It is a long journey down the rabbit hole of Cryptocurrency to truly understand everything that is going on within the space (and how it is affecting other industries). But it is not an impossible task, and you have to start somewhere. With Coinbase officially adding over 100,000 new accounts per day, I have started to get a lot more questions about Cryptocurrency and Bitcoin in general. My goal with this post is to provide people with a starting point to best get up to speed on the space, fast!
I first heard about Bitcoin in 2012 while writing daily Tech news for the Launch Ticker. I believe it was priced around $10, but I didn’t understand Bitcoin at the time, so I didn’t buy any. Then, in 2013, Bitcoin became what I would refer to as "Silicon Valley / Venture Capital" mainstream. Which in hindsight, I think we in the industry sometimes forget just how early to new ideas and industries we can be. Even still I did not buy any bitcoin. Even with everyone talking about something, it can be so easy to dismiss the things we don’t understand. And so, as Wayne Gretzky once famously said, "You miss 100% of the shots you don't take."
So two years later I took a deeper look at Bitcoin and I started to understand how it all works before buying some. I went down the rabbit hole; reading blog posts, sub-reddits, listening to podcasts, de-mystifying the blockchain, smart contracts, etc.
Which brings us to today. If 2016 and 2017 have taught us anything, it is that we are in a new era where awareness outpaces execution. In my opinion, social media and the connectivity of smartphones has no problem getting people talking about the hot topics of the day or week on the surface. But we are flooded with so much information that it has become harder to filter what is worth stopping, taking the time to learn more, and going deep on a subject.
And so today, my advice is to take some time to understand Cryptocurrency and it's surrounding technologies. Whether or not you are a believer in Bitcoin, Ethereum, or any other cryptocurrency, the technologies that have enabled this revolution, such as the blockchain, are almost certainly here to stay. I am going to lay out some information, which should help you gain a deeper understanding around the whole industry. I would recommend digesting them in the order I present them in, and remember to keep an open philosophical mind:
Understand Why We Have Money and How It Works Today:
Yuval Noah Harari, Author of the book Sapiens, explains how civilization came to have money over the course of evolution in this TED talk: "Why Humans Run The World". I recommend watching it all, but skip to 10:45 in the video if you want to fast forward to the money part.
This video on Money and Finance from John Green's youtube channel Crash Course is a super quick refresher on how our modern day monetary systems work. It even briefly mentions how Bitcoin has played a role as it has emerged over the past few years.
Banking on Bitcoin is a 2017 documentary currently on Netflix. The first 20 minutes will give you a great overview on how Bitcoin ad the technology around it works. With the rest of the film covering the history of cryptocurrency, regulation of the industry, who is Satoshi Nakamoto, the dark web, and how people have used Bitcoin to date. It features interviews with enthusiasts and experts, this documentary covers Bitcoin's roots, its future and the technology that makes it tick.
The Blockchain is actually explained somewhat simply during this TED talk by Lorne Lantz.
In this episode of the Tim Ferris Show "The Quiet Master of Cryptocurrency", he is joined by Naval Ravikant (who you will also see in Ethereum TechCrunch talk below with Vitalik Buterin) and Nick Szabo (who you might remember from the Banking On Bitcoin documentary above).
This episode goes much deeper into the world of cryptocurrency. You will learn about how the blockchain works, the history of smart contracts, what a Merkle Tree is, the importance of decentralization, and so much more!
In this video from Wired, Blockchain researcher Bettina Warburg explains the blockchain in every age from a child up through graduate school. It then ends with a great conversation with another Blockchain expert.
Lastly with regard to the blockchain, if you click the button below you can see a step by step visual demo of the blockchain in action. I highly recommend clicking through the demo to better understand how blockchains work.
Ethereum is a decentralized platform that runs smart contracts; applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference. These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.
Buying Bitcoin and Cryptocurrencies:
The easiest way to get started with cryptocurrencies is by creating an account on Coinbase.
After signing up you will be provided with your own digital wallet, which is stored in the cloud, on Coinbase’s servers. This is important to note because you are trusting a third party to protect your wallet. There are other digital wallet alternatives if you would prefer to not store your cryptocurrency on Coinbase, such as storing your wallet on your computers hard drive or on an external Zip drive. Whichever you choose, be sure to pick a wallet that is secure. Using Coinbase you can buy Bitcoin, Ethereum and Litecoin.
Important Note: Be sure to ALWAYS use two factor authentication. Do not use SMS based two step verification as your phone number can be stolen depending on your phone company. To understand why this is important and learn some more security tips to secure your digital wallet, I recommend reading Cody Brown's article "How to lose $8k worth of bitcoin in 15 minutes with Verizon and Coinbase.com".
If you are looking to get involved with more Crypto Assets & Currencies I am linking to some getting started guides below:
A Beginners Guide To:
For more cryptocurrencies you can check out Coin Market Cap to see what else is out there. Clicking on a currency on Coin Market Cap will show you more information about it, including historical prices, as well as tell you the available exchanges you can buy from.
Be wary of Initial Coin Offerings of new tokens. Many new coins that are being created are simply not needed in my opinion. Especially if the same function or utility could be done using an already existing cryptocurrency.
If you do find a crypto currency you like, then you need to evaluate the whole project, just like you would if you were investing in an early stage startup. Make sure you research the amount of money being raised, what the token does, the valuation that the project actually works and is live, the team behind it, etc. Just how with early stage startups, only the top 5% of companies are worth investing in, the same is true of ICO’s. Most ICO's will likely fail. Fred Wilson, has a good blog post on how to carefully evaluate these new crypto assets.
White papers lay out the foundation for how a crypto asset works and what principles it relies upon. In the world of crypto, they are similar to the pitch decks that startups put together today or a traditional business plan, and they are typically shared with the public. To really get a good understanding of what they look like, I am including the original Bitcoin white paper wrote by Satoshi Nakamoto and the Ethereum white paper.
Forks happen when a blockchain splits in two, going forward from a certain date. The main cause of a hard fork is because of a new rule that gets created by a certain portion of the community. This can create another currency if the new network is stable enough to sustain itself after the fork. Being as both the old and the new currencies share the same ledger history, customers with balances of the original currency at the time of the fork now have an equal quantity of the new currency. You can read more about forks here and the few most successful forks to date are:
Bitcoin Cash - Forked from Bitcoin on August 1st, 2017.
Bitcoin Gold - Forked from Bitcoin on October 25th, 2017.
Ethereum Classic - Forked from Ethereum in 2016.
Regulation And Sustainability:
Being as regulation can be quite complex, I am going to simply link out to some additional reading materials in this section.
- South Korea
- Mt. Gox: In 2014, 850,000 bitcoins, worth $450 million at the time, had disappeared or been stolen by hackers.
- DOA: In June 2016 an anonymous hacker exploited a critical flaw and stole $31 million in Ether in a few minutes.
High Energy Consumption:
Low Energy Consumption:
- Futures Contracts
The Future of Cryptocurrency:
I encourage you to clickthrough and view all of the slides Chris Burniske, Author of Cryptoassets: The Innovative Investor's Guide to Bitcoin and Beyond, has put together. I have shared the first slide and my favorite slide below:
DISCLAIMER: These are just my personal thoughts and resources. I hope it helps you learn about the cryptocurrency industry so you can better make your own decisions. Be sure to do your own thorough diligence before making any financial decisions. Always invest responsibly.