1/ USE CRYPTO IN A SENTENCE (a 101 newb-friendly megathread I wish I had 🥹🧵):
Going in the 101 folder.
Let’s go verrrry, very slow up the learning curve ⤴️, simple to complex.
You’ll be “DYOR” and “HODLing” at your next team happy hour before you know it. Cheers to joy. 😎
Going in the 101 folder.
Let’s go verrrry, very slow up the learning curve ⤴️, simple to complex.
You’ll be “DYOR” and “HODLing” at your next team happy hour before you know it. Cheers to joy. 😎
2/ The Basics:
In any society or social situation, you have things of “value” (i.e. goods & services). Give something valuable, receive something valuable in return.
$30 cash 🤝 $30 gas
Highest bid 🤝 nice painting
Good credit 🤝 car loan
X of my chickens 🤝 Y of your goats
In any society or social situation, you have things of “value” (i.e. goods & services). Give something valuable, receive something valuable in return.
$30 cash 🤝 $30 gas
Highest bid 🤝 nice painting
Good credit 🤝 car loan
X of my chickens 🤝 Y of your goats
3/
In a robust system (an “economy”), every time something of value is exchanged (a “transaction”), the exchange is recorded (stored to some kind of “record.”)
Imagine a giant book full of these recorded transactions. We’ll call it a “ledger.”
In a robust system (an “economy”), every time something of value is exchanged (a “transaction”), the exchange is recorded (stored to some kind of “record.”)
Imagine a giant book full of these recorded transactions. We’ll call it a “ledger.”
4/
Traditionally, a ledger is private property. Only a bank, government, or business can peek inside that big book.
But bankers can abuse insider knowledge, do inside trading.
A gov’t can be corrupt.
Businesses can be monopolies.
What if that big ledger belonged to everybody?
Traditionally, a ledger is private property. Only a bank, government, or business can peek inside that big book.
But bankers can abuse insider knowledge, do inside trading.
A gov’t can be corrupt.
Businesses can be monopolies.
What if that big ledger belonged to everybody?
5/ Welcome to crypto! 👋
The two MOST important terms in crypto:
“Centralized”: one or few own the ledger
vs.
“Decentralized”: everybody owns fhe ledger
And now, taking these terms to make your new favorite word and acronym salad…
The two MOST important terms in crypto:
“Centralized”: one or few own the ledger
vs.
“Decentralized”: everybody owns fhe ledger
And now, taking these terms to make your new favorite word and acronym salad…
6/ 🥗!
“Decentralized” (abbrev. to “De” or “d”) →
•“DeFi” (“Fi” = finance)
•“DeX” (“X” = exchange, like NYSE but decentralized)
•“dApp” (“App” = application, like on your laptop/smartphone)
“Centralized” (“Ce”) →
•CeFi
•CeX
May also see “TradFi” (“Trad” = traditional).
“Decentralized” (abbrev. to “De” or “d”) →
•“DeFi” (“Fi” = finance)
•“DeX” (“X” = exchange, like NYSE but decentralized)
•“dApp” (“App” = application, like on your laptop/smartphone)
“Centralized” (“Ce”) →
•CeFi
•CeX
May also see “TradFi” (“Trad” = traditional).
7/ And the big one:
•“Blockchain” (😱)
But blockchain is rly just a form of
•“DLT”: Distributed Ledger Technology
See, you’re a natural!
Blockchain = tx are simply bundled into “blocks” and those blocks saved to a public ledger, “chained” one after another, in perpetuity.
•“Blockchain” (😱)
But blockchain is rly just a form of
•“DLT”: Distributed Ledger Technology
See, you’re a natural!
Blockchain = tx are simply bundled into “blocks” and those blocks saved to a public ledger, “chained” one after another, in perpetuity.
8/ Okay, we still have a problem:
In our magic new economy, people can still be awful and may want to attack it (i.e. hack, steal).
If everyone owns the ledger, how can I “trust” or “verify” that all recorded exchanges are “honest.” How do I know my internet money is “secure”?
In our magic new economy, people can still be awful and may want to attack it (i.e. hack, steal).
If everyone owns the ledger, how can I “trust” or “verify” that all recorded exchanges are “honest.” How do I know my internet money is “secure”?
9/ We use math of course!
Here’s some simple math to start:
In governments and businesses (organizations with a lot of people) you need a “majority” to agree.
Majority, in any system, means greater than half.
Simple enough:
51%, or greater.
Here’s some simple math to start:
In governments and businesses (organizations with a lot of people) you need a “majority” to agree.
Majority, in any system, means greater than half.
Simple enough:
51%, or greater.
10/
Also, in order to HARM a decentralized system, a malicious actor needs to do it in a centralized way: get control of the majority of the system, then attack it.
More simply put: attack AS the majority of the system.
51%, or greater.
Also, in order to HARM a decentralized system, a malicious actor needs to do it in a centralized way: get control of the majority of the system, then attack it.
More simply put: attack AS the majority of the system.
51%, or greater.
11/
Brief detour, Pt. 1: a metaphor commonly used in crypto to describe coordinated >51% attacks on decentralized systems comes from a 1973 book about a woman with dissociative (f.k.a. “multiple”) identity disorder.
In the book, her name was pseudonymized as Sybil Dorsett.
Brief detour, Pt. 1: a metaphor commonly used in crypto to describe coordinated >51% attacks on decentralized systems comes from a 1973 book about a woman with dissociative (f.k.a. “multiple”) identity disorder.
In the book, her name was pseudonymized as Sybil Dorsett.
12/
Pt. 2: This book derives the terms “Sybil attack” (one entity acting as multiple, to attack a network) and “Sybil resistance.”
Personally not a fan of any technical term based on pathologizing a mental disorder.
But like MID changed to DID in 1994, language can evolve. ☺️
Pt. 2: This book derives the terms “Sybil attack” (one entity acting as multiple, to attack a network) and “Sybil resistance.”
Personally not a fan of any technical term based on pathologizing a mental disorder.
But like MID changed to DID in 1994, language can evolve. ☺️
13/ Okay, >51% attacks = bad. Got it.
>51% agreement about tx on the ledger = good?
Umm 😅, let’s aim for 100%! If you and I exchange value in a decentralized network, how do others in our network “agree” that our tx was honest?
Forget majority consensus: what about UNANIMOUS?
>51% agreement about tx on the ledger = good?
Umm 😅, let’s aim for 100%! If you and I exchange value in a decentralized network, how do others in our network “agree” that our tx was honest?
Forget majority consensus: what about UNANIMOUS?
14/ Well, we use a “consensus mechanism.”
Different than a 51% attack (“Sybil”) prevention mechanism. The two too often get used interchangeably. (I’ll tell you why shortly😉).
So, blockchain networks:
1. preventing attacks, and
2. agreeing upon every block, and every tx in it.
Different than a 51% attack (“Sybil”) prevention mechanism. The two too often get used interchangeably. (I’ll tell you why shortly😉).
So, blockchain networks:
1. preventing attacks, and
2. agreeing upon every block, and every tx in it.
15/
But GOODNESS: in an economy THAT busy, we have to screen EVERY single tx?
aLL ThE TiMeeEe??
Enter the power of computer science. In the world of code, developers can automate things.
Devs design “protocols” for the code to do so.
Yes, “protocol”: instructions! rules!
But GOODNESS: in an economy THAT busy, we have to screen EVERY single tx?
aLL ThE TiMeeEe??
Enter the power of computer science. In the world of code, developers can automate things.
Devs design “protocols” for the code to do so.
Yes, “protocol”: instructions! rules!
16/
Devs working on blockchains all across crypto combine both kinds of protocols (attack prevention, consensus) to facilitate decentralized economic activity.
When the code is robust and secure, so is the chain.
Devs working on blockchains all across crypto combine both kinds of protocols (attack prevention, consensus) to facilitate decentralized economic activity.
When the code is robust and secure, so is the chain.
17/ And, yes: in De-land, anyone can validate tx / make blocks!
Network protocols just ask for of “proof” from validators proposing blocks to the chain. (Again, the goals: reach consensus, prevent attacks)
Protocols can require “proof of” anything.
Time for some clever code.
Network protocols just ask for of “proof” from validators proposing blocks to the chain. (Again, the goals: reach consensus, prevent attacks)
Protocols can require “proof of” anything.
Time for some clever code.
18/
For consensus protocols, the easiest way to prove consensus among validators would involve some kind of majority vote.
Most consensus protocols ARE based in voting.
But perhaps the most sacrosanct of all protocols in blockchain history is not vote-based: Nakamoto Consensus.
For consensus protocols, the easiest way to prove consensus among validators would involve some kind of majority vote.
Most consensus protocols ARE based in voting.
But perhaps the most sacrosanct of all protocols in blockchain history is not vote-based: Nakamoto Consensus.
19/ The story of Nakamoto Consensus is the story of #Bitcoin, the 1st ever cryptocurrency.
It’s a much longer story than one can tweet, and many think it began as a ponzi.
Great reason to “DYOR” (do your own research)! 😉 Its history, purpose, and novel design are truly novel.
It’s a much longer story than one can tweet, and many think it began as a ponzi.
Great reason to “DYOR” (do your own research)! 😉 Its history, purpose, and novel design are truly novel.
20/ But while we’re here, another brief detour, Pt. 1:
Nakamoto Consensus is likely why ppl across the whole world of blockchain conflate “Sybil” with “consensus” protocol.
Sneak preview as you DYOR: Nakamoto Consensus is like a race to solve a cryptographic puzzle.
(Crypto!)
Nakamoto Consensus is likely why ppl across the whole world of blockchain conflate “Sybil” with “consensus” protocol.
Sneak preview as you DYOR: Nakamoto Consensus is like a race to solve a cryptographic puzzle.
(Crypto!)
21/ Pt. 2:
For Bitcoin, its 51% attack prevention protocol requires “Proof of Work.”
If BTC algorithm selects you (i.e. your massive computer rig) to validate add new incoming tx to the ledger of blocks, you must prove your rig did some amount of computational work.
For Bitcoin, its 51% attack prevention protocol requires “Proof of Work.”
If BTC algorithm selects you (i.e. your massive computer rig) to validate add new incoming tx to the ledger of blocks, you must prove your rig did some amount of computational work.
22/ Pt. 3:
How to prove that “work”? Simple: solve a puzzle.
For each block, the protocol generates a string of characters, called a “hash.”
PROVE (using your rig’s “hashing power”) that you mathematically generated (“found”) a hash that matches.
3, 2, 1: all validators GO.
How to prove that “work”? Simple: solve a puzzle.
For each block, the protocol generates a string of characters, called a “hash.”
PROVE (using your rig’s “hashing power”) that you mathematically generated (“found”) a hash that matches.
3, 2, 1: all validators GO.
23/ Pt. 4:
If your block, WITH its “found” hash, represents all tx new and prior, it’s honest. You win the race. (And protocol rewards you some Bitcoin.😉)
If WE ALL AGREE you PROVED you minted the BLOCK: we have CONSENSUS.
Satoshi Nakamoto-style.
(Commence Satoshi puns 😎)
If your block, WITH its “found” hash, represents all tx new and prior, it’s honest. You win the race. (And protocol rewards you some Bitcoin.😉)
If WE ALL AGREE you PROVED you minted the BLOCK: we have CONSENSUS.
Satoshi Nakamoto-style.
(Commence Satoshi puns 😎)
24/ That’s Bitcoin. And remember, it’s just ONE kind of chain.
A last reminder: devs can couple protocols (i.e. consensus, 51% attack prevention) cleverly as they like, to create as many kinds of chains as they like.
i.e. there can be as many chains as there are protocol combos
A last reminder: devs can couple protocols (i.e. consensus, 51% attack prevention) cleverly as they like, to create as many kinds of chains as they like.
i.e. there can be as many chains as there are protocol combos
25/ You did it!! Now you’re talking blockchain! 🥳🥳
You’re up the learning curve 🙂, and are now free to tumble down the rabbit hole 🙃
From here, it’s
- learning about specific chains (e.g. #Ethereum, #Cardano)
- crypto vs. fiat currency
- more fancy dev and finance lingo
You’re up the learning curve 🙂, and are now free to tumble down the rabbit hole 🙃
From here, it’s
- learning about specific chains (e.g. #Ethereum, #Cardano)
- crypto vs. fiat currency
- more fancy dev and finance lingo
26/ Some 202 DYOR topics,
Pt. 1, More blockchain anatomy:
The two record-keeping models both crypto and fiat ledgers
- UTxO-based (#Bitcoin, #Cardano)
- account/balance-based (#Ethereum, traditional banks)
Pt. 1, More blockchain anatomy:
The two record-keeping models both crypto and fiat ledgers
- UTxO-based (#Bitcoin, #Cardano)
- account/balance-based (#Ethereum, traditional banks)
27/ Pt. 2, More blockchain anatomy (cot’d):
- Also did you know you could stack protocols? Validate blocks off chain? (“Layer-1” or L1, L2, etc.)
Protocol combo + protocol layer topography + ledger model = my chain’s coin is built WAY differently than yours. Like, the CODE is.
- Also did you know you could stack protocols? Validate blocks off chain? (“Layer-1” or L1, L2, etc.)
Protocol combo + protocol layer topography + ledger model = my chain’s coin is built WAY differently than yours. Like, the CODE is.
28/ Pt. 3, Interoperability:
When the tech exists to “bridge” assets between chains (e.g. MS .docx files readable by Google Docs), or dApps can facilitate tx between different chains, that means the tech makes those “interoperable.”
BTC ↔ ETH ↔ ADA ↔ DOT ↔ etc.
When the tech exists to “bridge” assets between chains (e.g. MS .docx files readable by Google Docs), or dApps can facilitate tx between different chains, that means the tech makes those “interoperable.”
BTC ↔ ETH ↔ ADA ↔ DOT ↔ etc.
29/ Pt. 3, System Upgrades:
How does a decentralized network upgrade its entire “codebase” (think macOS)? Tiny updates and big ones?
- “Hard fork”: a chain-wide “event” where all in chain (validators, dApps) make a hard pivot (“fork”) from one block-making protocol to a new one
How does a decentralized network upgrade its entire “codebase” (think macOS)? Tiny updates and big ones?
- “Hard fork”: a chain-wide “event” where all in chain (validators, dApps) make a hard pivot (“fork”) from one block-making protocol to a new one
30/ Pt. 4, Understand Digital Assets!
“Coins” (base asset OF the chain) vs. “tokens” (assets created ON the chain)
Asset use cases, or “utility.”
Currency “scarcity,” both crypto and fiat:
- “minting” & “burning” coins and tokens
- “fungible” v. non-“fungible” (NOT A JPEG 🤬)
“Coins” (base asset OF the chain) vs. “tokens” (assets created ON the chain)
Asset use cases, or “utility.”
Currency “scarcity,” both crypto and fiat:
- “minting” & “burning” coins and tokens
- “fungible” v. non-“fungible” (NOT A JPEG 🤬)
31/ Pt. 5, Digital Assets (cot’d):
Scarcity and finance:
- burning → deflation
- minting → inflation
- certain assets are “hard-capped” (total supply will not increase) → “disinflationary” (i.e. Bitcoin, Cardano)
All key for understanding “stablecoins,” esp. algorithmic ones
Scarcity and finance:
- burning → deflation
- minting → inflation
- certain assets are “hard-capped” (total supply will not increase) → “disinflationary” (i.e. Bitcoin, Cardano)
All key for understanding “stablecoins,” esp. algorithmic ones
32/ Bye!!
If you’ve read this far, you are fully ready to begin your crypto journey.
Will link my other megathread below 🧵 with a few more tweets from me + great resources from the #CardanoCommunity.
Happy DYOR, friends, and invest safely!
If you’ve read this far, you are fully ready to begin your crypto journey.
Will link my other megathread below 🧵 with a few more tweets from me + great resources from the #CardanoCommunity.
Happy DYOR, friends, and invest safely!
oops, meant to use *novel once 😂
Bad typos are bad.
Bad typos are bad.
Backlink to the MEGA-megathread.
Also pinned to the top of my Twitter profile.↖️
(Please share with your crypto-curious friends. I love 101’s 😘)
↩️🧵
Also pinned to the top of my Twitter profile.↖️
(Please share with your crypto-curious friends. I love 101’s 😘)
↩️🧵
https://twitter.com/birdabioma/status/1546623561422450688
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