Crypto 102 - Crawl before you walk

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In Crypto 101, I talked about the basic information you need to get started with buying some crypto and the type of wallet you want to keep it in.

Hopefully, you have already taken the first step of opening an account with an exchange and/or acquiring a wallet. You have mastered the *how*. Now you might be pondering the *what*. What should I buy? There is an overwhelming choice in crypto tokens out there. What makes one better than another? I'll share how I see it. As always, your mileage may vary (YMMV).

There are a few key characteristics and features that differentiate different decentralized crypto platforms. Understanding these differences helps you understand their unique selling point (USP) [if they have one!{*}]. I'm not addressing stablecoins in this screed. Stablecoins (like Tether (USDT) and USD Coin (USDC)), are not decentralized and their value is supposed to be backed by (and pegged to the value of) some underlying assets.


First, it would be good to understand a fundamental difference in the way different decentralized crypto platforms reach consensus (ie. how they work) to record changes on the blockchain:
  • Proof of Work (POW) - The first crypto framework which is used by Bitcoin, Dogecoin, Litecoin and others.
  • Proof of Stake (POS) - Currently the most ubiquitous framework as it is faster and less energy intensive than POW systems. Most every decentralized crypto that isn't POW is POS. POS systems typically have added value to their platforms with various schemes for encoding data on the blockchain. This data can simple, like a URL to an image (creating a non-fungible token (NFT)) or executable software "smart contracts" that can do really powerful things.
  • Proof of Agreement (POA) - Currently only used by Stellar (XLM) as far as I know. It claims to be much more energy efficient than POS systems.

There are reams of technical explanations for these different architectures available for free out there in the internets, but that's not important for our purposes here and now. There are tradeoffs (speed, energy per transaction, degree of decentralization, additional functionality, etc.) to using one framework versus another and the technology for all three systems is still improving/evolving.

You might think that every crypto has it's own blockchain and is it's own, independent thing. That's not necessarily true. Many crypto tokens/platforms are derivatives of another one. In crypto terminology, tokens could be layer 1 (base layer), layer 2 (derivatives of a layer 1) or possibly even layer 3 (derivatives of layer 2). Ethereum (ETH) and Polygon (MATIC) are examples of layer one tokens that support several layer 2 tokens. Ethereum layer 2 tokens are - collectively as a class - also known as ERC20 tokens. In general, to own a layer 2 token means you need a wallet for the underlying layer token. The layer 2 tokens are managed from the same wallet address as the underlying layer 1 token. In other words, if you want to own some ChainLink (LINK), which is an ERC20 token, you would need an Etherem (ETH) wallet to receive it.

That probably sounded complicated, but it's really not. Every exchange or brokerage will handle the wallet magic for you. Hard storage wallets will also guide you to what you need. You do need to know what your soft wallet can handle if you are using one as they are generally limited to specific platforms (ie. MetaMask only handles Ethereum and ERC20 tokens [last I checked]).

The blockchain layer is just something to keep in mind when you are considering the value proposition for various cryptos.

Developer Activity

One metric you can use when evaluating a crypto token for potential investment is the developer community that is attached to the platform. Most decentralized crypto have a voting system where suggestions (for rules/governance as well as software changes to the protocol) are voted on before being implemented. Suggestions generally get voted on in specific time periods, so there is a constant cycle of suggestions and implementations happening.

Understanding that, you can look to see if there is a large community contributing (via suggestions and/or implementation efforts) to the development of the platform? Is it active? Are there a lot of (software) projects being developed on the platform? You won't find hard numbers to quantify answers to these questions, but you can get a feel for it by looking at social media (X, Twitter), news articles and/or Github or similar - wherever the open source software is actually being developed. A robust developer community is a good sign. A moribund developer community is not.

Market Cap

You can easily find lists ranking crypto by market cap. As of this writing, the top 52 crypto all have market caps over $1B. It's been my observation that, while crypto in the top 15 or so can be volatile, crypto outside the top 15 can be *very volatile*. That may be a feature or a bug depending upon whether you want high volatility for trading opportunities or stability for long term "Hold On for Dear Life" (HODL).

Hard (Wallet) Choices - Staking, DeFi or HODL

If you have elected to store your crypto in a hard wallet like the Ledger Nano X or Trezor, you will likely have a world of opportunities available to you for staking POS coins or getting adventurous with being your own banker with decentralized finance (DeFi) opportunities. As far as I'm aware, most of these opportunities are only available with POS based platforms. Bitcoin is (as of this moment) strictly a HODL platform in this context.

Use cases

There are a lot of crypto platforms that were designed to solve specific problems in a way that other crypto platforms do not. In general, you would need to just do some research (internet search on the token's name to find news stories, press releases, etc.) to figure out what the USP is for a given token. I'll list a few tokens and what I understand to be their USP:
  • Bitcoin (BTC) - The first/original token is the 800lb gorilla in the crypto world. It's a POW platform that will have (once they are all mined) a finite token supply by design. Fiat money/credit expands - the supply of Bitcoin stays static or deflates as coins get lost to forgotten passwords.
  • Ethereum (ETH) - Ethereum started out as a POW system and famously switched over to a POS system with the Shanghai update in April of 2022. It was designed to be more efficient and flexible than Bitcoin. It has a huge developer base and layer 2 token portfolio. It is and has been the #2 token by market cap for a good long time and #3 is not really close. The big problem that plagues Ethereum is the transaction expense ("gas fees") is just too high and that leaves the door open for a competitor to do it better.
  • Solana (SOL) - Solana appears to be a similar but technically superior to Ethereum (faster, cheaper, more efficient). Some pundits claim that Solana has the goods to eventually dethrone Ethereum as the #2 crypto. Solana had a huge run before the FTX collapse. Sam Bankman-Fried/FTX was a huge investor in Solana and the crypto markets worried that FTX holdings of Solana might get dumped on the market in their bankruptcy proceedings. Now that the markets got guidance that this was not going to happen, Solana has been on a tear in late 2023. Solana appears to have a lot of development muscle behind it.
  • Cardano (ADA) - Created by Ethereum co-founder Charles Hoskinson, Cardano was built from the get go as a POS system. Hoskinson had a fundamental disagreement with Ethereum co-founder Vitalik Buterin over the business plan for Ethereum. Cardano is the realization of his efforts at more commercial effort in token development. I get the sense that Cardano may have peaked both in terms of market cap ranking and developer excitement, but it is still the 8th ranked crypto by market cap and things can change quickly in this space.
  • {*}Dogecoin (DOGE) - Beloved by Elon Musk, Dogecoin was developed as a joke. It was never intended to be taken seriously and evolve/develop into anything useful. That changed a bit after Musk's sunshine pumping generated a huge market cap for the coin. Will it really ever develop into anything more than a Musk fascination? I don't know. Much like Cardano (ADA), I think it's day in the sun has passed, but you never know. The coin is actually a clone of the POW software used by Litecoin (LTC).
  • TRON (TRX) - I confess that I don't actually know much about this token other than Dominica has granted it legal tender status and most recently it's been used by some terrorist organizations to move money around.
  • Chainlink (LINK) - This is an ERC20 token (layer 2 token on the Ethereum system). The Chainlink blockchain has been very active in facilitating and developing cross chain solutions for clearing transactions across different crypto and CBDC platforms. LINK is the token powering the Chainlink solutions. If SWIFT or nation states continue to partner with Chainlink for these purposes, Chainlink likely will be around for a long time.
  • Avalanche (AVAX) - Avalanche is a unique POS based layer 1 blockchain system that is actually comprised of 3 separate blockchains that interface with each other (and separate the functions each perfoms to increase speed and efficiency and lower costs). Avalanche is a leading player in the tokenization of financial assets and is working with some heavy hitters in the traditional finance space.
  • Polygon (MATIC) - Polygon (MATIC) is a layer 1 system that competes with Ethereum. This token is planned to transition to a Polygon (POL) layer 2 Ethereum token.
  • Polkadot (DOT) - Another unique layer 1 POS system. The developers of Polkadot also created a sister token Kusama which they use as a test bed. Polkadot has developed several technical innovations in their blockchains including something called parachains. I have not taken the time to really understand it, but the team behind Polkadot seems pretty smart and active in developing novel technology.
  • Litecoin (LTC) - Once thought to be a potential challenger to Bitcoin, this POW system got surpassed by a joke copy of itself (Dogecoin). Ah, the power of memes/marketing.
  • Shibu Ina (SHIB) - Another meme token riding the coattails of Elon Musk's Dogecoin pumping. I really don't understand the USP for this one at all.
  • Uniswap (UNI) - Uniswap is an ERC20 token and the Uniswap blockchain is a popular facilitator of cross platform trading (facilitating trades of one type of crypto for a different one). I don't understand how it works. I tried to figure it out once. I failed. But there is a lot of trading happening with it, so lots of people apparently do understand it.
  • Cosmos (ATOM) - A unique layer 1 POS token. I don't remember why I acquired some of this or what it's USP really is, but this coin has earned me a very decent return on my staked tokens.
  • Stellar (XLM) - Stellar is the only POA system that I know of and claims to be superior by an order of magnitude in terms of efficiency and cost over POS tokens. Seems like it just needs some Elon Musk magic or better marketing to really take off.

While every crypto is a speculative play, you will find some *really* speculative plays and obscure USPs when you start looking beyond the top 25 (ranked by market cap) . It can be an adventure learning about them (and wading through the hype to see it's true potential).
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I figure this article is as good a place as any to post news regarding specific crypto tokens that aren't about market actions, but more about their USPs or governance. The following article is specifically about Polygon (MATIC), but likely applies to some degree to many cryptos but just haven't been caught in the act yet:
In early 2022, Polygon Labs announced an "important adoption milestone" for its tech infrastructure: DraftKings would begin running one of its network validators, "marking the first time a major publicly-traded firm has taken an active role in blockchain governance."

What Polygon neglected to disclose at the time: It was paying the sports-betting company millions of valuable MATIC tokens to do it.

Twenty months later, Polygon has sunk those millions into a validator that's gone kaput.
On-chain data reveals that DraftKings received millions of dollars in crypto directly from Polygon at the start of their "strategic blockchain agreement" in October 2021. DraftKings then earned millions more through a special staking relationship that few of Polygon network's other validators enjoyed. Neither company disclosed these financial ties.

It's not unheard of for Web3 companies to pay mainstream brands to take part in their crypto ecosystems, be it through marketing partnerships or tech setups. But they balk at publicly discussing the treasure they spend to build this image of mainstream adoption. The on-chain data showing Polygon's special treatment of DraftKings provides a rare window into such an arrangement.

More (long):

Polygon gifted DraftKings around 60M MATIC (worth around $45M as of this moment). That 60M MATIC was staked (committed) to DraftKings' validator node. DraftKings neglected to run their validator node properly and got booted from the system after several mistakes. Their 60M MATIC remains staked, but with a different validator (for?) now. Not a bad return for a year or two of doing almost nothing.
Blockchain protocol Algorand (ALGO) has expanded its footprint in India by securing new partnerships with NASSCOM, India's trade body and chamber of commerce for the tech industry, TiE Bangalore, a global venture supporting entrepreneurs, and the Mann Deshi Foundation which supports India's first rural bank for women.

Earlier this year, the Algorand Foundation branched into India with its initiative called AlgoBharat. The word Bharat represents the nation of India. At the time, Algorand partnered with Self Employed Women’s Association (SEWA) to support women-led enterprises building blockchain solutions and with Jawaharlal Nehru Technological University and the Indian School of Business to launch faculty development programs.

It will now build out the Web3 capabilities of youngsters under NASSCOM's FutureSkills Prime skilling hub and develop a blockchain-based credit scorecard and identity system for Mann Deshi Foundation's women entrepreneurs, Algorand Foundation's CEO Staci Warden and India Country Head Anil Kakani told CoinDesk in an interview.

Hopefully, you have already taken the first step of opening an account with an exchange and/or acquiring a wallet

Thanks for sharing your knowledge.

Earlier today I opened a crypto account with Fidelity. Haven't brought anything yet. Will buy on Monday. Probably bitcoin.
Welcome to the new wild west. If events play out in 2024 as people expect, Bitcoin is going to do very well.
Welcome to the new wild west. If events play out in 2024 as people expect, Bitcoin is going to do very well.

Once again, thanks for sharing your knowledge. Had you not posted this (and part one) I wouldn't have done it.

Ethereum getting more institutional use...
On 30 November 2023, Societe Generale issued its first digital green bond as a Security Token directly registered by SG-FORGE[1] on the Ethereum public blockchain with increased transparency and traceability on ESG data. Security tokens have been fully subscribed by two top tier institutional investors, AXA Investment Managers and Generali Investments, through a private placement.

This transaction is the first digital green bond issued by Societe Generale to leverage blockchain's differentiating functionalities. This digital format enables increased transparency and traceability as well as improved fluidity and speed in transactions and settlements.

This inaugural operation is structured as a EUR 10m senior preferred unsecured bond with a maturity of 3 years. An amount equivalent to the net proceeds of this bond will be exclusively used to finance or refinance Eligible Green Activities, as defined in the Sustainable and Positive Impact Bond framework[2] of Societe Generale. The Societe Generale group has been a recurrent issuer of Positive Impact Bonds since its inaugural issuance in the format in 2015.

This is also a first step towards using blockchain as a data repository and certification tool for issuers and investors to foster transparency on ESG and impact data on a global scale.


Here's a handy tip that I forgot to mention. Back when I was using Kraken to stake some coins, I installed Kraken's app on my Android phone. I never actually used their app for trading or managing my account, but even after I transferred all my crypto off the platform, I still use their app today to watch crypto trading charts. It's free and fairly easy to use (you do *not* need an account to access the trading charts):

If you install it and run it, you will get a screen prompting you to create an account or sign in. Underneath those buttons, it says "explore the app". Click that. The markets tab has a few configuration options - just make sure to select quotes in USD (or the currency of your choice). You can also click a star button for your favorites and then filter the list to just show your favorites.
Development activity on the Polygon (MATIC) network integrating data from Chainlink (LINK):

Chainlink Data Feeds are now live on Polygon zkEVM, enabling developers to build advanced DeFi applications with the industry-leading data solution.

The functionality enabled by Chainlink Data Feeds allows DeFi developers to easily tap external price data to build and launch highly effective liquidity protocols, advanced decentralized exchanges, and more.

“With the integration of Chainlink Data Feeds, DeFi can take the next step on Polygon zkEVM. Chainlink oracles unlock a host of DeFi applications, bringing opportunity for new dApps that truly leverage the unique value propositions of a ZK rollup, including fast finality and robust security,” said Marc Borion, CEO of Polygon Labs. “This functionality is set to unlock the deployment of several significant DeFi protocols on Polygon zkEVM early next year.”

Tokens of Solana, Avalanche and Injective surged as much as 20% in the past 24 hours as the meme coin trading frenzy extended into a third week on these networks.

Solana’s SOL jumped 8% while Avalanche’s AVAX added almost 12% before giving back some gains. Dog-themed tokens dogwifhat (WIF) and bonk (BONK) trended on Solana, while a hen-themed Coq Inu (COQ) led the meme narrative on Avalanche, surging more than 40% in the past 24 hours.

Traders have increasingly preferred these networks over Ethereum for their much lower transaction fees and faster speeds: It costs less than a cent and takes seconds for a Solana transaction, while Ethereum can cost at least $15 dollars and take up to a minute.

That’s led to more transactional activity on both networks, which has more than doubled in the past month, alongside an increase in active wallets and new users, data shows.

I don't care much for "meme coins", but the important takeaway from this report is that Ethereum (ETH) needs to effect some structural changes to their network to lower gas (transaction) fees or it will continue to bleed market share and developer interest to competing platforms. Right now Solana (SOL) and Avalanche (AVAX) are gaining ground on Ethereum.

To put this in perspective, Ethereum is currently the 2nd largest crypto with a market cap of $268B. Solana and Avalanche are 6 and 9 with $31.8B and $15B (8.4x and 17.8x smaller) respectively. That's a lot of growth potential for Solana and Avalanche even if this were a zero sum game (which it isn't because the overall pie can (and is currently) grow(ing)).
I had forgotten what Cosmos (ATOM) USP was. They provide a platform for developers to make their own blockchains (or applications using blockchains) which can communicate (transact) with other blockchains (or applications using blockchains) on the Cosmos system.

Injective (INJ), the native token of its namesake's layer 1 blockchain, surged to a record high of $39.15 on Tuesday to complete a 3,000% move to the upside over the course of 2023.

The token has risen by 28% in past 24-hours alone, with traders anticipating a wider altcoin rally following Solana's recent hype-fueled growth.

Injective is a Cosmos-based blockchain that combines elements of artificial intelligence (AI) with decentralized finance (DeFi). It currently has just $18 million in total value locked, according to DefiLlama, although the token has experienced $600 million in trading volume in the past 24-hours.

Decentralized applications (dApps) built on Injective can use AI algorithms to improve market efficiency and optimize decisions for users, for example trades on decentralized exchanges. Injective also describes itself as the first blockchain to offer "auto-executing smart contracts," which aims to increase efficiency.

AI hype or AI use case... Time will tell. If Injective matures, it's another value anchor for Cosmos.
A new one that seems to have strong momentum:
Layer 1 blockchain Sui, created by the team that led Meta's Diem crypto project, climbed into the top 10 decentralized finance (DeFi) rankings Tuesday, less than a year after inception, the project said.

The total value locked (TVL) has jumped by more than 1,000% in four months, catapulting the blockchain above more established incumbents such as Bitcoin and Cardano, as well as Coinbase's layer-2, Base. The dollar value of cryptocurrencies deposited in its decentralized finance (DeFi) protocols topped $430 million, making it the 10th-largest blockchain by TVL, Sui said. ...
Sui's mainnet went live in May 2023. It's a layer-1 blockchain, much like Ethereum or Bitcoin, but with a specific type of proof-of-stake consensus named delegated proof-of-stake. Its native token, (SUI), is used for validator and delegator staking, to pay gas fees and as a right on governance.
The SUI price surged 109% in January, extending the two-month winning streak to hit a record-high $1.65, according to CoinDesk data.

This tweet is not specific to any crypto token/platform, but highlights many use cases for tokenization (click on "show more" to see the full tweet). There are several crypto platforms that are focusing on developing tools for various applications in the list (rather trying to do everything at once):

Aside from THETA, here are some AI focused crypto plays:
Layer-1 blockchain NEAR's native token (NEAR) has almost doubled since March 5 as the hype surrounding Nvidia's (NVDA) upcoming annual conference continues to drive AI-related tokens to the upside.

Near Protocol co-founder and CEO Illia Polosukhin will be on a panel at the conference titled "Transforming AI" and will be hosted by Nvidia's founder and CEO Jensen Huang. His attendance and the upcoming release of Near Tasks, an artificial intelligence (AI) facet of the business, has sparked discussion over whether NEAR will work closely with Nvidia in the future. The company seems to be only crypto-related firm that will be presenting at the main panel.

Near's gains are mirrored across the crypto AI market, with the likes of (FET), the graph (GRT) and singularityNET (AGIX) all posting gains of more than 30% over the past week, according to CoinMarketCap. The CoinDesk 20 index (CD20) has risen by 9.18% in the same period.

I found this interesting:

The study examined the processing speed of the largest blockchains. The top 30 blockchains were selected based on total value locked (TVL) ranking on DefiLlama on May 15, 2024. Processing speed was measured using actual or realized transactions per second (TPS), and defined in terms of daily average in order to obtain standardized TPS for as many chains as possible. As a result, the highest real TPS calculated here may be higher or lower than other calculations. TPS was calculated using publicly available data from the respective blockchain explorers and Dune Analytics. Chains that lacked sufficient data were excluded from the study, namely Hyperliquid, PulseChain, Kava, Cardano and Rootstock.

Their methodology does not appear to consider the TPS with respect to scalability, which is where SUI is claiming that they are superior to Solana (meaning that as SUI grows more and activity increases, it will eventually overtake Solana on TPS metrics):

Reading through the comments on that CoinGecko tweet led me to this site which also gathers TPS metrics (but they don't include every chain/token):

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