I recently came across someone analogising blockchains as nation-states, and it led me to realise that entering and navigating the crypto space is actually very much like travelling.

In the following sections, I will try to develop this analogy in more detail, as I think this will be helpful for those new to the crypto space—to acquire a top-level overview of its key “attractions”, and thus feel more confident to step in and wander.

Blockchains as “countries”

Before we start, we should be clear what blockchains are. I have tried to outline their defining properties in my previous essay. But to summarise, blockchains are essentially databases on a distributed network, which can allow anyone to add entries to (permissionless), and whose data can be seen by everyone (transparent) but cannot be changed once it is validated by all nodes (immutable).

On top of that, what makes blockchains akin to countries are two additional factors:

• Most blockchains have their own native cryptocurrency, which is needed to pay for any transaction or activity on the network—just like how you would need Euros if you want to do things within the European Union (with the exception of the UK).
• Many blockchains also allow you to programme smart contracts, which are basically code that takes in a defined input (e.g. a specific amount of cryptocurrency) and delivers a defined output (e.g. minting a specific non-fungible token or NFT). Such smart contracts allow for more complex applications to be run on a blockchain (beyond simply sending cryptocurrencies to one another), and these applications can be somewhat analogous to the specific attractions you visit and engage with when you travel to a new country.

The major blockchains with smart contract functionality and an established ecosystem of applications that you can now readily enter and explore include Ethereum, Polygon, Solana, Terra, and Avalanche. (This list is non-exhaustive, but I have only outlined those that I am familiar with.)

Before you leave

Like travelling, getting into the crypto space requires some prior preparation. At the very least, you need to ensure that you have the right documents to travel (i.e. your passport) as well as some cash in the relevant currency.

Getting your documents in order

The equivalent of a passport in the crypto space is known as a wallet, which usually takes the form of a browser extension or a mobile app. Your crypto wallet is the interface by which you verify your ownership of crypto assets (e.g. cryptocurrencies and NFTs) on a blockchain, and interact with applications built on it.

However, unlike a physical wallet, the crypto assets you own are not actually in your crypto wallet, but remain within the blockchain. Your crypto assets are simply tied to the public address of your crypto wallet, and through public key cryptography, you can prove that you control the wallet address and hence those assets.

It is useful to understand how this works, so that you can use your crypto wallets with care when navigating the crypto space, just as how you would take care of your own passport:

• When you set up a crypto wallet, a private key—a string of letters and numbers—is randomly generated, which may be presented to you in the form of a seed phrase. This is the only thing that enables a user to control all the assets tied to the particular wallet, i.e. cryptocurrencies and NFTs. This is why your private key or seed phrase must be kept in a secure location, somewhere not connected to the internet (e.g. on a piece of paper or dedicated hardware wallets like those from Ledger). Losing one’s private key or seed phrase is arguably even more catastrophic than losing one’s passport, as it cannot be replaced or recovered by anyone, including the wallet service provider.
• The private key, in turn, is used to derive a public key through a one-way function called the Elliptic Curve Digital Signature Algorithm or ECDSA. Without getting into the mathematics behind it, the outcome is that while the public key can be derived from the private key, it is next to impossible to derive the private key from the public key. Much like an email address, your public key is what applications on the blockchain “see” when you interact with them via your wallet.
• Your private key and public key work in tandem when you make any transaction on the blockchain. Your wallet will allow you to sign the transaction data with your private key, which creates a signature using ECDSA that essentially proves you own the private key without revealing it to anyone.

Another important thing to note about crypto wallets is that most of them are currently not interoperable across all blockchains.

• The most established wallet now is MetaMask, but it can only be used to interact with the Ethereum blockchain, Ethereum-compatible blockchains like Polygon and Avalanche, as well as Ethereum roll-ups such as Arbitrum and zkSync. (Rainbow is another Ethereum wallet worth checking out, with a more vibrant user interface than MetaMask.)
• For Solana, the leading wallet seems to be Phantom, while for Terra, you have to use the official wallet called Terra Station.
• Nevertheless, cross-chain wallets that will allow you to operate across most of the established blockchains are being developed. An example is XDEFI.
• In addition, there are also crypto wallets that aim to make the user experience as simple as possible. For instance, Torus allows you to easily set up a wallet using your social media accounts (e.g. Google and Facebook), and it manages your private key in the backend through distributed key generation.

Getting the currency you need

Once you have the required crypto wallet(s), you will need to convert your fiat currency into the relevant cryptocurrencies. To do so, you will have to use what is called a fiat on-ramp, which is akin to a money changer to convert your local currency into the foreign currency you need.

The most established fiat on-ramps are your crypto exchanges, such as Coinbase, FTX, Crypto.com, and Gemini. Which exchange is best suited for you will depend on a few factors:

• Where you live. Each country has their own set of regulations governing crypto-related activities, which may result in certain exchanges being unavailable to users from particular countries. For example, Binance.com was recently ordered to stop operations in Singapore.
• What cryptocurrencies you need. The cryptocurrency you need may not be available on every exchange, so this is something you have to double-check on the respective exchanges’ website. Nevertheless, the established exchanges should offer most of the key cryptocurrencies you will need, e.g. BTC, ETH and USDC.
• What blockchains you want to use. This is an often overlooked aspect of selecting which crypto exchanges to use. Some exchanges may allow you to trade certain cryptocurrencies, but do not allow you to transfer them out to an external wallet. Others may allow you to transfer them out, but only to limited blockchains. For example, while I can buy MATIC or LUNA on Gemini, I currently can only transfer them to a wallet on the Ethereum blockchain, and not to their native blockchains, i.e. Polygon and Terra respectively. (If I need MATIC or LUNA on their native blockchains, I use Crypto.com instead.)
• Transaction fees. Crypto exchanges do not operate for free, and will levy various transaction costs, e.g. to trade and withdraw cryptocurrencies. This is therefore something you should check before you sign up to use an exchange. Do also note that some exchanges such as Coinbase and Gemini have interfaces for more advanced users, which offer much lower trading fees as compared to the default interface. For instance, trading fees on Gemini’s ActiveTrader interface are currently around 0.25%-0.35%, while those using its default web or mobile interface will have to face trading fees of around 1.49%. Since the savings can be rather significant, I highly suggest going straight to using these more “advanced” interfaces instead; they are not that difficult to use, and the experience will be very similar to how you buy a stock (e.g. setting limit orders).

During your trip

Once you have your crypto wallet(s) set up and transferred over some cryptocurrencies into them, you are now ready to enter and start exploring the crypto space properly.

Guides

Given the complexity of blockchains, it makes sense to consult guides to help you navigate the space, much like how you may rely on tour guides and/or guidebooks such as Lonely Planet when travelling.

If you are a complete beginner, I recommend investing time in an online course that covers all the basics. I did a couple of courses on Coursera about blockchain business models and decentralised finance, which gave me the confidence to dive deeper into the crypto space. These courses are completely free to audit, but you have to pay if you want a certificate. (Since the crypto space evolves very quickly, it is possible that the materials in a certain course may be outdated by the time you view it. Hence, do check on when a course was created or updated before jumping into one.)

If you already have some background with regard to blockchains, the important thing is to keep up with the rapid developments in this space.

• Good places to start include crypto-focused publications such as CoinDesk, Cointelegraph and Bankless.
• The venture capital firm a16z has also compiled extremely comprehensive sets of readings on the crypto space in general, as well as on non-fungible tokens, and decentralised autonomous organisations specifically. They are all worth bookmarking and perusing.
• For visual learners, YouTube has channels like Whiteboard Crypto and Finematics that create bite-sized video explainers on crypto-related topics.
• One crypto education project that has piqued my interest is Curious Addys’ Trading Club, which aims to create a “Duolingo for crypto”. Through a game (which is still being developed), users can learn how to trade cryptocurrencies and NFTs in a risk-free environment with a supportive community.
• For those who enjoy numbers and lists, Defi Llama aggregates and ranks applications across most blockchains based on the total value of digital assets locked within them. Their rankings provide a good overview of the top blockchain-based applications being used right now.

Finally, if you want to follow developments in real time, there is no other way but to follow the projects you are interested in (and their core team) on Twitter and Discord. Most developments are first highlighted on these two platforms, and being on them is a must if you want to go deep in your crypto “travels”.

Routine expenses

Just as how you will have to set aside some cash for expenses when travelling (e.g. buying food or taking the bus), you will have to do likewise when exploring the crypto space due to something called gas fees.

These fees are essentially transaction costs for using the blockchain, and you can think of them as payment to the blockchain’s node operators for devoting computational resources to validate your transactions.

Due to high demand for applications on the Ethereum blockchain, gas fees there have been rather costly. I have personally experienced gas fees ranging from the equivalent in ETH of US$10 to US$150, depending on the complexity of the transaction. (This article provides a concise explanation of what gas fees entail, and how to minimise them when using the Ethereum blockchain.)

Fortunately, gas fees on most other blockchains are significantly lower. For instance, gas fees on Polygon are almost always comfortably below 0.01 MATIC (~US$0.02). Hence, many applications on Ethereum have migrated to the so-called “Layer 2” blockchains, or are in the process of doing so.

Souvenirs

While travelling, I’m sure most of you will like to buy some souvenirs to showcase or share with your family and friends. You can also do something similar in the crypto space with non-fungible tokens (NFTs).

As the term “non-fungible” indicates, NFTs are essentially tokens on a blockchain that are unique, i.e. no NFTs will be exactly the same. This is in contrast to cryptocurrencies, which are fungible, i.e. one BTC or ETH is always equal to another BTC or ETH.

The primary use of NFTs thus far has been to represent ownership over unique digital assets such as various forms of art and media. Since records on a blockchain cannot be tampered with, NFTs provide a permanent form of assurance that their holders are the legitimate owners of the underlying assets. Even if those underlying assets can be easily duplicated (since they are digital), the NFTs themselves cannot. Hence, there can only always be one or a fixed number of owners over those assets—much like how even though there are many replicas of the Mona Lisa painting, there is only one legal owner of the original painting, i.e. France. (Note that the legal status of NFTs is still ambiguous, and the mainstream legal opinion is that NFTs do not grant the owners copyright over the underlying asset.)

In any case, NFTs have heralded an explosion in transactions of digital art and media. Creators of these assets can now sell them directly to collectors via NFTs, reducing the influence of middlemen and allowing for closer relationships with their fans. As some have put it, NFTs allow for “patronage+”, in which supporting creators becomes no longer just an act of altruism, but also an investment. (For a really deep dive on the value of NFTs, check out this tour de force of an essay.)

My personal view is that it wouldn’t hurt to purchase an NFT or two if you find something that resonates with you as you explore the crypto space. Even if the NFTs no longer commands the same monetary value you paid for it, it can serve as a souvenir of your time spent exploring the crypto space at the very least—representing a creator or project that you are proud to support and showcase to your friends.

In particular, I am interested in NFTs that can help support our fight against climate change, and I recently bought some NFT “rocks” minted with tokenised carbon offsets (see first Tweet below). I hope this can mark the beginning of a personal learning journey into the intersection of carbon markets, crypto and art. (See also the second Tweet below for an NFT that actually locks in more carbon offsets over time, but I couldn’t afford the auction.)

Separately, I also bought a couple other NFTs simply on the basis of their aesthetic quality (which of course is subjective):

• I minted witch #7441 from Crypto Coven’s public sale that ended recently. I was drawn not just to the intricate and textured artwork, but also the finely-crafted narrative surrounding the entire project. The tone was absolutely on point, and the words they used melded together beautifully (go read through the AI-generated “articulations” of each of the witches on the website). It is clear from the execution of the entire project that the team has good taste—even its smart contract code has been praised as a “work of art”!
• I bought Genesis Deity #411 from Neon Pantheon. The premise of having deities that amalgamate features from different cultures and mythologies is intriguing, and the project’s artwork looks pretty slick overall as well. Even though minting is still ongoing, I decided to buy a Genesis Deity off OpenSea because I wanted one whose features I can identify with (rather than take the chance with the mint).
• I was also fortunate to mint a “rare” piece from JPG People Club (but not so fortunate to mint the “super rare” or “OG” ones). The concept is fun—you get to input some text of your choice when minting the pieces—and the artwork is pretty cute as well.

While I certainly don’t expect to profit off these NFTs, I see them more as a way to put some skin into the game, and force myself to stay connected to this space. More importantly, I want to keep an open mind for even more innovative uses of NFTs that are bound to arise. There is an incredible amount of creative energy devoted to the space (as with a lot of spam and scams), and we are certainly in for many more surprises in the future.

Ticketed attractions

Besides being souvenirs, NFTs can also function somewhat like tickets to attractions that you want to visit.

Certain blockchain-based applications may require ownership of specific NFTs for you to engage with them. This is most evident in the fast-growing space of blockchain-based games, in which you can own in-game characters and assets as NFTs.

For example, Axie Infinity, which is one of the most popular blockchain-based game at the moment, requires players to own at least three “Axie” NFTs to play the game. Each Axie is a creature (somewhat like a Pokemon) with a unique combination of attributes that can influence gameplay. Players lead their teams of Axies to complete missions against computer-controlled enemies or battle other players to earn the in-game cryptocurrency. This can be used to “breed” new Axies or be exchanged for other cryptocurrencies, which is why Axie Infinity has also been characterised as a “play-to-earn game”.

Despite the potential to earn some money, there are still limitations to such blockchain-based games. For one, the cost of purchasing the required NFTs just to play the game may be prohibitive. Arising from this, some have criticised games like Axie Infinity as a “pay-to-win” game, given that Axies with more powerful attributes command far higher prices. In addition, many of these blockchain-based games are still rather primitive and not exactly fun, as compared to “normal” games already in the market. Nevertheless, this is still a nascent space, and I believe that the ability to own and control your own in-game avatars and assets (perhaps even across different games) will be a powerful driving force for blockchain-based games as a whole.

Besides Axie Infinity, other blockchain-based gaming projects that have piqued my interest at least somewhat cursorily (I don’t consider myself an avid gamer) include:

• The Sandbox allows people to buy digital land (as NFTs), and build their own virtual experiences, including games, on them using assets (again as NFTs). Prices of the Sandbox’s native token (SAND), alongside other similar projects, have surged after Facebook’s rebranding as Meta spurred interest in the ”metaverse”.
• Gala Games has a range of blockchain-based games under development, which reprise popular genres such as tower defense, simulation and fantasy RPG.
• Blankos Block Party has one of the more polished and developed gameplay of the blockchain-based games currently out there, while also being probably the least crypto-centric. Besides the player-controlled avatars called “Blankos” which are NFTs, there is no other token-based economics that are common in other blockchain-based games. Players simply control their Blankos to partake in multiplayer mini-games with different modes such as racing and shooting. The game studio behind this game, Mythical Games, has been recently valued at more than US$1 billion.
• Crypto Raiders is a game with classic sprite-based 2D graphics (like those in the Nintendo Game Boy Color I grew up playing) in which players can send their characters to raid dungeons and earn loot. The distinctive element in this game is that your NFT characters can “die”, resulting in them becoming unplayable within the game. This adds an element of risk that is perhaps unmatched by other games.
• Smol Brains is another game with sprite-based 2D graphics. Players have to stake their monkey characters (which are NFTs) to earn IQ points, and what is noteworthy is that the images of those monkey characters will dynamically change as they grow in intelligence (i.e. the size of their heads increase). This will unlock new tech breakthroughs for the players’ characters, and enable them to do more things within the “Smolverse”.

Investing

If you come across a compelling investment opportunity while travelling (e.g. a property with an attractive selling point or an interesting business), it will probably be quite difficult to directly invest in it as a foreigner. This may be due to local laws and the lack of trustworthy local intermediaries.

Such concerns would be less of an issue in the crypto space, since the permissionless nature of blockchains means that you can easily and securely move your capital around to take advantage of investment opportunities across different applications and even blockchains. This is what decentralised finance (DeFi) is about.

The central value proposition of DeFi is to reduce the need for traditional intermediaries like banks for certain financial services. Instead of these intermediaries, DeFi applications powered by self-executing smart contracts on a blockchain enable users to engage in services like lending/borrowing, trading and asset management, often at a lower cost and with lower barriers to entry.

Hence, even without using leverage, annualised yields on stablecoins (cryptocurrencies pegged to fiat currencies) can easily be at least 5%, which trump the interest rates offered by traditional banks.

In fact, the Anchor protocol on the Terra blockchain currently offers a mindboggling 19% APR (annual percentage yield) for simply depositing the TerraUSD stablecoin (UST) into its application. This yield is in part obtained from both the interest paid by those borrowing UST from the Anchor protocol, as well as the staking rewards generated by the assets placed by these borrowers as collateral (which are currently ETH and LUNA). [Afternote: UST and LUNA collapsed in early May, suffering from a classic bank run. Rather than an indictment of DeFi as a whole, this had more to do with how UST was designed, i.e. it was stabilised by an endogenous asset which led to a higher risk of a negative feedback loop when confidence in either UST or LUNA fell. Notwithstanding the resultant impact on crypto markets, I still believe in DeFi’s central value proposition of reducing intermediary costs and barriers of entry for financial services.]

Of course, there are still significant risks associated by DeFi applications, such as the risk of a smart contract being exploited or governments outright banning them. But I think it will be very hard to stop the sheer economic logic of lower transaction costs and higher yields. Furthermore, these risks will be mitigated as the space matures, through improved smart contract audits and DeFi insurance, as well as—eventually—greater regulatory clarity from authorities.

The crypto asset management firm Bitwise anticipates that the DeFi industry is poised to grow to several times of its current market capitalisation (around US$150 billion), especially when compared against the US$24 trillion market value of the traditional finance sector.

I agree that DeFi is likely to take up a non-trivial share of the financial industry as a whole, and I would not be surprised to see traditional banks or fintech companies offering services based on DeFi in the years ahead—somewhat like how Coinbase recently gave its users with the DAI stablecoin the option to earn yield through the Compound protocol.

Finding community

Of course, the primary motivation behind why we travel is less often about material things (e.g. buying souvenirs or making investments). It is the intangibles of travel—the relationships you make and the communities you experience—that form our most treasured travel memories, the ones we cherish most deeply.

Likewise, the crypto space is so much more than just trading the hottest cryptocurrencies and NFTs, or seeking out the highest-yielding DeFi projects. Fundamentally, it is about people. You come for the gains, but stay for the community.

From my explorations in the space thus far, I have been repeatedly amazed by the people who have conceived and built many fascinating applications using smart contracts and blockchains, as well as how thriving communities have emerged and coalesced around these use cases. Many of these communities take the form of decentralised autonomous organisations (DAOs).

While many definitions of DAOs have been put forth, I don’t think that there is a firm definition yet given their nascence. Broadly-speaking, we can conceive of DAOs as blockchain-enabled online collectives, in which the permissionless and transparent nature of blockchains are harnessed to empower groups of people to work together towards shared objectives.

DAOs, A Canon - a16z crypto

Curated resources for those seeking to understand, build, and otherwise get involved with decentralized autonomous organizations…

future.a16z.com

To me, the key differentiating factor between DAOs and other forms of human organisations is that certain processes within a DAO can be administered via smart contracts on a blockchain, without members necessarily having to completely trust each other. This provides DAOs with some unique characteristics:

• Operations. The smart contracts underpinning relevant aspects of a DAO’s operations (e.g. how the DAO uses crypto assets deposited into its treasury) are self-executing and transparent to all. Members can therefore be assured that any pre-determined rules are applied automatically and consistently.
• Governance. Core decisions regarding the DAO can also be subjected to the consensus of all members. With blockchains, voting can be done on-chain in a secure, permissionless and transparent manner, with voting rights restricted to only holders of the DAO’s governance token, which can be earned via contributing to the DAO. Innovations like quadratic voting can also help mitigate the drawbacks of existing voting mechanisms, i.e. “one dollar, one vote” (which over-privileges those with money) and “one person, one vote” (which under-privileges those who are able to contribute more).
• Ownership. Perhaps most importantly, DAOs can democratise ownership. Unlike traditional companies in which equity is concentrated in the hands of founders and investors, DAOs can enable a much broader range of stakeholders to have a share, such as users, contributors, vendors and other community partners. By spreading out ownership among the very people who create value in them (e.g. through tokens), DAOs may be in a better position to bring about the virtuous cycle of stakeholders being rewarded for their contributions, and in turn, becoming even more motivated to work hard for their DAOs’ interests.

As I mentioned in my previous essay, the range of DAOs that have sprung up is truly astounding, and examples include DAOs that aim to become a venture capital fund (e.g. the LAO), administer a crypto-collateralised stablecoin (e.g. MakerDAO), create a decentralised reserve currency (e.g. Olympus DAO), collect digital art (e.g. PleasrDAO), create an exclusive cultural community (e.g. Friends with Benefits), facilitate philanthropic grants (e.g. Big Green DAO) and even drive up the price of carbon offsets (e.g. Klima DAO).

Granted, we’re still in the early days of DAOs, and much remains to be seen whether they can scale up and find success. DAOs will have to navigate the same risks and pitfalls that afflict any human interactions, i.e. ego, greed and what not. Nevertheless, the potential DAOs bring in terms of facilitating trustless cooperation is unprecedented, and I am personally excited to see the things that they can accomplish in the years ahead.

Travelling onwards to another country

Finally, most of you will probably not be content with simply visiting one country when travelling—you want to travel to as many countries as possible. This is not an issue in the crypto space, given the permissionless nature of the established blockchains.

In addition, unlike the sometimes excessive baggage fees charged by airlines, the cost (and effort) of moving your digital assets across different blockchains tends to be more manageable. The way to do this is through something called a bridge.

How such bridges work is generally through a “lock and mint” and “burn and release” mechanism:

• Let’s say I want to transfer 1 USDC from the Polygon blockchain to the Avalanche blockchain. What a bridge does is first to lock 1 USDC in my wallet on the Polygon blockchain through its smart contract,. Then, it will mint (i.e. create) 1 USDC on the Avalanche blockchain, which will be credited to my wallet there.
• Should I want to transfer 1 USDC back from Avalanche to Polygon, the bridge will burn (i.e. destroy) 1 USDC from my wallet on Avalanche, and release the original 1 USDC to my wallet on Polygon.
• Through this process, the total number of the asset being transferred remains the same across both blockchains, and no one can use the asset on both chains at the same time.

Some of the more established bridges include AnySwap, AllBridge, Wormhole, and Synapse Protocol. Note that not every asset or blockchain may be supported by these bridges, but more options will certainly be offered with time. In addition, while bridges are mostly used to move cryptocurrencies across blockchains now, some of them support the movement of NFTs as well, e.g. Wormhole.

Conclusion

In this “travel guide”, I have tried to provide a broad overview of all the key elements that one would encounter when navigating the world of blockchains—from essential infrastructure like crypto wallets and fiat on-ramps, to key attractions like NFTs, DeFi and DAOs.

It turned out to be much longer than I had initially anticipated, which reflects the sheer breadth and complexity of the crypto space. Even then, I feel that I have barely scratched the surface in terms of both the underlying mechanics of blockchains, and the immense possibilities of their applications.

Needless to say, given how nascent the entire space is at the moment, it is very likely that some of the things I have written above will become obsolete in the months and years ahead. In fact, I foresee that in the not-too-distant future, one’s interactions with blockchain-based applications will be so seamless that you need not even know that you are dealing with blockchains in the first place (see for example Shopify’s recent launch of its NFT Beta Program that allows businesses to mint and sell NFTs directly on its platform).

That said, I believe that we should all try our best to understand the basics of blockchain technology today, so that we can be in a good position to appreciate and take advantage of its revolutionary possibilities in the future. Whether it is in the realm of investing or entertainment, or simply the ever-present human impulse to seek community, my hunch is that blockchains will redefine many of these aspects of our lives.

Hence, as we peer into this emerging crypto space, I hope we can all also hold on to the same spirit of curiosity and openness that often undergird our most transformative travel experiences in the real world. The path ahead will be fraught with much risk and volatility, but I think the experience itself will be worth it. Even if I do not get enriched financially or materially from this journey, I am confident that I will gain a much richer understanding and appreciation of our constantly-evolving world, and the people who make it what it is.

Bon voyage!

Disclaimer: Nothing in this essay constitutes financial advice. Please do your own research and be mindful of your own investment objectives before investing into any cryptocurrencies, DeFi protocols or NFTs.

Cover image by Valentin Antonucci from Pexels.