Let's talk about crypto

Hi ladies and gents,

How is everybody? I hope you enjoyed your time off and that family time during holidays was lovely a.k.a. that you avoided all the potential fighting that often happens during this jolly time 😏

New week, new newsletter. Let’s jump right in.

• We are starting with a controversial one this year - Crypto 

• Closing the Gap - Lisa Mosconi

• Book of the month - The Almanack Of Naval Ravikant - part I

LET’S COVER THE BASICS

Crypto 101

I know. Crypto right? Can we just move on from this? Well, we can’t.

Why? Because it is important for you to understand at least the basics of it, so you can explain it to everyone at the next family gathering and to tell that “smart uncle” that crypto is not a scam. At least not always. But that is for some other time. 😁

But first - quick story time.

It was 2015. I was working at a crypto startup and Bitcoin price was around 300€. We had a development team and one of the developers was paid 1 bitcoin per week, latter on even 1.5 a week. One of my tasks was to pay him each week. It took me exactly 2 clicks to send BTC (ticker symbol for bitcoin) and that was that. The money was in his crypto wallet almost instantly.

He was always explaining to me how bitcoin is going to be huuuge, how much value it will have and that I need to buy at least one. I was a young student, my money priorities were definitely elsewhere and I simply replied with a very famous Sex and the city quote - “I like my money where I can see it. Hanging in my closet.” So I spend my money in Zara instead.

That is why I am dedicating this edition of newsletter to my past self and to all crypto newbies. So you can know better and make smarter decisions than I did.

While I understood the technological part of crypto and blockchain, I definitely did not understand the meaning or value it would have 8 years latter. Since then I have worked on various crypto/blockchain related projects, so I think I have learnt a thing or two.

Ok. Crypto, cryptocurrency, blockchain and bitcoin. Those are probably the words we need to explain first before we continue, because I often hear them used in the wrong way.

• Crypto = cryptocurrency. Crypto is just a short version for cryptocurrency so this one is easy.

• Cryptocurrency - in its essence is any digital currency secured by cryptography¹, which is a technology that uses the process of encrypting and decrypting data. This is not something new. Most famously it has been used during World War II. There are various cryptocurrencies such as Bitcoin, Ethereum, like there are various national currencies such as euro, dollar etc.

• Blockchain² - is the underlying technology that cryptocurrencies are built on. It is a complex technology but what you need to know, is that it allows that the transactions are recorded into "blocks" and time stamped, which is an important fact. We’ll go into details later. 

• Bitcoin - is the most well known cryptocurrency and the one that started it all.

To simplify even more.

Picture a train station. You have rails = blockchain and trains = cryptocurrencies that run up and down those rails. You have different trains = different cryptocurrencies and you can also have different types of rails = different blockchains that support them. Can all trains use all rails? No, there are some limitations to that. And the role of bitcoin? It’s just the biggest train that passes the station.

I think we have the basics covered.

Why is crypto important?

Depends who you ask. When Satoshi Nakamoto³, who is the anonymous founder of Bitcoin, titled his whitepaper “A Peer-to-Peer Electronic Cash System”, he for sure had in mind something else for bitcoin, than what is happening today. In this paper he explains the idea behind a digital currency which would be a purely peer-to-peer version of electronic cash that would allow online payments to be sent directly from one party to another without going through a financial institution.

What this means is that cryptocurrency, like bitcoin, would not have a centralized authority such as a national bank, that would issue it and have a hand over it, nor would any other bank be involved in processing of transactions. All would be done using blockchain and would be going directly from the sender to the receiver. The idea was that you could also use crypto to pay for coffee, groceries, cars, whatever, which in part is true today, but in a very limited scope.

And even though his idea was all great and fine in theory, nowadays the situation is a bit different.

As we already spoke in our previous edition, crypto these days is more of an asset that is used as an investment option. As with every other investment you try to buy it low and sell it high. The price is driven by the supply and demand. However, if you compare it to let’s say a stock of a well established company with a long tradition and a verified business model, there is a slight difference. Even though with stocks the price is also based on the supply and demand, there is also an underlying asset in the shape of the company that gives it an additional value. With crypto there is no guarantee of the price going up, at least not at the moment.

But things are changing. Like we mentioned in last week’s edition, we are on the brink of the approval of the first spot Bitcoin ETF⁴  in US. This means that a lot of money will be invested into the crypto market, there will be more participants, so the supply and demand will be a bit more diversified and hopefully less volatile.

Another important question. Is crypto legal? 

Again, it depends. From country to country the regulation varies. It is legal in Europe, US to a certain extent, completely prohibited in China and in El Salvador for example it is one of their legal tenders.

Let’s talk a bit about blockchain as well and the importance of it.

Blockchain is like a super secure digital notebook where transactions are written in blocks. These blocks can only be added after many computers agree that the transactions are valid. It's like a teamwork system that makes it really tough to mess with the info inside. This was also one of the points that Satoshi Nakamoto pointed out, as a benefit in comparison to the existing financial system. 

Blockchain as a technology can also be used separately from crypto as a way to track certain data in industries, that need a secure and transparent way of storing information. Supply chains, and processes such as online voting and crowdfunding could be a use case for this.

When I was doing the research I found this video and wanted to share it. Even though it is an old video from Coinbase⁵, it very much represents what crypto should be about in my opinion.

Not sponsored by Coinbase obviously 😁 #oneday

I hope I made crypto a little bit more clearer to you. If not, I’ll try again next week so stay tuned.

Also to finish up the story from above - that 1 bitcoin would today be worth around 40.000€. More than enough to do some shopping in Zara 😅

GLOSSARY

• ¹ cryptography - is technique of securing information and communications through use of codes. The prefix “crypt” means “hidden” and suffix “graphy” means “writing”.

• ² blockchain - a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network.

• ³ Satoshi Nakamoto - is the name used by the presumed pseudonymous person or persons who developed Bitcoin, authored the bitcoin white paper.

• ⁴ spot Bitcoin ETF - an exchange-traded fund that tracks the price of bitcoin. The term "spot" refers to the actual immediate purchase and ownership of the underlying asset, which, in this case, is bitcoin. This means that the value of a spot bitcoin ETF will be directly correlated to the price of bitcoin.  

• ⁵ Coinbase - cryptocurrency exchange platform where you can trade various different cryptocurrencies.

CLOSING THE GAP

Lisa Mosconi

To be exact - Dr Lisa Mosconi.

She is a lady doctor. But not the lady doctor you have in mind.

Dr Lisa Mosconi is a neuroscientist that specializes in how genetics, hormones, environment, and lifestyle shape the brain - female brain in particular. Her work focuses on the early detection of Alzheimer’s disease and the role that menopause plays in the development of it.

She wrote a book called “The XX brain” where she points out that brain health is a vital, yet overlooked component of women’s health. To add on that she also wrote a book called “Brain food” that discusses which foods are more beneficial for brain health.

Statistically women are unfortunately the ones that get affected by Alzheimer’s disease the most. So we should educate ourselves and take care of our brain and give them a lot of ❤️.

I recommend watching this short interview where she explained a bit about the menopause and the affect it has on female brain.

BOOK OF THE MONTH

The Almanack of Naval Ravikant

by Eric Jorgenson

Ah, new year, new book, new knowledge.

This book has been on my reading list for quite some time. It is a book about the words and wisdoms of Naval Ravikant, who is a serial investor, entrepeneur and in my opinion a great advice giver. In this book the author has curated Naval's tweets, essays, and interviews on wealth and happiness.

He starts the first chapter with this quote:

And what this skill is? You need to figure it out.

Find a skill that is unique to you and find a way to make money by using that skill. He says that you need to “productize yourself”. You need to find a specific knowledge that you cannot be trained for it, because if it can be trained, there is someone that can replace you. Think about the things that you were doing as a kid or a teenager and you did them almost effortlessly.

He lists examples of specific knowledge that many would not consider as a skill, but can be used for making money:

• an obsessive personality - this means you can dive into thing and remember them quickly

• playing a lot of games - your understand game theory pretty well

• and my favorite - gossiping, digging into your friend network - that might make you into a very interesting journalist.

The last one special skill resonated with me I have to say.

Another Twitter thread of his goes like this:

Same as Morgan Housel said in his book, he points out that being rich and having wealth is not the same thing. Wealth is the thing you want.

And like compound interest is important when investing, the same goes for all other returns in life. Compounding in business relationships is very important. Same goes for reputation that you are building on a daily basis. If you have a great reputation and you build on it throughout the years, people will notice it, they will trust you and be willing to do business with you.

This is the lesson I still need to put into action, since I am still writing this newsletter anonymously. I’ll change that in the future. And why am I still a silent partner in this writing thing?

Probably, as Naval points out, because we are still socially hardwired to not fail in public under our own name. He continues to say that people who have the ability to fail in public under their own name actually gain a lot of power.

We’ll see how much power the 2024 has in store for me 😄

I highly recommend reading this book. It is a very easy read and if you want to read it yourself, you can find a free version of an e-book here.

SOME NEWS

• If you are in the mood for some extra reading. Bitcoin whitepaper explains what was the entire idea of decentralised currency.

• Another great TED talk that you can watch. I love watching these.

• We spoke about cryptography being used in World War II. Watch movie The Imitation Game, if you haven’t yet, to see where it has been used in the past.