This is a work in-progress.
The target audience for this series and work are, Rebel Coding and idioke contributors, as well as those recently entering financial stability.
Financial markets can be a daunting place, web3 antics aside; all to easy to get lost, or worse.
It is for this reason that I find it so critical that entry-level material be created and routinely maintained. These resources will help guide anyone from browser wallet, to DAOs and cold-storage; along with all of the why’s in-between. Followed up with how to manage money for long, short and mid-term, aspirations.
Concurrent to the improvement of this initial guide, the monthly $500 dollar challenge will be initiated in April. This will be a weekly YouTube series documenting what might be done in the month of April with $500.
This is an introduction to the web3 space for anyone just entering, or interested in entering, the space. We’ll be covering the four basic pillars (tokens, NFTs, DeFi & DAOs), providing examples, and entrance methodologies, and more!
Nothing below is financial advice and is purely for educational purposes.
First rule of web3/crypto, only put in money that you are willing to burn!
Better yet, get paid in crypto ~
The market is too volatile, and may never entirely calm down … So why even get into the space !?!
Because it’s pushing the boundaries of what is next … not just with (digital) art, but with social interactions, community organization and economic movement.
The revolutionary core of web3/crypto technologies is that they have taken the financial instruments used by the banking industry for the past 100’s of years out of esoteric obscurity, and into the light for all to explore, understand and modify.
This is as equally dangerous as it is inspiring.
So without any further adieu, let’s get started:
Tokens vs Coins
Bitcoin is likely the most well-known coin; this is crypto-graphic entity that is core to a specific blockchain. Etherem (ETH), Solana (SOL), Terra (LUNA), Near (NEAR) are all other examples of coins. Each are the core currency of their respective blockchain.
Tokens are built off of the these core coins.
Ethereum was the first blockchain to popularize creating tokens, with such notable tokens as $WRITE, $CABIN & FWB. Anyone can make a token … provided they have enough money for ‘gas fees’.
About gas fees, they are likely really simple to comprehend for many people, but not for me! BASICALLY, gas fees are transaction costs … credit cards tax businesses, platforms tax users, processing fees, etc … crypto has the same shit.
Later we’ll go a bit more in-depth about gas fees.
Why create a token ?
A few years ago people did go a bit crazy with what they called ICOs … introductory coin offers … mimicking stock IPOs … lots of people lost lots of money !!!
Though the idea sticks, tokens can be created to represent shares in an community; and can be traded for other assets such as USDC … which can be used to purchase materials, labor and more in furtherance of the organizational goal. While your new token and begin to be traded publicly; to rise and fall with the markets discernment of its value.
A few individuals have gone so far as to tokenize their own namesakes; giving up certain aspects of the daily decision making processes to their shareholders. As a matter of fact, this author has gone so far as to join their ranks …
Buy your choice of token via platform … I personally prefer to use FTX, though Coinbase, Kraken, kubicoin and Binance are a few others.
You’ll also need to have a wallet that aligns with your chosen purchases … Ethereum, Binance, and Solana are primary wallet types; though there are others.
Decentralized Finance vs What ?!?
Ok, let’s just start with the basic … we’ve got coins and tokens; both are able to be exchanged on … what ? On currency exchanges of course; but only the best decentralized, and therefore unregulated, crypto-currency exchanges!!
This is part of the revolution of making these tools available for all to explore, and modify … There are also centralized exchanges, most notable being FTX & Coinbase, who are regulated …
But why ..?
To get a better interest rate that what an institutional bank will give you.
When you put your money in the bank, it does not just sit there … rather the bank loans your money out to others for a fee … and your savings rate is your cut of that fee!
What if that fee, and process, were transparent; and your cut a better reflection of the money being made by the transaction ?!
Welcome to Old DeCent Buffet
The idea of making banking instruments open and available for anyone and everyone sounds really cool, it is also opening up a pandora’s box … because the variety of financial instruments/mechanisms available is some truly heady number-games!
The instrument we already mentioned is simple lending … you allow others to use your money to do stuff … and they promise to pay you back, with interest. Basic lending.
Ok, but what are they then doing with your money, or how do they exchange it … where does the exchange part come in ??
**Liquidity Pools. **In foreign exchange currency markets, they are referred to as currency pairs, USD-EUR, EUR-JPN, etc … We’ve already established that tokens and coins can be traded in a similar fashion … a liquidity pool is a place were reserves of both currencies are held in common … if someone wants a bit of Currency A, they need to put in a bit of Currency B, proportional to the exchange rate; and boom, transaction complete.
And this is the basic outline of what’s called an Automated Money-Market, or AMM; and the basis of such platforms as UniSwap, Radium and more … So instead of lending your money, you could provide it to the liquidity pool … for what though !?
Same with foreign exchange markets, and retail markets, all transactions will have a transaction, or processing, fee … by providing liquidity to the pool, you’ll get a cut of those fees; and this is called yield farming.
Curb Your Enthusiasm Please …
Which is super cool, until folks screw themselves over by doing leveraged yield farming … remember that money you originally loaned out for someone else to use … leveraged yield-farming is what they’re up to.
These are all tools taken from already existing financial markets, mind you … though the idea goes … if you’ve got $100, the platform will match your $100 … maybe even more than that … 2x, 3x, 5x, 10x-ing your investment … 10x-ing your gains … 10x-ing your losses. And this is called leveraged trading, you are using existing funds as a leverage to borrow more, and using that money to earn the same interest, though on a greater lump of assets.
The problem being, given markets with volatile price fluctuations … if the price goes below a certain point, one can be easily liquidated … meaning, the platform takes your original $100 in an attempt to recover some of the money you borrowed; to pay your lenders.
What is ReFi ..?
Good question … we’re all kind of confused; though there are some preliminary examples. Using markets to measure CO2 emissions and credits …
NFTs & the Art of the JPEG
Whew … some people really hated NFTs for a while … and aspects of the ire are entirely reasonable … given the information available and the growth society is experiencing.
The ecological cost is considerable … though this is likely the first time in contemporary society that a noticeable segment is concerned with the supply chain cost of their luxury. And we’ve never considered the social cost of any other currency.
The ire compounded by well-deserved feeling of humiliation. This gets taken out on any near by target; and outbursts can be triggered by truly tangential echoes.
On their face, NFT’s are sometimes cool artwork … or nifty pictures … or even a song, or video !!!
NFT stands for non-fungible-token … recognize the last word?
Ridiculous … $1,000,000+ for a JSON file … uff …
On their own NFT’s do offer a few upgrades … accreditation to the originating artist is written into the contracts (though notably the artist behind the BAYC brand has been excluded from their rise ... eeks.) Royalties are maintained in perpetuity.
Smart-contracts -- these are the underlying programs used to negotiate the exchange of assets and entities on blockchains. Read our Dev into to learn more.
Ownership & NFTs
Though we are still awaiting the PUNK / BAYC moment with audio NFTs, they are primed to serve the collective ownership aspect of NFT’s. By selling either shares, or editions, community ownership over IP can be assumed by a group of individuals.
This is already enabling artists to focus on their art, rather than fretting over Spotify listens, or YouTube views … and while at present, NFTs are not plug-able into traditional digital ecosystems; it is not impossible to fathom happening in the future.
What will be the first collectively owned TOP 10 Billboard hit ?!?
Imagine being able to be one of the first 1,000 supporters of such a song, and receiving a portion of the royalties !?!
NEED MORE INFO
Entrance Method: Carefully, very carefully.
We’ll provide a more in-depth paragraph after the DAO section.
The DAO of NOW
DAO’s are an evolution of the childhood clubhouse … but a considerable evolution, nonetheless. Or rather, this is the best way to look at them presently … clubhouse, meet lemonade stand. Or if we want to treat them as chic, they’re digital country clubs; with a join bank-account.
The two primary components of a DAO being said joint bank account, and method for voting on proposals. That’s it … the revolution being the digital automation of it all.
Decentralized Autonomous Organization
That is what DAO stands for … the theory being that by automating the proposal and voting process in front of the bank account … decisions on expenditures can be made in a decentralized and autonomous manner.
And this is still largely an aspiration, rather than a definite structure … so much of the communication remains between human hearts, and minds, which are stubborn, fickle and in perpetual states of growth themselves.
Though it has become common that NFTs are the key to entering certain DAOs …
When the NFT was minted, the funds were put in to a jointly-held treasury … and your NFT may give you the power of a vote in regards to the decisions and collective behavior of the community.