Recently, someone asked me what digital currencies are and how to choose projects worth investing in. Actually, this is definitely a topic that needs to be discussed properly, because many beginners still have a number of misconceptions about this area.

First, let’s make it clear: the “digital currencies” people usually talk about refer to encrypted digital currencies, not fiat digital currencies issued by central banks. Cryptocurrencies run based on cryptography and P2P technology. They do not rely on any physical assets and are issued and circulated entirely over the internet. Today, there are already more than 20,000 cryptocurrencies circulating in the market. Daily trading volumes can easily exceed over $100 billion (or exceed one trillion dollars, depending on how you measure), and the number of users has also surpassed 300 million.

Digital currencies can be roughly divided into two categories. One is centralized—such as PayPal and Alipay, as well as the digital yuan issued by central banks in various countries. The other is decentralized, including Bitcoin, Ethereum, Ripple, and so on—this is what investors truly focus on. Decentralized digital currencies can further be classified by market cap into large-cap coins, mid-cap tokens, and small-cap tokens, with different risks and potential.

When it comes to the advantages of digital currencies, I think the most core points are: first, the issuance rules are written into the code from the beginning and cannot be changed by developers, which fundamentally prevents over-issuance and reckless issuance. Second, every transaction must be confirmed by network-wide consensus before it can be recorded, ensuring transparency and security. And there’s also the fact that transaction costs are low, and cross-border transfers are much faster—nothing like traditional banks, which move slowly.

Of course, we also need to see the problems. The price volatility of digital currencies is too extreme, and there is no stable value benchmark. Also, if you lose your wallet password, you will never be able to recover your funds again—this is disastrous for users. In addition, because the total number is fixed and will not increase, from an economics perspective, there is indeed a natural deflationary issue.

For beginners, my suggestion is to prioritize large-cap mainstream coins. Don’t touch those “copycat” altcoins ranked beyond 100—their volatility is so intense that you may end up losing everything. You should also avoid projects that have no whitepaper, whose teams are anonymous, and that are highly hyped; in many cases, 9 out of 10 and a half are basically just scamming people for profit.

Bitcoin is the safest choice for getting started. As the “gold standard” of cryptocurrencies, its concept is simple and easy to understand, with the deepest liquidity—almost all exchanges support it. Bitcoin’s current price is around $74,450, and its market cap reaches $1.49 trillion. It uses the PoW consensus mechanism, with historically the strongest security, and it has been included on the balance sheets of big companies like Tesla and MicroStrategy, reflecting high institutional recognition.

Ethereum is the second choice, balancing stability and growth potential. Most DeFi, NFT, and blockchain gaming projects are built on Ethereum, so there is ongoing demand from the ecosystem. Ethereum has just shifted to the PoS mechanism; scalability improves while energy consumption decreases, and it looks promising in the long term. The current price is around $2,030, with a market cap of $24.4 billion, and trading depth is sufficient.

Ripple is worth a small allocation, but you need to recognize the risks. It focuses on cross-border payments for financial institutions and can complete low-cost international remittances in 3 to 5 seconds, and some banks have already adopted it. The current price is $1.31, and the market cap is $8.1 billion. However, XRP is relatively centralized, and the legal proceedings have not yet fully concluded. With drastic price volatility, it is only suitable for very small positions.

Binance Coin is also decent, especially if you trade frequently. It’s convenient to buy on mainstream exchanges, and the price is relatively affordable (currently $649). Most importantly, it can be used to pay trading fees and receive discounts. Binance repurchases and burns BNB using quarterly profits, reducing the circulating supply, which may push prices higher in the long run. The market cap is currently $8.75 billion, and liquidity is excellent.

Also, don’t forget stablecoins like USDT and USDC. These are pegged 1:1 to the U.S. dollar, with zero volatility, making them especially suitable for beginners to practice trading operations or to hedge during bear markets. USDT’s market cap is $18.958 billion, and USDC is $7.635 billion—both are very good tools.

As for how to invest in digital currencies, there are mainly several approaches. The first is to buy directly through mainstream exchanges. After completing identity verification, you can deposit TWD or USD. But be sure to choose compliant platforms with good reputations—don’t deal with exchanges operating in a regulatory gray zone. Second, use decentralized exchanges like Uniswap. You trade wallet-to-wallet without needing to register, but you have to bear the risks of smart contracts yourself.

Third, there are contracts for difference. You don’t need to actually hold cryptocurrencies; as long as you predict whether the price will rise or fall, you can make money, and you can also use leverage. This approach is especially friendly for small funds: there is 0 commission, you only pay the spread, and you don’t have to manage your wallet. In addition, for legitimate brokers, client funds are kept in segregated accounts under strict international regulatory oversight, making it safer than trading on exchanges.

Another option is buying spot ETFs. You can buy directly through a securities account, without having to handle private keys, which is very convenient for traditional investors. Finally, there is mining—but today Bitcoin mining has been dominated by large mining farms. Ordinary people can only participate through mining pools, or buy cloud contracts. The latter has a very high risk of fraud, so you need to be extremely careful.

In the end, what digital currencies are is essentially a new category of assets with high liquidity and global accessibility. Countries around the world are planning their own digital currencies, which shows that the crypto market is being valued more and more. In the future, digital currency technology will continue to innovate, attracting more users to enter the market. If you’re interested, I suggest you start with large-cap mainstream coins, slowly accumulate experience, don’t rush to chase high returns—risk management should always come first.