Cryptocurrency is one of the weird internet hatchlings that has gone from an esoteric project by an unknown guy to a financial industry that trumps many central banks around the world. It’s also one of the few areas of the internet where I got interested pretty early on.
Back in 2010, a friend of mine suggested I install a “bitcoin miner” on my pretty basic macbook pro (a 13″ 2009 macbook, specs were ok to use a browser). Over the next few days, it successfully mined something around 1.5 to 2 bitcoins, I don’t remember the exact amount. He suggested I get a “wallet” to keep it in. But, this didn’t make any sense to me, how can a digital hash generated by some random program have any money linked to it? Boy was I wrong. Well, a few weeks passed, this program kept running and I decided it was taking up too much CPU and RAM to work so I closed it. And then, a few days later, uninstalled it. And with it, went the 2 or so bitcoins I had stored in it. You might be thinking “dude, you just deleted $10k or $20k worth of money like that?” and the answer to that is no, I deleted what was essentially 5¢ or maybe 25¢ worth of money at the time. Additionally, there was no real way to turn that into real USD that I could do anything with. But, that’s the point of this, if it has potential for being something valuable later, it doesn’t mean that value is visible right this moment.
The next big moment in my crypto history came when Coinbase launched. I remember back then Brian Armstrong would send you 0.1 BTC just for joining. That was worth about $0.99 when he sent it (it shows in Coinbase transactions history). Well, I wanted Kristen to join Coinbase too so I sent that over to her. Eventually I also sent her $5 worth of Ethereum (later when it was added), which at the peak in 2017/2018 was worth $170!
The concept of crypto faucets might be familiar to some but they’re not around much more now. Akin to an internet version of a river of gold or diamonds, faucets would give you a small amount to deposit into your crypto wallet. I remember clicking random websites that would give you Bitcoin, Ethereum, Ripple, etc but never really anything more than a few cents worth. It was playful at most, not something that would give you a ton of money in today’s terms.
When Stripe partnered with Stellar to give out Lumens (XLM) to early adopters, I got 3,000 of them and at the peak of 2017/2018, it was worth about $0.90 a pop, I decided to hold and that again was a mistake, now XLM is moving between $0.08 and $0.12. I’m still holding on to that original grant since there’s no real advantage to selling it after all this time. But I believe Stellar has peaked since its use case of being a money transfer only currency is not really the highlight of cryptocurrencies.
Recent crypto activity
This is not advice but mostly my approach in crypto. I believe bitcoin has had its time, after 3 halving events, a couple of forks, and repeatedly proven slowness, it has had its time in the limelight. Ethereum still seems to be the front-runner but it might become challenged by the many different projects that rely on the network and will eventually run into a bottleneck of some sort. Ethereum’s contract system is probably the most useful part of the network.
Where Stellar and Ripple tried to be the Western Unions of the internet, there are attempts at any sort of use case possible right now with cryptocurrencies. For example, Handshake (HNS) is attempting to be the DNS and certificate authority using peer-to-peer DNS instead of centralized systems like Cloudflare. I also hold a bit of HNS but don’t expect it to return dollar returns and instead be useful to buy my domain (usmanity) in the crypto world world as well.
I remember when Tether launched and I was confused as to why you’d want to have a parallel of American dollars in crypto. Overtime, this has made more and more sense as going from crypto to fiat is expensive and slow, Tether and others help keep this simple. Plus, no tax reporting is needed if you go from one crypto asset to another (as of my understanding of this in May 2020). Coinbase launched their own USD-tied asset, USDC, it’s way too closely named to USD and I believe that was intentional. Tether just generates more Tether coins which means a lot of the money is non-existent and the money people are storing in this is just helping prop-up the coin in the first place (aka all modern banks in one sentence). An interesting development on USDC is that it pays interest to hold it! There are other coins that give some sort of a “dividend” for holding them, Stellar pays a 1% inflation fee which is to help early holders not lose value over time, this is possible since Stellar has scheduled release of more XLM over time. Others like NEO give out NeoGAS, but my understanding of that is limited since I don’t care much about NEO, it’s an Ethereum replica IMO.
Back to USDC, it seems that Coinbase is acting like a bank because just like banks can prove they have money to lend, Coinbase can use the USDC stored by their customers and lend out some of that for margin trading on Coinbase Pro. I’m sure it’s also useful for other use cases like proving they have enough money to stay afloat if most of their customers decide to pull out the maximum of $50k per day all around the same time. Imagine if your bank had that limit, it would be chaos. In the US, you can withdraw as much cash as you possibly can but banks do report it to the IRS if it exceeds $10k.
My current holdings
So nowadays, I’m pretty risk-averse, with a global pandemic in full swing, bills to pay, and not really being confident about the economy, I can’t be throwing around money willy nilly but I do hold some cryptocurrencies, I’ve listed them below, starting with the most to least:
- USDC, about $2k right now. In Coinbase, it earns about 1.25% APY which is negligible during a typical month.
- Tezos, about 500 USD equivalent. A staking based reward system which pays out 5% in Coinbase, very odd concept in that the rewards are paid for the first time after 40 days and then every 3-5 days.
- Stellar, about 3100 XLM which is around $300 right now.
- BAT, less than $50 worth at any given time. This is because I use it on the Brave browser. You can download Brave using my referral link which will pay me in BAT if you continue using the browser: link.
- Various ones in less than $10: 0x, Ripple, Dash, Litecoin.
- What about Bitcoin? I hold about $100 worth of Bitcoin right now. Using the Cash app to buy this since it is one of the most straight-forward ways to buy BTC. My referral link for Cash App.
I believe we’re still at the infancy (or maybe toddler) age of cryptocurrencies, there are new developments almost every week but it’s a financial tool so some people and institutions are afraid to get near it. This will change as digital payments and money transferring becomes as ubiquitous as sending an email, text message, or tweet.