Several weeks ago I returned from my vacation in California, and despite I really wanted to publish the notes and pictures I took during those days in the West coast as soon as I came back, I scarcely had time besides work, and training. On top of that a new current obsession has taken over: Blockchain and cryptocurrency.
Blockchain
I first heard of Blockchain several years ago, and mostly referring to Bitcoin. Since then I've been following casually its development, and watching from the sidelines. 1 I wasn't really interested in its use as digital currency, but I was hooked on the underlying technology, and its decentralized design and applications.
If I already lost you, before going any further I'd highly recommend watching this TED talk about How the Blockchain is changing money and business.
Ok, we're back.
If there was a moment I could take a glimpse into the future, and envision what role Blockchains played in it, it was after watching this talk by Mike Hearn: Autonomous agents, self driving cars and Bitcoin. I was already convinced Blockchain was part of that future, but I didn't think we were close yet.
Several years have passed, and Bitcoin still has to face its most notorious challenges: scalability of the platform, whose complexity grows exponentially as Bitcoin does, with bigger and bigger transaction times and fees; and agreement between all parts of the community. There are highly technical problems to solve, too.
Many visible heads have spoken on the current situation of Bitcoin, such Mike Hearn himself, and it doesn't look as bright as once seemed.
Ethereum
Recently, this growing interest has picked up with a new decentralized platform. Ethereum is a distributed computing platform that can execute scripts, or Smart contracts. 2
This new kid on the Blockchain looks more promising because of its capabilities not only as digital currency. While Ethereum popularity is peaking, so is ETH, the currency Token linked to the Ethereum Blockchain, and media outlets like Bloomberg ask if Bitcoin Is at Risk of No Longer Being the Biggest Digital Currency.
The community is thriving, the roadmap has plenty of developments in the pipeline, and every week there are new events and announcements lined up.
Percentage of Total Market Capitalization of Bitcoin and Ethereum
These past weeks have been specially remarkable, and we are in a key moment now:
- China's Biggest Exchanges to Add ETH
- ETH over 50% of BTC Marketcap
- New members joining Enterprise Ethereum Alliance
So I finally decided to take the plunge, and made some small investment.
Investing in cryptocurrency
The first thing to know once you've finally wrapped your head around to throw some money at cryptocurrency is where to get it. There are Exchanges where you can change fiat money (i.e. Euros) for cryptocurrency. My go to option when recommending an Exchange is Coinbase (affiliate link), but there are many others.
The process is very similar in all of them: you create an account, you get verified (in order to prevent money laundering), and you can use your credit card, or make a transfer for cryptocurrency.
Don't take this as Trading Advice, but just use common sense, as in other investments:
- Don't invest more than you are willing to lose
- Don't try to time the market, you'll only manage to buy high, sell low
- Do your research, holding is the best strategy if you believe in the technology
- You'd probably want to take out your ETH from the Exchange, and save it in some paper wallet, or buy a hardware wallet
- Take into account your capital gain/loss taxes
Once you are in the possesion of some amount of cryptocurrency you will be able to send it between Exchanges, or use tools like ShapeShift to trade any Blockchain asset.
The FOMO is real
Investing in cryptocurrency has been my first approach to any kind of inversion, and FOMO is even worse than social media as you are emotionally, and financially invested.
Now I have adopted a more relaxed attitude, but at the beginning I couldn't help but constantly check the graphs. I also found myself reading all the time to learn the technology, and keeping up with the news in order to make informed decissions.
You'll get familiar with terms like: bull, bear, head & shoulders, margin, long, short, dip, correction, and of course #tothemoon.
If at this point you still have any doubt I'd recommend reading the FAQ in ETHtrader, or the Beginners Guide to Ether Investing.
Tokens, and ICOs
Bitcoin, and Ethereum have inspired the creation of new Tokens, that can be used to incentivize participants in the network. Some people already call Crypto Tokens: A Breakthrough in Open Network Design.
Also, Tokens enable an alternative to traditional financing, where through a token sale, or ICO, anyone can participate in the funding of a product, or a company. This has a huge impact in the technology of the future.
Some examples of these new Tokens, issued on top of the Ethereum network are BAT, from the creator of JavaScript and the co-founder of Mozilla, or Kin, a cryptocurrency from Kik designed to bring people together in a new shared economy.
It's difficult not to think this is some kind of Ponzi scheme or just a fad, but what would you do if you could time-travel to the past and invest in the Internet after seeing its true potential? It's easier in hindsight.
Thanks to Juan Luis who inspired me writing this post.
- The closest I've ever been was a friend of mine who made a few grand investing in Bitcoin early. ↩
- For a more detailed description here's an overview by Ethereum's creator Vitalik Buterin at Devcon2. ↩