A lot of new people are discovering the crypto industry in 2021.
What basic mental models do you need to get right when learning about crypto?
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1/ The first thing to realize is that "cryptocurrencies" is the wrong term. Currency implies money. Other than Bitcoin, most assets are not money.
These are crypto-assets (not cryptocurrencies), and the critical question to ask is: what purpose does this new asset serve?
2/ The absolute worst way to enter crypto is to think, "Bitcoin appreciated, let me try to find the next Bitcoin." That's flawed at so many levels.
Bitcoin is a store-of-value, a type of hard money. Other assets are not even trying to be SoV (some are trying but failing).
3/ The mental model to use here is to divide crypto assets into categories:
1) Store-of-value (SoV): Bitcoin is the only real player here. 2) Gas for smart contracts: Ethereum, Solana, Avalanche, Stacks, etc. 3) Other use cases like storage networks, governance tokens etc.
4/ Bitcoin as a store-of-value is a use case with product-market fit. That's why corporate treasuries are building Bitcoin positions.
What crypto asset is a hedge against inflation or a collapse of bond markets? Answer: Bitcoin and, more importantly, only Bitcoin.
5/ Store-of-value should not be confused with gas for smart contracts. That is an entirely different market.
SoV is not a competitive market, with a clear winner (Bitcoin).
Gas for smart contracts is a competitive market, and it's becoming more competitive.
6/ Use cases outside of the two biggest ones (SoV and gas) are even more experimental. Several interesting new assets belong in this "other" category. There is potential, but for a new crypto user, the important thing to remember is that it's the riskiest category.
7/ The "other" category has subcategories like storage networks, governance tokens (for liquidity protocols, exchanges), etc. The rate of innovation is so rapid that even full-time research analysts can't keep up.
(I'll expand this separately but collapsing here for simplicity.)
8/ The biggest mistake new users make is to confuse the rise of Bitcoin with experimental new assets. Bitcoin is the rise of a digital store-of-value.
The new experimental assets are not a store-of-value.
Gas for smart contracts is also not a store-of-value.
9/ The two required readings for new crypto users should be:
(a) "The case for a small allocation to Bitcoin" by Wences Casares, and
(b) "The economics and valuation of utility protocols" by John Pfeffer.
10/ In summary, new crypto users need to cleanly differentiate between store-of-value (Bitcoin), gas for smart contracts, and the other experiments.
Learn the basics before diving in on the deep side of the pool. The crypto rabbit hole is exciting but here be dragons.
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1/ Turing completeness is not a desirable property for smart contracts. What you mean/want here is expressiveness i.e, developers can easily write any logic.
You can be expressive with *decidable* languages. Being Turing complete i.e, not decidable is a security problem.
2/ There is nothing fundamental about Bitcoin that stops smart contracts.
Bitcoin designers, very carefully, built it so that the base layer has a small attack vector (i.e, limited script).
This leaves several options open to implementing smart contracts.
1) It’s like building a new city. Someone needs to build the basic infrastructure that benefits everyone.
2) New cities have their respective new economies that are hard to bootstrap; moving to NYC was a risky and strange thing to do in 1700s.
3) There are early investors who look for return on investment (like buying land in a developing city). Understand their motives and appreciate the value they provide: initial capital.
(A thread of ideas too half-baked to be a blog post.)
2/ If we try to use known computer science concepts to describe a human brain, what would the model look like?
I love that question. I don't think we have answers yet. Here is a theory.
3/ I don't think our brain is a computer processor; it's probably a network of small processors. In fact, two large networks of processors (right and left hemisphere) that can function independently but are strangely connected.