Crypto Tech royalties – Cautious investment or a massive gambling?
As the crypto markets mature, there are increasing opportunities for investors and technology savvy individuals to move funds to new areas of interest.
Understanding exactly what you are getting into and how to reduce risk is a key component of any investment strategy. And the crypto markets are full of terms and languages like “gas taxes”, non-fungible tokens (NFT), “hodl” and many more.
Safely navigating the murky waters of the cryptocurrency world, and specifically the abundance of new tokens and projects, is almost a full-time job.
One area of interest is the tech royalty market.
Royalties can be compared to the dividends you will earn from a traditional stock market investment. But within “cryptocurrencies”, things are not quite as they seem.
Let’s see how you can protect yourself and your money when you dive into crypto – technology royalty investments.
What is the royalty for cryptocurrency?
Royalties are defined as the reward you receive in exchange for investing in an asset.
You may recognize the concept of royalty from the music industry. The record industry’s leaders have earned millions by funding upcoming artists. They do this by signing contracts that give them a certain share of sales on each song or album sold.
And these royalties continue to pay out cash for many years, depending on how popular they may be.
In the crypto world, royalty payments are distributed in the form of underlying tokens. You bet a certain amount of money by exchanging Bitcoin, Ethereum or any other cryptocurrency for a token that represents the crypto project that you hope will one day be worth something.
Let us now take a closer look at the investment process. Some terms need explanation so that you can more easily understand the process.
Proof of effort as opposed to proof of work
Proof-of-stake (PoS) and Proof-of-work (PoW) are consensus mechanisms that validate cryptocurrency transactions. These are essentially the processes performed on the blockchain to keep everyone honest.
The blockchain cannot be changed without these validation processes taking place.
With proof of work, miners will compete against each other to solve complex calculations. They then receive compensation for their work. But the cost of running a mine is enormous and uses enormous amounts of electrical energy. This is one of the disadvantages of using proof of work to validate blockchain transactions.
On the other hand, you have proof of effort. Here, validators earn an income based on the ownership interest they have in the blockchain. To be selected as a validator, you have to buy large quantities of a token, which is seen as one of the disadvantages.
To earn royalties, investors buy the cryptocurrency that allows them to bet, and then put it into a betting pool. They then collect royalties as compensation for investing in the token.
Staking is seen as a more efficient and less ecologically damaging way to validate blockchain transactions due to the much smaller amounts of electrical energy required to perform validations.
But what are you really investing in?
As any investor knows, if you do not understand the underlying business you are investing in, it is not possible to assess the risk of your investment.
Warren Buffet and Charlie Munger, arguably the most successful and productive value investors of the past half century, have over the years made billions of dollars by investing only in businesses they understand.
It may be wise to add that none of them consider Bitcoin or the cryptocurrency markets as anything other than a massive game.
The blockchain is not just cryptocurrency
But the blockchain is not just Bitcoin, Ethereum or any of the other cryptocurrencies
can be found on the stock exchanges.
Blockchain technology is essentially a technology that can guarantee secure data storage. It gives the end user the ability to encrypt all data so that it is impossible to change it without getting caught.
The system is also not subject to any authority, such as a government or financial institution.
Blockchain simplifies safe storage
The blockchain is used to certify documents, manage cryptocurrencies, control project management and manage dispute resolution processes.
It facilitates tokenization of assets such as NFTs and is used to allocate and manage shares in physical assets such as houses and apartment blocks.
The list of uses is virtually unlimited.
So now that you have some idea of the value of the blockchain, you can see that each project represented by a token has the potential to be an industry-changing event or a tool through the use of blockchain technology.
Blockchain value
This is where the value of a blockchain project lies. If the project takes off and is adopted by a large enough customer base, the underlying symbol will increase in value, and the investor will benefit from his share of not only
the initial investment, but also all tokens they have received as royalty payments.
Of course, they would have to keep their royalties and not withdraw early to enjoy long-term value addition in addition to a regular stream of royalties.
How to invest to receive cryptotechnological royalty
The process of investing in royalty-earning crypto projects can be a bit confusing, but it is not that difficult once you have been through the process.
Here is an overview of the steps you must take to own part of the crypto royalty action.
Buy cryptocurrency
The first step in investing in a project to receive crypto-royalties is to buy cryptocurrencies.
To do this you need a wallet where you will receive the currency you have purchased.
An electronic wallet is a program that you load on your computer or external device. You can also use an online wallet, but these are less secure than keeping cryptocurrencies on your own devices.
Once you have a wallet, you need to open an account on a cryptocurrency exchange. The stock exchange is the place where you want to buy the cryptocurrency you want.
Once your account is open and you have been verified, you will be asked to deposit money into your swap account.
When you buy a cryptocurrency, you are effectively trading dollars or other real money for virtual money such as Bitcoin or Ethereum.
Popular and safe exchanges are Coinbase and Binance, and safe wallets are available from Trezor, Ledger and Metamask.
2. Identify a project to invest in
There are many different projects available that you can invest in, with new ones coming online every day.
To keep track of existing projects and become aware of new projects, sites like CoinGecko and CryptoSlate offer research platforms and comments. You can also join groups on Twitter and Facebook as well as attend crypto conferences to get the latest information.
Once you have found a project that interests you and you have performed due diligence, it is time to make the investment.
3. Make your investment
To invest in a project, you need to buy a token.
Each project has a wallet address to which you must transfer your cryptocurrency. When you buy a token, it is referred to as a swap. This is because you are replacing one token with another.
Each project will have several cryptocurrency tokens that they will accept in exchange for their project token.
There will be an exchange rate where you will see how many project tokens you will receive for the cryptocurrency tokens you want to invest in.
Also remember that each platform has something called “gas charges”. This is the cost of replacing one token with another on their network. These fees fluctuate throughout the day and are related to online traffic.
To minimize the amount you pay in fees, it is worth keeping track of the times of day when the fees are lower. There are sites like crypto.com and etherscan.io, where you can track the latest gas charges and look at historical data to time your purchases.
4. Keep track of your investment
It is important that you stay up to date on what is happening with each project you have invested in.
Various websites provide comments on what is happening in the cryptocurrency markets, so it is not difficult to find new projects to invest in and keep track of your portfolio.
You should also monitor your investments by checking the project’s website, following their social media accounts or joining project disputes.
The line between gambling and investing can sometimes be blurred, but through careful research and sound money management strategies, your investment in crypto-technology royalty tokens can pay off.
