Spending some time trying to figure out and understand crypto currency and pretty sure I am not the only one so I thought I’d share.
I am finding Kamal Ravikant, James Altucher, Andreas Antonoppulous and Kevin Rose (Blockchain podcast) as helpful guides. Most of the below takeaways are summaries of their work.
Crypto is protocol vs a service (ex. PayPal, visa,…)
Allows you to do a trusted transaction with someone you don’t trust.
Independently verify the authority of those transactions without trusting anyone else
Allows for innovation at the edge, innovation without permission, API’s, global and borderless.
Look at Crypto with a Global view not only a North American/Euro one.
2.5B people have no access to banking
4B people are severely underbanked
1.5B bank as 1st world users
Bitcoin is less volatile than 100 national currencies.
Crypto is already a better solution to many real world problems in those countries not only as a store of wealth which is how it is trypically used in Canada/US.
Every new version of money solves the problems of the old version.
Gold was better than barter, simplified transaction.
Paper money was lighter than gold.
Crypto solves fraud, double spending, complexity of 3rd parties, anonymous, fees, …
Paper money has regional borders, crypto has “use” borders which is why there will be multiple currencies.
Different currencies do certain “uses” better. Ex. Storage, speed of transaction, privacy, industry specific,…
Currency use cases of interest:
⁃ smart contracts
⁃ Privacy
⁃ Resource utilization
⁃ Charitable use, transparency of getting money across borders where its needed
The thinking right now is limited in terms of parity functions, crypto will open up different ways of doing things.
Can usually only buy bitcoin directly with cash because credit card/bank account is reversible (=soft promise) where bitcoin is not reversible (=hard promise)
“Blocks” are a collection of transactions that happen over a specific period of time
When a block is processed it is added to the blockchain for all eternity
This is what makes the system work
Until a block is finalized you are waiting in front of your screen waiting for a transaction to clear, which is why speed is important
95%+ of crypto currencies will go to 0. The ones that survive will be worth a lot.
Most ICO’s (Initial coin offerings) are scams and not solving a real problem.
Internet boom is a good metaphor, many .COM companies were overvalued before crash and went to zero however great companies survived and ended up worth a lot (ex. Amazon, Google, …)
Bitcoin
⁃ removes the need for trusted 3rd party (bank/Gov) in transactions by building there function (verification, ledger) into the technology
⁃ Eliminates the risks of having 3rd party involved (gobs print money, banks fail)
⁃ Eliminates delays of exchanging money
⁃ Eliminates 3rd party fees
⁃ Simplify international transactions because it’s a global currency
Strengths
⁃ first crypto currency, so has first mover advantage
⁃ Network effect from early adoption
⁃ Limited supply – 21M
Challenge
⁃ Popularity has slowed down network and transactions making them more expensive
Ethereum
⁃ created as a platform currency other currencies can be built on
⁃ Difference from Bitcoin, it can run code called “Smart contract”
⁃ You can run apps or contracts on top of it (metaphor: Android or iOS for phones)
⁃ Most ICO’s are built on Ethereum
Strengths
⁃ first currency with platform intent and has highest adoption
⁃ Huge potential for smart contracts
Challenges
⁃ still early for smart contracts
⁃ Regulation changes limiting ICO’s will fluctuate the the short term price
ZCash
⁃ the fully private crypto
⁃ With Bitcoin there are ways to match up ledgers to see the details of a transaction eliminating privacy
⁃ It has zero knowledge proofs, it cryptographically hiding information, only revealing what you want revealed
⁃ Use cases: tell only a doctor information, eliminate Equifax with Y/N on credit worthiness without sharing 10yrs if personal data
⁃ Is a coin and a protocol
Strength
⁃ starting to be used by major financial institutions
⁃ Technology leadership
⁃ Strong management team
Challenges
⁃ new
⁃ Early in adoption cycle
Manero
⁃ Privacy based
Manero vs ZCash debate- both Privacy based
⁃ ZCash on creation had 6 signatures who if decided to collude could print more currency
⁃ Manero doesn’t have that flaw but uses a big mixer to create anonymity, argument being the mixer could be broken
⁃ Valid debate
Litecoin
⁃ Quicker(lighter) coin built on Bitcoin blockchain
⁃ Blocks are verified in 2.5min vs 10min for Bitcoin
Strength
⁃ speed and usability
Ray Dalio’s Perspective on Crypto
⁃ Currency has two main functions:
1. medium of exchange
2. Store of wealth
⁃ Not doing either right now
⁃ Like the internet the underlying technology will be highly impactful in the future
⁃ But like the internet you have risk of currencies replacing each other and you have to speculate on picking winners
⁃ Very similar to the dot com bubble and winnners
A guy trying to figure life out 