The result of spending hundreds and hundreds of hours reflecting with the disruptive experts at the forefront of the crypto space.
Since I started to study the crypto world, I spent hundreds and hundreds of hours — if not thousands — collecting, assimilating, and reflecting on everything I could in order to better understand this market (virus?) that fascinates me more everyday.
I found extremely valuable information that I would like to share with you today. Whether you are a newbie or a veteran in the crypto space, I hope that by the end of this post you will get new perspectives, and ideasyou’ve never heard or thought about before.
“The most valuable type of economists are cryptoeconomists, as they can actually create, manage, and analyze economies.”
— Naval Ravikant
In case you want to directly jump to a section, the post is composed of 8 parts:
- Decentralized Exchange Protocols Will Be Game Changers
- Coinbase (and The Other Centralized Exchanges) Have HUGE Opportunities To Evolve
- Protocols and Scalability: In Progress… But Still Waiting For The Killer Apps
- Crypto Geopolitics: Why The Crypto World Is Just Like Game of Thrones
- Fast Forward (Beyond 2018)
- Raw Crypto Thoughts and Aphorisms
- Some Tips, Especially For Crypto Newbies
We’ve got a lot of topics to cover, so let’s dive in:
1. Decentralized Exchange Protocols Will Be Game Changers
“If you believe we are headed to a world of thousands of tokens, supporting them all natively is critical.“
— Fred Ehrsam
- Decentralized exchange protocols will be game changers, because they are key pieces in the crypto infrastructure. They have potential to develop crypto economies and help to push them to new highs.
- Corollary: protocols that power decentralized exchanges protocols are probably going to be big winners in 2018–2019. See for example the 0x Project ($ZRX). You want to learn more about 0x? Read this gemwritten by Multicoin Capital.
- If we see more dapps based on the 0x protocol such as Paradex, this could lead to a strong increase in value for Ethereum ($ETH) and 0x.
- OmiseGo ($OMG) is probably one of the most ambitious project in the crypto sphere. It aims at building a decentralized exchange/liquidity provider mechanism/clearinghouse/messaging network/asset-backed blockchain gateway. But, while I was long on the project at first, I am now a bit more dubious about how transactions will settle on-chain. OmiseGo’s team is supposed to use a Cosmos network and a very complex process to settle transactions. Sure this is very perilous but so interesting at the same time, so wait and see.
- Other notable dEX projects : Airswap ($AST) and Kyber Networks ($KNC).
- Future decentralized apps (dapps)— including mobile apps — will require multiple tokens to power them. For example Ether (to commit transactions on the blockchain), Filecoin (to store and retrieve data), Golem ($GNT) (to perform heavy computation), and of course the token necessary to the application itself.
- As users will be very unlikely have tokens in the right ratios to execute dapps, an underlying mechanism will be required to acquire these tokens on demand.
- As a consequence, blockchain native decentralized apps will need smart contracts and open decentralized exchange protocols that are easy enough to use and customize in order to make decentralized apps work in a satisfying way. We could see more of decentralized apps in 2018, which would mechanically increase volume on decentralized exchanges.
- Another advantage of decentralized exchange protocols: new tokens are automatically supported. This would be a requirement for very complex applications that would create and support thousands of tokens. When we think about it, the future of decentralized exchanges is mind boggling.
- Networks like District0x ($DNT) might allow to make this happen by creating virtual places called districts, which would be markets and communities that would operate on the blockchain with Ethereum and the IPFS protocol. Governance would be done on Aragon ($ANT).
- Of course, don’t think everything should run on the blockchain. But many things can. As the technology expands it can grow to replace many services that require parallelization.
- Projects like NEO ($NEO) and Qtum ($QTUM) may also be interesting to follow as alternatives to Ethereum. They could facilitate the creation and execution of dapps, notably on mobile devices.
2. Coinbase (and The Other Centralized Exchanges) Have HUGE Opportunities To Evolve
Centralization is to Coinbase what the heel is to Achillas: a weakness in spite of overall strength, which can lead to downfall.
- Coinbase is the most mainstream fiat-crypto on ramps centralized exchange right now. But centralization is to Coinbase what the heel is to Achillas: a weakness in spite of overall strength, which can lead to downfall.
- As Brian Armstrong said, many more coins should be added to the Coinbase platform in 2018. Coins listed on this exchange have historically been sucessful. See how Litecoin performed in 2017 since its introduction on the famous exchange.
- As Coinbase want to be the “Stock Market 2.0”, my guess is that we will have the ability to invest in baskets of tokens like you would invest in index funds the Vanguard way, for instance with the Set Protocolwhich basically allows a low-cost, trustless creation and exchange of a collateralized basket of tokens.
- Keep in mind that ERC20 tokens particularly interest Coinbase. You want know why? Check this out, and read carefully.
- Coinbase is certainly one of the most influential and powerful company in the crypto space. They have a (not so secret) master plan. I believe Coinbase will solve some of their scalability and security issues by moving to a hybrid and decentralized structure.
- And then you ask: what would be their business model? Well, in my opinion they could become relayers on the 0x protocol, and make money by maintaining off-chain order books. Two more reasons to think seriously about this hypothesis: this and especially that. It also struck me that most of the 0x projet advisors are former Coinbase employees.
- If one day Coinbase adopts the 0x Protocol, imagine how the token value would just skyrocket based on its utility. Keep in mind that during peak hours, Coinbase has millions of visitors… and gazillion transactions.
- Note: while Coinbase and decentralized exchanges may have a bright future, most of the popular exchanges like Bittrex and Binance are centralized.
- Binance, which is in the top 5 of the most used exchanges, has even suspended new registration due to system overload. Kucoin may overtake Binance in the short term. Binance has recently closed new registrations, so Kucoin has an important opportunity here as it may be massively promoted by YouTubers who can’t use Binance referral links anymore. Unless Binance opens new signups and more interesting referral policy. This is what gets me excited about Kucoin.
3. Protocols and Scalability: In Progress… But Still Waiting For The Killer Apps
“Bitcoin is processing a bit less than 3 transactions per second (…) Ethereum is doing five a second. Uber gives 12 rides a second. It will take a couple of years for the blockchain to replace Visa.”
— Vitalik Buterin
- We are in the protocol development phase right now. Investing in apps might be a bit premature and risky, as they heavily depend on the underlying protocols they are built on.
- And, as we have witnessed during the recent months, scalability is the main bottleneck in the industry right now. But this could change by the end of 2018.
- If 2017 was the Bitcoin ($BTC) year, 2018 may be the Ethereum year, as Ethereum will remain the largest blockchain developer ecosystem in 2018. We could also see the rise of NEO in the following months and a multiplication of ICOs on this protocol.
- Current protocol limitations make running big user apps impossible for the time being. In this respect, CryptoKitties was an interesting experience. By the way, if you still think CryptoKitties is about cats, you’re missing the entire point. So it seems pretty adventurous to heavily invest in most blockchain apps right now.
- Some may find it funny and odd, but I think that porn has chances to be one of the first blockchain app successes. As TwoBitIdiot expressed it perfectly: “gambling, nerd games and porn are always at the bleeding edge of new technologies.” It will be interesting to follow what becomes SpankChain ($SPANK). Some advantages are obvious: borderless and private transactions.
- Let’s talk about Cardano ($ADA) for a while. Cardano is an utterly ambitious newcomer. The team markets the project as the first blockchain with peer reviewed tech. Charles Hoskinson (who previously worked on the Ethereum project with Vitalik Buterin) works on the project and as you can guess he has pretty good ideas on how to fix the scalability issues that current big players like Bitcoin and Ethereum have.
- Though we find plenty of skeptics online — and FUD on Reddit — mainly because Cardano is in the top 10 of crypto market cap while still in very early development stages. 2018 will surely be a decisive year for Cardano.
- Whether we talk about Bitcoin, Ethereum, Cardano, NEO, or others… It becomes increasingly clear to everyone that blockchain governance is one of the most important problems and that he winning protocols are those that will include built-in mechanisms to evolve over time. Interesting times…
- Oh, and I was about to forget to talk about Ripple ($XRP). Maybe it is because Ripple is not decentralized? Ripple’s current main advantage is transaction speed. If the Lightning Network (for Bitcoin) and Sharding, Raiden, and Plasma (for Ethereum) are successfully launched, Ripple’s token value may fade away. And, while I think that Ripple has chances to succeed as a company, I am more reserved on their token’s success in the long run.
4. Crypto Geopolitics: Why The Crypto World Is Just Like Game of Thrones
“Always keep your foes confused. If they are never certain who you are or what you want, they cannot know what you are like to do next. Sometimes the best way to baffle them is to make moves that have no purpose, or even seem to work against you. Remember that, Sansa, when you come to play the game.”
— Petyr “Littlefinger” Baelish in Game of Thrones
- Studying the crypto world is a bit like watching Game of Thrones. You see a lot of actors, intrigues and manipulation out there among institutional investors, big whales, central banks, States… and Reddit posts 😉
- Let’s focus on the institutional investors, the banks that are too big to fail for a while because it’s interesting. Right after Jamie Dimon (JP Morgan Chairman and CEO) called Bitcoin a fraud, people realized that JP Morgan was actually one of the most important Bitcoin buyers.
- But banks will make peace with Bitcoin. That’s why it’s called making peace. And they have seen the potential in blockchain technologies.
- For instance, JP Morgan is experimenting with blockchain technologies and recently integrated ZCash privacy tech in their blockchain project called Quorum.
- So far, central banks try to downplay Bitcoin’s role while emphasizing on the highly speculative aspect of cryptocurrencies. But for how long? The least we can say is that central banks have mixed feelings about cryptos.
- If mainstream adoption continues like what we have seen during the previous months, they will probably do something. But for the moment we are still at the “it’s something that cannot be ignored” phase, and “let me get back to you as soon as we have an answer.”
- In fact it’s a VERY tricky question for Central Banks and countries. Cryptocurrencies are the first application of blockchain, and decentralized communities. The concepts of blockchain and decentralization could be applied to many other things (identification, messaging, ownership, computing, money…) and imply that their is no need for a central authority.
- Money has been one of the easiest applications of blockchain because it removes the central party and peer-to-peer digital cash is possible because every transaction is recorded on the blockchain and the community agrees on who spend the money and who receives it.
- I think that China may have started to realize that cryptocurrencies are going mainstream through massive adoption and that this concept of decentralization (i.e. absence of central authority) may have political consequences.
- In August 2017, when China introduced cryptocurrency regulations and ICO bans, people had fear that China would shut down the whole thing (ICOs, exchanges, mining farms, Bitcoin, and all cryptos). But it didn’t happen. And I think that THIS is really important. We could see it as a very positive sign, showing that countries have realized it’s already too late to stop it.
- Since then, banks have also changed their minds about cryptos. The herd is coming in 2018: futures trading, digital asset custody, crypto trading desks, and probably ETFs will be the name of the game for banks.
- CBOE, Goldman Sachs, Nasdaq, JP Morgan… Wall Street people clearly don’t want to be out of the crypto market, which is still a very tiny market compared to others like gold, stocks, global money supply, global debt, derivatives, and real estate. This input of value could be very high, even if this has already been partially priced in.
- Regulating and/or banning cryptos is a tricky issue for States:
- Firstly, because it’s impossible for them to control the circulation of cryptos, especially with dEX.
- Secondly, because if their regulations are too rigid, they would shot themselves in the foot by preventing people to be involved in a major innovation wave, emerging and break-through technologies/investments they could potentially earn taxes from.
- I am convinced that the best card they have to play is to move with the times, facilitate innovation, protect citizens from scams, and reap a fair share of the crypto benefits through taxes. And this leads us to…
- The privacy coins craze!
- Whether people want privacy (for “good” or “bad” reasons), we will probably hear a lot about privacy coins in 2018. I don’t have a crystal ball so I don’t know what will happen, but you can be sure that regulators will analyze them.
- Among the privacy coins, ZCash ($ZEC) is currently the most respected from a technological point of view. Edward Snowden said their privacy tech is secure, Naval Ravikant is (more than?) interested in it, and Vitalik Butertin said that ZCash’s underlying technology is under-hyped right now… that JP Morgan has integrated in a blockchain project.
- Monero ($XMR) is the most popular privacy coin so far, with an important and supportive community, notably on the dark net.
- Note: beware of the meteoric rises and resist to the fear of missing out (FOMO). Whether Verge ($XVG) is a scam or not, you should stress test your investing/trading idea before making a decision, especially for a +688256.46% YTD crypto.
- Can’t say/spoil what will happen, but winter might be coming.
5. Fast Forward (Beyond 2018)
Imagine a future with enterprise-grade applications (think Salesforce or SAP) running on the blockchain, and managing thousands of different tokens, for processing, storing, and securing information.
- Let’s pause here for a second, and think about what comes after. Beyond 2018.
- Some things people will tokenize in the future: personal investments accounts, salaries (or percentages of it), ownership in their homes, luxury assets, companies they build, the personal data they create (like those from your Apple Watch/Fitbit).
- Imagine a future with enterprise-grade applications (think Salesforce or SAP) running on the blockchain, and managing thousands of different tokens, for processing, storing, and securing information.
- Blockchain security is also the solution to IoT to make it almost impossible to hack.
- Also think about the videogame industry where heavy computation would be executed on underused supercomputers on the other side of the planet.
- Decentralized social networks: unlike their centralized counterparts, they would not be controlled by a central authority that collects and sell your personal information, and where content creators would be better retributed (think about PROPS).
- States are interested in blockchain technologies and could integrate their services on it. Many potential use cases, including: secure storage of highly sensitive information, citizen ID and social security management, treaties written in smart contracts, and why not… governance through the blockchain. It might happen even sooner than expected.
- A freaking Watch Dogs style (but decentralized) city OS may also appear in the future, but certainly not in 2018. Still… Just imagine: a city-wide decentralized operating system could help to cut-cost and maximize efficiency.
- Combine blockchain and AI and you could manage transportation services with fully autonomous electric cars, build streets and buildings to save energy, use smart contracts for emergency responses, utilities, crime monitoring, and many other things that my imagination hasn’t touched (yet).
- Dark and centralized version of the city OS: if you make it centralized and/or non quantum-proof for the coming years, here is what could happen. And you don’t want this! Just the same way you don’t want that to happen again. Duh.
- Finally, I think there is a huge potential in putting real-world assets on the blockchain for one obvious reason: by cutting out middlemen, the cost of investing in real estate would dramatically be reduced. This would also allow people to buy real estate without geographical restrictions. There would be (almost) no waiting and no bank account would be needed. Transactions would be executed with the help of smart contracts. And it’s also cost efficient because people could invest even small sums and still yield annual returns.
- Here I see 3 real estate use cases at least: real estate funds, digital assets backed by real estate, and tokenized ownership. Wouldn’t you buy a house on a peer-to-peer real estate platform? Well, I would… If I could.
6. Raw Crypto Thoughts and Aphorisms
“Crypto is the greatest videogame ever created. Play 24/7 with everyone in the world, directly from your phone. New challengers, meme wars, and MONEY. Every new player has to pay off all of the existing ones.”
— Naval Ravikant
- Note: most of the following are “draft thoughts” that I didn’t have time to develop in this post. But still… I decided to include them so you can get the idea.
- Bitcoin is a trojan horse. The lure of overnight riches has its purpose: it serves as a trojan horse for a decentralized future and people who would otherwise be leery of societal upheaval. Some topics we may hear about in 2018: P2P cash, remittance network, freedom, privacy, global currency, payment system, bank the unbanked, digital gold, no banking fees, ending monopoly of inflationary fiat, inviolability from government, programmable money, transparency, and liberty… just to name a few of them.
- In 2010, around 2.5 billion of the world’s adults was not using formal banks or semiformal microfinance institutions to save or borrow money. Nearly 2.2 billion of these unserved adults live in Africa, Asia, Latin America, and the Middle East. In most cases, they are unbanked because banks cannot serve them for various reasons (example: remote areas). But a lot of these people have mobile phones and make transactions with it. Why wouldn’t they transact with bitcoin and other cryptoassets?
- Western Union is a Kodak. Coinbase is a Nokia. We are still waiting for the iPhone.
- In 2017, Ripple became the Sherminator of the crypto world.
- Proof-of-stake is to cryptos what dividends are to stocks.
- Bitcoin is the MySpace of cryptos. Now let’s hope that Bitcoin evolves. Yes I am talking about scaling improvements.
- 2018 may be violent for the unprepared investors/traders that have invested in projects that will not delivered as expected.
- Most people are still not ready/willing to be their own banks and manage their own private keys. This is an opportunity for middlemen like banks.
- Bitcoin is philosophically and fundamentally libertarian/cypherpunk.
- Even if blockchain in unstoppable, states and central banks are huge influential players that cannot be ignored, and legislation will evolve in countries in 2018. China, France, Russia, South Korea, the United States, and many others have already started. Depending on the decisions, it could foster innovation or seriously hinder cryptocurrency potential.
- “Crypto is the greatest videogame ever created. Play 24/7 with everyone in the world, directly from your phone. New challengers, meme wars, and MONEY. Every new player has to pay off all of the existing ones.” — Naval Ravikant
7. Some Tips, Especially For Crypto Newbies
“I believe that the biggest problem that humanity faces is an ego sensitivity to finding out whether one is right or wrong and identifying what one’s strengths and weaknesses are.”
— Ray Dalio
Here is a condensed version of the best lessons I learned in 2017.
Portfolio Tracking and Investing Strategy
- I recommend coin.fyi for portfolio tracking. I know I know… There are many Blockfolio addicts out there, but I personnaly find it too clunky for a daily use. Coin.fyi is a website, and they have a web app so you can easily access it on desktop/mobile. Hopefully we will see good portfolio tracking solutions that use APIs to automatically sync trades in 2018.
- Similarly, I see a huge market opportunity for crypto accounting solutions such as BitcoinTaxes.
- Coinmarketcap is probably the most famous way to track crypto market capitalizations.
- But there are growing concerns about assessing solely the market capitalization to assess and rank cryptocurrencies. So you may be interested in checking tools like Onchainfx.
- If you are starting a portfolio, then you should read this.
- Diversify your portfolio to reduce your exposure.
- If you live in the US, have $25,000 or more, and want to invest in cryptos but don’t want to spend a lot of time doing research, but still invest smartly… then I would recommend you a passive investment solution like Bitwise’s HOLD 10 Index.
- Otherwise, you could be interested in having 2 different portfolios: one for long term (projects in which you really trust) and one for short term/fun.
- Get rid of emotions, and pay close attention to FOMOing and FUDing.
- Don’t rely solely on Fundamental or Technical Analysis (FA/TA). Use both, and read a lot (whitepapers, opinions, articles) and reflect on this to see the most important trends.
- Whether it’s about crypto or not, find intelligent people that disagree with you and constantly stress-test your ideas with theirs. As Ray Dalio wisely formulated it in Principles, we should always ask ourselves questions such as “how could I be wrong?” and “what proves I am right?”
- Try to always keep a meaningful cash allocation that you will during a crash when everyone is freaking out or during a massive rally, and then rebalance. Over time it may add a lot of value to your portfolio. Remember Littlefinger’s wise words in Game of Thrones: “Chaos isn’t a pit. Chaos is a ladder. Many who try to climb it fail. And never get to try again. The fall breaks them.”
- Which is approximately what Warren Buffet said in his most famous quote: “Be fearful when others are greedy and greedy when others are fearful.”
- Realize that you don’t know what you don’t know. And this is very important, because what we don’t know is what usually gets us killed.
- As Jack Bogle once said: “Time is your friend; impulse is your enemy”.
- Don’t rush, especially when you buy and sell. You could make very painful mistakes.
- Use Paretto’s 80/20 rule at your advantage.
- Remember that you are (most of the time) bad at decision making, because it’s just how your brain works. You want a great example of it? Here you go:
- “One of the great investing mistakes is stupid extrapolation. In the 1960s, investors extrapolated that IBM could keep growing at 25%+ a year, failing to realize that it would soon be worth more than all human productivity at that rate. Total cryptocurrency value grew roughly 33x in 2017. If that happened again in 2018, we’d up at $20 trillion. Repeat in 2019, and crypto would be worth much more than all the wealth on earth.” — Ari Paul
- If you don’t control the private keys, then you are not really in control of your cryptos. So?
- Consequently: buying a cryptocurrency hardware wallet may be one of the smartest decisions in your life. It’s not to late to buy one.
- Corollary: don’t let all your cryptos on exchanges to avoid counter-party risk. Coinbase may not be the next Mt. Gox, but it will always be easier to hack something centralized. That’s the whole point of using blockhain.
- 2-Factor Authentication is your best friend. Activate it everywhere you can.
- Several exchanges = several email addresses.
- Use solutions like LastPass or 1Password to secure your passwords and 2FA keys.
- Keep your passwords on paper… and keep them in a very safe place. If you are fancy, you could do a Prison Break style enigma that you would be the only one to understand.
- Avoid using public WiFi, especially for trading.
- Bookmark the exchanges and wallets websites to avoid phishing.
- To follow crypto news easily (and for free), you can use Cryptopanic.
- Some interesting news: Coindesk and Cointelegraph.
- Twitter is probably my favorite place to keep up with crypto news. Here is a non-exhaustive list of the smart people you should definitely follow:
- Naval Ravikant (for his wise aphorisms). Everyone should read this tweetstorm and follow him.
- Andreas M. Antonopoulos (to see the big picture).
- Ari Paul (to get general insights about investing and the crypto market).
- Tuur Demeester (to see the economist/bitcoin-maximalist point of view).
- Crypto Rand (for technical analysis).
- Luke Martin (technical analysis).
- For long analyses, I would recommend Medium and Reddit. For example this article from Preethi Kasireddy (former Coinbase employee) is one of the best I’ve read about Ethereum.
- And last but not least, Andreas Antonopoulos’s YouTube channel is a great place to start for newbies.
- Token Summits, Techcrunch conferences, and DevCons are also great, but generally for more advanced crypto enthusiasts.
- And, above all, I would recommend reading books that have different topics than crypto. Mostly philosophy, history, sociology, and business books.
This post is not an investment advice. Please do your own due diligence. If you like/dislike this post, I would be more than happy to discuss and deliberate with you in a constructive way. You can contact me on Twitter and LinkedIn. Thank you, and remember this:
“First they ignore you, then they laugh at you, then they fight you, then you win.”
— Mahatma Gandhi
Phase 3 is only beginning.
Welcome to 2018.
Disclaimer: I own some of the crypto assets discussed in this post, and included several referral links.
I’ve put a lot of time and energy in chewing all this information, trying to make sense of it, and compiling this post. If you’d like to send a crypto gift, you can do so at one of these addresses: