Practical crypto n00b guide
Here are the stupid things I’ve done to better understand this web3. The goal was to learn some words and gently dip my toe but not to peel back all the abstraction layers. The reader must have heard of Bitcoin and will need basic computer knowledge and either a few hundred dollars or a bunch of time to play along. Player guide:
A lot more money than time: Step #1
More money than time: Steps #1, #2, #3, #4, #7
More time than money: Steps #1, #2, #3, #5, #9
A lot more time than money: Step #5
1. Joined an exchange platform
Coinbase is a cryptocurrency exchange platform — allows anyone to buy and sell Bitcoin (BTC), Ethereum (ETH) and many other currencies. Coinbase is a real company and a user friendly way to own crypto, available in many countries.
=> Join Coinbase here (moral-lacking affiliate link)
This unlocks “I own some crypto” and perfectly fine to stop here and just wait a few years to see what happens.
Alternatively, if those who don’t get very involved with the ecosystem, just want to be financially exposed to the volatility that crypto offers, a regular brokerage account will allow to purchase $GBTC, $BITO, $BTCFX or $ETHE — the first 3 attempts to track BTC, the last ETH. They do it well (1, 2), but come with additional fees & risks and you don’t get to play, do your research.
2. Got a wallet (or two)
Once I realized I want to play with the crypto-money, buying an NFT and all— I had to have a wallet. A wallet is a unique identifier and to access it, I need a browser extension or a mobile app that shows balances and let me approve transactions — very similarly to 2-factor authenticator apps.
=> Because different currencies are supported by different wallets, I ended up with Phantom wallet as well to be able to play with Solana (SOL).
Once there’s a wallet — and it takes some patience and taking down passwords and codes and all — I could transfer some crypto-money from Coinbase to the wallet. Just know: transactions from and to a wallet are public for all to see.
3. VHS/Betamax of 2022*
BTC (or Bitcoin) is the original cryptocurrency. Play value is limited (besides the wild value movements). You can buy or sell it on market and send BTC from your wallet to someone else’s, but — no play.
ETH (Ethereum) is a solid second on top cryptocurrencies list — it started a few years later after BTC, but has a magical property of being able to embed computer code with transactions. This means that when you send some ETH to an address, you can get something else back, like a stupid monkey gif, or, more interestingly, whatever the contract describes in code.
Gas Fee: ETH currently has an elephant-sized problem that all transactions have a cost proportional to the complexity of the transaction and with a fixed minimum (gas fee), which practically means that transactions cost at least a few dozen dollars and can take a minute to happen. This in practice is extra-extra demoralizing. ETH folks are attempting to solve this problem, but it’ll take literal years to find the right performance-security tradeoffs.
SOL (Solana) is one of the many-many-many alt-coins. It has two benefits: 1. It seems to already have a healthy ecosystem with a ton of stupid GIFs you can buy (NFT). 2. Solana is also already fast and has low fees.
This is not an exhaustive list, there are hundreds of different crypto currencies; and there are also stupid memecoins like DOGE or SHIB, do your own research for a chuckle.
4. Bought my first “art”
NFT stands for non-fungible token. If you’re like me with a 300-word vocabulary, here’s an explanation: Tokens described above (BTC, ETH, SOL) are fungible — like cash is cash is cash, if I give you a Bitcoin, you can give me back a bitcoin from totally elsewhere and I’m still whole.
NFT is a piece of property you can buy and sell and move around, but there’s only one original. Overwhelmingly, the first uses of NFT is art, or art-like substance.
Opensea is a big NFT art marketplace. Most of the art there is on the Ethereum blockchain, which is a fancy way of saying that you’ll need ETH in your wallet to get them.
I heard about people getting super rich from buying and selling NFT, but I had zero worries, that’s wasn’t gonna happen to me. Here’s the process I followed:
- Bought some ETH on a crypto exchange like Coinbase
- Transferred ETH to my wallet
- Went to opensea.io and clicked on the profile icon on the top right
- Logged in using my wallet
- It’s a website, looked around (here’s a search to get started)
- Once I fancied something, I clicked on “Buy now” and approve the transaction using my wallet. It took a (literal) minute for the transaction to process.
There was a bit of a surprise! Because ETH has high transaction costs (in the dozens or hundreds of dollars), my wallet turned out a lot more empty than expected. But I had an art! Here’s what I first bought. It moves and all.
5. Heard some good gossip on twitter & discord
The above description has a crucial point missing: what do I buy? NFTs on Opensea are pieces that are already are on the blockchain and someone wants to sell them (for profit). What if… I wasn’t at the bottom of the pyramid game?
NFT pieces are created with the process of minting — a transaction that creates a new token out of nothing, generally for cheaper than buying and selling it on the marketplace. That’s where it’s at! That’s where the money’s at!
All crypto talk is happening on twitter and discord for those who want to get involved with a project. Discord is not too scary if you’ve seen irc before; each project has a “server” with a number of groups, many controlled by bots. More popular discord servers (like the one for OpenSea) have a *lot* of spam and phishing so I had to be careful not to click on any odd link. The general process is:
- I stumble upon a great crypto project on twitter (by sheer luck or following a list)
- I find the twitter handle running a new project, look at their profile and see a discord link
- I join the discord server and learn All Secrets that make me well informed and learn about events that allow me to mint (create new NFTs) for cheap. When I mint a new piece of NFT, the image is usually randomly generated so one needs some luck. Not everyone is lucky.
- So that I can put the art on OpenSea for sale and get rich etc.
Getting involved with projects early on (and in this world, everything is early on) and helping with any way that your skills allow might be even a better approach than throwing money at random stuff.
But anyway, I was on twitter the other day…
6. Participated in my first DAO
…and saw some tweets from folks who want to buy the US Constitution, or at least one of the few a copies of that. Send us some crypto-money and we’ll take care of the rest! The plan of these people was to collect a big chunk of money and go to an auction, and buy an early copy of the document.
The format these folks were using is called DAO (decentralized autonomous organization), pretty much like a corporation but instead of founding documents, a big chunk of the behavior of a DAO is not in text, but using code — for example, owners of the DAO can vote (using crypto transactions) on certain decisions.
The plan for the ConstitutionDAO folks was to gather all the money, go to the auction, win it, and formulate a DAO with all people who invested to figure out next steps.
This needed all my previous knowledge to vaguely follow:
- Had to go to the website, connect my wallet and send some money
- Joined their discord server to follow all the news
- Watched the auction live with a heart rate elevated totally inconsistent with the amount of money at stake
- And finally… had my heart broken when it turned out that the DAO did not win the auction, and the whole thing shut down.
These series of events transpired in not but a week and showed how quickly can a totally new idea can turn into a working machine at a previously unimaginable pace. What if the next DAO gets just a tiny bit more luck?
7. Won the vanity game (tjp.eth)
The reader might be aware that once a domain is typed into a browser, the code will contact a DNS server that turns the domain name into an IP address (long hexadecimal number) of the servers for that domain. In crypto land, every wallet is identified by a long hexadecimal number and if wallets are people, it can be awkward to refer to people like 0x4cdf45f378f8950f25fb8fba690c56431e5ec064.
ENS (Ethereum Name Service) is the native Ethereum domain system that allows you to buy domains like tjp.eth. These are not domains in the old (web) sense, so if you type in tjp.eth to the browser, nothing will happen. But, if you want to send me some ETH, you can use my domain. This all sounds not very useful, but who doesn’t like to own a piece of vanity. Buying an ENS domain on ens needs almost the same steps as buying a NFT on OpenSea, and then a few more:
- Have some ETH on my wallet
- Went to https://ens.domains/ and clicked on “Go to App” in the right corner.
- Used the search bar to find my favorite domain.
- Bought it, following the instructions and configured it.
The domains themselves are not that expensive (a basic 5-letter is $5/yr), but the whole process takes multiple transactions, and each one of them has a gas fee. For illustration:
So — this cost a few hundred dollars for the whole process — after the domain is bought, I also had set some metadata so that my wallet id is associated with my fancy new domain (that does little more than a twitter handle.)
8. Won the vanity game (again)
This might be a personality trait — I had to play the dumbest game ever https://pay.game/ — you pay some ETH and you get on a hall of fame list. Everyone who pays gets a NFT of a spinning coin; and whoever is currently leading gets to hold another one that says winner, until obviously a more vanity-hungry person pays in a bigger amount.
I was a winner for four hours —but the real value was learning about the author, Marc Köhlbrugge, who has also explained in great detail how this “hello world” of a crypto app was built in this video:
I also got this:
9. Looked around in Solana land
The transaction costs and speed on the Ethereum network are truly awful, and it’s hard to tell if people will turn to less embedded ecosystems because of their speed/fee benefits.
The process for Solana is very similar to ETH-based games — but I had to have a Solana-enabled wallet (eg. Phantom) and a Solana-based market like Magic Eden or Solanart. Solana projects also have great, vibrant communities on Discord and I’m sure they are waiting for great minds to help out.
However, when I first transferred SOL to my wallet, it was outrageously quick; then when I found some stupid gifs (sorry, a penguin), the transaction was also a lot less anxiety-inducing. Easy is extra valuable.
So… do you like going to a casino? You will love whatever web3 is right now. Is everything all figured out? Heck no! Are there some mechanisms in crypto economy that will stick around? You bet! Can you just bring your brain to the table and find new friends and build new things? You know that’s right! Is this all gonna sound laughably naive in a year or ten? (TBD)