I’m 43 years old, and the global head of research for a specialist crypto asset manager.
According to a recent survey, that makes me just one year older than the average crypto investor. But in my experience, the age gap is bigger. Like it or not, young people just have an easier time connecting with crypto.
For example: When I told my 12-year-old daughter that I was leaving my career in ETFs to focus on crypto last year, she shrugged and said, “Digital money, huh? Cool.” My father-in-law’s take was different: “Isn’t that only used by criminals?”
The challenge, mainly, lies with the way crypto-natives talk about the space. They throw around buzzwords like “consensus algorithms” and “decentralization,” and then tell us that these are the reasons “crypto will obviously change everything.”
How can this magic internet money “change everything” when I never actually encounter it in my day-to-day life?
The answering is to stop thinking about bitcoin as a currency and start thinking about it as a technology: one that fundamentally changes how we use the internet.
The beauty of doing this is two-fold: First, it’s a more accurate understanding of what crypto is; second, because us over-40 folks have seen these kinds of technological breakthroughs before, we know how the story ends. More importantly, we know how to profit from it.
Let me explain.
What The History Of The Internet Teaches Us About Crypto
Those of us who are over 40 can remember a time when the internet stunk: When you had to look up websites in a (printed) book; when email didn’t exist; when you couldn’t do much with the internet except send files.
If you think back hard, you might remember that we all used to send files using something called “FTP.”
FTP stands for “file transfer protocol.” “Protocol” is a fancy word that means a set of instructions for how to transfer information across the internet. In the early days, files were the only thing you could send across the internet
That wasn’t, of course, because no one wanted to send email, or voice, or videos. It’s just that no one knew how. More specifically, no one had figured out the right “protocols” that would allow us to do all these wonderful things. Plus, the network wasn’t fast enough, anyway.
Over time, however, we made progress.
In 1982, researchers developed something called the Simple Mail Transmission Protocol, or SMTP. SMTP allowed us to send email over the internet. You might have noticed, sometimes, when you click a link on the web to send someone an email, the link will start with “smtp:…”.
In 1989, we took another big step forward with the creation of Hypertext Transfer Protocol, or HTTP. HTTP lets us send webpages with linked text (or “hyperlinks”). It gave rise to the World Wide Web.
In 1994, the Secure Sockets Layer protocol was created, better known as SSL. SSL allows us to securely enter sensitive information into the internet, like personal or credit card information. Not coincidentally, Amazon was founded later that year.
There were other breakthroughs along the way: Voice Over Internet Protocol, or VOIP, created 1995, changed telecom forever; Real-Time Streaming Protocol, or RTSP, created in 1996, helped enable streaming video. And so on.
From a distance, each of these advances seemed unprecedented. But in reality, they were just the next logical thing: a new protocol that expanded the way the internet can be used.
Crypto As A New Internet Protocol
The right way to think of bitcoin, crypto, and public blockchains is as the next step in this evolution. Just instead of sending files or email or voice or credit card data, bitcoin and crypto let us send money.
Of course, there have been online banks and payment services for decades. But they’ve always been hybrids or bridges: A bank like Wells Fargo or a service provider like PayPal might put up a digital veneer, but it would actually extract each transaction and process it in the traditional, physical world.
As a consumer, you can feel this clunky digital-physical hand-off if you stop to reflect for a minute:
- Why, if I pay my internet bill from my online bank account, does it take five days before that payment hits my account?
- Why do credit card companies–and services like PayPal–charge merchants 3% on every purchase I make?
- Why, in an age of free and instant video chat, does it cost me 8% and three days to send money to Mexico?
The reason is that we haven’t yet had the proper “protocol” in place to do these things online and human-free. At least, that is, until the publication of the Bitcoin Protocol white paper in 2009.
How Bitcoin And Crypto Changes Everything
The Bitcoin Protocol’s breakthrough–the reason “it changes everything”–is that it lets you send money over the internet natively, without a bank or a service provider in the middle.
And that’s a big deal.
For starters, it lets us do things we already do today faster/better/cheaper. If you want to wire $10 million to someone in another country today, for instance, it takes three-to-five days, they can deny your wire for any reason or create limits, and the fees are significant. With bitcoin, it takes about 10 minutes, it’s open 24/7, and is essentially free.
Which one sounds more like the internet we know and love?
More than this, however, this new protocol lets us do entirely new things that we never dreamed of before.
We can, for the first time, program money. Instead of using lawyers and investment bankers, you can create any contract or trust or entity or set of financial instructions … for free … with code. That means disrupting services like escrow, debt issuance, derivatives, trust creation, fundraising, and more.
And the actual coins we’re talking about? Bitcoin, ether and so on?
They are the fuel that powers these public blockchains. That is, to use this new internet technology–to move money around the world instantly on the Bitcoin blockchain, or to replace your investment bankers with the Ethereum blockchain–you have to own and use bitcoin or ether. Otherwise, you’re back in the hybrid world with the digital/physical hand-off.
A lot of smart investors are buying up bitcoin and ether today, before everyone else figures out how valuable these new technologies can be.
What This Means For The Future
For those of us who have lived the history of the internet, we know that every major new internet protocol has disrupted a major industry:
- SMTP created email and disrupted the Post Office;
- HTTP created the web and disrupted media and advertising;
- SSL created internet commerce and disrupted retail;
- RTSP created streaming and disrupted the entertainment industry.
By allowing money to travel over the internet, Bitcoin and crypto will disrupt the financial industry just as surely as Amazon disrupted Sears.
So if you’re over 40 like me, and someone starts talking to you about Elliptic-curve cryptography and SHA-256 and proof-of-work vs. proof-of-stake, it’s ok to let your eyes glaze over. They’re engineering details. You don’t need to understand them, any more than you need to understand jet propulsion to invest in Boeing.
Just remember that bitcoin and crypto is a software protocol that lets you send money over the internet.
Or like my daughter would say: “Digital money, huh? Cool.”