The Truth About Crypto

Your Investing Guide to Understanding Blockchain, Bitcoin, and Other Digital Assets

Ric Edelman

• Éditeur: Simon & Schuster
• Année: 2022
• ISBN:
  9781668002346
• Sujet: Personal Development
• Sous-sujet: Personal Finance

A TOP FINANCE BOOK OF 2022 by THE NEXT BIG IDEA CLUB
A SABEW BEST IN BUSINESS BOOK AWARDS FINALIST A straightforward, practical guide to the newest frontier in investment strategy—crypto—from #1 New York Times bestselling author and personal finance expert Ric Edelman. Blockchain and bitcoin are here to stay—and as the Bank of England stated, this new technology could "transform the global financial system." No wonder PWC says blockchain technology will add $2 trillion to the world's $80 trillion economy by 2030. Indeed, blockchain technology and the digital assets it makes possible are revolutionary, the most profound innovation for commerce since the invention of the internet.And yet, the average investor—and the investment advisors who manage two-thirds of all their money—aren't aware of all this, or of the incredible investment opportunities now available. Fortunately, Ric Edelman, one of the most influential experts in the financial field, shows investors how they can engage and thrive in today's new investment marketplace.Featuring the prophetic insights you'd expect from one of most acclaimed financial advisors, The Truth About Crypto is fun to read and easy to understand—and most importantly gives readers the sound, practical advice we all need to succeed with this new asset class. Best of all, Edelman shows how blockchain works, the difference between digital currency and digital assets, and a comprehensive look at every aspect of the field. This book is a must-read guide if you want to achieve investment success today.

PART ONE Understanding the Technology

Chapter 1 The Four Most Transformative Innovations in the History of Commerce

All human advances are due to innovation—from new ways of thinking to the invention of new tools. In the world of commerce, it’s been suggested that the four most impactful innovations are:

• Fire
• The wheel
• The internet
• The blockchain

It’s easy to agree that the first three changed history. But blockchain?

“You shouldn’t have asked me to show you how it works.”

Yeah, blockchain. Think of it as Internet 3.0. The first internet connected people on a mass scale—think Facebook and social media. You know how impactful that was (and still is). That led to Internet 2.0 (more commonly called IoT, the Internet of Things). This internet connects things to each other—my dog wears a collar that tells my phone if she leaves the yard. And at the grocer, a QR code tells the automated checkout kiosk that I’m buying a banana.

Internet 3.0 is the Internet of Money, aka blockchain. Connecting money via the internet is as transformative to commerce and society as the Internet of People and the Internet of Things have been, and because “money makes the world go ’round,” Internet 3.0 will prove to be even more impactful than its predecessors. The wealth-creation opportunities on a global scale are truly unprecedented.

Indeed, Nasdaq says blockchain technology “holds great promise in allowing capital markets to operate more efficiently with greater transparency and security.” The Bank of England (Great Britain’s central bank, comparable to our Federal Reserve) goes even further, saying blockchain technology could transform the world’s financial system. More than 90% of the world’s banks are developing blockchain technology; in 2021, Bank of America alone filed more than 160 patent applications involving digital payment technologies. JPMorgan Chase says banks will save $120 billion a year. Banks and other companies spent $6.6 billion on blockchain R&D in 2021 and will spend $19 billion annually by 2024, according to market intelligence firm IDC. Already, almost all the nation’s top colleges and universities offer courses in blockchain and digital assets, and blockchain engineers are now the highest-paid programmers in the country, earning $175,000+ a year. (According to LinkedIn, US job postings for “crypto” and “blockchain” positions skyrocketed 1,000% in 2021. Major financial services firms, including JPMorgan Chase, BNY Mellon, Deutsche Bank, Wells Fargo, Citigroup, Goldman Sachs, Morgan Stanley, Capital One, UBS, Bank of America, Credit Suisse, and Barclays, hired 40% more crypto employees in 2021 than in the prior year. Jobs include sales professionals, workers designing crypto offerings for consumers, and engineers building blockchain platforms for banks.)

Excitement isn’t limited to the financial sector. MarketsandMarkets reports that the blockchain market will grow 53% per year, reaching $3.2 billion by 2026. For example, Billboard magazine says blockchain “offers solutions to intractable problems, such as song rights monitoring and reliable distribution of royalties and event tickets.”

All this helps explain why PricewaterhouseCoopers says blockchain technology will add nearly $2 trillion to the $80 trillion global economy by 2030. Transformative, indeed.

Chapter 2 Why Blockchain Is So Transformative

Blockchain technology will be so impactful because it revolutionizes business. And it all starts with the humble ledger.

What’s a ledger? It’s a place where you record deposits and withdrawals. Your checkbook is a ledger. So is an Excel spreadsheet. Both are private; you alone have access to them, and you alone decide who gets to see the information. If you want to cheat, you can create a second ledger with false information—and you can show the fake one to others instead of showing your real ledger. (This is known as a “second set of books” and was Al Capone’s downfall.)

Ledgers are used throughout the world’s financial system. Because every ledger is private, they’re expensive to manage and maintain, and they allow for fraud and abuse. Thus, the global accounting industry is a $120 billion business, according to IBISWorld. No wonder banking costs are so high!

Now, consider a ledger that exists on a blockchain. It is broadly distributed to everyone who has an internet connection, which is why blockchain is also known as DLT, distributed ledger technology. Instead of being private, DLT is public; anyone can see it anytime, for free (simply visit https://www.blockchain.com/explorer). But although everyone can see the data, no one can alter it. Indeed, data on a blockchain can never be erased, changed, or copied by anyone.

What I’ve just described is revolutionary.

You see, when I look at data on your private ledger, I am forced to trust you when you say the data is legitimate. This is why our global financial system is known as the trust economy. We do business with each other because we trust each other.

But trust has limits. So, I hire auditors to confirm that what you’re telling me is true.

Trust (or lack thereof) is the reason buying a house is so cumbersome. After you sign the sales contract, you hire a settlement attorney to conduct a title search—to verify that the seller really does own the deed and has the legal right to sell it to you. Then, you buy title insurance in case the title search was flawed. Meanwhile, you apply for a mortgage and the lender verifies that you really do have the income and assets you claim to have. All this adds months and tens of thousands of dollars to the transaction—and none of that increases the value of the house. You’re spending money on verification because we operate in a trust economy.

Blockchains eliminate all of that. It replaces the trust economy with an authentication economy. Because data on a blockchain is permanent, we don’t need to trust its legitimacy. It simply is, innately. The reason: as a distributed record, multiple parties (every computer on the network) has an identical copy. All the records are linked in such a way that no single person is the sole holder of the record, and therefore, no one can tamper with the record (they’d have to tamper with every copy of the record that exists everywhere, and they’d have to tamper with every copy at the same time).

Let’s return to our Excel spreadsheet. Imagine entering data about yourself in cell A1. In cell B1 you’ll find the deed to your house, and in cell C1 is information about the buyer. Each cell is a block. Within each block is data. And the three blocks are linked together in a chain. A blockchain.^I

Because the data have been verified and are linked together, the transaction can be completed nearly instantaneously—as quickly as you buy bananas at the grocer. That means you instantly qualify for the mortgage. No need for title searches or insurance. No escrow payments. You eliminate months of delay, and you save thousands of dollars in fees. You are able to move into the house the same day the sales contract is accepted.

FIGURE 2.1

It is impossible to overstate how transformative this is for global commerce. It’s also incredibly disruptive—because if you’re the settlement attorney or the title insurance company, you’ve just become as obsolete as the maker of horse-drawn buggies.

In fact, blockchains eliminate all middlemen, the intermediaries who are between buyers and sellers. Thanks to blockchain tech, we don’t need any of them anymore. Stockbrokers, attorneys, insurance agents, ticket resellers—everyone who processes paperwork to help buyers and sellers execute transactions is likely to be out of work. We’re talking about 10 million white-collar workers in the United States, representing 21% of our GDP.^II

The Features of Blockchain

We’ve seen just one example so far of the transformational power of this new technology. And we’ve only just begun. Blockchain’s capabilities are extensive, thanks to its many features. These include:

1. 1. It’s decentralized. There’s no single point of potential failure. No single location or individual can threaten the network—either maliciously or through incompetence.
2. 2. No collusion. By being decentralized, it is extremely difficult for manipulation to occur.
3. 3. Transparency. Everyone has equal access to all records. It’s the democratization of information.
4. 4. No preferential authority. There is no hierarchy as with centralized systems.
5. 5. Immutability. Once created, a record can’t be deleted, copied, or altered.
6. 6. Limitless. We can append to existing records and provide new information endlessly.
7. 7. Open-sourced software. The program is not only viewable and auditable by anyone, but it can also be changed only by consensus. No dictators, no CEOs.
8. 8. Low transaction costs. The technology is inexpensive to use, making it more accessible to more people worldwide.
9. 9. Greater speed. Time is the one commodity we all have in equal amounts and which we cannot replace, so being able to complete transactions faster is one of blockchain’s key features.
10. 10. Anonymity. In many cases, you can post data onto a blockchain and execute transactions while maintaining your privacy.

The Benefits of Blockchain

There are thousands upon thousands of commercial applications for blockchain technology. DLT lets governments and businesses operate at higher speed, with greater safety, at lower cost, and with more transparency. Let’s look at some of the key uses.

Consumer Purchases

In 2020, $4.2 trillion in merchant transactions, representing 14% of all global commerce, occurred over the internet. Most of those transactions involved credit cards; Visa and MasterCard typically charge merchants about 2%, American Express and Discover, 3%. That’s about $100 billion per year in fees, which merchants pass along to consumers in the form of higher prices.

Visa

Amex

Blockchain technology allows consumers to skip the credit card infrastructure and transmit money directly to merchants. This provides massive cost savings to consumers but poses an existential threat to credit card companies.

Remittances

Every year, $4 trillion moves from one country to another. It’s not just big corporations that move money globally. Ordinary people do, too: migrant workers send about $500 billion from one country to another—usually to family members living back home—according to the World Bank.

To send money to another country (called a cross-border transmittal) via the world’s banking system, you use SWIFT, the Society for Worldwide Interbank Financial Telecommunication network. More than 11,000 banks process over 35 million of these transactions e...

Table des matières

• Cover
• Title Page
• Dedication
• Helpful Lists You’ll Find Inside: The Investments, Products, Services, and Companies in the Blockchain and Digital Assets World
• Foreword
• Welcome
• Part One: Understanding the Technology
• Part Two: Understanding Bitcoin and Other Digital Assets
• Part Three: Investing in Digital Assets
• Part Four: Regulation, Taxation, and Compliance
• Part Five: Getting Started
• Acknowledgments
• About the Author
• Glossary
• Index
• Copyright