Bitcoin continued its slow bleed for the fifth week in a row, ending the week down 7% to $46,700, while the broader crypto market cap settled at $2.19 trillion, just a smidge down from $2.28 trillion the prior week.
I continue to take advantage of the brief break in the market and add to some of my positions as the Mickey D’s paycheck continue to trickle in.
In fact, this week I surprised myself by picking up some Bitcoin for the first time since October as it got to a price I did not think I would see again. But here we are.
Overall, most of the new additions this week were largely in the blue-chips, but for those who want to know, they were in these order:
Ethereum, 41% of purchases this week, at an average token price of $3,767
Bitcoin, 27%, $46,918
Cardano, 16%, $1.24
Polkadot, 12%, $25.7
Solana, 4%, $165
My portfolio continues to be down for the fourth week in a row, closing at negative 40% on a levered basis, and down 15% without leverage. The largest losses continue to be driven by Polkadot and Cardano, while Ethereum continues to hold strong and essentially at cost.
The Evolution of the Internet
When I first logged on to the internet in the 1990s on a chunky cathode ray tube monitor, I did it with a 512 kb dial-up modem that made the strangest mechanical noise, and there were only a couple "websites” that you could visit.
Altavista, was the first search engine that I was exposed to, and Yahoo was just a place where you went to look for other websites. Yahoo was what we call a directory, and all it did was literally put together a list of other websites that you can click through. It was the earliest version of Instagram’s Explore page, where you get to find other interesting things but only if Yahoo had decided that a certain website was worth directing you to.
By and large, all you can do with the internet back then really was to view things that were already set up. You couldn’t modify any of these websites, and you certainly can’t post status updates about yourself on a platform that connected you with thousands of your “friends”.
In typical computer systems parlance, Web 1.0 was read-only.
By the turn of the millennium, as our hardware infrastructure and connectivity speeds improved exponentially, data-intensive applications that were able to upload and download in megabytes per minute as opposed to kilobytes began to proliferate.
In the same time period, desktop capabilities quickly transitioned to mobile, and the iPhone today is a supercomputer so small, it fits in the palm of your hand.
MySpace and Friendster were the first incarnation of the social media capabilities of our new world, before Facebook ate their lunch - first briefly on desktop, and then destroyed the competition entirely when mobile came along.
Facebook, Twitter, Google and the many other applications that we use today are examples of Web 2.0 - a drastic expansion in the capabilities of the internet, but at the same time, allowing users to interact with these platforms in a way Web 1.0 did not allow.
You can now create and edit your professional profile page on LinkedIn, upload pictures of your trip to Vail on Instagram, and be your own movie director on YouTube - all while being able to share with millions of people around the world in a matter of seconds.
In contrast to Web 1.0, you can now read-and-write on Web 2.0.
However, this latest iteration of the internet masks a fatal flaw.
While Facebook is on the surface a free service that users get to use, we essentially pay for that service by providing Mark Zuckerberg with a throve of our personal data, which he then packages and sells it on to the highest bidder.
While Gmail is free, Google generates revenue by scanning every email communication that we get and use that knowledge to build a personal profile of us that it then sells on to advertisers for the privilege of serving us ads somewhere else on the internet.
In essence, in Web 2.0, the user is the product.
While we have benefited from the dramatic improvement in the capabilities of the internet, we have also inadvertently ceded control of our lives to centralized platforms that are run by very few corporations that has acted essentially as supranational governments, where they act as final arbiter on many important issues, and dictate what can or cannot be on their platform.
As some YouTubers who count on making a living on the platform have found out, Google’s algorithm dictates whether a video gets demonetized or get taken down, and there’s often no easy way to dispute those changes.
Apple’s App Store is another case in point. If your business has a dispute with Apple over what payment method the user is allowed to pay for your service, you may find yourself kicked out of the App Store - a de-facto death sentence to the business since so many users are on Apple’s iOS operating system.
Read, Write and Own
Many today argue that we are on the cusp of the next evolution of the internet.
As Chris Dixon at a16z would summarize most succinctly, Web 3.0 is “read, write, and own.”
With the introduction of the decentralized ecosystems of Bitcoin, Ethereum and others, we have the chance to leave the centralized internet of the past two decade behind, and transition into one where the user, and not the shareholder, own the network.
Because crypto markets are open 24/7 and the commentary of day-to-day price movement is so virulent on social media, it is often easy for the average Joe to fall into the trap of thinking that crypto is just a giant casino.
Many ignore that Bitcoin is actually a working proof-of-concept that value can be secured through a decentralized system.
For the first time, it allows for value to be transferred globally without a need for a centralized authority such as a bank or a government to ascertain a transaction, taking out the middleman that has plagued civilizations for millennia.
Ethereum is a global decentralized computer, owned and operated by its user. Decentralized applications (affectionately termed Dapps) are being built that are today very primitive versions of apps that you can find on the App Store, but allow users to own the network as opposed to being the product.
Borrowing and lending protocols (often called DeFi - decentralized finance) was one of those applications that have blown up in recent years, while non-fungible tokens (or NFTs) were the most recent use case that took off in a meaningful way on top of the Ethereum network.
Based on my observations of the ecosystem lately, my guess is gaming will probably be the next big use case to really take advantage of the decentralized network and drive even further adoption in the ecosystem.
Crypto as Web 3.0 Infrastructure
It is helpful to contextualize the development of Bitcoin, Ethereum and such as the laying of rail tracks for the next generation of a decentralized Web 3.0 infrastructure.
I would argue that in ten years, the typical user would not care about which network or railroad is underpinning the application that he or she is using, whether it is Ethereum, Solana or Cardano.
One day, the vast majority of the new value created will be in the applications built on top of these networks. These are the Dapps and the DAOs (Decentralized Autonomous Organizations - essentially LLCs) that are being built today.
As with everything, some will fail, and some will thrive.
While they are going to look really primitive and not user-friendly today, the ecosystem will iterate itself over time and get better.
In the meantime, there is tremendous value in owning the train tracks that these new applications have to run through, and for the first time, the users will get to own the network, and not the other way around.