Hey everyone! Thanks for all the feedback on my second post. I particularly loved hearing from a CEO of a crypto company who offered this helpful context:
“I remind people that the crypto industry right now is like the first few years of the Internet. Netscape popped on the scene - but quickly there were a multitude of projects and companies... before you saw (maybe 10-15 years into the cycle) companies like Amazon, Google (and eventually) Facebook emerge as leaders. But in 2000, it wasn't at all clear that Google was going to win the search engine war.”
If anything, that advice blew some wind in my sails, hoping that we can understand this paradigm shift on the relatively early side, right?
In this post, I’d like to shine a light on Ethereum, especially since my last post was heavy on Bitcoin. Later in the post, there’s a geopolitical recap on recent crypto events, but let’s start with grasping what Ethereum is about.
To begin, there’s lots of debate around Bitcoin vs Ethereum, but they are quite different. I’ve seen Ethereum referred to as a cryptocurrency, while elsewhere, people talk about it as a gigantic worldwide platform running on a blockchain—capable of having many applications built on top of it. So, let’s clear that up first: the cryptocurrency first built on the shoulders of Ethereum is called ETHER. The technology foundation underneath it is Ethereum.
Ethereum was created in 2013 by 17-yr-old wiz kid, Vitalik Buterin, a winner of the Thiel Fellowship which allowed him to drop out of school and get to work with his idea. Exactly what all our kids are up to, right? His goal was to take the essential innovation of blockchain (a network of trusted computers sharing the same information) as he saw with the likes of Bitcoin, and essentially “open it up” in order to, in his words, create “a general purpose blockchain”. This is different than Bitcoin because of their dissimilar intentions. Bitcoin was created to be an alternative to national currencies where as Ethereum was built as an open-sourced platform to facilitate smart contracts, or safe and trustable digital deals between anyone, anywhere and offer both applications and the ability to trade via its own currency, ETH. My take is their respective popularity has created the debate of which is a better asset to own even though they are quite different in nature and intent.
Over the past few years, many types of applications, not only financial-based ones, have been created on Ethereum. And, as stated earlier, we’re in the early days. This is because it is open source— meaning anyone can work on top of it and build whatever they want using a series of rules called smart contracts. Here’s a few examples of other applications built on top of the Ethereum network: there’s a messaging app akin to Whatsapp or Telegram called Status, a predictions marketplace where you can bet on things- like who will win a sports game, and applications to buy and sell collectibles- similar to the world of collecting rare baseball cards. To understand it better, we need to wrap our heads around smart contracts.
Smart contracts, a term coined by Nick Szabo, can be thought of as an automated digital vending machine where you put money in, there’s a series of programmed and immutable rules at play, and you receive something in return. This can be done anywhere in the world and you get it immediately—not needing to worry about trust nor a middleman. The vending machine, in this case, is a bunch of computers all over the world. Let’s say you’ve got an app trading NFTs and a bad actor tries to mess around with the rules, the rest of the users just leave; essentially leaving the poor guy by himself. That is called “forking” and it has happened before- making the system more trustworthy and smart contracts, well… smart.
So, to try out an application using Ethereum, I downloaded the messaging app, Status, and let’s just say it felt like walking on the moon! I was asked to choose a name for myself, and was prompted with a few…
Of course, I chose: “Hospitable Competent Jingle”. Why not? I asked a friend if he’d join Status and give it a whirl with me, and he replied that Telegram already works great. That’s true. However, something pretty powerful dawned on me. Today’s popular messaging apps are all owned by a central organization—like a Twitter or a Facebook—and these centralized behemoths can make their own censorship decisions as they wish. As my 19-year-old noted the other night at dinner: “Cancel culture is everywhere. There are lots of influencers with tons of followers who get canceled because of something so incredibly random they said.” To become de-platformed means a complete loss of livelihood, essentially. The decentralized nature of Status is massively different - essentially uncancellable unless you’re a bad actor deemed by the whole of the decentralized network. It’ll be interesting to see how all of this evolves.
In the next few weeks, I want to dip my toes into buying an NFT ( non-fungible token) on Ethereum. These NFTs are essentially a one-of-a-kind token that could be anything: a piece of music, an image, digital art, video… and so on, that you want to own and collect, and maybe someday trade. I’m sure you’ve read about crazy lucrative NFT sales of late. One thing that is intriguing about this technology is that every time an NFT is sold, the person who created it gets a cut instead of a middleman—that’s a game-changer for artists and creators.
Let’s say you buy an NFT of digital art—what makes it unpreventable that someone can just go and copy it? Thanks to cryptographic principles, there’s digital scarcity that is immutable, or makes that impossible. I don’t fully understand “cryptographic principles” on the whole, which is why I’m taking this class- so please bear with me as I learn more.
If you have already bought an NFT or are thinking about it, please let me know. I’d love to do this with a friend!
Finally, I want to do a short section in each post entitled:
>>Crypto + Geopolitical News
I’ll include a few really quick headlines— so you can be aware of a few happenings:
China basically banned bitcoin mining which means that around half of miners (if you need more on mining, see my last post), are looking to relocate their computing efforts elsewhere. What is notable about this, at least to me, is that removing HALF the mining efforts on Bitcoin didn’t send the cryptocurrency to zero. I think that when there is less mining being performed, it becomes computationally easier to mine and when there are more miners— harder. So this was a built-in insulation system that helps protect the currency vis-à-vis government regulatory movements. Kinda ingenious!
Starbucks just announced they’re accepting payments in Bitcoin, via Bakkt. This nicely offsets Elon’s seemingly shifty stance on Tesla accepting Bitcoin, then refuting it, then agreeing again to accept it if mining efforts become more climate-friendly. It should be noted that a handful of companies are holding Bitcoin on their balance sheets- Tesla being one of them @ $1.3b.
El Salvador & Mexico: As I said in my last post, it is exciting for me to think of all the economic good that will come El Salvador’s way since passing a law making Bitcoin legal tender. It was rather weird to see what happened last week in Mexico. Ricardo Salinas, head of Banco Azteca, announced on Twitter that his bank would be the first in Mexico to lend crypto. The Central Bank quipped back a day later with a harsh warning. Of course, this will only lend to offshoring; however, it is clear we are in a regulatory wonderland on a global scale. Power, baby, it’s all about power.
I find all of this so interesting and hope you do too. Thanks so much for reading and sharing- so appreciated! Until next time…
-Susan
Hi Susan! I, too, have been delving into the world of cryptocurrency and working to understand it better. I do own cryptocurrency funds and do own both Ethereum and ETClassic (they are different) via Coinbase. I have not invested in an NFT or entered that world as of yet. I am in the learning phases too and would be good to stay in touch! All a bit overwhelming, but I feel it's just the beginning and important to know.