Hey there!
For the next several Fridays, I’ll introduce some of the main concepts in the web3 space. This will be broken down into different parts, broaching topics such as blockchain fundamentals, cryptocurrencies, web3 vs web2, NFTs and POAPs, DAOs, and the Metaverse.
Please think of my writing as a “launching pad” as you inevitably do more research and dive deeper down the web3 rabbit hole. I’m no blockchain expert, and I’m not a financial advisor, so please always DYOR (do your own research).
To be clear, the term web3 has not been completely defined yet; however, its current use is the ideation for the World Wide Web that is living on the blockchain. Now what exactly is the blockchain? Much smarter individuals than me can break down that concept for you on YouTube videos - my aim here is to touch base on the fundamentals of what blockchain technology has to offer everyday users and provide simple explanations.
Yes, crypto and web3 is risky.
Yes, there is large volatility.
Yes, there are large rewards to be made.
The best analogy I’ve heard is that web3 is like the Wild West - at any moment things can go South and you can get scammed; on the other hand, if you’re lucky then you may just strike gold. By inducting you into the web3 space, you’ll be able to better understand why I am so bullish on this movement.
So sit down, sip on your coffee, and let’s dive in.
Why do I care about blockchain technology?
Being a new practicing dentist with >$300k in student loans is not easy (though there are far worse situations to be in). And don’t even get me started on California taxes (as a good friend once stated: “It’s the price you pay for living in the Golden State”). Add on to that the shifting economy due to the ongoing coronavirus pandemic and the whole “transitory inflation” debacle (read: no longer “transitory”)…and you pretty much get a complete mess. The following is one of my favorite memes that pretty much shows us what’s going on:
While in undergrad, my friend and I took a “Personal Finance” course and became enamored at the textbook examples of having a savings account with “8% APY savings account”, or investing into the S&P500 for an average annual return of ~10%. Enter the real world, where a “high-yield” savings account is roughly 0.5% APY (average of ~0.05% APY at most banks) and the annual daily cost of living increases ever so much due to inflation (RIP cheap KBBQ prices from just 10 years ago). If your income isn’t increasing by the amount of inflation each year (~5-6% annual inflation), then you’re losing money. Investing in the traditional sense of our predecessors is but a dream. And that’s just in the US. Imagine all of the developing countries without access to consistent/safe banking - they are suffering with inflation and are also relying on the US dollar (a lot of countries rely on the US dollar, thus pegging it as today’s global currency). If the US dollar becomes weaker…a lot of the global population are adversely affected as well.
I’m sure you’ve seen instagram posts, ads, YouTube videos, etc. detailing the crazy amount of gains that people have had within cryptocurrency. It can’t really be true, can it? Well….yea, it actually can be.
Naturally, I had to look into this further. And what I found down the rabbit hole is what made me a true believer in blockchain technology.
Blockchain Fundamentals
Decentralization
Permissionless/Trustless
Borderless
Transparency
Self-Sovereignty
Verifiable Ownership
Okay, let’s break down each of these topics one-by-one.
Decentralization
Decentralization is the transfer of authority from a single entity (government, individual, company, etc.) to a dispersed network. In other words, entities like the US Government or Facebook are no longer making the decisions in a decentralized landscape. Essentially, cryptocurrencies that are decentralized exist as digital assets outside the control of governments and central authority figures who may have ulterior motives. This brings the power of the network to its users - AKA you.
Permissionless/Trustless
As the word implies, blockchain technology is permissionless/trustless. This means that you don’t need permission from a third party to make transactions, and as a result you don’t need to trust a third party. Essentially, a permissionless system is open to everyone to operate without interference from a third party such as a bank, company, or any other type of institution. And due to the trustless nature of the blockchain, you don’t need to worry or depend on a third party in order for your transaction to function as intended.
Borderless
Simply put, anyone anywhere can use cryptocurrency since it is a digital asset native to the internet; as such, no single nation has dominion over its value and/or its transactions. Someone living in Ukraine, Zimbabwe, or down the street from your house all have access to the same network if you are simply connected to the internet. This revolutionizes the idea of a money transfer between nations. Have you ever wanted to wire funds to someone in another country? That can take a long time with a visit to the bank and validations between different financial institutions. And don’t get me started if you wanted to start this process on a Friday afternoon (or Holidays). With cryptocurrency…it can take seconds from the comfort of your couch. Effectively, geographic location of the sender and receiver becomes irrelevant.
Transparency
Everything on the blockchain is public information. Period. If you wanted to see what’s happening at any point in time on the blockchain - feel free to browse its public ledger. If you wanted to see the valuation of a cryptocurrency over time, you don’t have to wait on a quarterly earning’s report to do so. It’s all there for your eyes to see.
Self-Sovereignty
Otherwise known as individual ownership. The assets that you own in the blockchain are solely yours. You own it. Let this sink in. Everything that you’ve posted on instagram, Facebook, everything in your google drive, your private DMs, etc….you don’t actually own them. I don’t even own the content that I’m writing on this Substack. In a world of blockchain technology, however, this changes.
Verifiable Ownership
Ah yes, verifiable ownership. This is pretty cool. The things that you own? It’s verified on the blockchain. Anyone can post a picture of themselves with a Porsche, 1st edition Holographic Charizard card, (insert rare item of your interest), etc. - but that doesn’t mean they actually own it. Due to the aforementioned features of the blockchain, the assets that you own can be verified if needed. If you own it, you own it. If someone else tries to copy you, it can be verified that they don’t own it. Imagine all the fake influencers shaking in their boots (lol). This whole notion of verifiable ownership - this is one of the reasons NFTs are so popular, but we’ll get into that in another article.
“Alright Philip, you’ve piqued my interest. But life is pretty good for me right now as is. Why should I care?”
What it can be:
Financial independence
Blockchain technology can be the key to financial independence for a lot of people in the world. The blockchain fundamentals take away a lot of the daily issues that people across the globe face in terms of access to banking, hedging against inflation, and accruing assets to become financially independent.
Increasing access to the developing world
According to WorldBank.org, there are 1.7 billion adults in the world that are unbanked. That’s a lot of people.
Creating the foundations of a better system for future generations
Less about ourselves…if we adopt cryptocurrency and web3 in the correct manner and build a strong foundation, then we are setting up a better financial system for our successors. As I see it, the largest transfer in generational wealth will be seen due to the advent of blockchain technology. You’re either an early adopter, or you’ll get dragged into it down the road.
“Alright Philip, how do I get started?!”
STOP…NOT ALL CRYPTOCURRENCIES HAVE THE ABOVE FUNDAMENTALS.
Different cryptocurrencies have varying degrees of the above fundamentals, and delving into each coin’s core values will be important before deciding to use it.
Remember, it’s also very easy to get scammed and lose access to your accounts.
This is the Wild West. Tread with caution and practice good wallet/account hygiene to be safe. And of course, invest only what you’re comfortable with losing. ← again, I’m not a financial advisor lol.
In the coming weeks, I’ll discuss some of the other factors that come into play with web3, how to stay safe in the space, and resources to set yourself up for success. Once this “series” is over, I’ll start talking about NFT projects that I’m interested in, and give insight as to what moves traders are making. Exciting stuff ahead!
I hope you found this piece enlightening - this is just the beginning.
***Part 2
Best,
Philip
Disclaimer:
All thoughts and opinions are my own; please DYOR (do your own research) and remember that this is NFA (not financial advice). After all, I’m just another dentist.