine and I can’t cover ALL altcoins here, so please get specific details from their respective communities. There are some altcoins that you can still mine with simple equipment. Just be wary of dodgy cloud mining or anything with MLM or Ponzi structure.
There are some discussions about mining in Bitcoin Malaysia #1 Group (Open) Facebook page.
Are gains from cryptocurrencies taxable in Malaysia?
As of now, BNM does not consider cryptocurrencies as currencies and do not regulate them. Therefore, gains from cryptocurrencies are not taxable at this point. More and more countries worldwide are regulating cryptocurrencies though, so expect this in the future.
I personally calculate my gains using Zakat Emas calculation. No idea if this is the right approach, but trading is a zero-sum game – if I win, somebody else loses. I want my karma to be cleaner a bit.
Can I spend ether and other altcoins in Malaysia?
You can spend ether and any altcoins provided the merchants accept it as payment. Compared to bitcoin, the number of merchants accepting altcoins are much more limited.
If you want an easier way to spend it, I suggest getting a bitcoin debit card. Wirex has Shapeshift integration, so you can send altcoins to your Wirex account and it will appear as bitcoin in your Wirex bitcoin wallet. Wirex cards are linked to Visa, so effectively you’ll get to spend it at millions more places. Here’s an article I wrote about the cards’ usefulness, published on CompareHero. Use this referral link to get 25% off plastic Wirex cards).
ProTip: Use my referral link to register an account, then install the Wirex app (android, iOS) and get free virtual card (tutorial). This way, you get both free virtual card AND the 25% plastic card discount.
(Disclosure: I’m affiliated with Wirex)
Super high risk type of investment, but super high rewards as well. Take at least a few weeks to read what you can, join the communities (try to recognise the herd mentality), and make your selection based on the cryptocurrencies’ tech potential. A LOT of people have lost A LOT of money overnight because it’s very easy to get greedy. Do not invest more than what you can afford to lose.
Any specific questions about investing in cryptocurrencies in Malaysia not covered above? Comment and I’ll get back to you. This article will be continually updated with new info.