My goals with this page are to walk the reader through a short journey into Digital Assets and Crypto. Starting with how blockchain works and what problems a blockchain solves (decentralizing “Trust” away from Institutions), to the simple genius of using a blockchain to implement a new version of “money”, this page is a base level introduction to Digital Assets.
I also introduce readers to Stablecloins; a type of Digital Asset whose value is tied to an underlying asset (Dollars, Euro, Gold, etc). I believe US Dollar-pegged digital assets, like Circle’s USDC, represent the (almost) frictionless exchange of value over the internet that is a natural follow to the frictionless exchange of information, then frictionless commerce that the internet has allowed for. It is clear to me stablecoins will be the dominant medium of exchange in the near future
How Does a Blockchain Work?
How Does Bitcoin Actually Work?
Why Bitcoin? The Annual Shareholder Letter from Stone Ridge Corp lays out excellent reasons for corporations and individuals to hold Bitcoin as a reserve asset.
How Can I Buy and Hold Bitcoin?
Bitcoin was created as a peer-to-peer digital asset. This means Bitcoin is a “bearer asset”. Bitcoin are held in digital Wallets, and he who controls the Wallet controls the Bitcoin inside. Below is a short and useful explanation of Wallets and how they work.
As seen above, a major difference between digital assets and other types of assets (stocks, mutual funds, etc) is that you are responsible for holding, securing and transferring those digital assets. However, like almost all financial assets, service providers have popped up to service the growing number of digital assets. There are now digital asset Exchanges and Custodians, just like for stocks. With stocks and mutual funds, you do not hold them yourself; you buy them through a brokerage (Fidelity, Schwab, E-Trade, Goldman Sachs, Morgan Stanley, etc) and the brokerage records your ownership. And when you want to move the value those stocks and mutual funds represent, you need to request your brokerage move that value for you (“sell 100 shares of Facebook and send the Dollars from that sale to my bank account”). The same level of service is available for those digital asset holders who do not want to secure their digital assets themselves.
Bitcoin’s Energy Consumption
Creating new Bitcoin and transferring Bitcoin uses electricity. There has been much discussion of this aspect of Bitcoin in 2021. While I am no expert in the usage of energy on the Bitcoin network, I do read those who are. And you should too:
“Second, Seetee will establish mining operations that transfer stranded
or intermittent electricity without stable demand locally—wind, solar,
hydro power— to economic assets that can be used anywhere. Bitcoin is,
in our eyes, a load-balancing economic battery, and batteries are essential
to the energy transition required to reach the targets of the Paris Agreement. Our ambition is to be a valuable partner in new renewable projects” – Kjell Inge Røkke, Chairman of Aker ASA, the largest Energy Production company in Norway from his inaugural letter to the shareholders of Seetee
“That means that when we ask, “Is Bitcoin worth its environmental impact,” the actual negative impact we’re talking about is likely a lot less alarming than you might think. But there’s no denying that Bitcoin (like almost everything else that adds value in our society) does consume resources. As with every other energy-consuming industry, it’s up to the crypto community to acknowledge and address these environmental concerns, work in good faith to reduce Bitcoin’s carbon footprint, and ultimately demonstrate that the societal value Bitcoin provides is worth the resources needed to sustain it.” – Nic Carter, General Partner, Castle Island Ventures. From Nic’s essay in Harvard Business Review, May 05, 2021
What is a “Digital Dollar” and Why Do We Need Them?
PROGRAMMABLE MONEY IS A MULTI-TRILLION DOLLAR MARKET
Great read from Peter Johnson and Shanav Mehta from Jump Capital
https://jumpcap.com/insights/stablecoins-the-impending-rise-of-a-multi-trillion-dollar-market
Brian Brooks explains Blockchains to US Congress
Brian Brooks is a former Comptroller of the Currency under Trump 1.0. He has been EVP & CLO at Fannie Mae, and CLO at Coinbase, and has worked at Binance. Excellent explanation of what Web 2.0 is and how Web 3.0 improves on that.
Decentralized Finance vs Traditional Lending
CONMODUM 