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Twitter is a great place for ideas in short, summary form. We don’t just use it to get a pulse on which business models, technical developments, and social trends are worth researching further.
We also use it to share new ideas and get feedback on those ideas.
We have readers and followers joining us at different times. Our readerbase has grown a lot since these threads came out so this post is intended to serve as a resource for those who missed our threads or want to revisit them.
Today, we’re going to cover some of our greatest hits on twitter.
Which topics do you want to learn more about? Every month we host a Q&A where paid subscribers can ask us questions directly and suggest future research items.
The Greatest Hits
1. Millions Moved From Alameda Wallets After SBF Leaves Jail
In a widely shared thread which was reported by lawyers to the DoJ and even mentioned in Court, our resident Lizard spotted some on-chain evidence that wallets linked to SBF were sending funds to an offshore exchange. On-chain analysis can be used to support investment decisions by monitoring what insiders are doing with smaller cap tokens. Occasionally, transactions made by high profile wallets give useful information, but sophisticated whales will try to cover their tracks.
Check it out here:
2. Institutional vs. Retail Investors
Most people coming into crypto don’t have a professional / institutional background in finance or investments. Institutions are set up to make it hard to make expensive mistakes that put you out of the game. Without professional training it’s hard to spot the differences in approach, and easy to make costly errors which the professionals know to avoid.
Things like your time horizon, experience, relationships, predictive capabilities and your risk management make all the difference in the long run.
Make sure to give this one a read!
3. Iguana’s Cybersecurity Tips
Smart scammers are always finding a new angle and it’s hard to stay one step ahead. That’s why building a solid foundation is important. Get the basic stuff right: separate computer, VPN, strong passwords, 2FA and it’s much less likely you’ll be hacked.
4. Understanding Tokenomics
Digital tokens are the latest iteration of creating a tradable interest in some valuable economic activity or property. The OG tokens are Equity and Debt. Equity is ownership of an asset, and debt is money owed attached to that asset. The old tokens rely on a legal system to enforce rights and the new tokens rely on code to enforce rights, and a social consensus to deal with any gaps in the code.
These are not the same thing.
Legal rights are backed by the force of the State which will act (on a valid request) to restore your property or something of equivalent value if a contract is broken, and will otherwise enforce that decisions made are actually carried out.
In the case of debt, enforcement means the lender can usually recover either the money owed or collateral of equivalent value. Smart contracts automatically enforce this norm in DeFi, a clear advantage over the legacy system.
(FTX and 3AC had to repay their DeFi loans in full, while other creditors lost out!)
Equity is a different beast to tokens. Equity means you *own* a share in the company. The majority owners can force a sale, shut the company down, or fire the executives. Owners (even the minority) have the right to share in any sale proceeds or any property left when the company ceases to exist. Decisions taken by equity holders - if legal and in compliance with formal procedures - are legally binding.
Governance tokens don’t confer ownership. They shouldn’t be thought of as equity.
“Treasury value” is a meme - there is no enforceable right for a governance token holder to participate in any distribution if the protocol ceases to exist. If many token holders see a doomed venture but the team want to carry on trying (while earning salaries) there is no mechanism to fire the team and distribute the treasury.
This also applies to disagreements about how the business should be run. There is usually no way to enforce that a team who have technical control of the protocol carry out the wishes of tokenholders as expressed in a valid on-chain vote.
Instead, most protocols rely on social factor and the good will of the team to implement the results of governance voting which is merely advisory. Usually this works well, but sometimes a clear conflict of interest arises. As teams have no legal duty towards the protocol or to protect the financial interests of token holders, incentives dictate that they will act in their personal best interests in some circumstances (such as where the protocol faces regulatory or legal action).
That doesn’t mean tokens are bad. They provide liquidity for early stage projects. When done effectively, they decentralize governance. And. They give everyone access to potentially high returns. They exhibit convexity - you can lose 100% but make 10x or more. You can trade them 24/7 completely permissionlessly. That’s powerful.
This thread is a year old and likely deserves a follow-up with our updated thoughts. Let us know if you’d be interested in a part two!
5. US National Security Interests Trump Privacy
Want privacy for your financial transactions? Too bad. No matter who you are or where you live, the US government is determined to capture your transaction data in its dragnet surveillance program. The existence of this program was revealed by a whistleblower over a decade ago and has been the subject of extensive litigation and public commentary.
The Tornado Cash protocol built on Ethereum was added to the Specially Designated Nationals and Blocked Persons list where it joins major international terrorists, drug cartel leaders, and the political elite of hostile states. Tornado Cash has been used extensively by hackers and other criminals, but it also had a committed user base of legitimate users who value privacy (or needed privacy to safely advocate for and fund legal causes).
This is the most heavy handed regulation of crypto by the US to date as it criminalizes any US citizen or resident who interacts with the banned blockchain addresses. This is the first time a technology or software program has been added to a sanctions progam which targets “persons” (individuals, corporations, nations).
And. A Tornado Cash developer was arrested soon after OFAC acted. He remains detained without bail today.
6. Crash Course In Corporate Insolvency
Everything you need to know to understand why FTX, Celsius and BlockFi customers won’t be getting their money back any time soon.
In this thread Owl goes over the basics of corporate capital structures and insolvency. In a healthy company, the value of the company is greater than its debt and its cash & cash flows are greater than its interest and debt obligations.
Usually management and lenders will be aware of financial difficulties and take action to restructure the business to preserve value. If bankruptcy is necessary, most of the details will have been figured out prior to filing - a 1 day “prepackaged” bankruptcy. But sometimes a businenss fails overnight, and must prerpare for a “free fall” bankruptcy very quickly.
This is what happened when 3AC, Celsius, FTX and other prominent crypto businesses were suddenly discovered to be insolvent last year. We go into more detail on the bankruptcy process in this post written the week after FTX collapsed.
7. Starting Over When You’ve Messed Up
A popular question in a wallet privacy context: “I bought coins on Coinbase what do I do?”
If you’re just learning about privacy and security, it’s likely you’ve done a lot of stuff in the past that could put you at risk in the future. This thread explains some easy ways to reduce your digital footprint, including ways to obtain clean crypto. While the thread suggests OTC with a trusted network, we also have a DeFi Ed guide on using the Bisq DEX to trade non-KYC crypto.
8. Should You Leave Your Job To Do Crypto Full Time?
Well, we did. So some of this might sound like “do as I say, not as I do”.
But we’ve also seen it go wrong for people who did not have their ducks in a row or who were simply unlucky.
While the focus of the thread comes from the perspective of finance, many of these considerations are applicable to other careers. It’s all about your risk appetite, patience, and goals. Crypto can be a rewarding career independent of market prices. There are many ways to participate.
9. The Academy Launch Thread
For those who remember, we launched the academy not only in the depth of the bear, but also right when FTX collapsed. While many consider this an “inopportune time” to launch a new project, we knew it would turn into a strength for everyone involved. If you are one of the people who bought the course at launch, you have the thick skin needed to survive treacherous markets. You will definitely make it.
The story from owl in this thread explains why.
Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are opinions from an anonymous group of cartoon animals with Wall Street and Software backgrounds.
We now have a full course on crypto that will get you up to speed (Click Here)
Security: Our official views on how to store Crypto correctly (Click Here)
Fun to look back on some of these.
The information is high quality as always, some of these will remain timeless.
Advise everyone subbed to act on this, especially the privacy/security advice!
This compilation post is gold