Getting Curious About Cryptocurrencies
There is no question that a cultivated understanding of blockchain technology is essential for thinking about the future of the internet. With cryptocurrencies being the first commercialized application of blockchain technology, it remains a difficult task to know where to start in developing an educated understanding of the technology from first principles.
At Faktory Ventures, Samantha and I have been immersed in developing our understanding of blockchain, cryptocurrencies, dApps, mining, and cryptography recently. We’re most interested in understanding the fundamental, long-term shifts that blockchain technology will enable in society. We’re less focused (and skilled!) on trying to play the short-term day trading market in cryptocurrencies. We’ve spent time understanding the underlying innovations that blockchain technology allows as well as current use cases of it.
A lot of people have asked me where to begin, so I wanted to compile a list of resources we have used. Hopefully this can help you avoid scraping through the 24.3 million odd Google hits that ‘Cryptocurrencies’ will yield you in your search.
Understanding Blockchain Technology:
To develop an overall strategic view of blockchain technology in terms of its potential use cases, economics, and thought leadership, we have read a variety of contrasting views. A few notable places to start with are:
- Union Square Ventures blog: Albert Wenger, Fred Wilson, and Joel Menegro (ex-USV)
- Andreas M. Antonopoulos blog and his Mastering Bitcoin
- Don Tapscott and Alexander Tapscott’s Blockchain Revolution
- William Mougayar and Vitalik Buterin’s The Business Blockchain
Regulation around blockchain technologies can no longer be ignored. With a total number of 706 ICOs raising approximately ~4.9B in 2017, the potential for increased regulation and even litigation is becoming a pressing aspect to be cognizant of — many are quickly learning that nothing about cryptocurrencies makes them outside of the purview of government regulation. Most importantly, when evaluating any cryptocurrency or ICO, try to gauge if they will pass The Howey Test. My friend Brittany Laughlin from Lattice Venture’s recently wrote a great post on this.
For a primer on Decentralized Applications built atop of token protocols, Siraj Raval’s Decentralized Applications is an excellent place to start. However, the best way for you to truly get to know dApps is to go ahead and start using ones already out there. It wasn’t until we actually played around with them that we begun to understand how these work. CryptoKitties and Basic Attention Token are two to check out.
Understanding Applications of Blockchain Technology:
While cryptocurrencies are far from the only potential application of blockchain technology, they certainly offer a new way to manage protocol financing. Yet, with 1,500 odd cryptocurrencies out there, it is a daunting task to figure where to start analyzing altcoins and if you should invest in them. Clearly these are highly speculative investments and rife with volatility. I started investing a very small amount a few years ago so I could understand the psychology and behaviour of the market. I am currently an investor in Bitcoin, ethereum, Litecoin, BAT, and Rypple. CoinGecko or Coinmarketcap are two great resources to compare and research altcoins.
Understanding Trading, Altcoins and Exchanges:
If you do decide to get in on the game, and are ready to set up a trading account, it’s crucial to ensure that you choose one of the most reputable cryptocurrency exchanges, because one of your biggest risks as a cryptocurrency investor are operational and technological in terms of liquidity and redemption matters. Gemini, Kraken and Bitfinex are examples of trading platforms. If you want to stick to large cap cryptocurrencies Coinsquare is an option for Canadian investors. Coinbase is a USV funded exchange also providing access to large cap cryptocurrencies, however beware to Canadian investors that selling options are not available in Canada yet.
If you don’t want to keep your coins on an exchange, the best way to safely store your coins is using a hardware wallet. I have the Ledger wallet which is well regarded in the industry.
Last, another crucial aspect to understanding cryptocurrencies are mining operations. The best way to learn how mining works is to learn how miners actually mine and the economics of mining operations and pools. Two great resources to start with are:
- Cryptocurrency Mining Guide by Alan T. Norman
- ‘Global Cryptocurrency Benchmarking Study’, pg. 85–105, Dr. Garrick Hileman and Michel Rauchs, Cambridge University
While the market is down and the bubble seems to be bursting a bit, I think it is very important to understand what has taken the world by storm and made lots of entrepreneurs and investors jump on the bandwagon. We hope these resources help you in your learning journey!
Please feel free to add great resources to this post in the comments.