As part of my practical experience for my Personal MBA, I am documenting my experience using developing my understanding of cryptocurrencies, specifically Acorn which is aiming to “build a blockchain based crowdfunding platform that’s the first to be free and open to any legal project in any country.”
DISCLAIMER – The below is the opposite of a recommendation, it is not investing by what I consider to be investing, I consider the money used (and lost or gained) as tuition fees.
Is it the future?
It is highly speculative.
It is a bubble.
It is too big too ignore.
I am new (late?) to the crypto party. I arrived 2 weeks ago, so I do not understand enough, but perhaps my (mis)understanding is simple enough to be useful. It is probably wrong, but maybe what little I’ve learnt will help others.
I have already seen 47% dive in my first week, the worst week since 2013 and a 49% upswing in my second week (note that doesn’t leave me in the same position, it still leaves me about 22% down). There is a reason the catch word in the Crypto-world is “HODL” – Hold On for Dear Life.
There seem to be 3 stereotypical reactions when it comes to cryptocurrencies:
- I kind of think I understand it, but don’t really, so just go with “clearly it’s a bubble”
- I don’t fully understand it, so I just tortuously explain what little I know until I seem clever
- Huh, I’ve heard of it, puppies
I was in the first category and I’m trying to avoid the second. I wanted to take time to understand it.
The reality is that there is still a relatively low volume being traded, so it is natural that there are price swings as big players can drive price fluctuations. It has now also become more mainstream, with investments funds wanting a balanced exposure to the market. So, as cryptocurrencies have become more significant, the funds have bought more to balance their exposure, driving up demand.
I do not know if we will see another surge like Bitcoin, but there are a number of other cryptocurrencies establishing themselves and I wanted to understand more, so it was time for an experiment.
The experiment – to improve my understanding
“I hear and I forget. I see and I remember. I do and I understand.” – Confucius
I found the terminology and mechanisms confusing, like trying to explain theoretically how to drive, it is better to get some basics and then actually just give it a go in a low risk environment. I decided to get some skin in the game. I was happy to pay the “school fees”, as needed, to learn.
I realise that it is speculating, not investing, but there does appear to be some asymmetrical risk. The value could drop to zero, but it could also increase multiple times. I do not know the likelihood of each possibility, which is why I say it is speculating.
I took £400, half for purchasing Decred and half Acorn, it is enough to make it interesting, but not so much that if it went to zero, I would be destitute. It needed to be nominal/but noticeable amount. For some this may be £30, others £300. There are fees along the way, some are set, others are a %, so it probably isn’t worth doing for too small an amount. There is also a very real risk you could lose your money by entering the wrong information, literally lost in (cyber)space.
I have included the mechanisms I used, which generally were amongst the biggest and provide a more intuitive user experience. They are not necessarily the cheapest or the best.
Step 1 – The bank – Buying Ethereum – I used Coinbase (Referral link)
I call it “the bank”, as the closest analogy I can think of. This was the first step, to convert pounds into one of the bigger/more established cryptocurrencies. It is my understanding that they hold it on your behalf, like a bank does.
I bought £200 of Ethereum.
Step 2 – The Wallet – Storing my Ethereum – I used Exodus
Exodus is a desktop based wallet, which can keep 23 of the more common currencies. If I lose my wallet because my laptop crashes, I can restore it by using a 12 keyword phrase. I lose both and it’s again lost to cyberspace. It’s security is it’s risk.
I sent £190 of Ethereum from Coinbase to my wallet in Exodus, using my unique address, which I copied from Exodus. £190 was what I had left after fees. Roughly £7.50 for GBP to ETH and £2.50 withdrawal fee.
Step 3 – The Exchange – Speculating on Decred – I used Exodus again
Exodus has a built-in exchange for what is currently 23 currencies. An alternative is a much bigger exchange such as Binance.
I exchanged my Ethereum for Decred. Paying some more fees, which were difficult to conceptualise with all the decimal points and a currency I’m still familiarising myself with.
I chose Decred, and plan to hold it for the long term, because I read somewhere that it had a good team and they were looking to overcome some of the shortcomings of Bitcoin. Bitcoin is not currently a ready substitute for traditional currencies because of transaction fees and speed. Making it more like holding gold.
The truth is that I didn’t do a lot of investigating alternatives or the validity of what I had read. That wasn’t the purpose of the experiment.
Step 4 – Acorn – My first ICO – Initial Coin Offering
ICOs are a bit like buying an off-plan house. A great opportunity to get a discounted prize, but it comes with additional risks in that you don’t know what the market will be doing when it’s ready and simply, you don’t know what you will get in the end.
Acorn and a couple of interested mates from work are the reason I finally decided to step out of my “It’s a bubble” bubble. I needed to learn the mechanics if I wanted to take advantage of their 50% pre-launch discount.
Acorn is a bold and ambitious step towards further liberalising crowdfunding, with their own cryptocurrency as a a key pillar. Who knows if they will succeed? – I hope they do.
Their primary pitch is that most Crowdfunding platforms are an exclusive club. My own experience with Crowdfunding is that it is a herd mentality and to get the herd moving, you need to bring your own money. Perhaps this will be different. I certainly would like it to succeed. I think there will have to be a limitation on the volume of projects. Part of the success of Kiva and Trine are the stories supporting the funding, I have a fear that too many projects would dilute the success of the platform.
Step 5 – Buying OAK (Acorn’s short code)
The ICO is pretty much available to everyone, bar people from the USA and China or about 1/3 of the world. The sign up was pretty easy, with a proof of ID needed.
I don’t fully understand it, but in order to receive the OAK, I had to purchase them from an ERC-20 wallet that I had. As Oak is an Ethereum blockchain, using the ERC-20 digital token that is used for most transactions. I couldn’t use Coinbase, as I think hold the currency on my behalf, so I used Exodus. I followed steps 1 and 2.
Then I sent my Ethereum and expected to receive my OAK tokens. That is when the stress started. I realised that I couldn’t see if I received my currency. More importantly, I realised I still didn’t know what I was doing. I thought I had just spent £200 in school fees. 30 minutes later (which would probably have been 5 if I had a clear head), I found a workaround that I could do by using MyEtherWallet.
It is certainly an interesting experiment. In the crypto world it is like everything is super-charged and it is easy to get caught up in the hype. There is so much going on, that it can be difficult to keep track of.
Is the currency on sale or is it crashing? What will be the next one to have an exponential increase? Will regulation make them more or less valuable? Do they have any real value? Does any currency?
There are more questions than answers, what I do know is:
It is highly speculative.
It is a bubble.
It is too big too ignore.
Read more about Acorn – One Pager – Acorn Collective