The Rabbit Hole

I have a speech I give to people I introduce to crypto. I feel it helps to prepare them for the dangers they are going to encounter when they dive deeper, to give them some guided skepticism while not deterring them from exploring, and to keep them optimistic in the face of the toxic vitriol. I’ve written it down in case you just can’t help but share your enthusiasm on this topic with someone over the holidays.

The Rabbit Hole

Crypto is a rabbit hole. Like all powerful ideas, it is an infectious brain-worm that, once it takes root, tugs at your thoughts forever. Those impulses suck you deeper and deeper into the rabbit hole. You’ll discover fanciful things beyond your imagination, sovereignty of a type you never thought possible, anti-corruption mechanisms that you’ll wish governments had, global coordination mechanisms that might literally save humanity from extinction, and eventually maybe even a purpose to your life. Nothing about crypto ends with money but that will be many peoples motivation when they start. And, make no mistake, there is money to be made here. Software is eating the world; crypto is eating software. Whatever you think you know when you hear cryptocurrency you need to strip your preconceptions away.

To start with, cryptocurrency is a misnomer at this point. At the level you’re going to be interacting with it you’ll never need to know about cryptography. Also, crypto is not about currency in the sense that you’re going to go to the grocery store and pay with ETH. At the grocery store you’re going to continue to use Visa. Rather than repaying your credit card from a bank account though, you’ll eventually repay it using crypto. There’s not enough there to call that a rabbit hole and as a use case it is an insignificant tip of an iceberg. At the user level (you), crypto is about incentives and coordination. It’s about removing the need for trust entirely and giving you actual choice and control. Now that topic goes deep. It touches philosophy, psychology, economics, and humanity in its truest sense. That is the rabbit hole.

Crypto Media

Despite all the wonderful things you will find in this rabbit hole, entering crypto is a painful Dunning-Kruger test. The information age has led to more information than anyone can possibly digest. There are 24 hour news channels, thousands of hours of YouTube footage created every day, Tiktok, Facebook, and Reddit feeds that scroll forever and they all want the same thing from us: our attention. We have to filter. The more information we get bombarded with, the tighter our filters become to cut the flow of information down to the limits of our human attention span.

Unfortunately, our preinstalled filters kind of suck. We fall prey to confirmation bias and create echo chambers around us that reinforce rather than challenges our beliefs. We fall prey to authority and listen to whales, venture capitalists, and companies. I have nothing against Raoul Pal or Mark Cuban, but the only reason you find them instead of me is because of their authority. Lastly, we filter to the loudest, most confident sounding data feeds. And this is where we really get into trouble.

The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence.

While I love that quote, in crypto the problem isn’t just stupidity; we add money. This adds incentives. From the perspective of someone trying to get past your information filter being loud has a cost. It costs money to advertise on YouTube. It costs money to pay for bots to drop links across Twitter, YouTube comments, and all the Discords. So who is willing to pay the most? Whomever is able to profit from your attention the most. In a word, scams.

Why are these scams allowed to exist? Well, I mentioned sovereignty above. It’s a big thing around these parts. If sovereignty is the ability to do what you want without others being able to stop you and we grant you sovereignty we also grant it to dishonest people. With these technologies it is not up to the corruptible judgement of humans to decide who to censor (not that YouTube is winning on that front either). The answer is uniform and firm, no one. Censorship resistance inevitably means there will be bad actors. Money throws gasoline on that fire. The result is that crypto media is a toxic cesspool of misinformation, stupid confident people, scams, and tribalism motivated by a desire for your money and elevated by algorithms above thoughtful, data-rich information. So be warned, here be dragons.

Compounding/reinforcing that problem, people are directed by social media algorithms towards what is effective at securing your attention. That tends to be the most emotionally manipulative presentation of information, easy to digest sound bytes, and of course promises of riches. The AI behind YouTube is designed to steer you towards the most effective scams. There’s no fixing this, it’s human nature + technology. Just for comparison, google for the tags on any of my pages/posts. I don’t even rank. That’s because I can’t afford to be loud. I have no advertisements. I pay for hosting out of my own pocket without monetizing you, the reader, at all.

When entering this space you either have to be introduced to quality media feeds by someone who has been in the space for awhile and can guide you or you have to think very critically/technically and figure out who is full of shit yourself, often with painful lessons learned along the way. I lost so much money in 2018 learning those lessons the hard way. So here is my information bubble:

Ethfinance Subreddit. The daily general post, every day. Lurk or engage, it’ll be worth your time.

Bankless. State of the nation, weekly rollup, any project introductions.

UpOnly. Still lighthearted, mostly interviews.

TheDailyGwei. Getting deeper and more technical at this point.

Polynya. Strap in.

Project Discords. Now you’re following announcements and are on the edge.

A highly curated Twitter feed I built by being part of ethfinance for a long time.

Crypto Assets

The next thing people usually ask me is “what should I buy”. I’m not answering that for you. I don’t know your financial situation and I’m not your fiduciary. All financial decisions will be yours and you alone will have to live with them. Here is some general advice that is good no matter what you decide.

Whatever you decide, slow down and know what you’re buying. If you’re buying crypto make sure that it can be withdrawn from the exchange you are using. This is like Direct Registration Shares (DRS). Without that, you aren’t really buying it; you are buying price exposure to it.

For L1 chains, the base asset is fuel; block space is the product. You should pause buying anything until you first understand some of what people are using that block space for, what you are actually buying, and services that are accessible to you on that chain. You should understand the inflation rate and revenue of that chain. By my metrics, every L1 is in debt. Some are in debt 1000x more than others.

For governance tokens at least skim past votes. Who are you getting in bed with? What are their values? How is the revenue of the protocol distributed? How can you compare these assets? I provide some illustrative examples on this site but I’m not even scratching the surface here.

I’d like to end on one last serious warning. This is the frontier. There are no guard rails. There is no one you can sue to correct your mistake. There is no one the government can point a gun at to get your money back. There is no FDIC insurance that is going to bail you out. Once you are in custody of your funds, if you fuck something up, it is literally gone forever. Take this seriously.

This is also the future. It’s where fortunes are made, where an entire new financial system is being invented, and where exciting innovation is happening in games, art, culture, technology, and finance.

To quote Bankless:

Welcome to the frontier, we’re headed west. It’s not for everyone but we’re glad you’re with us.

Self-serving link