Crypto 101: A Primer

Crypto 101: A Primer

by Nico (@nicoglennon)

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ANNOUNCEMENT: This guide has been moved over to Primer (primer.guide)! It's been open-sourced and broken up for easier navigation. Please head over that way if you're new here!

1. Intro

"Wake up, Neo..." - The Matrix (1999)
"Wake up, Neo..." - The Matrix (1999)

You are reading this because you are a smart and curious person looking to learn more about crypto but don't really know where to begin. Perhaps you were sent here by a friend who is further down the rabbit hole than you, or you found your way here all on your own. In either case, welcome.

You've googled the buzzwords, perhaps watched a video or two about crypto, but so far things haven't really clicked. Yet you can feel that something important is happening.

I've compiled this document to hopefully serve you as a roadmap and guide. I won't be writing too much of it myself — there are far smarter people who already articulated these concepts much better than I ever could. I plan to simply compile all the best sources in a single place that is easy to parse through and share with others.

This is an ever-evolving aggregation of links, videos, articles, explainers, etc. Crypto is a moving target — I will try and keep this up to date as much as possible, but ideally after learning the foundations you will be informed enough to be able to take ownership of your own journey.

A warning: the rabbit hole is extremely deep, possibly endless. And once it hits, it's hard to think of anything else. Good luck.

2. Basics

History

Before starting, I believe it's important to understand the historical context that motivated the idea of blockchains and eventually gave birth to Bitcoin (the first cryptocurrency). The following three articles, when read in order, do a great job at painting the initial picture that will inform everything else:

  1. Brief History of Money
  2. The Cypherpunks
  3. Satoshi Nakamoto

Blockchain

An important concept to have a basic understanding of is a blockchain. Here are a few good breakdowns of what a blockchain is, how it works, etc. Don't worry if this doesn't completely make sense — you should be good for now if you just grasp it at a high level.

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After reading some of these pieces you might be wondering why anyone would care about decentralization so much. Here's an article on why it's important:

Wallets & Keys

Just like you have an email account with Google, you can have an "account" in the blockchain, which is referred to as a wallet. They are called wallets because they store your (digital) money. Like your email account, your wallet consists of a public address (email address) that everyone knows, and a private key (password) that only you know. In the blockchain, an address is usually a long string of random letters and numbers. It usually looks like this:

17qtBGaDvsebQvx9bnBMNMsfzWqmDZuEWa

On the other hand, your private key is 12 random words, as it is very secure and still easy to store. A private key (or sometimes called 'seed phrase') looks like this:

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Private keys are extremely sensitive information because anyone who has access to it can steal all your funds, in the same way a hacker with your email and password might be able able to steal your information. This is why people usually write the private key on a piece of paper and then store it safely, instead of keeping it in their computers or phones digitally where it could be potentially hacked.

Here is some good articles with more details about how wallets and keys work.

3. Bitcoin

Bitcoin was the first cryptocurrency and is currently the largest one by total market capitalization, collectively worth over $1 trillion as of 2021.

Bitcoin is the world’s first completely open payment network which anyone with an internet connection can participate in. Bitcoin was designed to be used on the internet, and doesn’t depend on banks or private companies to process transactions.

Similar to how a bank tracks assets, Bitcoin tracks who owns what using a blockchain. What sets the Bitcoin blockchain apart from a bank's ledger is that it is decentralized, meaning anyone can view it and no single entity controls it.

Understanding Bitcoin is key to understanding the rest of crypto, since all other cryptocurrencies share many of the foundational aspects of Bitcoin. Here are a few articles that best motivate Bitcoin, explain how it works and why it is important.

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I highly recommend the Bitcoin Whitepaper, published by Satoshi Nakamoto in 2008 introducing Bitcoin to the world. It is fairly short (9 pages) and contains all the technical details of Bitcoin's implementation.

4. Ethereum

After Bitcoin was launched, people starting thinking of many other uses for blockchains besides just as a store of value. One of those people was Vitalik Buterin, a teenager in Canada who together with a team of collaborators came up with the idea of a multi-purpose blockchain called Ethereum.

Ethereum was designed to let anyone build arbitrary applications on the blockchain — if it can be written in code, it can be built on Ethereum. Because of this, Ethereum is often referred to as the World Computer.

You can think of Ethereum as a public App Store, where anyone in the world can upload an application that can then be used by anyone else.

Since this World Computer is public, you have to pay to operate it — if you are uploading an app, the cost of computing power to do so must be paid in Ethereum's native cryptocurrency, Ether (or ETH). If someone else wants to run that app, the same rule applies: they must pay the computing cost to run it in ETH.

If Bitcoin is digital gold, ETH is digital oil. Like oil, ETH can be used as fuel to power more economic activity. In oil's case, that activity is factories, cars, and cargo ships, and in ETH's case, it is decentralized internet applications.

This cost to execute applications in Ethereum is commonly referred to as gas. Similar to Uber surge pricing, when the Ethereum network is busy, the cost of gas rises, and when it's less busy it decreases.

Most people think of ETH (the cryptocurrency) when they think of Ethereum (the platform/app store). Hopefully the distinction between them is a bit more clear now, and you're starting to see that Ethereum is a lot more than just a cryptocurrency.

Here are a few resources to start understanding how Ethereum works.

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If you are comfortable with a technical overview, definitely read the Ethereum Whitepaper — it explores the motivation of Ethereum using Bitcoin as a starting point.

5. DeFi (Decentralized Finance)

Decentralized Finance (or DeFi for short) refers to the collection of open financial apps made possible by blockchains like Ethereum. These apps allow anyone in the world to borrow, save, lend, invest, trade, etc. in a decentralized and transparent way.

DeFi is a completely new field of tech/finance that is rapidly evolving: here are some of my favorite resources for learning more about it.

Stablecoins

Given Bitcoin and Ethereum's volatile price movements, one of the first ideas for products to build on Ethereum were stablecoins. Stablecoins are tokens that are pegged to real-world currencies like the US-dollar, meaning they are always worth exactly one dollar. This allows people to store their money in crypto while not being exposed to its volatility, and still able to interact with applications in the Ethereum ecosystem.

For the millions of people in countries with unstable currencies, having access to US-dollar pegged stablecoins in Ethereum means protecting their savings from volatility or inflation.

Here are some pieces that talk a bit more about stablecoins:

Protocols

So far I've been talking about "apps" on Ethereum: the name we actually use for them are protocols. Learning how the most important DeFi protocols work is the best way to understand a lot of the mechanics in DeFi. For a really solid understanding of everything DeFi, I recommend doing a deep dive on the most important ones:

6. NFTs and Cryptoart

A Non-fungible Token (NFTs) is a type of token in blockchains like Ethereum that is verifiably unique.

Fungible means "capable of mutual substitution" — essentially, if something is fungible, it can be replaced by another of its kind. An example of something fungible is a $1 bill, since if I trade it with someone for another $1 bill, nothing really changed.

An example of something non-fungible is the Mona Lisa. Even if a super talented artist were to re-paint an exact replica of the Mona Lisa, you would not simply replace the original for the replica, as the original is always going to be more valuable.

A non-fungible token is a digital token on the blockchain that, like the Mona Lisa, cannot be replaced, and whoever owns it has unique claim to it. This idea of digital uniqueness has opened up a world of possibilities for many industries including music, art, photography, real estate, finance, etc.

Here are a few resources to learn more about NFTs:

7. DAOs

Decentralized Autonomous Organizations (or DAOs) are collectives of users on blockchains like Ethereum with a shared mission. DAOs are kind of the blockchain equivalent of an LLC, but with several key differences:

  • DAOs are usually created around a native token (as an example, everyone in the Friends with Benefits DAO holds the $FWB token). This is to both keep track of who is in the DAO and allow any value that the DAO accrues (the token's price going up) to be shared with every member
  • Collectively owned and managed by its members. Decisions are governed by proposals and voting to ensure everyone in the organisation has a voice
  • All political activity (voting, token allocations, proposals) are completely public and transparent as they are stored on the blockchain
  • DAOs are automatically global from day one — anyone anywhere can become a part of one

You can learn more about DAOs in the articles below.

8. Putting it all together: "Web3"

Once you have wrapped your head around the above concepts, you can start to see the forest for the trees — the massive innovation space being enabled by all this new technology is referred to as web3. Web3 is a new chapter of the internet, one where money moves as easily as information & media does in our current chapter. Web3 encompasses DeFi, NFTs, DAOs, and much more.

You can read more about web3 and what it means for the future of the internet in the articles below.

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These are really good pieces that connect all the dots, so highly recommend reading all of them.

9. How to Get Started

Enough theory, how do you actually get started with this? Here's my suggestion.

Buy ETH

Buy a small amount of ETH on Coinbase, Binance, or Gemini. To start, I'd recommend buying somewhere between $300 - $3,000 (0.1- 1 ETH), anything less might not be enough to explore.

These three services (Coinbase/Binance/Gemini) are called CEXes (centralized exchanges). This is where you turn your dollars into crypto and vice-versa, but now you want to move the money to a wallet you actually have the private key to.

Create an Ethereum Wallet

Download Rainbow, which is by far the best Ethereum wallet (I also happen to work there). Create a new wallet in the app, and when asked to back up your wallet, remember to write down the seed phrase and store it somewhere safe! This is your private key — only you are in control of this wallet, unlike your CEX wallet.

Send the Ethereum that you bought in Coinbase/Binance/Gemini to your Rainbow wallet by copying the address from your Rainbow wallet and using that as the to address when sending. I I usually start by sending a small amount and once confirmed it arrived, I send the rest.

Get an NFT

There are many places to explore NFTs but my favorites are Zora, OpenSea and Foundation. (If we're friends, just message me and I will send you one for free!)

Get some tokens

Uniswap has thousands and thousands of tokens available to purchase. From Wrapped Bitcoin (WBTC) to tokenized ultra-rare unicorn socks (SOCKS), the possibilities are endless. (Again, if we're friends just message me and I will send you some, gratis!)

Get an ENS domain

An ENS domain is an NFT that acts as your Ethereum username. Instead of sharing your long and convoluted wallet address, you can purchase a .eth domain like example.eth and use that as your public address instead. This is the Ethereum equivalent of buying a .com domain and using example.com instead of giving people a long and convoluted IP address. You can purchase an ENS domain at ens.domains.

10. Further Reading

Here are some awesome crypto articles/writings/videos/podcasts that I personally love and highly recommend checking out.

11. Keeping Up

Here is a list of some good news sources to keep up with web3.

Newsletters

Podcasts / Youtube