Letter to a Friend: Getting Started with Crypto
What everyone should know about Crypto and where to learn it
Recently I’ve been writing basically the same email to multiple friends, so I decided to clean them up and combine them into this post - in case anyone else finds it a useful resource either for themselves or to send to a friend. What follows is my personal opinion and is very much not financial advice. Do your own research, make your own choices.
What you need to know about crypto
Welcome to cryptocurrency - there is a lot to learn! Here are some thoughts about how to get started.
First, Bitcoin is changing the world and every intelligent adult needs to have a basic understanding of what that means. This reading list is a good (but also dense) set of essays that explore what Bitcoin means. Probably read them slowly over time. I also think everyone should own at least a small amount of Bitcoin. This post discusses why and how much.
Many people are suspicious of Bitcoin or explicitly disapprove of it - but that doesn’t make it any less important to understand. Anyone who worries about the ethics of Bitcoin should take a look at the "Ethical Case for Bitcoin" section of this reading list. Criminal usage of Bitcoin is actually quite rare in practice. The environmental impact of Bitcoin is complicated but it is very obviously smaller than the alternative. Bitcoin is already empowering activists, subsidizing renewable energy and reducing corruption in emerging markets. It is possible to both understand Bitcoin and still disapprove of it but for the disapproval to be legitimate the understanding has to come first.
Everyone should also be familiar with non-fungible tokens (NFTs). The best way to think of NFTs is as technologically advanced certificates of authenticity. It may be counter-intuitive, but authenticity and provenance are important and valuable problems. Here is a good introduction to what NFTs are and why they matter. NFTs are transforming art and culture, so anyone who cares about or consumes culture should probably familiarize themselves with the broad strokes. As with any art some NFTs become popular and valuable but most never do. I don’t recommend investing in NFTs but I do think owning a few you like is fun.1
Anyone who works in social media, marketing, fashion or community building should probably be familiar with the major NFT projects and why they are successful. You can learn a lot about advertising by studying soda companies, because advertising is basically the only thing they sell. The same principle applies to NFT projects - the successful ones are manufacturing consumer engagement out of thin air. The explorations happening in pricing, marketing and community equity are all applicable much more broadly than just NFTs. You can find a good crash-course introduction to a few of the major NFT projects here.
Anyone who works in technology, banking or finance should have a basic familiarity with Ethereum and the Decentralized Finance (DeFi) ecosystem. The permissionless environment of DeFi has caused an explosion of new experiments in lending, trading and banking. Individual dApps can be combined into complex and unfamiliar financial instruments. For now DeFi is largely a self-contained ecosystem where most of the activity is limited to a small handful of traders, but the explorations happening there are very likely a glimpse into the future of finance. This post is a good introduction to what DeFi is and how Ethereum has enabled it.
On the other hand I do not think that ETH or the current generation of DeFi tokens are good investments - building the future is not the same as profiting from it. Contemporary dApps are more like fascinating prototypes with fundamental scaling challenges than healthy, thriving businesses. The technology being developed might be valuable and interesting, but the technology is not the token and the token is not the technology. This post is a good introduction to why compelling technology doesn’t necessarily mean good investment and this traditional analyst’s report makes a similar argument but in greater detail. I recommend understanding Ethereum and DeFi, but I don’t recommend investing in them.
No one needs to understand anything about XRP, Bitcoin Cash or Bitcoin Satoshi’s Vision. Those projects are worthless both financially and intellectually. You can safely ignore them. If there are other cryptocurrency projects you are curious about you can find a brief introduction to some more notable projects here. They change frequently, I don’t think you need to pay attention to them unless you are interested.
Finally, everyone should subscribe to the Something Interesting newsletter. I write regularly both about current events and general concepts in cryptocurrency and I answer all reader submitted questions!
P.S. I also did a brief (~20m) talk for Product School introducing the space if video is more your preferred format: