Cryptocurrencies: Scam or Technology of the Future?
How a U-M student became involved in the world of cryptocurrencies
—By Nate Petty
“Whenever a new [technology] arrives, there will be doubters and there will be believers,” Gu Gu proclaims.
It was November 2020 when Gu Gu—a then-sophomore at the University of Michigan majoring in computer science—purchased his first ever NBA Top Shot Moment, a digitally tradable collectible created in an official collaboration with the National Basketball Association, for 10 dollars and some change. NBA Top Shot was a new venture with the goal of extending the league into the realm of cryptocurrency or “crypto” for short. Top Shot helped mark the beginning of an explosion of crypto and NFT projects across the internet in late 2020 and early 2021.
Gu’s discovery of the project was mainly coincidence, “I was already on #tech Twitter, so [crypto] Twitter started popping up,” said Gu. He quickly became sucked into the world of NFTs and crypto; “it definitely became a decent hobby for me,” he said. This hobby eventually evolved into an internship at Coinbase, one of the world’s leading cryptocurrency trading platforms, as well as Gu’s very own NFT project (which he prefers to keep the details of private), over a year later, with its roots in his first days on NBA Top Shot. These efforts have given him a strong, although possibly biased, outlook on where cryptocurrencies are headed.
Investment without money
A quick internet search on cryptocurrencies will bring up plenty of articles, both positive and negative. One New York Times Op-Ed by Paul Krugman goes as far to say “This will end badly, and the sooner it does, the better,” when responding to the question of whether or not to invest in Bitcoin, one of the world’s largest cryptocurrencies.
The question of whether or not to invest personal wealth into cryptocurrencies is a common question these days. Gu believes that money is not the only way to get involved. “You do not need to invest financial wealth to invest and commit to the space,” he said. “At the very least I would suggest people take some time to learn.”
Learning is exactly how Gu found his footing in a segment of the internet that was brand new to him. “I started finding collections…where people without professional artistic backgrounds, but a knack for digital marketing and storytelling, were releasing successful projects,” he said when describing his learning process.
“I found [multiple NFT projects] at release…. There was an outline for how to approach these things in the market,” he went on to say. Gu would find his time spent learning early on fruitful as he dove deeper into the world of crypto. When he later built his own NFT project and became more invested financially, he used the very lessons he learned from these early days to conceptualize what the best paths were.
Payoffs to investment with money
Warren Buffet, a man who has made billions from predicting the success of new technologies in the future, is another “doubter,” as Gu would say. “If you…owned all of the Bitcoin in the world and you offered it to me for $25, I wouldn’t take it,” Buffett said at a meeting for Berkshire Hathaway investors. “Because what would I do with it? I’ll have to sell it back to you one way or another. It isn’t going to do anything,” Buffet declared. The current market cap on Bitcoin is 358.81 billion dollars, although that value often fluctuates billions of dollars up or down each day. This doubt on the usefulness of cryptocurrencies is a common reason people stray away from investing.
Gu, however, believes that the lack of utility cryptocurrencies provide is only a temporary issue. “I would counter that with the fact that every new development starts that way. A small group first believing and then rallying a larger group around that belief until the value can be consistently maintained.” Gu’s belief in crypto runs deep, and although he does not disagree with claims such as Buffett’s at this moment, he does believe it will change for the better.
“People who bought NY real estate early on were just banking on the value increasing over time. Everything needs to start like that,” Gu explained. New York, long known as a port of entry into the United States, saw a boom in growth after the Hart-Cellar Immigration and Nationality Act in 1965 which drastically increased population and revitalized the city. Gu believes that, similarly to New York real estate’s economic boom that successfully rewarded early investors, crypto will reward early action in the same way.
There is a point to be made for the comparison of crypto to other investments, like real estate, which draw skepticism from the beginning. There are, however, major differences between crypto and real estate that many would push back on. One of the most reasonable differences is that crypto possesses no physical asset. Real estate provides land as well as whatever the land provides, while crypto seems to many to be intangible and to a certain extent even mysterious. Gu hopes that crypto will not remain that way for long. As always, investors should do their own research into possible investments before committing important sections of their financial wealth.
Bringing cryptocurrencies to the real world
When most people hear terms such as “metaverse” their mind quickly jumps to sci-fi movies and books depicting a society living through technology. Gu does not see us donning VR headsets all day anytime soon. “The idea that we have from [movies such as] Ready Player One is pretty far-fetched,” he said.
Instead, Gu believes that other utilities will take hold in our daily lives first. “Tokenized assets (sports cards, tickets, fashion) and DeFi are going to take more hold,” he explained. Gu’s reasoning for his claim is that, especially with tokenized assets, these concepts are already coming into fruition.
DeFi is a shortening of “decentralized finance,” which is a current movement for a shift away from centralized banking. The difference between DeFi and the current banking system is that currently when sending or receiving money, you need an intermediary such as a bank. DeFi is an attempt to bypass these middlemen in the money business with algorithms that can safely and securely transfer funds between two parties without the need for another party. A New York Times article by Kevin Roose claims “Basically, crypto people are building their own version of Wall Street.” A claim comparing this new movement to the most well known financial sector in the world is certainly a large leap, but one that many believe is possible in the future.
A current example of tokenized assets is tickets to entrepreneur Gary Vee’s “VeeCon”. Veecon is a large-scale conference on Web3 which is a broad encompassing term for almost anything related to cryptocurrencies. The conference is partnered with big name sponsors such as Chipotle, Pepsi, and Coach among many more. Tickets for Veecon are located exclusively in the form of NFTs and holders gain access to the speakers, events, and much more through their NFT. Holders of Vee’s previous NFT project “Vee Friends” automatically received an NFT ticket simply for owning a past project. For those who do not own a Vee Friend, they are still able to purchase a ticket on the secondary market, where owners are able to resell their NFT ticket with the buyer being able to have no fear of scam or other theft on the side of the seller. This use of NFTs is exactly what Gu pictures becoming more common in the short term as physical tickets fade out of relevancy.
Gu’s next project
Although Gu began his journey in the world of NFTs, his future ideas take hold in some of the other aspects of cryptocurrency. Currently, Gu is spending multiple hours a day researching and networking in order to build the foundation for what he hopes to be his next big project.
Gu’s process for brainstorming focuses on identifying areas in his life where he believes there can be improvements. “When thinking about a project I generally just try to identify problems by being a user first,” Gu explained. “When you use existing products, or build with existing infrastructure, it becomes natural to spot inefficiencies and points that could be improved.” Gu’s experience from being a user throughout multiple current products within crypto has led him towards the realm of DeFi where he believes there is clear room for improvement.
Gu plans to create a new project centered around DeFi. “I have a few ideas I’m mulling over right now, but Mint for crypto wallets is one of them,” he said. Mint is a popular personal finance app that many use to keep track of their spending and investments. Gu hopes to bring the utility of DeFi to the public in the form of an app that incorporates the same idea as Mint while improving in other aspects.
No matter Gu’s next project, he is confident that his research and understanding will give him the information he needs to succeed. Gu is a strong believer in the future uses of cryptocurrencies although he certainly does not go unopposed.
It seems it may be a few years before we see which of the “doubters” or “believers” are correct.
Feature photo, Alexander Gu; photo credit, Joan Xiao