Why, oh Why, Did I Get Involved in Cryptocurrency?
I’m bad at math. In high school for some ungodly reason I was put into higher level algebra and calculus classes. It was a nightmare realm of pain and torment. I learned nothing. I retained nothing.
And in the years since, and despite the insistence of the hit, extremely-2000s CBS crime procedural NUMB3rs, most days I don’t use a whole bunch of calculations. So I thought I’d be the perfect kind of idiot, two years after the Bitcoin bubble burst into flames like the Hindenburg, to look into cryptocurrency.
If you did your taxes, you probably noticed the feds are sniffing around, trying to figure out who’s holding some. They’re just asking questions right now. But if they care, does that mean it’s worth it for the average person to get involved? Is there real money in fake money?
If these market caps, and the touted value of all of these various coins are to be believed, the answer is a resounding “apparently so.” Bitcoin: $200 billion with a B US dollars. Ethereum: $40 billion. XRP: $11 billion. Frigging Dogecoin? $300 million. The total value of these coins floating around is supposedly massive. It’s no surprise the feds want a piece of what’s being thrown around.
A regular person might see those large numbers, and their next question will probably be: “Ok fine, what the hell is a cryptocurrency?”
What The Hell Is a Cryptocurrency?
Like me, if you had heard of bitcoin before, it sounds like some shady nonsense that that weird guy you know is into and won’t shut up about. He talks about mining and staking and the secret word: blockchain. And all you can think is that it sounds like a pyramid scheme for Reddit dudes.
And you’re not wrong.
Cryptocurrencies are digital currencies that, rather than being backed by a government, are verified by a digital ledger secured with cryptography. Cryptocurrencies are meant to be decentralized, meaning they are not controlled by whoever issues the currency and are controlled by the mass of those who hold the currency collectively and separately.
For most of these coins, the integrity and security of who’s holding what and how much is answered by our friend El Blockchain. The blockchain is a peer-to-peer protocol for recording and checking (and checking, and checking, and checking) transactions. A transaction occurs and all of the other computers in the system validate the transaction. This occurs over and over again.
People can place servers on the network that will facilitate these transactions, sacrificing their GPUs to compute calculations the fastest. Those that do will be rewarded with transaction fees of the crypto in question. This is “mining.”
That’s basically the gist of blockchain as I understand it. If it’s wrong, screw you, let me have this.
The general selling point of cryptocurrency as a whole is that it isn’t beholden to a government, it’s anonymous, secure, and it’s trackable to the point of being untrackable. However, a lot of those benefits quickly vanish.
For instance, obtaining the damn currency.
Where The Hell Do You Get Crypto?
Cryptos don’t exist materially. You can’t go to the change machine at the laundromat, break a five and get ETH back. The way most people will break into crypto is by going to an exchange. Exchanges are websites and apps that do just that: they exchange currencies. Most of them allow you to “buy” crypto with actual money.
I used Coinbase after doing a cursory search for sites that didn’t look like they would steal everything from me. Hashtag not a sponsor.
Here’s where things get funny, or at least ironic. In order to buy crypto on the exchange, they want to verify your identity. So much for that whole anonymity thing. Full name, address, even your social security number. Also, as it turns out, you can’t get near crypto with a 10 foot pole in the state of New York. There goes the not beholden to governments part. The exchanges and even wallets all play very nicely with government regulations as it happens.
Another fun thing? No PayPal. You want to buy crypto, you gotta put down a credit card baby. And if you’re a savvy, privacy-minded person (you know, the kind of individual that’s probably looking into anonymous money in the first place), that site where you can set up burner credit cards to hide your real one so you can sign up for free trials? Not accepted, they somehow catch it.
Here’s the real kicker though. Your bank, you know, that place where you have all your money, the place that then uses your money to gamble and make a lot more money, and you pay them for the privilege? The terms of their operating agreement might expressly forbid doing anything at all with cryptocurrencies. Even though it’s your own money. Good stuff. Guess what the banks are doing. They’re investing in specific cryptos and protocols. Weird. Wild.
Cyberpunk 2020
There are approximately 5674546328765346372861534637286354683624 different cryptocurrencies and each one comes with a manifesto. It’s like picking a faction in an RPG.
Some are offshoots or splits from other currencies. This happens when the ledgers from mining don’t match, or when there are ideological differences. Each cryptocurrency comes with their own manifesto and quasi-belief system. It’s very weird. When you buy into a specific crypto, you’re putting stock into a network, and the goals and theories of the network. “Staking” or putting a crypto in reserve in a network to strengthen the network, is essentially saying “I believe in what this affiliation is doing.”
On one hand, it all sort of makes sense. In some kind of scenario in which we would need contactless, non-physical payments between different businesses and merchants and fiat currency isn’t dependable due to volatile global panics (that kind of thing would never happen, right?) the cases for crypto seem reasonable.
Here’s a digital wallet that will hold all of your different tokens, and look, you can pay anyone through the wallet. They can just scan your QR code. This merchant doesn’t take the currency you’re holding a lot of? No problem, just convert some of what you have to what you need right there in the wallet.
It’s easy to imagine this being a seamless way to make transactions when traveling abroad (ha, remember when people did that?) with vendors that might not all take one singular, unified currency. It feels like the future, at least in concept. The kind of thing you see in a sci-fi movie.
On the other, realistic and present hand, this stuff isn’t practical to use in the day-to-day. For one, all the 5467327645378 different currencies can only be understood relative to their value in USD. How much is .0000006546 Ethereum? Who would know that unless you can see the value in US dollars and cents (or Euros or other fiat currency) immediately next to it?
And your town’s supermarket won’t let you buy this week’s groceries in XRP or Bitcoin Cash (not to be confused with Bitcoin or Bitcoin Classic or Bitcoin SV. They’re like Coke varieties.) Most online shops don’t even take this nonsense either. At least not any of the sites you would use regularly, none of the big players.
In fact, I was buying a record or band merch or something not very long after I started this little experiment, and the checkout screen actually had a Bitcoin payment option below the usual credit card and PayPal choices. Great, I thought. I can see how this works. I have some of the imaginary money, I can put it to use. The link didn’t work. It just didn’t do anything. Currently, for the average, even internet and tech-savvy person, crypto is just not a valid payment method for anything.
It may be 2020, but cryptocurrencies are functionally useless for most people, despite bearing cybertech names like Ethereum, Neo, Tron, Cosmos, and Eos. Crypto is wrapped up in all of this cyberpunk jargon and lingo and each one wants to be the futuristic, universal “credit” currency you’d see in any sci-fi fiction, but it’s all window dressing.
Earning With Crypto
So you can’t buy anything with crypto, regular banks don’t want you to touch it, and buying into one feels like joining an online cult. What the hell can you do with cryptocurrencies, and is it worth it?
Short answer: probably not. Longer answer: Maybe?
Here’s what I did and discovered. I went through the whole ordeal with Coinbase where I had to sign away everything about myself (it’s cool, my identity’s been stolen and wasn’t worth stealing in the first place) and bought $75 real United States actual dollars worth of fake money.
And before some dude who thinks he’s a “crypto entrepreneur” or some shit like that comes at me and tries to MLM-me and say that’s not nearly enough to do anything with, buzz off. I went into this with the expectation that I would lose that $75, so I treated it like an entertainment purchase, as if I were buying a video game or something around that amount. If I made a couple bucks, all the better. If I hit 0.00, oh well, I got to have a little fun and write this odyssey. Aside from that I had no expectations, I did minimal research. I went in like an average person who might somehow buy crypto. As if that’s an actual case.
I bought Ethereum, as it seemed like one of the main coins. Using ETH, I traded for a bit of XRP as that’s the one with PNC-backing and it seemed like a good horse to get behind. All well and good, but aside from waiting until like stonks and the prices rise and you sell off when they’re high, how are people earning?
Back to staking. So, not every crypto can be staked, and because this is crypto, every single currency treats staking completely differently and of course, it gets weird. For example, NEO has a sub-currency called NEO GAS, which supposedly is what is used for transactions that use the NEO network. When you stake NEO, you don’t get paid back in NEO, you get paid in NEO GAS. I’ve made 11 cents in NEO GAS in three months. Rolling in it. To be fair, that is more than my bank interest has accrued. Although the bank interest does, you know, exist.
Tezos (XTZ), allows currency holders to stake coins, and after a period of 30 days will start to see returns deposited into their wallets every few days. According to my wallet, XTZ has an APY (Annual Percentage Yield) of 5.72%.
COMPOUND is another complicated one. It allows users to loan out specific amounts of crypto by essentially staking the coins. Whoever borrows the currencies (which could be several, hundreds even, people) pays interest to the loaner.
But the process is, surprise surprise, complicated. In my wallet, I can only lend DAI. DAI is a “stable coin” which means that it aims to always be as close to the actual value of the US dollar as possible, and it is Ethereum based. So I needed to use Ethereum to trade for DAI, stake DAI with COMP, allowing it to be borrowed by decentralized users that will never know where their coins are coming from, and I’ll never know where they’re going.
Then, my returns come in in the form of another currency called COMPOUND DAI. Not to be confused with COMPOUND or DAI. All three are different. Sufficiently lost? Yeah me too. When I want to withdraw my funds, with the interest accrued, they’re turned back into DAI. Why this third currency needs to happen, I have no idea. Also, the APY on COMPOUND is variable, so the interest earned changes every day. Some days it’s as high as 8%, the next it might be 1.72%.
Should You Bother?
All told, I’ve actually just about doubled my theoretical money. Starting with that $75, staking and interest, along with occasionally claiming some coins Coinbase gives away if you watch a couple PowerPoint presentations, my wallet currently fluctuates between $140–150ish dollars. I peaked in the $170 range, when I clearly should have sold off, but I stopped checking for like a month. Them’s the breaks.
But nah, no one should really bother with this nonsense. Because in order for me to even cash out, I would need to trade all of my weirder coins for something mainstream like Ethereum, where I’d lose some in the mining fees. Then I’d need to sell them for USD, where I would also lose in the transaction fees. So by then, who knows what that $140 actually looks like by the end.
It’s been a fun little thing to check on. If there’s some kind of crazy boom, I might make a bit. But otherwise this artificial money is going to sit, and I can watch the stonks go up every so often. Or forget about it entirely.
