Crypto adventures — week 15 (previous weeks)

Cardano (ADA) — better than Bitcoin, but can it be best?

This week, I say good things about Cardano, ponder preferred realities and think about a nicer Twitter.

But first …

The profit check-in

Last week I was down 20%, now I’m only down 10%.

I’ve doubled my money!

Cardano (ADA)

Ouroboros, doing it wrong. Photo by David Clode on Unsplash

Cardano is objectively better than Bitcoin. And because I used the word ‘objectively’, it means I’m right.

At a basic level, Cardano is Just Another Blockchain. It’s proof-of-stake, not proof-of-work, but I don’t think the trading-card stats tell much of a story.

I think their strength is in their approach.

And that’s a scientific, academic approach. With peer reviewed papers, PhDs all over the place, and university affiliations. I even saw one of them wearing a sweater vest.

And they’re actually out there in the wild, in the countries that can most benefit, educating people.

I highly recommend watching this 50 minute video that is one of the Cardano dudes just explaining things on a whiteboard. I think every cryptocurrency should do this.

I’m beginning to think that this whole whitepaper fad is a bit silly. If you’ve got a paper to publish, publish a paper. If you can’t get it published, then make it a Medium post.

Really, at this point, a whitepaper is just a PR tool — people won’t take you seriously if you don’t have one.

Anyway, this two hour video was also pretty great, but more conceptual than actually explaining the tech. It gives a good sense of the vision and, if nothing else, shows what a top notch public speaker looks like.

The guy’s a natural.

I think of Cardano this way: imagine if things were opposite and Bitcoin had always been proof-of-stake with fast, cheap transactions. Then years later Cardano came along and said “hey, we do the same thing but with a consensus method called ‘proof-of-work’. Transactions cost three bucks and take ten minutes, and the network requires the electricity consumption of Greece just to process 7 transactions per second”.

You’d tell them get the fudge out and shut the front door.

On the other hand, I reckon mind share is incredibly valuable — and that’s something Bitcoin has the lion’s share of (the lion’s share of mind share).

It will be interesting to see if any of these other straight cryptocurrencies ever make a dent in Bitcoin in the long run. If nothing else, the whole space is going to be an interesting marketing case study one day.

So, maybe Bitcoin will get faster and cheaper and more environmentally friendly, and Cardano will fall by the wayside. Or maybe Cardano’s strengths, combined with the fact that they’re actually out there spreading the word where the word is needed and are a superior product, will make all the difference and they’ll become #1.

Or maybe they’ll live side-by-side (as described in the first video) with Ethereum and others.

Time will tell.

The verdict

It was an easy choice: this week I’ve picked up $500 worth of ADA.

Now, the following was going to be a short thought, but turned into quite a few words. I’m wincing already imagining reading this in four years time and remembering how naive I was back in 2018.

It will be fun.

Preferred Reality

I’ve noticed something.

When people are explaining their reason for liking one particular coin, they pick the analogy that suits their preferred reality, and if you don’t think about it too much, it can sound like a convincing argument.

For example, if someone’s preferred reality is that Bitcoin becomes the only blockchain and the rest wither and die, they will invoke the internet-protocol analogy: sure, there were technically superior protocols to TCP/IP, but the protocol that wins is the protocol that everyone uses. So Bitcoin is just like TCP/IP. It will be the only crypto protocol because TCP/IP is the only internet protocol.

If someone’s favourite coin is a second tier coin (my phrase), like Stellar, their preferred reality is that it exists in conjunction with the other cryptoassets, and so they might invoke the multi-protocol analogy: we have TCP/IP for the internet, SMTP for email, FTP for updating self-hosted WordPress sites. Ergo, we will have Bitcoin for store of value, Ethereum for DApps, Stellar for payments, and so on.

Yet someone else may be optimistic about their very targeted, lesser known coin. They will invoke the websites analogy: as long as a coin does something unique, there is room for it in the market. Sure, there’s GAFA (Google, Apple, Facebook, Amazon) but there’s also millions of other websites; a cryptocurrency doesn’t need to be earth shattering, it just needs to find its niche.

This is really just an observation, but I feel like I should make a point. Um, that making analogies like these has no weight at all. The fact that someone can identify a simile doesn’t make it any more or less likely that their preferred reality will come into being.

(Note that simile means exactly the same thing as analogy, because they’re both the opposite of a metaphor.)

Bitcoin as a national currency

Something that I didn’t really realise until this week, is that in some countries, currencies are not forever. On Laura Shin’s excellent podcast, Wences Casares explained how in Argentina, they’ve gone through three currencies in three generations.

I find it hard to even comprehend having the good old Aussie dollar cease to exist; it must cause such a colossal amount of angst. I try not to have empathy (it rarely makes me feel better), but I can’t help but feel for those people who’s lives have been turned upside down in such a way.

Thinking about that has got me thinking about Bitcoin’s two roles.

It was ‘supposed’ to be used for exchange-of-value — buying pizzas and coffee — but that doesn’t work very well now that it’s so slow and expensive. Instead, it has become more useful as a store-as-value.

Wences Casares (clearly my new best friend) pointed out that as Bitcoin gains traction as a store-of-value, and total market cap goes from billions to trillions, and the institutional investors and real-world use begin to outweigh the trigger-happy amateur traders, it’s price will begin to stabilise.

As a result, it will become a more viable tool for exchange-of-value, because you will be able to keep your money in Bitcoin between transactions, without fear of losing 40% of it in a month.

That’s the thing I realised this week, that as soon as the volatility is low enough for consumers to confidently leave their money in Bitcoin, then it becomes a viable currency.

And the specific level of volatility will be different for different countries. It’s going to be hard to beat the stability of the AUD or USD or EURO. But if Bitcoin dropped to a 30-day volatility of 2% (against the US buck) then maybe it becomes a legitimate substitute for the Argentine Peso.

FYI this is the volatility of Bitcoin vs some fiat currencies and gold:

https://www.buybitcoinworldwide.com/volatility-index/

I like this idea, that as volatility drops viability increases. It charts a nice course toward adoption. There is still the problem of electricity usage and speed and fees, but if they’re not sorted out in the next 10–20 years, Cardano and others will be there to take Bitcoin’s place.

There’s one other thing that needs to happen for Bitcoin to be a viable fiat currency replacement. Ease-of-use and security need to improve. At the moment, you can have pretty-good security and not-bad ease-of-use if you’re happy with trusting a central authority, or full decentralisation if you’re up for some hefty risk.

I have thoughts about both.

Easy & centralised

I think the key to mass adoption is insurance. If people are going to use crypto to replace a fiat currency — and have a cryptocurrency account to deposit their paychecks into, to pay their bills from, to buy their food from — there needs to be a zero chance of it disappearing.

I don’t see how that can happen without insurance. And since insurance brings with it insurance fraud, I don’t see how it can work in a decentralised, unsupervised manner.

Today, there’s at least one exchange (Coinbase) offering insurance against theft or hack. (Sort of. If your coins are in cold storage, they’re pretty safe, but not insured. If your coins are online, you’re insured.)

Obviously over time there will be more and more insured exchanges, and I’d guess that eventually cold stored coins will be insured as well (if they’re so safe, they shouldn’t be expensive to insure).

I bet that banks also get in on the game of being custodians for your cryptocurrency private keys. They’ll insure the value they hold, offer loans, password resets, and phone support, and access to thousands of ATMs, if physical money is still a thing.

And all for one low low fee (or none at all if they’re allowed to do fractional reserve banking and loan out some of your coins).

People will still be able to choose less-hated alternatives like Coinbase and maybe credit unions. The consumers will decide based on who offers good support, services and who they trust to keep their money safe.

I reckon the most general of the general public will choose banks. The most tech-savvy will take matters into their own hands. And the inbetweeners will go with insured alternatives like Coinbase.

So, that’s the easy way, then there’s …

Hard and decentralised

This is probably what naive people think everyone should do. ‘Simply’ get a computer that’s never been on the internet and ‘just’ create a paper wallet with ‘easy to use’ software that creates a private key and a QR code then print that using a printer with no memory that has also never touched the internet, then throw the computer and the printer into the ocean.

Or, just buy a hardware wallet. Oh, except don’t buy it off eBay, or Amazon, because it’s probably been tampered with to generate a private key that the hacker already knows. So you’ll put all your money in it then the next day it will be gone. Yeah, better buy it straight from Ledger and hope like hell no one intercepts it (only a crazy person would think criminals aren’t already trying to do this).

And if you misplace your wallet or your 12 magic words, you’ll have lost your life savings with absolutely no recourse.

(Remember that time someone accidentally flashed a paper QR code on TV and someone watching pointed their phone at the TV and took the money? That’s not exactly consumer friendly.)

It’s inherent in the whole system that if you decentralise, and don’t trust anyone, then you must trust yourself, and yourself is not very trustable.

Another hardware option is the Token Ring, which is all sorts of awesome. It’s got some great features and blah blah blah, but really I’m excited because I finally have an excuse to wear some finger jewellery.

I’d get one of each, from tokenring.com

Anyway, that’s just some stuff I’ve been thinking about. I think all of these storage solutions will be worked out long before crypto reaches a volatility level low enough to make it viable as an exchange-of-value, and really I’m pretty excited about everything.

Nice Twitter via Blockstack

I have the hots for Blockstack. And by ‘Blockstack’, I mean ‘Blockstack and others like it’.

I had an idea a while back, that I planned on calling Nice Twitter. It would be a layer on top of Twitter that hid all the garbage comments from garbage people. It would have two components:

• AI to detect toxicity and hide those tweets.
• Auto block users with a high block/tweet ratio. So, if someone has X followers, and Y tweets in the last month, and had been blocked Z times, they would be seen as an annoying person and be hidden from view.

Until now, these ideas would mean either a change in Twitter (not going to happen, they want people to fight), or a layer on top like a Chrome extension, or launching a competitor and swimming against the network effect tide before — several million dollars later — giving in to failure.

But there’s a brave new world on the horizon, a world where interface and data are separate.

Twitter, Reddit, Facebook, Instagram, Medium — they’re all the same thing, right? Imagine them as a form you fill out. There’s a short ‘name’, a long ‘description’, some attachments, a vote, some tags and some comments.

Some have formatted text, some allow multiple photos, some have down as well as up votes. Medium has five tags, Reddit has one which they call a subreddit. Slack and Discord and Telegram are no different either, you could wrangle the interface from one to show data from any other.

So imagine a single, shared data layer where all messages reside. All in the same standardised format.

Then imagine: years go by, some new social networks have been created and are in use. Then a better service with a better user experience comes along, it doesn’t need to fight against network effects quite as hard. People can switch to using it and not lose any history. Their data and their friend network exist on a separate layer. Their friends don’t even need to know that they read their feeds in a different interface.

I think what will be really interesting about this is how people think about data privacy and advertising, because the cost/benefit will become a lot clearer. Right now, Facebook could come to your house and kick you in the crotch and you’d smile and say thank you, may I have another.

But that won’t be the case when it becomes easy to leave.

And on the flip side, people complain about advertising and services selling their public data. But when given the choice between a crappy user experience on some open source platform, vs an excellent experience built by a talented/expensive product team that uses ads to pay for it — what will people choose?

There’s actually already an example of this today. Do you choose Google Maps, with ads and tracking and evil overlord undertones, or the free and open source OpenStreetMap?

I think this is going to be a great new era of the internet. Consumers will be granted a new freedom to switch (without downsides), and as a result the social networks know they won’t be able to get away with as much crap as they do now.

May the best product win.

BIP39

I learnt about BIP39 this week. I’m not going to bother explaining anything about it (other than say it involves a list of 2048 words, in several languages), but I’d like to share that Google translates word 541 on the Japanese list into ‘bullshit’.

I don’t recall why I wanted to look at the word lists, I don’t recall why I wanted to look at the Japanese word list (I can’t read Japanese). I do know why I wanted to translate them (because I can’t read Japanese) but I don’t know how I got down to word 541.

This is the magic of the internet.

Next week

I’ve made a little spreadsheet showing the rank movement over the last three months, and filtered out all the fluff. So I’ll go through a few of these and see what catches my eye.

Ontology is clearly on the war path, currently at rank 20 with $780 million, triple where it was three months ago.

I’ve become numb to the ludicrous dollar figures. $780m. Meh.

I’m also a bit keen on the Basic Attention Token, because I had a similar idea decades ago: you should be able to watch a bunch of ads, and take a quiz on what they were about, an earn credits Then you can use those credits later when watching TV. That way you can bunch up all your ad-watching while you’re sitting on the toilet, and later watch TV uninterrupted.

If advertisers will pay 10c for 30 seconds of your undivided attention and comprehension, then a few minutes a day would pay for your Netflix.

I must have talked about this in my sleep and someone was watching my Dream Cam and stole the idea, because that’s pretty much what BAT does. Brendan Eich, the creator of JavaScript (and co-founder of Mozilla) is behind it. Among Brendan’s other achievements is getting fired from Mozilla for funding a bill to ban gay marriage. So, he wrote my favourite programming language is also a dickhead. It will be interesting to see if he can Make Advertising Great Again.

The third coin I want to take a look at is LOOM, up 89 darn spots to break into the top 100. According to them: “We don’t write whitepapers. We ship product.”

They ship the sass, too.

Thanks for persevering for so many words! Have a lovely evening.

And if you want more, here’s next week.