gm,

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And sometimes even things that are not directly Ethereum-related :)

In this first day of Spring, we have prompt from @freeatnet.eth:

If you were discovering crypto today, what would peek your interest? Where would you start? How would you grow your portfolio?

Happy vernal equinox!

Personally I would dive deep in programmable cryptography. (Anyway that’s what I’m doing now!) Blockchains like Ethereum are only the beginning of a new future internet, components of a larger technological evolution rather than ends in themselves. We’re going to collectively dream up hallucinated servers on a mathematical world computer. Don’t waste your time on coins and the degen casino, it’s short term gains and will pass as global crypto regulations are currently implemented, trad banks are entering the space and AI integration is redefining possibilities. The value is on the zero-knowledge horizon, go built for that. Study, learn.

I‘d probably get rich with algotrading. I feel like I could pull it off because I‘m really insistent and smart with computers, so I feel like I could outsmart some finance bros just on the basis of understanding computers a lil betta 😂

If you were discovering crypto today, what would peek your interest? Where would you start? How would you grow your portfolio?

I think I would still look into a project like Ethereum, but I would probably expand my horizon by looking into protocols which work in a similar way to Ethereum.

If you look at financial analysis of the stock market, the traditional idea of a value investor, what people do is they download the SEC earnings reports and in Excel spreadsheets they go through all of the numerical business data, assuming that this method gives them a better understanding of the business than an investor which just seemingly invests because they like the company or its products.

In crypto we are often confronted with the idea that holding bitcoins doesn't give you any right about owning the intrinsic value of a business. But when you buy all of Google's stock you own the Google company and so you own all of the value within Google. This right is granted to you legally and the respective financial authorities make sure that you get to execute your right.

I think because Ethereum was using Proof-of-Work for a long time, and the fact that Bitcoin has been using Proof-of-Work since its inception, crypto has gotten a reputation of hosting countless scam tokens that do not provide the investor with a right to the intrinsic value of the project or company.

However, since we've shipped Proof-of-Stake in the Ethereum merge, Ethereum owners now get access to the cash flows of the Ethereum protocol, which consists of the fees that are accrued from users' transactions and all the yields coming from MEV.

It's really simple. If you were to buy all ETH in existence, you would get all fees paid by ETH users and the MEV resulting from them. So, we've really built this complicated legal guarantee into a technical protocol, because it's also not trivial to change this logic in Ethereum. And since Ethereum is decentralized, this logic will likely remain a property of owning ETH.

Now, going back to the value investor idea, Warren Buffett recommends to only invest in your circle of competence. In companies that you uniquely understand better than others. Warren Buffett also happens to be almost a millennia old. And so, while I do not want to discredit his way of investing, in fact, I strongly believe in investing in your circle of competence, I do think that, opposed to traditional value investors in the traditional finance space, we in the crypto space, with projects like Ethereum, have a unique chance of investing differently. That is, because as the entire system, every single data point, every line of code, every conversation that leads to a protocol change is accessible to all of us.

With investing in Google, Apple, and so on, we are constrained to evaluating their products based on how beautiful or useful they are. Or we constrain ourselves by looking at their SEC filings.

With Ethereum, we can scan all of the ETH magicians forum. We can read all of the posts on ETH Research. We can follow each of the researchers. We can look at all of the CoreDev calls. We can read the entirety of all code making up Ethereum.

And so, I think we can become a new class of investor that actually goes beyond the value investor. A person that is able to build confidence in a project so much, because they have access to its internals.

At the end of the day, a mispricing between a stock price and its cash flows is really just a mechanical arbitrage that will be taken advantage of.

Which is why I believe that Ethereum's fee accrual must be very much related to its price. And the fact that we can measure this and many other factors that lead to fee accrual and value extraction for Ethereum stakers means that we can build a model of the value of Ether that is far beyond the estimation capacity of traditional finance.

@macbudkowski.eth called me out for not responding to my own prompt…

I was hoping to find some inspiration in responses because I find myself discouraged by the combination of “hold until institutions buy our bags,” “omg a vc coin — what a steal at $100B FDV,” and “we only care about the vibes (because we’re already comfortably rich and can be philanthropists for the rest of our lives)” perspectives.

I’m not saying crypto is all about “coins and the degen casino,” but I do find that most people in crypto today came because it allowed them financial opportunities that weren’t available otherwise.

Alas, gone are the ICO days, when you could find a solid project, back it for $50-500 at ICO price, hold it, enjoy the gains. Early opportunity is now available only to institutional investors (thanks, SEC!). Anyone new to crypto can only insane valuations and be left holding the bag ($EIGEN, anyone?) — or try their luck in memecoin casino (where most people lose their money[^1]).

So my question is: what financial opportunities does crypto (aka the Internet of value or whatever) offer newcomers? where does a person, who wants the best return on their $50, start today?

[^1]: https://unchainedcrypto.com/most-users-keep-losing-money-on-pump-fun-despite-the-protocols-record-profits/

And so, I think we can become a new class of investor that actually goes beyond the value investor. A person that is able to build confidence in a project so much, because they have access to its internals.

That's a very interesting point. I have been taking Ethereum's open source/data/coordination for granted, but when we compare it with stocks, it's a totally different approach. The fact that you can track all these information in real-time (vs. waiting for the end of the quarter), makes it even more distinct from Wall Street.

What's also interesting is that big banks (JPMorgan, Goldman Sachs etc.) for years shared takes on crypto that shown their lack of competence, despite their ability to pay people really good salaries. So there's probably some alpha from being an insider here.

***

I was hoping to find some inspiration in responses because I find myself discouraged by the combination of “hold until institutions buy our bags,” “omg a vc coin — what a steal at $100B FDV,” and “we only care about the vibes (because we’re already comfortably rich and can be philanthropists for the rest of our lives)” perspectives.

I feel you bro.

Things that would excite me today:

(1) Stablecoins.

Last week had to receive some money via Stripe. Guy paid $750, I received $711. After 3 days. This is fucking absurd and I want stablecoin adoption ASAP.

(2) Transparency for governments.

If I came in today, I'd probably try to lobby my government to adopt blockchains for tracking documents. It's already being done by the biggest Polish bank (IIRC they do it on Hyperledger), and now there's a great opening because our government supports this bottom-up deregulation group, ran by one of the most successful Polish entrepreneurs (our DOGE, but 10X less radical).

(3) Bottom-up IP creation and better licensing.

I've been nerding on this subject for some time (https://kanfa.macbudkowski.com/ip-protocols-part-1), and Story Protocol is doing some interesting things in that domain. So if I wasn't working on Kiwi, I'd probably work there, so that the world gets more quality TV series, games, and books.

So my question is: what financial opportunities does crypto (aka the Internet of value or whatever) offer newcomers? where does a person, who wants the best return on their $50, start today?

If they had $500-$1,000, they might go to Cobie's Echo and invest there. But it's ofc high risk/high reward. Less risky things would be probably farming yields in some DeFi vaults - I never did that, but know some people who do it regularly.

@freeatnet after a longer thought, I think the best way to go forward with $50 is being active on Farcaster. They're giving away these rewards in USDC and coins like DEGEN etc, and new accounts get some extra points in the rankings. So if they post good stuff, they could multiply their USDC, get some memecoins exposition and look for other opportunities. Not as good as ICOs probably but still not bad I think.

If I had 50 USD to spend, I‘d spend it on financial privacy coins. They‘ve been so cucked by OFAC and it‘s starting to look as if this clears up regulatorily. Financial privacy is a huge growth opportunity