What The Hell Is Going On With Cryptocurrencies?

I didn’t understand cryptocurrencies when I first heard about them. And even though I’m a software engineer, I didn’t care about them either. They seemed like an idea peddled by idealists — too abstract, too lofty, and ultimately too fake. However, as I looked into them more and began to buy a little at the end of 2019, I have continued down the rabbit hole ever since. After learning about the underlying technology, its implications, and how to obtain and use crypto — I’ve become one of those idealists. I love the fundamentals of the technology, the principles they support, and believe that cryptocurrencies will be one of the most empowering developments of the decade.

Especially within the last couple months, a lot of people are genuinely interested and asking questions. I love talking with people about this. And after having conversations in my writer’s group, at my bar, and among other friends, I started thinking about trying to write up some of what I’ve learned.

Something I wish I had when I was starting was a birds eye view of things. There was a lot I didn’t understand at first, a lot I’ve learned along the way — sometimes by trial and error. So, here’s an attempt to sum up and share some of what I’ve learned. I tried keeping it higher level with links to more. There are so many things that could be covered, especially the deeper you go. But, for this I want to start at the beginning and try to give a rough lay of the land.

It’s not too late to get involved with cryptocurrencies, and they’re not going away. So the question is not if you will start integrating them into your investments and life, but when?

And as I mentioned, I love talking about this stuff. Especially over Scotch. If anyone has questions or also wants to discuss — feel free to connect.

So Why Is Crypto Such a Big Deal?

To understand why crypto is so transformative it’s necessary to understand the fundamentals behind it.

The technology underlying cryptocurrencies such as Bitcoin is blockchain. This isn’t a new technology in itself, but a new combination of existing technologies and practices, such as consensus algorithms, distributed databases, and cryptography. Together they make something really powerful by enabling data to be recorded from a wide variety of sources with a high degree of integrity, allowing people to trust it. Trust is critical.

There is no one person or company that owns your data on the blockchain except yourself. The database isn’t sitting in a server room belonging to only Facebook, Google, or anyone. Instead the data is encrypted and stored in a ledger that is copied across thousands and thousands of computers around the world (nodes). Anyone that wants to can set up a node and participate in a wide variety of blockchains.

What makes blockchain so secure is that you can add records and read records but never update or delete records. Once the data has been validated and added to the blockchain it is there forever. To prevent any tampering or hacking of the data, the data is organized into blocks that are all connected together (in a chain — hence “blockchain”). Each block has a unique hash code generated from a combination of the data it contains and the hash code of the block that came before it. That hash code is unique to that specific combination of inputs. If anything changes, the hash code of the block will change, causing the next block’s hash code to change, and on and on down the chain. It would take an immense amount of processing power to regenerate the chain. Also, this change would immediately be detected by all the other nodes, and they would disregard it.

Every time new data is submitted to the blockchain, the nodes compete with each other to validate it and add it to the ledger (the database). When one is successful, it earns a token native to that blockchain (so for the Bitcoin Blockchain you would earn bitcoin). This is called mining, and is how people are incentivized to organically create the infrastructure necessary to support a blockchain. Once the data is validated and added to that individual node’s copy of the blockchain, it is distributed to the other nodes on the network.

Cryptography keeps the blockchain secure. As mentioned earlier, because of how the blockchain is structured, if someone tries to change a single record it will be immediately detected and rejected. This level of security enables people to trust the integrity of the blockchain ledger, knowing that it has not been hacked or corrupted. For an individual user to access their data, they will have a set of private keys that can unlock the encryption specific to them. This public-private key cryptography is common in applications you already use, such as authentication and digital signatures. If you hear about people getting hacked and losing their bitcoin, this is not because the blockchain was hacked. This is because someone’s keys got stolen. Imagine they are car keys. Individual car keys can be stolen, but there is no central, back-door hack that would enable a hacker to control all cars. Keep your car keys safe. I’ll talk more about this later.

One other key concept to know about are smart contracts. This is executable code that is hosted on the blockchain. Bitcoin doesn’t have this natively, but another network called Ethereum does, along with many others. Smart contracts eliminate intermediaries, are instantly auditable, and are highly secure. Essentially, all the middle men required to execute an agreement between two parties today can easily be replaced by a smart contract. For more information about this, Vinay Gupta has a good write up here.

There are a lot of details I’ve glossed over, and it’s valuable to understand those details and dig deeper. The white paper for Bitcoin is pretty accessible even for non-technical people, and it’s definitely worth a read. Or look up YouTube videos. I had to do both before I got a good grasp on it, and then took a couple classes.

But without going to far into the details, here’s a bird’s eye view of why blockchain is a huge, world-changing technology potentially as game changing as the internet itself:

  1. DecentralizationNo central authority owns your data. You own it. Not Robinhood, Facebook, Google, or even a government. You can’t get shut down. This flips the power structure of the internet. Do you think that your data is not valuable? Think about all the free software you use like Gmail or any social media platform. Do you know how expensive it is to build and maintain those applications? And yet the companies behind them are so desperate for your data that they’re willing to give the software away for free. It’s a bad trade.
  2. Trust — People who can participate in the blockchain can trust the integrity of the data. No one can manipulate it. It’s almost hack-proof (there is a known vulnerability called a 50% hack in which if one party could own more than half the nodes of the blockchain, they could rewrite transactions as they chose. This is extremely unlikely given the scale of Bitcoin already). And no blundering programmer — like I am sometimes — is going to accidentally run a query and corrupt a myriad of tables on a Friday afternoon.
  3. Data Sharing — Because the blockchain exists outside centralized organizations, this enables various competing or even conflicting companies to share data and collaborate. This opens up new competitive strategies and whole new businesses. As an example, there’s been a lot of research that shows the fish you think you bought from the grocery store has potentially been mislabeled. Who knows what it actually is or where it came from in the labyrinth of a supply chain that eventually delivered it to you. However, by utilizing a blockchain all the parties involved (from fishermen to the grocery store and everyone in between) can quickly scan and record it in a blockchain ledger external to themselves. Everyone at any point in the supply chain can look up an individual item’s records and have a high degree of certainty of where it’s been, when it’s been there, and ultimately what it is. This is done without the cost of each company involved needing to host a database, develop and maintain API’s, and work out terms of service with each and every vendor. This is huge. Walmart is doing it for multiple items in their fresh foods department. If you see a QR code and scan it, you’ll get these kinds of details.
  4. Smart Contracts — As described above, these can eliminate intermediary costs and middle men. Not only does this make transactions more efficient, it also lessens the cost of entry into markets for smaller companies that might not be able to afford or qualify for different certifications. Revisiting the fish example, for smaller fisheries that want to do business with companies that demand certifications that prove where they’ve sourced the fish, now the blockchain can provide that assurance and integrity. The fisheries can prove “this is when and where we got our fish” and then pass it along the supply chain at minimal cost instead of navigating the headaches of inflated regulatory bureaucracies that would be cost prohibitive to them otherwise.

To summarize, in the same way that the internet empowered people to engage with the world in new ways, enabled existing businesses to scale, and generated opportunities for entirely new businesses not possible otherwise — blockchain will do all of that too.

So what is Bitcoin changing?

Instead of using a bank to hold your money or process a transfer to someone else, now you can do it on your own. You can “unbank” yourself, because the bank itself is a middle man. Your funds can’t be stolen, frozen, or whatever. Maybe Americans are apathetic about this, but Bitcoin is global. For people in countries where banks and governments are corrupt and unstable — now they are empowered to own their wealth outside of the failed politics of … well … politics. This is how a lot of political dissidents from Hong Kong or anywhere else in the world can keep themselves funded or take their money with them when fleeing a corrupt regime.

Additionally, there are a fixed number of Bitcoin. There is no Federal Reserve or other regulatory body that decides it is reasonable to inflate money year after year. This makes Bitcoin similar to gold as a store of value.

Why Is The Price Of Bitcoin Spiking?

One of the reasons the price is spiking so much lately is because there is widening institutional investment and adoption of Bitcoin. Tesla, Square, Paypal, Microstrategy, Massachusetts Mutual Life Insurance, and many others are buying billions of dollars worth of Bitcoin. The current bull market is not yet driven by retail investors having FOMO (fear of missing out) like previous cycles.

How much will it be worth? Who knows. Some project $100K, others like the Winklevoss twins advocate half a million. JP Morgan projected over $600K, then speculated it may not break $40K ever again (which, since I wrote this sentence, it has — significantly). In the end, no one knows the future, and maybe something happens and it goes to $0. But I’m sharing all this information so that you can judge for yourself. One thing to keep in mind, this isn’t like the stock market. It can be extremely volatile, and the SEC is still clarifying its regulations for the industry.

My own judgment: I’m confident that Bitcoin has staying power as a store of value, especially seeing how many companies have invested in it. People lie, but their money doesn’t. But well beyond that, I believe the blockchain technology itself is novel and revolutionary. It is no more a passing fad than the internet.

What’s Ethereum?

Ethereum is a network similar to Bitcoin — but it allows smart contracts. The cryptocurrency native to its blockchain is called Ether. This is where a lot of developers are going, because people can build decentralized applications (dApps) on this blockchain and take advantage of all of its benefits. This blockchain serves a different purpose than Bitcoin, filling a different niche. Other cryptocurrencies can be hosted on Ethereum as well, so sometimes as you’re investigating a token you might see that it’s an ERC-20 token, which means that it runs off a smart contract hosted on Ethereum.

Ethereum is significant because it has the vast majority of developer talent. A lot of the innovation involving smart contracts is currently taking place on its blockchain, and other blockchains are building bridges to it. Some projects are focused on bridging Ethereum and Bitcoin (like REN).

What about all those other hundreds of cryptocurrencies?

Some have value, and some are trash (affectionately called shitcoins), just like all the startups in the early days of the internet. The industry will balloon and bubble and then pop, and only the worthwhile ones will be left. That’s coming. But there is room for a lot to survive. The Dot Com Bust in the early 2000’s didn’t kill the internet. What company is not online today? Blockchain will endure and thrive similarly.

Every industry will be transformed or disrupted by blockchain. Whatever blockchain is being used in a specific industry will have its own native token, and that’s what a lot of these other cryptocurrencies are. Some of the cryptocurrencies you see are specific to logistics, others to finance, others to energy, others to insurance, and on and on and on. It might seem bloated, and to some degree is, but it’s also a huge world and again blockchain will likely affect all of it.

How Do I Buy Cryptocurrencies?

You can buy cryptocurrency on crypto specific exchanges or through investment apps like Robinhood, Etoro, or others. Be aware though that if you buy on Robinhood-eque apps you won’t have easy or any access to the underlying wallet. You won’t be able to transfer it. Essentially, they make themselves a central authority that will own the cryptocurrency for you — which in my opinion is self-defeating to the whole ethos. But — do what you want.

The US is clarifying its regulation around cryptocurrencies, and has publicly stated that Bitcoin and Ethereum are not securities. Currently there is an SEC case against a currency XRP that will be resolved sometime this year and provide additional guidance for the space. But, as a US citizen you should expect to provide documentation to comply with KYC (know your customer) when signing up through any of these services to buy crypto. This normally includes providing your social security number, a picture of your driver’s license, and a few other details.

I personally use Coinbase, Binance.US, Kraken, Uniswap (which I access through Coinbase Wallet — a separate app than Coinbase), and OKCoin, along with a few others that don’t necessarily have KYC requirements. Full disclosure, some of these are referral links.

Each of these exchanges have different cryptocurrencies listed, and so you will have different options from each for what you can buy. But overall the process is simple to sign up, connect a bank account or credit card, and then buy the crypto. Or you can buy bitcoin on one and transfer it to other exchanges, so that way you don’t have to connect your bank account all over the place.

So if within the hour you want to own some bitcoin or ether, sign up on one of the exchanges above (Coinbase is the easiest) and follow their walk-through to set up your account. Easy.

After you purchase, you can leave the crypto there (not really recommended since it’s sitting on someone else’s servers and can be hacked) or transfer it to cold storage.

What the hell is cold storage?

It’s essentially a little USB stick or external hard drive that has some specific functionality on it to store cryptocurrencies. You can connect it to your computer, transfer crypto from the exchange to your device, and then unplug it. After it’s unplugged your crypto is not connected to the internet at all, keeping your private keys safe.

When you initially set up your cold storage device, it will give you a series of words (a pass phrase) that you need to write down and keep safe. If you lose or inadvertently destroy your device, you can reclaim your crypto by setting up a new device and entering your pass phrase. Write this passcode down on multiple cards and keep them in separate locations. If your house burns down, you don’t want it to destroy both your device and your passcode. Grab a shovel, head to the woods, and bury a copy of your passcode if you have no other options.

Some people really recommend using Trezors, but I use Ledger Nano (I have both an S and an X). Depending on how many distinct currencies you plan on acquiring (not the amount of an individual currency, but the number of unique currencies since each typically require their own app) you’ll want to determine the space requirement you’ll need. For Ledger users, just download their app Ledger Live onto your computer, and look up the currency to see how large the app is.

But crypto can also work for you and earn you money

Some of the blockchains allow you to reinvest your cryptocurrency into the network to be used in validating future data. This in turn earns you more crypto. It’s called staking, and is very useful — almost like it pays dividends.

You can also store your crypto in Celsius (or BlockFi does something similar), where they essentially operate as good, old-fashioned savings and loans. They lend out your money, and share the interest with you. Here’s a great podcast with the founder of Celsius explaining how it works. The rates are amazing, and beat just about any savings account you can find at any bank. The qualifier for this is that this does become a centralized source that is holding onto your crypto for you. It’s the risk you have to determine you want to take for yourself.

I do it, and can vouch that Celsius is the real deal. I’ve earned significant interest off my cryptocurrencies simply for letting them sit, which they were going to be doing anyway. Celsius pays out every Monday and while it’s really lame, getting that little notification about how much interest was paid out is one of my favorite moments of the week. Additionally, it is paid out in the cryptocurrency that you have invested, which then if you leave it there, continues to earn even more interest.

It’s been amazing for me to see how money really can work for me, and profoundly discouraging to see how underwhelming modern banking is with regular dollars. It doesn’t work for people like me. I don’t give a shit about the minimal interest rate on a savings account — that just doesn’t change my life. What I earn off Celsius does affect my life.

Even if you don’t want to buy crypto because you think it’s risky — you can buy a stablecoin and store it on Celsius. Currently, their interest rate for USD Coin (USDC) is 12.50%.

Wait — What’s a Stablecoin?

Oh yeah — some of the cryptocurrencies are called stablecoins because they are pegged to a fiat currency like the US dollar. USDC is one of the most regulated and secure stablecoins out there. It’s worth a dollar, and will always be worth a dollar. No more, no less. So all I was saying about putting stablecoins on Celsius is that instead of leaving your dollars in a worthless savings account that barely beats inflation — you could convert some savings to a stablecoin and move it to Celsius for a real return.

So What Cryptocurrencies Should I Buy?

I’m not a financial adviser. And I don’t know the future. People have told me “don’t put in what you’re not willing to lose,” and that’s seemed like good advice. But it also feels like a CYA (cover your ass). If you have convictions and means, and have done the research and clearly understand the risks — the world is yours to meet as you will. So for some people “don’t put in what you’re not willing to lose” means to put in a little. For other people, they calculate the risk and declare, “I’m willing to lose it all.” It’s always been like this — some people sailed for the new world, some didn’t. Neither was right or wrong, each acted in their own self-interest. Decide what that is for yourself.

Some other good advice: don’t buy dogecoin — it’s a meme coin. As in, the founder of it made it as a joke. It’s a pump and dump. I made money off of it, but only because I didn’t want to miss out on a situation like we’re presently seeing — where it would spike because of FOMO. And I got it for well under a penny, so it cost next to nothing. This is not something to invest in. It has no practical purpose. It has no significant development talent going into it. It is just a joke.


There are a lot of sources I use to research cryptocurrencies. Some people are absolute wizards at it, and I’ve learned a great deal from them. Two YouTube channels I follow in particular that I highly recommend are Chico Crypto and Coin Bureau. They do great research and while I disagree with some of their opinions, they’re overall fantastic.

The biggest thing is that you want to understand why a cryptocurrency could be valuable, and how valuable it might become. Don’t just take hot tips you don’t understand.

I’m going to rant a little here. Part of what makes cryptocurrency so great is that it empowers people to be responsible for themselves. So be responsible for yourself and don’t throw money around thinking you can make quick cash without understanding anything. It’s not unreasonable for you to be knowledgeable and to have a good justification for the decisions you make. Hot tips on their own are not good reasons. Do the work. Sharpen your mind then trust it.

So, that being said, understand the market. You don’t have to do a deep dive, just a quick look around. For instance, if you’re looking at a cryptocurrency that is primarily a competitor to Bitcoin or worse an offshoot of it (like Bitcoin Cash or something) … leave it. Maybe it has legs, but that part of the market has already been claimed by a king.

Ethereum is a little different because there is a lot of space in the world for networks that allow smart contracts. There are also a lot of problems that need to be solved as a blockchain with smart contracts grows larger and scales. Ethereum might seem the winner now, but it might just be AOL or Netscape. Two people from the original founding team of Ethereum have each started their own chains, Polkadot and Cardano, implementing different solutions. Both are strong alternatives to Ethereum with interesting projects partnering with them.

But I truly believe blockchain will be transformational for almost all industries. I’ve tried to diversify my portfolio so that I’m not all in on a handful of popular cryptos, but instead spread out across a variety of industries. Energy, insurance, finance, logistics, and on and on. That has worked well.

Is there a quick reality check I can do?

A quick litmus test is to look at a cryptocurrency’s market cap. This is inspired by a video from Coin Bureau. This means looking at the circulating supply of the coin, and then multiplying it by its current price, or the projected price you want it to be. Keeping the math simple, if there are a 100 coins in circulation, and you hope that the coin will be worth $10 some day, then you know the market cap will be $1000. Bitcoin has a hard limit of how many there will ever be, and there will only be 21 million of them. Multiply that by $100,000 (where some people say it will go) and that is equivalent to a 2.1 trillion market cap, still much less than gold’s market cap at 10 trillion. So if Bitcoin is the new gold, maybe it will go higher?

Some currencies will never reach great heights for the simple reason that there are too many. You can look this up on Coin Market Cap, using the Coinbase app, or a lot of other resources. Some coins have tens of billions of coins circulating. There are some people that get really excited about one specific currency (and I’m guilty of this too) but overlook that “hey — I want to make millions off this thing hoping it reaches $1000 dollars someday” but the reality check is that if there are 40 billion coins, and they hit $1000 each, that market cap would be approximately twice the size of the US economy.

That’s not realistic. Honestly, when there are that many coins I’m skeptical they would even near $100. Does that mean they are worthless to buy? No — profit is profit. And if they’re cheap enough, you could buy 100,000 of them. Then even if they only reach $10 … huzzah.

In the end, you need to set what you think are reasonable numbers to cash out at, or if you believe in holding the crypto long term. What’s the song?

You got to know when to hold ’em, know when to fold ‘em.

Is There Anything Else To Keep In Mind?

Cryptocurrency is a nascent industry, and there are things that are not going to be easy to understand or easy to use. Don’t let that stop you, because if it’s coming to you in pretty packaging, you’re paying someone else to have done that legwork for you. You’re never going to see the potential reward of taking the risks for yourself upfront.

Be aware that as people pour into crypto, the apps are all doing the best they can to adjust to the load. Sometimes the exchanges are down. A few weeks ago every single one of my exchanges were inaccessible because of the volume of new users. They’ve each gone offline for maintenance to handle things better in the future — but understand this is a new industry and there will be growing pains.

Closing Thoughts

The philosophy underlying cryptocurrency and even blockchain itself is one that I identify with strongly. It’s strange because this is the first time in my career as a software engineer that I’ve come across a technology whose technical fundamentals resonate as personal principles. There’s something very human and optimistic sewn into the fabric of it.

Individuals are empowered to act in their own self-interest to no harm of others with a high degree of privacy. You own your data and are empowered to act according to your own competencies. For some of the extra responsibility it may require, it rewards you with even more freedom and self-direction. And the more of that you have, the more of that you want.

This matters.

I’m personally convicted this will be one of the most transformative technologies we’ve seen and will be implemented worldwide, but I encourage everyone to learn more about blockchain and cryptocurrencies to make up their own minds. Nothing replaces thinking for yourself.



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Christopher Guarnera

Christopher Guarnera

Entrepreneur, software developer, and writer. Enthusiast of good stories, interesting conversations, and serendipity.