A Friendly Intro to Crypto
Every other day I meet with friends and acquaintances and the topic of the blockchain, crypto, bitcoin, ether, etc, invariably pops up. Hell, I even came across someone in a hoodie talking in hushed tones to the guy behind the counter at the local bodega… about Bitcoin. The mania and hype around bitcoin price fluctuations and newly minted millionaires can easily distract from the wide ranging ramifications of the technology. Ramifications which anyone who likes to stay informed and take responsibility for their financial future should understand. If you work in design, tech or finance, you need to know this shit if you want to be taken seriously and have a viable career ten years from now.
So I thought I would put a little 101 together for those friends and acquaintances to help us all get beyond level one “how’s that Bitcoin thing going? I see it’s at [insert today’s price]” conversation, and into more informed territory. There are a million and one guides and introductions to blockchain and cryptoassets on the internets, a million of which will be far superior to this. But fuck it, here’s a quick from zero to almost hero guide following the trail I took to become less ignorant about a technology that will be as transformative for society and enterprise as the internet was. I hope it might inspire anyone else who has till now been marginally interested in the space to explore it further.
What follows represents a total of around 5 hours of podcast listening that you can do in your car, during your commute, or in bed. It begins with ‘what is blockchain’, covers basics of the cryptocurrencies that the blockchain facilitates and then dives right down into ICOs (2020 update: ICOs were a nice idea, but dumb in execution. Lots of people got screwed and it’s an SEC hell scape. So don’t ICO). All explained in layperson’s terms by some of the industry’s leading minds. Please note that this is NOT a guide on how to trade cryptocurrencies, but a foundation in the field.
Before you don your headphones, i’d like to share some quick personal observations and learnings on the space from the journey I was privileged enough to take:
- It’s Transformative. I firmly believe that the (or a) blockchain in all its decentralised, immutable, trusted, disintermediating, glory will ultimately fulfill its promise and transform enterprise, finance, and in turn better society. There are a great deal of scammers and hustlers in the burgeoning ecosystem just like any other technological gold rush. But sift through the noise and you will see that some of the world’s finest minds are working in the field, many of them on a voluntary basis.
- It’s Revolutionary. There is the air of revolution to the technology. Satoshi Nakamoto, the mysterious founder of the blockchain, embedded the front page of The Times newspaper of 3rd Jan 2009, headline: ‘Chancellor on brink of second bailout for banks’. Not only to time stamp block zero, but also perhaps as a fuck you to the banking system. A noble intent! However, in the same way that the big banks and governments manipulate Fiat currency markets, a small number of ‘whales’ control an outsized proportion of Bitcoin and other major cryptocurrencies. So the ‘for the people’ credo is currently not quite as pure as intended by Mr Nakamoto.
- It’s Male, White and Leans Right. Cryptocurrencies are the lovechild of the tech and finance industry, which for a multitude of reasons are both disproportionately white, male, dominated industries. Both sectors are improving slowly on that front, but true representation will only come through change to our societal and educational foundations. The evangelical developer community who are shaping the technology and platforms are different constituents to the trading community. On the trading side, the ‘crypto scene’ is largely populated by young, white, conservative leaning, males, many of whom have become extremely wealthy. You can’t in any way denigrate them for their payoff on the risk they took many years ago. Here’s the thing though. If fully realised, the blockchain revolution will yet again facilitate one of the greatest transfers of wealth in the modern era. My real concern is that we’re going to be putting yet another link in the chain of generational wealth, just like property ownership, and the emergence of the financial and tech markets have. If the cycle repeats yet again, we will exacerbate social and economic gaps that are deeply unhealthy for society. It is hugely important that we work hard to develop a diverse and representative community in this phase of adoption. So please share your passion for this space with as many people from as many backgrounds as you can so that the knowledge, benefits and ownership ends up in a more representative community.
- It’s Informal. Culturally, the crypto trading scene is a world away from the staid and ‘dignified’ world of finance. That dignified world that brought all the greatest hits like: manipulated interest rates, fixed libor, customer ripp offs and scams, Mexican drug cartel money laundering, and of course the 08 financial crisis that you the taxpayer picked up the tab for. Anyway, point is, that it is a very informal world where people often operate and trade anonymously via crypto alter egos. Trading side, informal terminology such as “When Lambo?” FUD, “HODL”, “To The Moon” abounds! This is one reason, like water and oil, that the pinstriped world of high finance and politics has such problems interfacing with the crypto community. Ultimately this has limited their engagement and understanding of the technology and fueled the distrust and FUD (fear, uncertainty and doubt).
- It’s Going Mainstream. In 2017 Bitcoin hit the mainstream, making the headlines almost daily. A lot of the coverage was negative, such as when Bitcoin dropped from a peak of near $20,000 in Dec 2017 all the way down to nearly $7,000 in Feb 2018. Most pieces ignored the fact it started 2017 at $800, but that doesn’t make for good clickbait does it now. Either way, popular consumer trading platforms such as Coinbase, Binance and even the Square’s Cash App are facilitating trading by the masses. Demand is high — at one point Binance was adding 250,000 new users A DAY! The popular stock trading app Robin Hood also announced fee free crypto currency trading will be facilitated through their platform in 2018. Millennials, for one reason or another no longer trust large financial institutions and increasingly see cryptocurrencies as their preferred investment. The coming years will see institutional investors steam into the space, after years of sniffing crypto’s butt.
- It’s Volatile & Risky AF. Even a bunch of very clever people can still be wrong and certain bank CEOs have claimed Bitcoin is a fraud. When hearing their proclamations, it is hard to ignore how much the blockchain threatens their trusted third party intermediary status and the money they make from that status. Apple may never go to zero, but a random cryptocurrency coin well could. So it’s not like trading exchange-traded funds (ETF). This is a high risk zero sum game with either winners or losers. When it comes to trading you need to be able to stomach 30% rises or drops in a day as par for the course. For me, that’s a damn good reason not to try to be clever and day trade the stuff. I’d rather opt for a quality-of-life preserving, long-term, HODL position. Remember that you are a mere pissant trying to pick up crumbs at the whim of the whales. Whilst cryptoassets don’t ‘behave’ the same way as regular stocks, a lot of well-worn trading advice applies: Never trade money you cannot afford to lose completely. That makes you less emotional and irrational during the ride. You haven’t lost anything unless you close your trade, so keep a cool head because even 24 hours is a long time on the markets. The adage “Buy the rumor, sell the news” is especially true in cryptocurrency trading, with FUD (fear, uncertainty and doubt) moving the market more than the facts do. I’ll leave you with with the wise words of Warren Buffett “The stock market is a device for transferring money from the impatient to the patient.”.
Anyway, that’s my two ether on the matter. If you’re not already bored to hell, then here is your 4hrs and 45mins minutes of listening across five pieces of content.
1 of 5: How the blockchain is changing money and business
20 Mins. This lays down the fundamentals of the blockchain, upon which everything else is built. It’s an essential starting point for the journey.
Description: What is the blockchain? If you don’t know, you should; if you do, chances are you still need some clarification on how it actually works. Don Tapscott is here to help, demystifying this world-changing, trust-building technology which, he says, represents nothing less than the second generation of the internet and holds the potential to transform money, business, government and society.
2 of 5: How the blockchain will radically transform the economy
15 Mins. This digs a little into what innovations flow from the blockchain. Apoligies for another TED Talk (last one, promise). Here the lightbulbs really start to go off about how institutions and industries will be fundamentally remodelled by the blockchain.
Description: Say hello to the decentralized economy — the blockchain is about to change everything. In this lucid explainer of the complex (and confusing) technology, Bettina Warburg describes how the blockchain will eliminate the need for centralized institutions like banks or governments to facilitate trade, evolving age-old models of commerce and finance into something far more interesting: a distributed, transparent, autonomous system for exchanging value.
3 of 5: How the blockchain will radically transform the economy
2 hrs 35 mins. This is a fascinating, wide-ranging, conversation on a wider range of cryptocurrencies, with Nick Szabo, one of the pioneers of the space. It’s a long listen, but deeply engaging throughout with Tim Ferriss keeping on the lay person track. This will begin to broaden your knowledge from blockchain and Bitcoin into Etherium and ICOs. (Remember 2020 reader. ICOs are a no no).
http://tim.blog/2017/06/04/nick-szabo/
Description: Nick Szabo is a polymath. The breadth and depth of his interests and knowledge are truly astounding. He’s a computer scientist, legal scholar, and cryptographer best known for his pioneering research in digital contracts and cryptocurrency. The phrase and concept of “smart contracts” were developed by Nick with the goal of bringing what he calls the “highly evolved” practices of contract law and practice for the design of electronic commerce protocols between strangers on the Internet. We cover a lot, including:
- What is Bitcoin, what are cryptocurrencies, and what problem do they solve?
- What is “social scalability?”
- What is Ethereum and what makes it unique? Strengths and weaknesses?
- How will smart contracts actually get adopted or go mainstream?
- What are ICOs (Initial Coin Offerings)?
- Blockchain governance — is there any existential risk?
- “Wet” versus “dry” code
- Pascal’s scams
- Quantum thought
4 of 5: The Disruptive Potential of Cryptoassets with Chris Burniske
30 mins. Here we get a touch more technical as Chris Burniske breaks down his taxonomy of cryptoassets: cryptocurrencies, crypto commodities and crypto-tokens (stay with me). He also discusses the supporting developer community and the politics of progress. What practical services could be built on the blockchain? How could Facebook or Twitter be disrupted? We also get into ICOs, initial coin offerings. Relatable and understandable. A great 30 minutes.
Description: James Wang, ARK Invest analyst, interviews Chris Burniske, ARK Theme Developer and author of the book “Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond”, to chat about the disruptive potential of Bitcoin, Ethereum, Litecoin, and other cryptoassets.
5 of 5: — ICOs (Initial Coin Offerings) with Ryan Zurrer
1 hr 3 mins. The blockchain not only enabled cryptocurrencies and cryptoassets, but also the ICO. Here Horace Dediu talks with Ryan Zurrer about how the ICO has the potential to transform and democratise how companies are funded and grown. This discussion truly helps land the potential of the crowdfunded ICO model and how it will disrupt both venture capital and wall street. I have listened to this episode at least four times now, letting the ramifications wash over me. Quality listen. (2020 update: ICOs were a nice idea, so it’s worth listening to this content, but lots of people got screwed and it’s an SEC hell scape. Don’t play with ICO)
Description: Horace and Anders speak with Ryan Zurrer of Polychain Capital about the disruptive possibilities of Initial Coin Offerings (ICOs) and the blockchain token model.
6 of 5: — Bonus Round — Security Tokens
A quick update on the rapidly developing field of security tokens. An evolution of the blockchain which has the very real potential to dramatically change how equity in all asset classes are handled. This Fortune Q&A with Joshua Stein of harbor.com is highly informative and yet another mind-bender when it comes to the transformative potential.
When the bitcoin drops, it is truly…
Hope you found this blockchain breadcrumb trail useful in beginning to understand the purpose, potential and value of the blockchain, cryptoassets and ICOs. You can and always should do your own research. You can do so from the huge array of resources out there from blogs, Twitter Accounts to Telegram Groups and Email Newsletters. Here are some resources if you’re really keen to go deeper.
Over many of years working in the field of digital and design, the slow drum of blockchain and bitcoin has grown incessentaly louder. David Fisher, an exceptional designer and friend, has been banging that drum for as long as I can remember. I also had the good fortune of meeting Tim Lea, whose passion for the field pushed me down ‘the rabbit hole’. Also to Jasper Ehrhardt who has generously expanded my knowledge and learning in the space. Hat tip to the three of you.
Note: The author of this article owns small positions in Bitcoin and Ethereum. The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.’ — aka don’t come to me if you lose your shirt.
