Down the crypto rabbit hole I go š°
Come join me on this journey
Hi friends,
Iāve been excited to get my writing going again. Like many endeavors, hard work over time pays off. Itās something that people should understand when they get into any creative project. The easy part is the writing, or podcasting, or drawing, or [insert creative output here]. The hard part is being consistent. Itās hard because it feels like work, rather than a fun hobby. Although, thereās so much beauty with consistency in your project. You begin to experience the compounding effect of your output. That can manifest itself in many ways; skills development, relationships, income, etc.
Although, we need to go easy on ourselves too. Thatās why youāll see me be consistent for months, and then drop off for a few weeks at a time to recoup and regain my creativity. I write this for you, but I write it for me first. It helps construct my thinking, which helps me make better decisions in my life.
Today, and over the next few months, I wanted to write about crypto. Yes I know, everyone who is a tech bro is thinking about this now. For me, it has started to finally make sense how much this new technology will impact the world. I wanted to share some of the lessons Iām learning with you. Letās get going.
Sir, are you sure you would like to send your money to this account?
The first time I heard about cryptocurrencies was from my friend Josh. It was late 2017 and he was going off on these new coins that he was invested in and how much money he was making. I thought it was bullshit - how could people earn so much by just holding some digital currencies? This had to be a scam.Ā
Like most entering into space, you do so excitedly to make money. The appeal of putting in just $20 and having that turn to $40, $100, or more, brought many people in. It definitely excited me. I remember eagerly asking Josh how I could get a piece of this game. He told me I had to start an account at this exchange called Kraken. At the time, to get the money into the exchange I had to wire money from my Canadian bank account directly to this account that was in Japan. I remember writing down this Japanese address, their account name, and going to the bank to wire the money.
I recall standing in line at the bank a bit nervous but energized with the potential of this new economy that was being created.Ā This excitement probably came across in a weird way to the teller who looked at me skeptically as I asked her to send money to this random address in Japan. This is how I began my own crypto journey.
The market cap for cryptocurrencies went from $17B in 2016 to $560B by the end of 2017. I remember getting a call from Josh when I was at the airport during my winter break.
My girlfriend and I at the time had been on a 12-hour flight back to Dallas from Paris on a layover to Vancouver. I answered the phone and Josh was stoked: āRipple just went up a ton! Look at the prices!ā. Despite only putting in a few hundred bucks, by the end of the vacation, we had been able to pay off our trip with the appreciation of coins. This was crazy.Ā
Irrational exuberanceĀ
Many new technologies grow in an unassuming manner and then explode into mainstream society. When they are being developed without much attention, itās probably more impactful than what most people expect. When it reaches the mainstream, itās probably not as impactful as most people expect it to be. This was crypto in 2017. People thought that crypto, and by extension blockchain technologies, would change the world. But it didn't, at least not that year. What happened in 2017 was that billions of dollars were put into the economy which laid the foundation for subsequent growth in the coming years.Ā
āAll new technologies start with irrational exuberanceā - Fred Wilson
Fred Wilson, who is a legendary investor and an early investor in the space, put it well. Like the technologies before it, crypto was riding high, people pumped money in, and it crashedā but in the meantime, a lot of money stayed. The same thing happened in other technological changes.Ā The internet through the dot com bubble went through the same cycle. Many investors poured money in which helped build the foundation and infrastructure for the internet. The same thing has happened in the crypto economy.Ā
After the 2017 run, I like many others, forgot about the space and refocused on other areas of my life. While this was happening people continued to build. After being away from the space I started to tune back in. I started to hear about NFTs being sold for $69M, a small start-up called Coinbase was about to go public, and Dogecoin was going to the moon š. The reasons why the 2020 run-up occurred are varied but include the following:
Decentralized Finance and other crypto use cases are growing exponentially (link)
Society became worried about the US dollar inflating, and wanted to hedge against our current financial institutions (link)
Large institutions like MicroStrategy, Square, and Tesla started to put Bitcoin on their balance sheet (link)
Visa and other payment processors began accepting Bitcoin as an alternative payment method (link)
The reasons are nuanced, and were most likely a confluence of many factors, but wow has the space grown tremendously. Iāve become fascinated with their implications on the world. The asset prices bring you into crypto, the technology keeps you here.
I wanted to break down my learnings into four main buckets and explore the innovation that has occurred in all of these. This is not meant to be an exhaustive list, but the goal is to provide you some starting points to begin thinking about the space. Here are the four:
Sociological
EconomicĀ
PoliticalĀ
Technological
Today weāll be starting with the sociological aspects of how crypto will change the world. Over the next few weeks, Iāll do a deep dive into the economic, political, and technological ramifications of this new technology. The buckets I have outlined will clearly have aspects that bleed into each other. The reason why this is new technology is so powerful is because it will have an impact in all of these areas.
Sociological
Itās always been fascinating for me to study new trends from a sociological perspective. The rise in crypto has brought me down some crazy rabbit holes. Iāve defined āsociologicalā to concern the development, structure, and functioning of human society, and how it will adapt with crypto and blockchain technologies.
NFTs & The Creator Economy āļø
NFTs stand for Non-Fungible Tokens. Itās a way to own something digitally. The first use cases have been pieces of digital art, like the one an artist named Beeple sold for $69M (link). NFTs are files that live on a blockchain and are able to verify a work of a piece of digital art. This concept was coined by the founders of Dapper Labs out in Vancouver (link); the same folks created Crypto Kitties. NFTs are the wedge that opens a broader potential on how to monetize your creative output.
Imagine if you could buy ownership in this article youāre reading. Like a stock on the NYSE, you could own this piece of work that could appreciate over time. The creator would have more opportunities to make money off of their work. The future of this space is dynamic and the people building it have a huge say in where weāre going. One of my friends Patrick has become one of these people, and his work with Mirror has already begun to change how writers interact with the crypto economy. PLEASE read this thread and subsequent article below to get his detailed thoughts on how crypto and the creator economy are coming together.
Dogecoin š
Itās fascinating how a large group of people can make something increase in value without inherent value backing it.
Like any currency, the value of something is what society deems the value to be. At some point in time, we thought gold held value and used that as a form of currency, and later a store of value. In many African countries, Cowrie shells were a form of currency. Today diamonds are worth millions. Luxury cars that cost $20K to make may sell for $200K. Humans in a capitalist system determine what has value and what does not.
Over the last few months, Redditors deemed GameStop had value and worked to pump the stock. A similar trend occurred with Dogecoin; a meme currency that has the Shiba Inu dog on it.Ā The coin was started as a joke and has become a phenomenon. It has increased in value 11,000% over the past year - minting many Doge Millionaires. Elon Musk has been tweeting about it for months, which hasnāt hurt the increase in price.
Crypto can be intimidating. Dogecoin is fun and therefore has acted as a bridge for people to start dabbling with this new economy. Theyāre able to earn a few bucks off of Doge, then explore more serious currencies and begin to learn about the broader market. I am not saying that Dogecoin is a good investment. The reasons why it shouldnāt be worth what it is are plenty (link). Although for me, I always love thinking about how something could work, especially when everyone is saying it canāt. Iād implore you to have some fun with that frame of thinking as well. If this works, Iāll see you on the moon.š
Newly minted millionaires & billionaires š°
We need to pay attention to how wealthy crypto people are becoming. In our society, many decisions are made by people who have a lot of money. They can start businesses, build products, influence governments, and shift society in the way they deem fit. Weāve seen this throughout history. The groups of people that had more money had the ability to build better weapons and win wars. The groups of people who have more money can invest in the companies that will shape the future.
The CEO and Co-Founder of Coinbase Brian Armstrong had an interesting blog post about this topic. By running the math, he determined that if Bitcoin gets to $200K a coin, then half of the worldās billionaires will be crypto billionaires (link).
To understand where the world is going we need to understand the world that these individuals want to create. To influence where the world is going we need to influence how these people are thinking. By doing so we can encourage them (if they are not already) to invest in areas of society that will support the growth of a broad array of people - rather than building a whole nother industry by white men for white men. I love my Chads and Brads, we just need some more diversity in this space.
This problem is highlighted by the fact that today only 15% of Bitcoin holders are women (link). I believe that we need more people of color, women, and other folks from underrepresented backgrounds in this space ASAP. Working in big tech I can see this hiring strategy becoming a priority, but it happened retroactively. Thinking about these concepts now is vital. As you go down the rabbit hole yourself and continue to read my writing, youāll see how this space can dramatically shift society. We need more people with diverse backgrounds helping to call these big shots, and guiding the technology in a way that can benefit the most amount of people.
The money that is coming into this space is a benefit for society - I strongly believe that. For example, Coinbaseās IPO has made many employees millionaires. They will be looking to deploy their capital back into the markets that made them successful. This will only benefit the entire ecosystem.
With all of this happening, we need to ensure there is a diversity of thinking in the field. If we can, there will be more economic freedom for everyone.Ā
Iāll touch on it in another piece, but this is why I am so bullish on Coinbase. The company just went public and has a lot of hype around them, but I think itās for the right reasons. Their vision to create economic freedom, if executed correctly, can support developing countries and marginalized communities. Iāll save the rest of my thoughts on Coinbase for another time.
Earning for learning š
As Iāve explored crypto I have brought down everyone around me with it. My sister has been one of the first casualties. Living at home over the past month has been awesome for our relationship, but even better for our collective knowledge of crypto. Sheās plugged in.
After bugging her to set up a Coinbase account, she came back a few hours later stoked! āIāve earned like $5 by just taking some courses. Want to hear about how crypto is going to change the remittances industry?ā.
My sister is a smart person so it wasn't surprising she wanted to talk about this topic. What was surprising was a.) the speed at which she picked up the concept, b.) the incentive system that Coinbase had implemented for her to learn, and c.) the broader idea that you can get paid to learn something.Ā
Coinbase Earn is a product within Coinbase (link). It was started by one of the OGs in the crypto space Balaji Srinivasan (link).Ā The idea from Balaji was simple: what if we paid people to learn? Earn paid people to learn about certain cryptocurrencies, and when they completed their courses, they were given tokens of that currency. These coins would appreciate over time as well. That blew my mind.
I started to reflect on the other areas of life that we could pay people to learn. I mean, we kind of do that already with scholarships, funds, government incentives, etc. But what if instead of paying to go to college someone paid you to learn specific skills? Iām still in my early stages of thinking about how this model of earning for learning can impact the broader society, but Iām excited about it.
We should think about other areas of society where we can pay people to learn specific skills. Starting with crypto makes sense as it is the native way to transfer value on the internet without intermediariesĀ
Summary
Next week Iāll be discussing the economic impact of crypto; specifically the following:
How people want to hedge their crypto assets against the USD
How Bitcoin maximalists believe that our current financial institution is failing
How the prices of cryptocurrencies have increased dramatically, and why that may have been due to the stimulus cheques
How crypto can support developing economies by lowering the barriers to make payments, send money across borders, and generally live their lives
Tune in next week or subscribe below for these thoughts!