So, I've been doing some stuff with cryptocurrencies for the past 6 months and I decided it would be a nice idea to share some of my experiences. But first 2 disclaimers:
1. This is not financial advice. It is merely my opinion and experience so far. You are responsible for any trading you decide to do, regardless of the outcome.
2. Cryptocurrency trading is highly volatile and very risky. There is a realistic chance that you will lose all your investment.
Before I go into any detail, I want to explain what a blockchain is. It's basically a huge log file with the history of all transactions. What miners actually do is solve mathematical puzzles (with a hashing algorithm) in order to confirm the legitimacy of these transactions and then they are reward with a certain amount Bitcoins for their work. You also put aside some of the currency you send that is then awarded to the miner as well which basically means you pay a fee for transactions (you will see soon why this is important). This is also why it's called "proof of work algorithm" since it's assumed that you did the work to solve the puzzles if you have the solution. The key here is that miners all have copies of the entire blockchain (which is currently 170GB I think) and they sync each other up all the time so it's not really possible to do something like a 51%-attack to confirm fake transactions, because other miners will not confirm them if you try to fake it.
The two most important currencies are the well-known Bitcoin (XBT/BTC) and Ether (ETH). About 5-6 months ago 2 friends and I decided to take up Ether mining. So far it has paid off the 2 rigs (5 ATI RX580 8GB on each), but mainly due to the massive price surge of Ether. When we started, the price was slightly under $300. Mining is a bit less risky probably since you do have some sort of value in the PCs you put together. If nothing else, you can sell the GPUs for a decent price. Though right now the GPU prices have spiked due to mining demand. We literally got the last 10 GPUs in the entire city at a normal price back in July. Bitcoin mining is useless, because you need ASICs which is basically dedicate hardware and it's very expensive. It's true that one unit can do the work of 5-6 GPUs easily, but it's not worth it. It's too late to take up Bitcoin mining.
Trading / Investing
Now comes the fun part. First I want to suggest a simple rule to follow: Only invest what you are prepare to lose. Never invest any money that you need for living or eating or paying your rent. And please, for the love of god / science / flying spaghetti monster / whatever you believe in, do not, and I repeat DO NOT take out a loan to buy Bitcoin or any other cryptocurrency. This is all very risky and could fuck up your life.
What kind of risk am I taking? Due to my current financial situation, I could probably save money for the next 10 years and buy an apartment without having to take out a loan. Now, with Bitcoin and other currencies I am attempting to invest savings from (I guess) 8 months in order to cut down the entire process to 2 years or even less. If I lose all my money, I lose 8 months which is very little compared to the 10 years I would conventionally need to save up money. But if it succeeds, I might cut down 80%-90% of the time, down to 1-2 years only. This calculated risk for me is acceptable as the potential gain outweighs the risk of losing everything. Of course, this is my personal situation. You need to decide for yourself. My simplest advice is that you take some spare money you have and put it into Ether (ETH). Keep reading for more info on that.
As of writing Bitcoin spiked at over $20,000 and is currently dancing above the $18,000 limit. Bitcoin is problematic due to many reasons. Since it's the most known cryptocurrency, people will immediately think of Bitcoin when you mention digital currencies. This kind of hype usually pumps up the price as more people buy Bitcoin. The problem is that Bitcoin is highly unpractical as currency. It should rather be viewed as an asset or as investment. And as with all assets and investments, the value can go up and like crazy. I've seen drops of 20% and then recovery by 10%-15% within a single day. It's definitely not for the faint of heart. Another problem with Bitcoin are the transfer fees. 2-3 weeks ago fees were usually at the $10 mark, but now I've seen people post fees like $28 on Twitter. Since the value is pumped right now, it will go down quite a bit at some point. It's hard to say when. Maybe next week, maybe next month, maybe in the next hour. But since it's so well known, Bitcoin's price will go up again after a while. This kind of ups and downs have been happening over its entire history in the past years and each cycle left more people in the user base that actually do believe that Bitcoin is the future. Fun thing is that Bitcoin is lagging behind heavily as far as technology goes which you can already see from the high fees. The transaction times are also very high right now, mostly due to increased demand. Remember this part, it will be important later.
Ether is much better than Bitcoin. Why? Disregarding the low fees and transaction times in comparison, the Ethererum blockchain actually has something called "Smart Contracts". Those are basically small programs and applications that are integrated into the blockchain directly, usually in form of conditional behavior. e.g. You can create a website that automatically sends a confirmation email on purchase from a website. The beauty here is that it's all within the blockchain and nobody can hack your website to mess you up. Because of this single distinction, I think that the Ethereum blockchain is superior and will surpass Bitcoin at some point in the future in price. Whether Bitcoin will crash down or whether Ether will rise to Bitcoin levels, I do not know. Either way, ETH is a good investment IMO.
Bitcoin Cash (BCC/BCH), Litecoin (LTC), Dash (DASH), Ripple (XRP), Monero
These are all so-called alt-coins which have seen quite some boosts in the past months. As far as I can tell, people who are losing their faith, usually turn to these coins. Most of them solve the issue of high transaction fees and long transactions times, but I'm unsure how they would really handle the same load that BTC has right now since a lot more people are trading BTC than they are with the other currencies. It's hard to say. All of these will probably grow as Bitcoin grows, but they all use outdated tech and their scalability issues will catch up to them most likely.
Tronix Token (TRX)
Eh, this is an obscure one. I've started investing a bit of money into it recently since it's very cheap right now (only $0.04 per coin) and it has some potential for growth as it's supposed to help something with content creators, blablabla, didn't listen too much. It's an experiment that has already paid of (I bought some at $0.03). Honestly, you can just ignore it if you're not interested into going deeper. I'm just listing it, because I put some money into it.
This is another somewhat obscure one. The only reason why I invested in it is because it seems to be more advanced than ETH, but the idea behind it is similar. There's also the interesting fact that it was created to fulfill a vision rather than a functionality and high-profile scientist groups are working on it. Also feel free to ignore it if you're not going any deeper. I don't think it will boom within the next 6 months.
I saved the best for last. If any "digital currency" has the potential to actually be used globally within a few years, it's IOTA. It actually doesn't use a blockchain for transactions, but something else entirely called "Tangle". Look it up if you're interested further, but I can tell you right now, this is the only currency that not only doesn't clutter and get slower the more people use it, it gets faster! I'm not shitting you, the math behind it checks out. The idea is basically that each new transaction added into the system requires to confirm two previous transactions. That way the more devices join in, the faster the network gets. This also means no transaction fees at all. And I said "devices" on purpose since the idea is that the simplest IOT devices could handle these kind of transactions so each device would kind of become a consumer and miner at the same time. One possible application of this technology could be autonomous self-driving cars. The car would charge you some IOTA for getting you to your destination and then use the currency to pay for gas and maintenance. They don't have a contract with Microsoft, as was falsely reported recently, but they do work together with them and some other high-profile companies to come up with possible usages and implementations of the whole thing. The only drawback is that it requires a critical mass of users to be able to become fully self-sustained so it might be a miss in the end. Either way, I'm convinced that IOTA will be the world's first widely adopted real digital currency. If not IOTA, then something that tops it.
To sum things up, most of these currencies are probably already in the top 20 as far as market cap goes. I think TRX is the only that's not. If you think of all this as long term investment, the only thing that might be shaky is Bitcoin. Though some believe that Bitcoin will become the new digital gold, mostly due to its high adoption rate so far. Technically it's possible since I don't think the miners that are currently holding the majority of hashing power will easily give up their millions and billions of Dollars. There will always be people supporting it. The question is only when it will stabilize and whether it will fall before that. IMO Bitcoin won't experience as big boosts as other currencies anymore. I'm talking about stuff like 80% (LTC the other day) or 1300% in a month (IOTA) or something like that.
A few last advices I can give you:
1. Don't buy high. Buy when the price drops. You can't predict an increase in price, but if it's already going up, the chances are high that it's too late and the price will come down again. Of course this isn't a rule, but be aware of the risks.
2. Best you just buy some coins and forget about it for 1-2 or 5 years.
3. Don't think in terms of coins, think in terms of your fiat currency. Don't think "I can't buy one Bitcoin, it's too expensive", think "I will invest $1000 into Bitcoin". This makes things much, much simpler.
4. If you want to invest into alt-coins, DO RESEARCH! Don't invest in stuff you don't believe in. e.g. There's this coin called Potcoin. It has something to do with marihuana and payment, but I don't see it go mainstream or have any growth potential or any kind of value besides being a currency so I don't want to invest in it. In comparison to that, IOTA might also be only a currency, but it has the potential to change the world.
5. If anything, put some money into ETH and some into IOTA (50-50 or 60-40 or something like that). Those two have a future. I think that IOTA will go up somewhere during 2018. They are in their beta phase after all.