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As a Governing Council member of ASCENT Foundation, I and fellow ASCENTer Rutvika Charegaonkar curate the ASCENT Finance Special Interest Group with around 250+ entrepreneur members. Many members were interested in knowing about cryptos (the slang for Cryptocurrencies). So with the help of a couple of fellow ASCENT members, we arranged an online seminar by two Crypto experts (Nirali Solani and Ajeet Khurana). More than 250 members attended this seminar held in May 2021. Though this seminar touched upon few essential aspects of cryptos, most felt it went over their heads. Some members then floated the idea of Crypto Learning Circle. I jumped at the opportunity to lead the group. I thought this would help me understand cryptos in a bit more depth and structure my learning.

Our group decided the course timeline at three months, and each month was dedicated to one aspect of learning. We also modified Simon Sinek’s Golden Circle sequence and WHY, WHAT and HOW were defined as the themes for each month. The WHY took care of causes and course of history that led to crypto’s entry into the financial world, and WHAT addressed the different aspects of the crypto-currencies investments universe. The HOW section focused on hands-on learning of the investment process. Here is the distilled version of those three months of learning.

Why

To understand cryptocurrency, we should first know currencies, and for that, understanding money is essential.

Around 6000 BC, Mesopotamians started the exchange of goods through barter arrangements. But the barter had its pitfalls. A person needed grains and had a horse to exchange for them. But how many people in that person’s close network wanted a horse and had grains to offer in exchange at the same time? That was the problem with barter.  The invention of money as a means for the sale of goods was a forward step. Humans could exchange goods across timelines by using coins as a “store of value”. But then, over time, carrying a large number of gold coins (or gold bricks) for transactions across cities became cumbersome and risky. That’s when the traders started depositing the gold with banks and, in exchange, obtained IOUs (I owe You) or certificates that confirmed their gold deposits in the bank. These certificates became the currency that the business community started exchanging against goods. But then banks quickly understood that not everyone would come back and claim their gold at once. They can simply loan more money to traders (by issuing IOU certificates without any gold deposits) and increase their fee income. The money in the market swelled beyond the value of gold in the bank vaults. Exactly 50 years back, in 1971, this pegging of gold with money supply was formally abolished by the Nixon government and the money that we now use became Fiat Money. It’s the money that we believe in and use due to our sheer trust in the issuer of money, i.e. the government (and is not backed by any precious commodity like gold.)

However, money has a long history of abuse by kings, rulers and governments. In the middle of the sixteenth century, King Henry VIII had reduced the gold and silver content in coins and replaced it with copper. The king had a lavish lifestyle but not enough tax income to support that. The coin debasement (adulteration) was a quick way to generate extra money. Similarly, even today, when governments worldwide don’t have enough sources of income to meet their expenditure, they simply print more money. When the money supply increases, its value decreases. For buying the same goods, you now need to pay more. The money oversupply results in inflation, and it’s just another tax on your income.

Another irritating yet essential part of our financial systems is banks. We need them to validate each transaction and maintain a ledger of all inward-outward financial entries. These banks are inefficient (for overseas transfers, it takes days for the money to appear in your bank account), and the transaction costs are high.

But what if there is a system where we don’t need banks to record these transactions? What if, without any intermediary bank, a network of computers can make Peer-to-Peer payments and community members maintain the transaction ledger for a fee? What if we could keep the money supply constant (or fixed), thus avoiding inflation?

These ideas are at the heart of Bitcoin, the first cryptocurrency that came into being in 2009.

That’s a super-short history of cryptocurrency genesis. Now let’s understand these cryptocurrencies and the concepts around them.

What

Cryptocurrencies are a digital form of currencies. These can be exchanged in a Peer-to-Peer network without involving any central intermediary like a bank. The records of all these transactions are maintained and validated in a public electronic ledger by developers. The developer community needs incentives to keep the records and hence, gets some coins whenever they validate a transaction. (that’s bitcoin mining for you). In general, the name Bitcoin is synonymous with cryptocurrency. However, there are thousands of cryptocurrencies in the market. The entire crypto ecosystem revolves around blockchains, which enable the issuance of currencies. Though Bitcoin started as a mode of payment for stuff (digital currency as legal tender), new currencies like Ethereum have redefined the use cases. Ethereum blockchain is used for Decentralised Finance (Defi), where Smart Contacts are built for many applications like lending, insurance, land records etc. Some of the other vital cryptocurrencies and platforms are Litecoin, Cardano, Ripple, Polkadot and Binance. There are thousands of cryptocurrencies in circulation currently, and I can’t explain them in this short article.

The cryptocurrency world is vast. Apart from the cryptos mentioned above, there is another universe of altcoins, stablecoins and coins/tokens built on Ethereum’s ERC20 standards. You finish understanding these, and you would have to master the nuances of public keys, private keys, hot wallets, cold wallets, Metamask etc. That’s essential learning for buying, transferring and storing cryptos. And not just that, you also need to make sense of NFTs (Non-Fungible Tokens) and how art, designs, events, movies and even tweets are turning into NFT and getting insane valuations. The list goes on and on, and you are still scratching the surface.

All these learnings aim at investing in cryptocurrencies and making some intelligent bets. Our next step was to determine the best ways to invest in cryptos and dos/don’ts around that subject.

How

For investments in stocks, you need to open a trading account with a stock exchange. Similarly, if you are not mining the bitcoins (or other cryptos), the only way to own them is to buy them on Crypto exchanges. These exchanges are mainly similar to stock exchanges when it comes to onboarding or KYC procedures. Even the buying procedure is relatively similar. However, when it comes to storing or transferring these cryptos, the processes are complex and demand abundant caution from the buyer’s end. As there are no intermediaries and the sale/buy transaction is between peers, a wrong transfer can be devastating. The transfer wallet addresses are long strings of alphabets, characters and numbers, and a single missed character can make you lose your entire transfer. Such mistakes have cost millions of dollars to investors. Apart from these, stealing cryptos from exchanges through hacks or stealing them from investors’ hot wallets (online wallets, either on the web or on the phone) is quite common. Hence, storing them on a cold wallet (a small USB like device that’s not connected to the internet) is relatively standard.

Like IPOs in traditional stock markets, we have ICOs (Initial Coin Offerings) in the crypto sphere. Entrepreneurs publish the details of their crypto projects through White Papers and raise funds by issuing coins. But everything here is not hunky-dory. Large scale frauds are pretty routine. The use of flashy online PR and social media hype is a norm for launching fictitious projects. Unfortunately, Investors buy these coins at high valuations, then the owners dump their holdings at a premium and vanish from the scene (pump-and-dump schemes). Thousands of investors have burnt their fingers due to the subject’s complexity and lack of domain knowledge. (I have been studying this subject for the last 3-4 months, and I can barely say I know this around 2-3%)

After having come this far, you must be eager to know what’s the bottom line. Should you invest in cryptos or not, and which crypto is going to give 100x returns? I am afraid I don’t know the answers yet. But here are few deductions I have arrived at after the last three months.

1. The current crypto space is like the 90s of the internet. The technology is promising and has many use cases. It can change many industries fundamentally, especially finance, banking, money transfer, investments etc.
2. Bitcoin is unlikely to be a digital currency that we will use on a day-to-day basis. Due to its decentralised nature & anonymity, most governments will fight it tooth and nail and resist becoming a “legal tender”. It’s more likely that Bitcoin will become “Gold Standard” due to its finite stock (The maximum no of bitcoins would be 21 million & that’s hardcoded in its blockchain). People will invest in it as a “store of value” or hedge against “traditional investments”.
3. Ethereum derives its value from not being a cryptocurrency but an ecosystem for Decentralised Applications (DApps). Ethereum and its forks can fundamentally change many industries. Ether (currency on Ethereum blockchain) would continue to appreciate as it’s a must-buy for building projects on the Ethereum Network.
4. Among the thousands of currencies and tokens, other attractive currencies are Litecoin, Cardano, Polkadot, Stellar, Monero, Binance and a few more. I still haven’t been able to study them in detail, and any causal comment would be misleading. I would urge you to explore more on this.
5. Crypto is like a Wild West, and you are on your own. If you make mistakes and lose your investments, there is no legal recourse. There is no central authority or intermediary to whom you can take your disputes. 

During these three months of learning cryptos, I gained some interesting insights on “Learning” as a concept. Here are those:

• The most prominent university in the world is YouTube. You just have to think of anything to learn, and there are excellent videos about that on YouTube. My entire course of around 40 lessons is mostly YouTube videos viewed by thousands of people.
• People’s attention span has become way shorter. It’s difficult for people to dedicate more than 30 minutes to a single task at a stretch. To ensure engagement, I had to keep most of the videos between 15-20 minutes. Had the videos been longer, I would have had a difficult time holding the cohort together. (Most popular and high viewership videos on YouTube are around 5-6 minutes long).
• People have lost their ability to sit still and read long articles. As people cannot read without getting distracted, the most avoided content consumption is Long Form articles. During my course, I just had two long-form articles as crypto lessons, and I got feedback from many members that they could not finish the whole thing.
• People love quiz. The enthusiasts want to know if their understandings are correct. Adding quiz during a learning process is an excellent engagement tool and works wonders.

Learning and then teaching those learnings provides the highest retention rate of knowledge. I am happy that I could seize this opportunity, and while helping others fathom it, I could dig deeper into this cryptocurrency rabbit hole. Many thanks to ASCENT Finance Special Interest Group members for initiating this and my Crypto Learning Group members on Telegram for bearing with me until now (Our course ends on 30^th August)

Note 1

For those who want to improve their attention span and thus productivity, I would recommend two books. One is Atomic Habits by James Clear, and the other is Deep Work by Cal Newport.

Note 2

I would be compiling the courseware and the quiz questions on a Notion page in early September. Those who would like to access this courseware can write to me at sarnobat.sudhir@gmail.com & I would be happy to provide them access. I will need the email id that you would use to log in to Notion.

About The Author

Credits: Sudhir Sarnobat, Director & Chief Transformation Officer, Anish Pharmequip Pvt Ltd, Member of ASCENT Foundation