This episode is brief and covers the essential differences between using blockchain-backed money (like Bitcoin) and using paper-backed money. For those who only know of Bitcoin from the Bitcoin mass media hype of 2017, and now the Bitcoin ‘crash’ of 2018: this one minute 30 second episode was made for you.

Audio length 00:01:24

Episode 3: Show Notes

Jackson Palmer, the creator of Dogecoin — the alt-coin that uses the Shiba Inu as its logo and which was originally introduced as nothing more than a joke currency — wrote an article recently published by Vice on the current state of cryptocurrency. Below are quotes from his post that I’ve pulled together to go along with Episode 3 of this podcast. Palmer’s post helped re-awaken many readers to a more essential perspective that cuts through the panic-mania now inherently and unfortunately implied by anything with the word ‘crypto’ in its name.

“In 2013, the vision for the future of cryptocurrencies seemed relatively clear: To deliver a peer-to-peer alternative to cash that, through decentralization, did away with the need for trust in financial institutions, which the 2008 crisis showed to be unscrupulous, and often corrupt. Bitcoin, which ignited the cryptocurrency movement in 2009, brought real technical innovation to the table in achieving this vision. Back then, I hoped that through the power of community, a project such as Dogecoin may help drive further awareness of and innovation in that technology.

However, as I quickly learned, a passionate community of people throwing around money is like blood in the water to the shark-like scammers and opportunists who, in late 2014, co-opted the Dogecoin community and fleeced its members for millions of dollars. I saw the space being overrun by opportunists looking to make a buck, rather than people investing in evolving the technology (which, even back then, we knew was facing real technical issues.) Over the following two years, I monitored the space from afar. What I noticed was a shift away from developing the core technology powering these networks to churning out shiny new projects that shoehorned in “blockchain” wherever possible.”

“There is a popular saying in financial markets along the lines of, “When your taxi driver is telling you to buy stock, you know it’s time to sell.” Basically, when a stranger with (presumably) little experience in the stock market is giving you tips, it’s an indication that the market is too popular for its own good. Having been out of the cryptocurrency space for two years, in early 2017 when my Uber drivers started talking to me about Ethereum, I knew we were entering a renewed period of speculative crypto-mania.”

“Over the past year we’ve seen the collective market cap of all cryptocurrency assets balloon to more than $700B USD, largely because of speculative trading. Everyday, it seems there is a fresh news article about the 20 year-old who became a millionaire in Bitcoin. Or in the case of my own creation — Dogecoin — how a currency that hasn’t received a software update since 2015 briefly passed a $2 billion market cap ($1.5 billion at the time of writing).”

“Dogecoin’s valuation is the result of market mania that has resulted in inexperienced investors buying up low-priced assets on a whim, hoping that they will follow Bitcoin’s meteoric trajectory. This irrational enthusiasm, coupled with large players manipulating largely unregulated markets, has resulted in a weekly cycle of rallies and crashes across just about every crypto asset.

It’s great to see mainstream excitement about cryptocurrency, but the continued focus on price and potential to “get rich quick” distracts from the laudable goals that projects like Bitcoin set out with.”

“Given the immense price increases and media hype, there’s a tendency to see 2017 as the best year for cryptocurrencies yet, but I would argue the opposite. In many ways, 2017 marked the year that cryptocurrency stopped being about technologically innovative peer-to-peer cash and instead essentially became a new, unregulated penny stock market. 2017 was also the year that the very institutions Bitcoin originally sought to dismantle have begun to co-opt it for profit.

Still, I can’t concede that it’s game over for cryptocurrencies. It’s difficult to predict how much the current crypto bubble will inflate, or when it’ll burst (not if). The burning question on my mind is this: Once the cryptocurrency price bubble pops and takes all the hype with it, will the community be able to recover the energy it needs to build real, innovative technology once again?”

As someone with a high dose of optimism and much faith in the cryptocurrency movement, this ending question raised real doubt and concern in my mind, for the first time ever, over whether or not this could be overcome. Then a few hours later, I came across a completely unrelated yet somehow perfectly-fitted article from the Financial Times, written by Izabella Kaminska, which had an answer:

“Unfortunately, no matter how much protocol is coded into an alternative system, the incentive for people to cheat or leave the system if and when inequality gets too severe will always be there…”

“Which is why if any altcoin system stands a chance of outwitting the central bank… at it’s own game, it’s unlikely to be one obsessed with re-concentrating power and staving off the “oppressive” forces of central banks. No, it will more likely be something like Dogecoin, a system that understands that a benevolent, fun ideology and a good reputation for sharing the wealth is essential to maintaining system discipline.”

Early stage investments will be volatile. Currency systems will become unequal. And investors’ faith will constantly be tested. Keep in mind that economic time, like biological time, is not synchronized with the man made clock. Economic time is not linear day to day, month to month, or year to year. If an investment goes no where for months, it wasn’t a waste of your time because the very follow month, it could rise 10 years just like that.

So invest in what you believe will be part of the future. Whether that’s Bitcoin, Solar Power, MoviePass (yikes), or the US economy. Invest in many things and stay diverse. If you’re don’t know whether to invest — or whether you ‘believe’ in something or not — don’t wait for answers, search for them. If you believe in something, don’t wait for its adoption, campaign for it. Then let time do its thing.