PM’s Guide to Crypto in 2021
Understanding Decentralization tech
👋 This post appeared in my weekly newsletter on Product Management.
Sign up here to get the next post straight to your inbox.I first stumbled upon blockchains and cryptocurrencies in 2015 and it immediately piqued my interest. What sorcery was this thing called Bitcoin? why was it getting so much press? Why did it have any value at all?
As I entered the dark crypto world — I met some otherwise rational people going crazy about anything that had to do with blockchains and bitcoins. They talked endlessly and fanatically about mining, rigs, GPUs, blockchain apps, decentralization etc. I had no idea what these things were or what was going on, but it was hard not to be smitten by this new technology?… asset class? …both?
At the time Bitcoin was less than $400.
Of course, crypto skeptics were on it too, as they still are. The speculative interest in cryptocurrencies was touted akin to the Tulip mania — the first recorded asset bubble in history.
Before I knew it, I dived headfirst into everything blockchains. Learning about the technology, reading books, building my own blockchains, buying, selling & HODL ‘ing cryptocurrencies and digital cats.
I soon realized that while cryptocurrencies captured the popular imagination, the technology that powers them was the real deal. Blockchains were potentially transformational. In the process of learning about decentralized tech, I’ve wrote a series of posts/tutorials on blockchain tech and the associated ecosystem and what excites me as a product builder.
Going Mainstream
Every year since I actively started following it , crypto tech has gone increasingly mainstream — being pushed, peddled, and promoted by people with massive Twitter followings, tech icons, governments, top banks, mainstream media, wall street, MetaKovan, and of course the Techno king of Tesla, Elon Musk.
The media hype notwithstanding, As product managers and product builders, we can no longer ignore the (gradual) shift to — and the need for — decentralized systems and applications that blockchains can power. As always, step#1 towards understanding decentralization is to take some time to look for and understand the signal behind all this hullaballoo and noise.
In this post, I am sharing links to all that I’ve learned about the tech and have written about at various forums and blogs. For the more technical PMs reading this I will share a few notes on the tech stack for developing and deploying decentralized applications (Dapps) & its more famous 2021 cousins — “NFTs”.
Understanding the basics — The blockchain
I still think that the best way to understand blockchain is in fact to understand the only killer application we have so far — cryptocurrencies — such as bitcoin and ETH. So to understand the basics, here is a post I wrote in Dec 2016 — The Product Manager’s guide to Blockchain. And it blew up when Naval shared it as a primer on the topic 🚀🚀.
Back then, Bitcoin got all the crypto media attention — but then another powerful implementation of blockchain technology was quickly grabbing technologists’ attention. Ethereum.
Storing computer code in the blockchain — Ethereum
In summary, Ethereum proposes to utilize the blockchain to store computer code. This lets you create “Smart Contracts” that execute without the need for any intermediary. This is the tech that also enables Non-Fungible Tokens or “NFTs” the hottest crypto trends of 2021. Ethereum is currently the leading blockchain service for NFT issuance.
If you want to learn more about Ethereum, Ethereum’s homepage is the best place on the internet to start. If you are a Product Manager looking to get a firm understanding of the tech without too many technical details — here is a deep dive post I wrote for PMs. While there have been a number of technical developments over the years, the underlying framework is by and large the same.
In short, what Ethereum brought to the decentralization party was the ability for regular developers to build trustless applications of arbitrary complexity, without being bogged down by the details of how everything under the hood was working.
For more Technical PMs, Here’s a writeup that explains how everything under the hood works.
Building a Personal Blockchain….
At this point, I was deep into decentralization tech. I wanted to learn more and nothing helps me learn things faster than getting my hands dirty and actually building the thing. So I built a prototype personal blockchain ….and wrote a tutorial about it 😬. I do not recommend that you follow my tutorial — there are now much easier tools to do this — but tools notwithstanding, reading through the tutorial will help you see the building blocks of a blockchain in action.
…And then I tested out a Blockchain Smart Contract 🤖
If you think about the blockchain as a distributed operating system of the future, then my personal view is Smart Contracts are its *real* killer app. Smart contracts can be thought of as a blockchain-based vending machine. Just as a vending machine takes in dollars/cents as inputs and is configured to dispense your choice of a snack or a drink — Smart contracts are a virtual vending machine of sorts. Instead of dollars and cents, Smart Contracts take cryptocurrency (ETH in Ethereum’s case) as inputs and will execute some code based on some pre-configured rules as an output. These rules can be defined by whoever is writing the contract.
Here’s a tutorial I wrote (in 2017) on how to prototype a smart contract. Like I said before, Smart contracts are also the underlying framework that power NFTs.
And here’s another gold from Naval Ravikant
2021 & Our decentralized future state
Fast forward to 2021 , and its safe to say that crypto is mainstream. Bitcoin is trading at $55K-60K levels and has minted a new class of crypto millionaires. Its been accepted and even endorsed by giants of the global finance industry. While its utility as a medium of exchange is still largely debated, the idea that it can perhaps replace gold or exist as “Digital Gold” is finding wider acceptance.
National Governments are now thinking about launching their own digital currencies, and brainstorming on how best to regulate cryptocurrencies such as Bitcoin and ETH such that they operate within a framework they can somewhat control and whether or not that’s even possible. Crypto Promoters such as Balaji Sridharan are making a case for why national governments should embrace cryptocurrencies and what the future state might look like.
Decentralized Finance (DeFi)
And as this crypto diplomacy plays out, there is a lot of attention and development on the decentralized finance or, DeFi. Here’s a quick explanation from the Ethereum Org, which powers most of the decentralized finance apps available today.
DeFi is a collective term for financial products and services that are accessible to anyone who can use Ethereum — anyone with an internet connection. With DeFi, the markets are always open and there are no centralized authorities who can block payments or deny you access to anything. Services that were previously slow and at risk of human error are automatic and safer now that they’re handled by code that anyone can inspect and scrutinize.
To be sure, there will be several iterations before we reach this decentralized future, and some iterations will be more painful than others. But from the outside, things won’t seem that different. We will still have websites and apps to interact with, just like we do today. Except these applications would be talking to ‘decentralized’ platforms or networks managed and run by multiple entities, instead of centralized systems controlled by one. More likely though, these entities will probably fall in one of the two camps — they’ll either be completely independent of each other (permission less, e.g. bitcoin nodes), or will be related in some way (permissioned, e.g. governments/corporate).) These decentralized networks will be transporters and store of encrypted user and operational data. When it makes sense, every node connected to the network will store this data — but not always.
Long post, but we’re definitely at the cusp of something special , and make no mistake, all this will happen sooner than we think.
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