It's Time To Revisit The Web 3/Crypto Ethos
First off, thank you for reading and as always, nothing you read or hear of my content is ever financial advice. It is simply content to help you think more about the ever changing landscape of finance/technology and where I believe we are headed in the future.
My goal in creating this Substack/Twitter (follow me @CryptoOnramp) is to onramp 100+ people into crypto through easy to understand descriptions of the various new technological concepts, so I would appreciate it if you could please subscribe and share if this article hits the spot!
This content is intended to provide a high level overview of concepts for beginnings looking to enter the space. If you are looking for more in-depth analysis regarding anything written below, I would strongly suggest creating a Twitter account and joining the Crypto Twitter space. Start by following a few of the same people that I do on @CryptoOnramp, or reach out to me via DM and I can suggest a few educational resources to dive deeper into the wide world of Web 3, crypto, and blockchains!
Given the recent events of the collapse of FTX and the blatant fraud committed by Sam Bankman-Fried, this article is dedicated to a number of short phrases/mantras to remind us of the ethos of Web3/crypto and why we are still here!
I refuse to spend any more collective effort in the space to dissect what happened and give attention to a criminal, but rather hope that you will keep a couple of these phrases in mind when interacting with any protocols/exchanges/characters in the space so that when the next negative event happens (and it will inevitably happen), your funds are safe.
If you are unfamiliar with the events of FTX, a simple Google search will return thousands of articles. Just try to avoid ones from the mainstream media, as “credible” journalistic sources like the New York Times have been able to write articles about FTX and SBF without using the word fraud or mentioning that FTX used and lost customer funds.
Shame on them.
Anyways… let’s begin!
Core Web3/Crypto Ethos Mantras
Protocols, not people. Code, not kings.
The core ethos of Web3 is decentralized, permissionless, trustless, self-custody. It is time to stop placing our reliance on people. Even the most noble people have personal incentives and can become bad actors if given the right opportunities. Protocols controlled by open-sourced smart contracts do not have those human urges, and are always fully transparent. We should never get to a point where we are idolizing some human figures within crypto and make them larger than life, because they will inevitably let us down.
“You either die a hero, or you live long enough to see yourself become the villain.”
And nobody wants to die.
Not your keys, not your crypto.
The main lesson in almost every hack/fraud/scam that has happened since the creation of the crypto space can be attributed to 1 thing: self-custody.
Bitcoin was created in 2009 by Satoshi Nakamoto based on a disgust of what a reliance on the banking system did to us in the 2008 financial crisis. Banks custody our wealth through bank accounts, mortgages, etc., and the federal reserve can inflate the money supply whenever they please to decrease our relative spending power.
Crypto was created to take power away from corporations and give it back to the people. A legitimate way to self-custody your own wealth.
In cases like FTX, people choose to keep their crypto on an exchange where they do not hold the private keys to the crypto wallet and trust actors like SBF, which makes them susceptible to events in which they can no longer access/withdraw the funds. While the price of crypto may drop significantly on black swan events such as this, I can sleep peacefully knowing that the amount of BTC and ETH I own remains the same.
Keep your crypto in a wallet in which you (and only you) hold the private keys.
If you don’t know the source of the yield, you are the yield.
Most crypto protocols offer an interest rate (aPY) in exchange for you staking or storing your tokens within their protocol or exchange. It is important to understand where that yield comes from. Perhaps it is protocol from the revenue generating fees on transactions? Yield from token supply inflation?
If you do not understand where the yield comes from, it is likely that your funds may be the source of the yield, and you are partaking in a pyramid scheme. Be weary of protocols that offer a fixed aPY forever. Legitimate sources of yield like investment returns or protocol fees will vary from month to month, and should result in a yield that constantly fluctuates.
Don’t trust, verify.
This can be described as DYOR (do your own research) as well.
More and more in real life, don’t trust any “credible” or “expert” sources that you may come across. More specifically in the Web 3 space, always make sure you do OWN due diligence before investing or interacting with a protocol. Do the research, and come to your own conclusions.
Trusting what you read on Twitter or a friend can lead to loss of funds, scams, rugpulls, etc. We are most vulnerable when we act with emotion and not logic.
Don’t trust what others have said, verify with your own eyes and brain.
Markets can remain irrational longer than you can remain solvent.
Sometimes, we look at market prices and think to ourselves that the market has overcorrected and will swing back hard in the opposite direction in the near future, so we choose to bet with bigger size than usual or use leverage.
I mean, I currently look at BTC price and think its way undervalued.
However, it’s often important to remember that probabilities or reason only make sense over a large sample size, which is years in investing.
A simple example of this is casino gambling. Seeing the ball at a roulette table hit red 8 times in a row doesn’t mean you should place all of your chips on black for the 9th spin. The sample size is simply too small and your duration of play at the table will not be long enough to see the data average itself out over the long run.
An illusion of short term rational correction will lead you to make larger bets than you normally would reasonably do, which inevitably leads to disaster.
The #1 key to investing is to never put yourself in a position in which you can no longer play the game. You always have a chance only if you can keep playing. Always protect your capital, and never go all in on short term predictions.
“There are only three ways a smart person can go broke: liquor, ladies, and leverage” – Charlie Munger
Never use leverage. If you are smart enough, you do not need leverage to make money, and if you’re not smart, you shouldn’t be using it.
Leverage may work out in the short run, but eventually it will catch up to you.
Just ask 3AC and Alameda.
Hopefully, you’re able to find a couple of mantras/phrases from the above that resonate with you, and come to mind in moments where you’re vulnerable to protect you from losing any precious crypto.
If you’ve read this far, it is likely that you are interested in the Web 3/crypto space, and still believe in it’s bright future despite recent events.
WAGMI (we all gonna make it) was a huge saying back in the bull run, but truthfully it isn’t true. A number of us will either lose faith in the space, or lose our funds due to scams/hacks/etc.
Remembering these mantras will help you survive while we wait for the inevitable next wave of Web 3 acceptance/adoption.