Learn about crypto
How to safely navigate the cryptocurrency landscape
By Jack Filiba, contributor to Trezor blog
Finding your footing amidst the spectacle that surrounds cryptocurrencies can be extremely daunting. It’s an industry that moves at a mile a minute, with new projects constantly emerging that seem to dominate public discourse.
This guide will serve as a way of helping you make sense of the cryptocurrency industry. It is targeted at helping both newcomers and experienced individuals develop a healthy attitude towards skepticism and cautious optimism.
While it may feel like crypto has already taken off, you haven’t missed the boat
It can be easy to fall into the trap of feeling like cryptocurrencies have taken off without you. Alongside the spotlight that altcoins are thrown into every time the price of Bitcoin skyrockets, organizations are increasingly creating native assets of their own or investing directly in Bitcoin for their currency reserves.
Yet, it is by no means too late to find your footing in the industry. Despite the attention that some of the major players like Bitcoin and Ethereum have garnered over the last few years, the technology itself is still a relatively new addition to our world. There is still a lot of room for adoption, and major players such as Tesla have only recently started to accumulate Bitcoin.
In fact, it is easier than ever to get involved with digital assets and see beyond the hype. Where overly-technical language has commonly been used to discuss tokens and cryptocurrencies in the past, plain English explanations have become plentiful. After all, the public’s ability to understand the benefits of having a digital store of value and medium of exchange is necessary for widespread adoption.
The good news for newcomers is that there is an abundance of educational materials targeted at beginners. Finding these resources can be as simple as throwing queries into your favorite search engine and browsing through the results that make sense to you. Some well-respected bitcoiners making a concerted effort to improve access to information include Jameson Lopp and Andreas Antonopoulos.
At the risk of sounding self-promotional, Trezor has also published guides that cover some of the basic questions you might have about cryptocurrencies. Check out our guides on the history of Bitcoin, using bitcoin addresses, and the risks of storing cryptocurrencies on exchanges.
Get information from a variety of sources
The most important thing to keep in mind when learning about specific coins or tokens is the source of your information. Many influential voices in the scene do have some form of vested interest in getting people on board with certain cryptocurrencies or projects. That is not to say that they are unable to maintain their objectivity and journalistic integrity, but it is nonetheless something that you should be aware of.
Further, social media platforms can be manipulated by paid actors and bots which attempt to appear as unbiased participants in a discussion. In actuality, these accounts aim to spread disinformation in the hope of luring new investors into a project they control or have significant investments in.
To combat these innate biases, it is important to obtain information from a variety of sources. Casting a wide net that includes news outlets, educational resources, and a blend of both proponents and skeptics will help you make your own decisions about the industry and its value to you.
How to get excited about cryptocurrencies without becoming disillusioned
Due to its popularity and the wealth of resources that explain how the asset works in simple terms, Bitcoin is often the entry point for members of the general public. However, discourse on social media platforms and forums can instead create the impression that cryptocurrencies revolve around a specific niche — which may alienate those who are not as intrigued by whichever development happens to be the flavor of the week.
In fact, a result of the plurality of ways in which blockchain can be leveraged, it is common for people to be intrigued by completely different applications of the technology. For instance, while many people are drawn to cryptocurrencies like Bitcoin as a means of storing wealth, handling payments or remittance, others are interested in assets that are tied to digital collectibles, used in smart contracts, or enable a solution to an issue that they are passionate about.
The internal dynamics of the industry are fast and furious, while global impact is being achieved much more slowly and cautiously. Even if it feels like everyone in the cryptocurrency space is deeply invested in something that doesn’t personally appeal to you, it is very likely that something else will.
By finding personal and measured reasons to be interested in cryptocurrencies, you can avoid falling victim to the insatiable hype that surrounds some projects. Per Gartner’s Hype Cycles, emerging technologies often go through a process wherein “a wave of ‘buzz’ builds and the expectations for this innovation rise above the current reality of its capabilities.”
This leads to what is referred to as the Trough of Disillusionment. “Inevitably, impatience for results begins to replace the original excitement about potential value,” write Blosch and Fenn, on behalf of Gartner. “Problems with performance, slower-than-expected adoption or a failure to deliver financial returns in the time anticipated all lead to missed expectations, and disillusionment sets in.”
It is never a good idea to sell the public on digital assets with fantastical promises, as doing so will leave people feeling short-changed. There are already a lot of genuine reasons to be excited about what the technology entails. While these reasons may differ depending on your interests, even just the ability to digitally store value and enable fast and affordable global payments is worth celebrating. Taking a measured approach in your optimism will help you avoid disillusionment so that you can develop a long-term appreciation for cryptocurrencies.
The value of being skeptical
In an industry as young as the one that surrounds cryptocurrencies, the ability to approach new developments with caution is invaluable. Despite the good actors and innovative projects that exist within the space, the landscape has also become a breeding ground for scams and undue hype. Chasing projects which claim to be ‘the next Bitcoin’ often turns sour for investors, as this marketing tactic creates an expected return on investment that is impossible to predict and unlikely to be delivered.
Cryptocurrency scams made off with billions of dollars in 2019, with a single ponzi scheme accounting for $2.6 billion USD worth of stolen digital assets. Chainanalysis reported that investment scams and ponzi schemes accounted for 95% of digital assets lost to scams. The upside, however, is that cryptocurrency-related crime purportedly fell significantly in 2020 and accounts for only a fraction of the overall economy.
While this decrease in cryptocurrency-related scams can be attributed to a wide variety of factors, skeptics do play a valuable role in helping themselves and others steer clear of schemes which exploit excitement and public interest. A cautious approach is often the best way to avoid becoming a victim of offerings which are simply too good to be true.
Beyond minimizing your risk of being scammed, a healthy dose of skepticism can also help you avoid being swept up in situations where a development in the space is met with an unsustainable amount of hype. Several decentralized finance (DeFi) projects, for instance, skyrocketed in value almost immediately after launch — despite concerns about their transparency or readiness to keep large sums of money secure. Many of these projects quickly crashed in value as a consequence of newly-discovered coding errors and/or developers abandoning their work, resulting in multi-million-dollar losses.
Even just words associated with cryptocurrencies can create hysteria around projects and shares. Notoriously, a company named Long Island Iced Tea Corp changed its name to Long Island Blockchain and enjoyed a 200% increase in its stock as a result. This echoes a study which found that companies that changed their names to incorporate the word “blockchain” enjoyed abnormally-positive returns for two months, before turning negative in the months that followed.
These types of events reinforce the need for both investors and the public to express some healthy skepticism when it comes to projects which are capitalizing on the excitement that surrounds cryptocurrencies.
The industry is rife with exciting innovation and genuine actors who are working hard to introduce solutions and real-world use cases which could have a positive and measurable impact. However, the cryptocurrency scene needs skeptics in order to keep it honest. Skeptics are the voice of reason; they help pioneers identify the blindspots that prevent public adoption and help the public steer clear of ponzi schemes and false prophets.
Ultimately, effectively navigating the landscape means taking a step back from the spectacle in order to find practical applications that spark your interest and developments that truly appeal to you. Rather than dive head-first into a project based on its hype, it may be worth drawing your own conclusions by treating yourself to straightforward guides and articles from a wide variety of sources. Finally, finding the balance between skepticism and cautious optimism will help you avoid scams and disillusionment so that you can enjoy a prolonged interest in cryptocurrencies.
