I think the core concepts behind blockchain are important ideas. They include peer-to-peer networks without a central authority (or server), verifiable and unchangeable ledgers keeping track of activity along a chain of events, and the ability to transact between parties without requiring trust between those two parties are all. These ideas are vastly important to governments and corporations in ways that most people can’t even begin to fathom.
Banking is the most obviously disrupted industry in this space. We’ve seen through Bitcoin how networks can interact and communicate without having to rely on a central authority (the bank’s servers and databases) to determine how much money is in each user’s account (cutting out the middleman). I can think of at least 20 other different use cases for this technology, as can thousands of other Silicon Valley engineers like myself. Many interesting use cases for this technology being worked on. Some of my favorites include Earn and SteemIt, which are already backed by some of the biggest VCs in the Valley.
One of the first cryptoassets that I ever got interested in is Bitcoin back in late 2012, which it sounds like people are at least slowly becoming familiar with. I still think that Bitcoin has a long term potential as an alternative store of wealth (think internet gold), and as a way for criminals and government officials to launder money across borders. Bitcoin is currently the preferred method of transacting on “dark” web sites to let people buy guns and drugs sent through the mail, but that will change. As an alternative to transacting between parties, Bitcoin has a lot of shortcomings. For technical reasons that I’m not yet qualified to try and explain, Bitcoin cannot and will not replace traditional banking, PayPal, or Venmo-style transactions.
I have become progressively more interested in Ethereum as a sort of improvement to Bitcoin’s core technology, the blockchain. Coinbase.com makes it easy for people to buy and sell Ethereum for US Dollars, and is one of the most popular exchanges in the world. Ethereum has many of the same properties as Bitcoin, with the key difference being that people can literally write code (called smart contracts) onto what is called the Ethereum Virtual Machine (think a computer that lives entirely on the internet). This concept is so far over people’s heads these days that the only people investing in this space are the open-minded people who have enough money to pay experts to advise them (or to just dump money into every new crypto they see), and industry-specific people who can see the potential for themselves.
I know a lot of people who grew up on traditional banking values are seeing these cryptoassets as the equivalent of penny stocks. However, unlike bullshit companies that pump and dump their stock, these cryptoassets often represent an idea and a technology more so than a share of any single company. For example, the same way that Ethereum provides additional functionality that Bitcoin doesn’t have, there are cryptoassets being created that are optimized for very specific use cases (look at LiteCoin, Bitcoin Cash, etc. which allow transactions to occur and be verified far more quickly than Bitcoin, or require less computing power to achieve the same functionality). This is much the same way that programming languages work. The popular ones are popular because they work in a specific way that ends up being universally recognized as superior and thus adopted on a large scale.
I strongly believe that adoption will also be the key driver in which of these technologies succeed. In a lot of cases, numerous companies will be built around a single cryptoasset, or existing companies will adopt one of these technologies and implement it into their existing technology. Microsoft and IBM are just two that have already started doing this — banks will have to follow suit or be decimated.
In many ways, this is like the infancy of other technologies like the computer or the internet. A lot of people also thought these ideas were mostly smoke and mirrors and didn’t see any reason to learn how to use them. Even today, so-called ‘digital natives’ are growing up without the need to learn how to use technology in ways other than getting through school or work, surfing the web, and sharing on social media. But there are smart people out there who recognized the potential of these new technologies and built companies around their ideas. These cryptoassets are the new Apples and Googles. Over 10,000 new ones were created this year alone.
People with a finance background might therefore look at this as the new dot-com bubble, but that’s a poor analogy. There is certainly a lot of hype and misunderstanding in this space, but investors and speculators aren’t necessarily relying on individual companies in order to make returns. They’re relying on the technology being useful and therefore widely adopted. With crypto, you can almost do the equivalent of directly investing in “the internet” as a concept, and not just as a bunch of companies and stocks. I think that long term, “the internet” has proven that it’s not just a fad, and I can assure you that blockchain technology won’t be either.
The question then becomes how to wade through all the shit out there and figure out which technologies will prove to be useful. I wouldn’t yet consider myself a crypto expert by any means, so my personal plan is to continue learning about and trying to understand the benefits and shortcomings of various cryptoassets. Living in Silicon Valley keeps my ears so deep on the ground that I’m digging worms out of them. Finally, I plan to rely on my own intuition, as I’ve always had a good eye for business opportunities and a proven track record with investment plans.
In the past, my biggest shortcoming has always come down to my being too trusting. When Mt. Gox was hacked in January 2014, I was robbed of all of my Bitcoin. I now know how to put crypto assets into “cold storage” (not on a 3rd party’s servers) so that it is literally impossible to hack them (part of the beauty of crypto). It’s also important to diversify, and I wouldn’t suggest investing (or maybe speculating is the correct term here) everything in Ethereum alone — it’s my biggest bet right now because it currently has some of the strongest adoption and use cases.
Governments all over the world are scratching their heads at what to do about this new technology. It’s an uncharted area and has already given rise to one of the greatest criminal tools of all time. An amazing part of this technology though, is that everything is decentralized and happens through the internet, so pretty much all that governments can do is criminalize the exchanging of these cryptoassets. However, any attempts to stop development on these technologies will effectively leave these countries’ governments in the dark ages, while their citizens will still be able to skirt any regulations as long as they have the internet.
I think we’re at a pivotal moment where non-tech-oriented people are only now waking up to the idea that Bitcoin isn’t just fake internet gold, and that there are other cryptocurrencies out there that aren’t just a different “brand” of Bitcoin, and can be evaluated entirely on their merits. It’s only a matter of time before people start seeing the light when this technology begins to disrupt industries all around the world.
Disclaimer: Nothing that is written here should be regarded as investment advice or as a recommendation regarding a course of action. I’m neither a crypto expert, nor an expert on investing. I’m simply a crypto enthusiast who works as a full time software engineer at the YC-backed startup Quartzy. I have nothing to gain financially by offering people this information. You can check out my credentials for yourself here. Do your own homework on this subject, and never invest more than you can afford to lose.
2 CommentsLeave a Reply
Hi Chris, I enjoyed reading your article. I’m a crypto enthusiast as well but my background is in math education. Are there any books or websites you would recommend for someone who is interested in learning more about specific altcoins and crypto investment strategies? Thanks! -Chris
I personally found this chart to be of interest: https://techcrunch.com/2017/11/19/100-cryptocurrencies-described-in-4-words-or-less/. My personal strategy has been to work my way down the market cap list (https://coinmarketcap.com/ – top of the list will have the most sticking power and largest developer communities), and just do some google-fu to try and figure out what sets them apart from other use cases.