October19: Crypto-notes

Cryptocurrency vs Cryptoassets

“Crypto” means it’s anchored in solid cryptographic foundations. So I’d add Identity to the mix. Don’t mistake crypto with “stocks” or “investments” and look at it like a new p2p internet.

Many folks I have talked to think of crypto only in terms of currency and art. I agree that this view is too narrow. The most valuable uses of crypto are likely hard to predict and imagine today (like the internet in the early 90s). Nearly everyone who joins crypto for the first time goes through the payments fallacy. Namely, they exclusively, but erroneously focus on crypto as a way to solve the world’s payment woes. But seeing crypto only through a payments lens is akin to seeing the World Wide Web as a way to put newspapers and books online. It’s so much more.

A crypto account should and will be a global account, accessible from any part in the world, regardless which country you had to move out from. In case of war or whatever disaster, your wealth should be stored safely and travels with your identity/biometrics. Only and easily accesable with ID for you, and finally your heirs.

Rather than currency, each crypto asset is … well, different:

• Bitcoin: A deflationary commodity focused on scarcity and capital preservation
• Ether: A claim to being able to write on the Ethereum blockchain, enabling you to create and interact with smart contracts
• Most DeFi Protocol tokens: A claim to governance (today) in a decentralized protocol - and potentially a claim to cash flows (tomorrow)
• Digital NFTs: A public claim on the blockchain to related digital artwork
• Stablecoins: A claim to fiat currency (with varying degrees of trust)

The subtlety of “varying degrees of trust” as only applied to nation state currencies seems to be now extended to every walk of life (This could imply “trustlessness” to be an important first charateristics of the many more to bubble up via the crypto ecosystem. In crypto one over-emphasizes the importance of trustlessness, when global accessibility, open networks, composability, etc. are important too.

Immutability is the key feature of blockchain that allows us to reimagine ownership and transfer of ownership, trust governed by mathematics instead of being “facilitated” by intermediaries. It doesn’t solve for the trust equation entirely but can get us quite far along.

Much like the Internet was the foundation which let information be created and disseminated, the blockchain is the foundation on which all assets will be created and moved.

Instead of payments, openness and programmability is the first act of today’s blockchains.

First, just like the internet, crypto and the blockchain are open for anyone to access and to build on, encouraging innovation and opening up financial services to the entire world. (And new risks to confront)

Second, crypto enables us to program using smart contracts. These smart contracts lets us set explicit rules that even the creators can’t violate, providing a degree of custodial protection and letting us create wholly new user behaviors (NFTs anyone?). This is the foundation for Web 3, a token and ownership based model of the web.

Programmability and openness is crypto’s necessary first act where a panoply of individual applications like NFTs, Decentralized Finance, and token trading attract users into crypto, rather than payment interactions between users.

Someday, crypto will disrupt payments.Payments are a singular use case for a blockchain network. The blockchain and the cryptography behind it enables TRUSTLESS systems. That’s the key word for me, if implemented correctly there’s not a single user, hacker, organization, or government that can alter its function nor stop it once set in motion. That’s powerful. Today it offers us something that is even closer to fruition: the opportunity to reimagine global ownership and commerce through programmability and openness. Ownership is absolutely the greatest focus of the space because ordinary people can recapture value in their ownership.

We’re still early on the Internet, less than half of world’s population connected to it after 2+ decades … Crypto journey is barely day one and is only 0.01% progressed. One has to look beyond just #bitcoin and #ethereum . Many more are live and still very in their growth phase. The era of cross-chain and multi-chain is still to come.