Crypto in Plain English - by cryptohunt.it

Latest Episodes:

What is CeFi (Centralized Finance) and does it exist in crypto? - Crypto in Plain English - Episode 193 - by cryptohunt.it Jun 23, 2022

Show notes

What is CeFi (Centralized Finance) and does it exist in crypto?

Welcome to our cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

CeFi, short for “Centralized Finance”, refers to a form of banking or trading where your money is either held by a centralized organization, or passes through it.

Traditionally, this concept obviously applies to the existing financial system: Banks, stock exchanges, etc. are all centralized. But you’d be surprised to hear: It also exists in a world that strives to be decentralized: Crypto!

The thing is: When you buy crypto through an exchange like Coinbase, that’s CeFi, because there is still a company aggregating all the business and doing all the work. The same for stable tokens that have a reserve managed by a single entity, like USDC. Or those lending portals like Celsius that made negative headlines recently.

And, ideology aside, that isn’t a bad thing per se. Coinbase can offer you free token swaps because they technically don’t buy or sell anything. They just move things around in an internal account. And managing a stablecoin reserve through a single entity allows that company to do all the regulatory and compliance work that helps with building consumer trust.

But it could be a bad thing when that organization doesn’t mean well or is incompetent. In the case of Celsius for example, they locked all customer withdrawals. So you are exposed to arbitrary decisions those companies make about your money.

As you see… there are pros and cons. Is CeFi good or bad then? As always, it depends!

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.

What is the Celsius Network and why did it freeze user withdrawals? - Crypto in Plain English - Episode 192 - by cryptohunt.it Jun 22, 2022

Show notes

What is the Celsius Network and why did it freeze user withdrawals?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Today, let's take a quick look at the Celcius Network, a crypto lending company that promised high returns on deposits… until they froze customers’ withdrawals.

So, what happened? Let’s look at how their company worked to understand what is going on here.

In a way, Celsius worked like a regular bank. If you put money into a normal checking account, it’s only there on paper. The bank actually takes that money and invests it, making a profit with the money you thought was just sitting there. Governments, however, limit what percentage banks can invest, and how much risk they can take, to protect you, the customer – at least to some extent.

Celsius did all of these things, without any of the limitations. Returns were abnormally high, driven by borrowers who speculated on increasing crypto prices.

But Celsius also offered special deals: If you bought their Celsius token, they would often give you much higher rates of return. That also only worked as long as people kept buying in, inflating the token’s value.

In the end it all collapsed, driven by falling crypto prices. It is unclear, if customers will see the whopping $8bn of their money back.

So consider this: Is government intervention such a bad thing in these cases? Do we need a little more balance? As always, we’ll let you be the judge.

Could stablecoin Tether (USDT) collapse? And how? - Crypto in Plain English - Episode 191 - by cryptohunt.it Jun 21, 2022

Show notes

Could stablecoin Tether (USDT) collapse? And how?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Could Tether, the most popular so-called stablecoin, collapse? It's possible! Let's see how this would go down.

In order for Tether to "de-peg", meaning to drop significantly below the stabilized price of $1, two things would need to happen.

First, a run on the "bank": If enough people lose trust in USDT and want to exchange it back to US Dollars, Tether, the company behind it, would have to sell their significant reserves to make that happen.

Now, if people still don't trust that Tether has enough money to convert it all back to real, hard Dollars, step 2 kicks in: They will dump USDT on the open market for a discount, hoping to avoid the worst.

So, here's the big question: Why would people think Tether can't pay? Don't they claim to be over-collateralized, meaning they have more in the reserve than there are USDTs out there?

Allegedly, but nobody really knows the details. In fact, they have been sued by the US government for shady reporting multiple times. You'll have to assume that many of their assets are volatile in value – such as stocks and crypto. And with the recent wider market crash, Tether reserves might reach a tipping point.

So, will Tether collapse? Your guess is as good as ours. It might take another black swan event to make it trip, but there have been a few of those lately.

Regardless of where you stand on that: always think about the risk/reward of owning something that will never go over $1, but could lose peg and fall way below.

What is “fiat” 🚗? - Crypto in Plain English - Episode 190 - by cryptohunt.it Jun 20, 2022

Show notes

What is “fiat” 🚗?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

The crypto community often speaks of “fiat”, and no - they don't mean the Italian car maker, although we also think that is a cool company.

So what is “fiat” in the context of money?

Fiat is simply a government issued currency. The US Dollar is a great example, or the Euro.

What's more interesting though is, why fiat plays such an important role in the crypto world.

Everyday transactions anywhere in the world still require fiat. Crypto hasn't even made a dent yet – we are still very far away from a world of decentralized payment systems that were envisioned ever since Bitcoin launched over 13(!) years ago.

That also means that crypto has mostly been used as a means to speculate. And when you speculate, the value of your crypto portfolio is worth nothing in practice, if you don't cash out into fiat, that hard government backed cash.

And there you have it, that’s why fiat is so important - but maybe someday we'll all pay with crypto, or maybe fiat will even be blockchain-based. Interesting times ahead!

What is Jack Dorsey’s “web5”? - Crypto in Plain English - Episode 189 - by cryptohunt.it Jun 17, 2022

Show notes

What is Jack Dorsey’s “web5”?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Just as you thought you finally understand roughly what web3 means, Jack Dorsey – the co-founder of Twitter – is here to confuse you some more by introducing web5.

That’s right. Nevermind web4, we are jumping right to web5. And to make things worse, he’s releasing under a company called “TBD” - which usually stands for “to be determined”. But don’t worry, we are here to untangle his confusingly named new ideas.

His web5 wants to be a combination of web2, which represents the existing “big company controlled” internet and web3, the new wave of community owned and operated organizations. 2 + 3 equals 5. Yeah… we didn’t giggle either.

The greater idea is to give people control over their identity and data back.

Consider this example: If you sign up with Facebook, your account and all the content you post is stuck inside Facebook. You can only use it there. They can do with it what they want. If Facebook wants to go through your messages to target ads, they can and will do that.

Web5, in contrast, would provide an open service that allows you to keep those all in one place, and only you control them. Like we showed in yesterday’s episode, this is similar to crypto wallets, which also let you log into websites, or store credentials such as proof of ownership of digital art, on them. Those sites could then build traditional products like Facebook, making this the “2+3=5” hybrid approach.

And that’s also where our questions are about web5: What is it actually trying to do that wallets don’t already promise? We guess we’ll just have to wait and see.

And lastly, Dorsey and the web5 creators are big Bitcoin fans and propose to use it as the underlying technology to verify data. And you know how much we always bash Bitcoin for its energy footprint: We don’t think we really need another projects contributing to the destruction of our planet.

Can blockchains do more than just handle money? - Crypto in Plain English - Episode 188 - by cryptohunt.it Jun 16, 2022

Show notes

Can blockchains do more than just handle money?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

If you’ve followed this podcast closely, you will have likely asked yourself: If blockchains are giant decentralized databases, why’s everyone just trying to move money around?

And that’s a really great question. It is true: Crypto currencies, stable coins, smart contracts. Even NFTs - it’s all about money or some sort of asset representing value.

But we are here to tell you: Blockchains that can be programmed, such as Ethereum, can do anything the programmer wants. Think of it as simple logic: If this, then that.

They can replace your username and password for example. A wallet app lets you log into websites that support it. Your wallet becomes your online identity.

And there is more that you can do with that concept: You could record personal accomplishments, such as a learning credential, and attach it to your wallet. Because it is on the blockchain, anyone can verify it, and nobody can steal it.

And the possibilities are much larger. In fact, Jack Dorsey thinks that this type of use is going to be where blockchains really break free. And that’s why we’ll look into his idea of web5 in the next episode.

How large is the crypto market really? - Crypto in Plain English - Episode 187 - by cryptohunt.it Jun 15, 2022

Show notes

How large is the crypto market really?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Bitcoin, Ethereum, crypto winter, boom, crash. Crypto is in the news cycles all day long. So it should be reasonable to assume that everyone has a little crypto and it’s a massive market?

Surprisingly, not quite. Let’s take a deeper look at how much money is really floating around.

The best way to do this is to look at total market capitalization, which refers to all the money market value of all the traded crypto assets in the world.

As of today, there are around $1 trillion dollars worth of crypto assets out there. That’s a lot of money! But if you put it in perspective, you can see how early we still are if you believe that crypto is going to eventually take off.

Apple for example, the famous iPhone maker, is worth double of ALL of crypto as a single company. So is Saudi Aramco, the oil company. Microsoft is pretty close as well. And there are a whopping 2000x more US dollars in circulation than crypto.

So there you have it. You may think crypto is massive, or that a crypto winter would be a huge blow to any economy. But in reality, it still pales in comparison.

What is Staked Ethereum (stETH)? - Crypto in Plain English - Episode 186 - by cryptohunt.it Jun 14, 2022

Show notes

What is Staked Ethereum (stETH)?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

You may have heard the name “Staked Ethereum” in the news, as yet another crypto product is at risk of collapsing.

Staked Ethereum, also known as stETH is a token that solves a simple problem: How to participate in the Ethereum 2 transition and not lock up your funds.

Sounds more complicated than it is, so let’s take a step back.

At some point in the future, Ethereum will move to “proof of stake” which means that people who deposit money can take part in validating transactions and getting rewards for it. To get enough people to help validate in the future, the blockchain allows people to put their current Ethereum into an escrow, where it is locked up until the move, but earns interest.

The problem for many: It’s locked up, and nobody knows for sure when the move to Ethereum 2 happens.

That prompted a company called Lido to come up with a solution: They will take your Ethereum and put it in the escrow on your behalf, and give you their own token in return which you can use just like the real Ethereum. On top of that, they are paying you staking rewards, which are like interest. Once Ethereum 2 launches, it all gets exchanged back.

So, in theory - because one stEth will be exchanged back to one Ethereum, both will always have the same price. But if people start to doubt that they will get their money back, or think Ethereum 2 will take longer, they may start selling at a discount - and that is exactly what happened last week.

Currently, stEth is trending 5% under the actual value of Ethereum - so beware, those staking rewards may not be worth it!

What is the Bitcoin Lightnig network and why does it exist? - Crypto in Plain English - Episode 185 - by cryptohunt.it Jun 13, 2022

Show notes

What is the Bitcoin Lightnig network and why does it exist?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

By now, you’ve heard many times over that Bitcoin, the original blockchain, struggles with various problems, such as low transaction volumes, expensive transactions, and a tremendous negative impact on the environment.

And that’s why the Lightning Network was invented. It is a separate fast lane, trying to make Bitcoin more usable. If you think about it, it makes sense: Why invent all these hundreds of other blockchains when you can just fix Bitcoin’s problems?

So, let’s take a quick look at how it works. The lightning network essentially keeps transactions off the main record of the Bitcoin blockchain, and hence it doesn’t need to process them.

Say you are at a birthday party and someone bought a gift. They are collecting money from everyone. In the traditional Bitcoin world, everyone would have to leave, go to the bank, and send the person the money. They can then confirm the money has arrived and a few days later, you could finally gift the present.

In the Lightning network world, you would simply give them cash at the party, maybe even exchange something for smaller bills with another person. In the end, only the person who bought the gift would have to go to the bank.

And this is taking off by storm. Thanks to Jack Dorsey’s Cash App alone, there are already 80m people on the Lightnig network. Definitely one to keep an eye on.

How do I create my own coin? And should I? - Crypto in Plain English - Episode 184 - by cryptohunt.it Jun 10, 2022

Show notes

How do I create my own coin? And should I?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

How do I create my own crypto coin, and should I? Today, let's look at it: Is that possible? And is it worth it?

Yes, it is absolutely possible! Anyone can do it nowadays. So let's talk about the reasons you'd want to, how to do it, and why it's probably not worth it.

There are a few reasons people want to mint their own token. It could be just to learn, for fun, or because they hope it'll be worth something one day.

Well, let's say: You just feel like it - a fun project to teach you something new. There are a few steps to jump through.

You see, your own coin is basically a computer program on the blockchain. You could write it yourself, or copy a template and fill in the blanks. But you can also easily Google many tools that get this done for you if you want to take the easy route.

And that leads us to the next topic; Anyone can practically do this now. There are 10,000 traded coins alone that have some sort of market value, and yours isn't even among them. It's very unlikely your coin will be worth something, especially if there is nothing different about it. So you’re not really doing it for the money. On top of that, fees for some blockchains. Those can be tremendous, easily in the hundreds of dollars.

But you may decide that you can’t go wrong learning something, and we’d be with you on that one. So: A fun project to dig deeper into blockchains, or a colossal waste of money? You decide.

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