Today we'll get our hands dirty and I'll teach you how to
Dougie use Solana, because, you know, all the female dogs crypto curious love me.
Quick update at the top on the Bitcoin ETFs. As of Friday, total net inflows to Bitcoin ETFs are at $2.3 billion. Again, I’m not a trader and this is not investment advice, but I think there is a good chance that Bitcoin goes on a bit of a run here. There seem to have been a number of investors waiting to get the heck out of GBTC and over $6 billion has flowed out of GBTC. It’s impossible to know how much of that was recycled immediately into other Bitcoin funds or just cashed out, but GBTC outflow have started to slow down. Friday alone saw $400 million of net inflows.
Out of 5,535 ETF launches in 30 years, the Blackrock and Fidelity Bitcoin ETFs have taken in more assets (both over $3 billion now) in their first month than any other ETF. I sense we are only getting started here.
Last issue, we talked about Solana: its history, its role in the crypto ecosystem and its potential. This time, we’ll make it interactive. You’ll need to do some work yourself, but trust me, it will be worth it. Given that Solana is so fast and cheap, it’s a great place to play around and get a sense of how crypto can really work. So today, you’re going to take $100 (or even $10 if you’re really cheap) and go do some stuff!
If you’ve never played directly with crypto like this, I highly encourage you all to actually do it. On Ethereum, $5-10 transaction fees are not unusual so it’s a bit harder to just play around. But on Solana, the costs are so small that even if you totally eff it up, it’s no big deal. But doing it yourself is still the best way to understand how it all works and start to see some of the potential. If you’re not willing to do it (or too lazy, looking at you Michael), then at least follow along the steps to get a sense.
I assume that for most of you this will be the first time you have a “self-custodied” wallet. This is the true heart of crypto: the ability to manage and move your assets without a third-party. You don’t need Chase or Coinbase or Blackrock; you hold your assets yourself and you can do with them what you will.
Phantom is the most popular Solana wallet and you can manage it as a browser extension. Just go to https://phantom.app/ and then download the extension. Once it’s added to your browser, click “Create a new wallet” and create a password.
When you create your wallet, Phantom will give you a 12-word phrase. It will include words like “grocery”, “apart”, “sauce” but when put together will allow you to recover your wallet and get access to it from anywhere in the world. It will also allow hackers to get to your assets as well, however. For $100, sticking your recovery phrase in 1Password (you use a password manager, right?!?) or some other semi-secure spot is probably fine (note: please be more careful if you are dealing with larger amounts). But now you’ve got your own crypto wallet!
Within your Phantom wallet, one of the first things you’ll see is a “Buy” button. Click “Solana” and then how much you want to add (seriously $100 is plenty). The Buy button will send you off to MoonPay which lets you use a credit or debit card to buy some Solana. It’s not the best execution price, but at least they seem to be waiving fees for the time being.
Alternatively, if you have a Coinbase or Kraken account, you can buy some Solana there and then send it to your own wallet. If you click “Deposit” from the main menu, it will give you something like this:
If you have an app, you can use the QR code, but otherwise, you can copy your public address which will look something like this: wUJMT9rN9JLjrqs2GarQwsHbzFfEnzNTQZMLqJZ25Yb.
If you’re totally helpless, you can PayPal or Venmo me $100 US greenbacks and I will send you some Solana myself. Depending on how you send it, the process should be virtually instantaneous. You are ready to go.
All of the main blockchains have Decentralized Exchanges (DEXs) where you can swap one token for another. Uniswap is the largest Ethereum DEX, for example, and does more trading volume than Coinbase.
Because you have a self-custodied wallet and you control your own Solana, you can do a trade on any exchange. In Traditional Finance, your shares are custodied at Schwab or Vanguard or wherever, and so you can only trade those shares at that brokerage. In crypto, you are your own custodian. You can use any exchange you like. This flexibility also opens up options unique to crypto. A number of aggregators have come along that will automatically scan dozens of exchanges to optimize your routing, even splitting your trades across multiple exchanges to generate the most efficient execution.
Jupiter is the most popular aggregator on Solana and here is a sample routing of swapping $10,000 to a meme token called BONK:
Jupiter has determined that for the least slippage and lowest fees, 50% of the trade should get routed via the Phoenix exchange. The other 50% should actually get turned into Solana first on the Orca exchange and then turned into Bonk on the Phoenix exchange.
For our <$100 trade, this won’t be required, but let’s give it a go ourselves. Head to Jupiter (https://jup.ag/), press “Connect Wallet” and then select Phantom. Now, we get to the point where we need to pay some attention. Jupiter will request access to Phantom to be able to actually *do* something. In this case, it just wants permission to see what assets you have and to request approval if you want to trade later:
When you see messages like this, it’s a good time to slow down and actually read what permissions you are granting before clicking. This is where crypto can get scary and you can mess up. That’s why we’re only playing with small amounts here.
Once you are connected, we can swap our Solana for something else. If you want to be reasonable and boring, you can buy some USDC (a stable coin set to be worth $1) or some staked Solana (we’ll actually stake directly in a bit), but we are degenerates playing around so let’s buy us some of that BONK (this is not investment advice). The Bitcoin based world has Doge Coin, the original dumb meme dog coin ($11.7 billion market cap, my god!) and ETH has Shibu Inu (a mere $5.6 billion MC). Well, Solana has BONK so let’s speculate! I’m going to take 0.1 SOL and that’s going to get me 870,362 BONK coins (such a deal!):
If you dig a little, you can see the routing, my price slippage tolerance and the transaction fee. Let’s pause there as this trade will involve $9.38 of Solana and the transaction fee will be $0.000468. I know Schwab is cheap these days, but you could do this trade 2,000 times over before it cost you a dollar! Let that sink in.
Once you press “Swap”, you’ll need to confirm the transaction from your wallet, but from there, your trade should take just a few seconds to be finalized and settled (no T+2 settlement here suckers!).
And congratulations! If you spent more than $12, you’re now a BONK millionaire. Tomorrow, it could be worth $24. Or $2. Each is probably equally likely.
Ethereum is definitely the home of all of the big NFTs: CryptoPunks, Bored Apes, CryptoDickbutts, and “art” NFTs like QQL which we have discussed before. Solana NFTs tend to be even lower quality (if that’s possible) and maybe even more speculative, but, hey, they are cheaper so YOLO.
Tensor is (for now) the largest Solana NFT marketplace so let’s head there: https://www.tensor.trade/. Like most sites, you can filter so let’s pick a “floor” (minimum price) for a collection of 1 SOL. If you care to, you can look at recent volume, price movements, market cap, etc. to find something attractive.
Most of these are pretty awful (like Horses? where the question mark tells you a lot). At this price, you’re getting the absolute dregs of the NFT market and most aren’t even ¼ assed. As most of you know, I’m still very intrigued by the long-term potential of NFTs on multiple dimensions, but this ain’t that. You’ll never sell these for more than you paid, but at least now you can say you own an NFT.
For example, Stitched Stories are merely mostly awful. Where else are you going to get a teddy bear with a spray can in its mouth and a cat on its head? But it’s the same process as other sites to buy: Connect your wallet and approve in Phantom. You can either buy immediately or just make an offer. Maybe you only think 1 of 1,978 Stitches is only worth $12 so you want to make a lowball offer. You’re rude, but go for it.
To be honest, I don’t care if you actually buy an NFT. I’m proud of you for having made it this far and have gotten a chance to see how it works.
Our last step will be to do something responsible. We’re going to make our Solana start paying us interest. We’ve talked a decent amount about Proof of Stake networks (vs. Proof of Work like Bitcoin). In Proof of Stake, the Stakers help run the network and get rewarded with newly issued tokens for that role. By delegating your tokens to a staker, you can earn interest yourself. In Solana, that reward rate is around 7.28% right now (a bit more than the current inflation rate of 6.4%).
To stake within Phantom, you click on you Solana in your wallet, then click “Start earning SOL” to access the staking menu. You’ll get a list of validators along with their estimated APY. Once you click in, you’ll get more details like this:
This also shows you the commission the validator will take along with how much Solana they currently stake. There are lots of nuances about how to pick a validator that are a bit beyond our scope today so for now, just pick one that offers the lowest commision/highest APY. You can enter an amount to stake, approve the transaction and now you’ll start earning interest.
The catch is that once you stake, your Solana is now locked up for some period of time. If you want to transfer it, sell it or really do anything, you’ll need to come back and unstake. How long that takes depends on where you are in the current “epoch” (don’t worry about it), but will normally take 2-3 days.
The alternative way to get staking yields is to use “liquid staking.” This was pioneered by Lido on Etheruem, but involves turning your Solana into a derivative token that automatically accrues the staking benefit. The pros are that you don’t have to manually stake and unstake and you’re not subject to waiting periods. The cons are that you become subject to some smart contract risk (the contract that does the staking for you could get hacked) and that the derivative token may have less liquidity or may not 100% track its full value.
For this use case, that’s probably worth it. You could either use Jupiter to trade your SOL for something like JitoSOL (the largest of the liquid tokens on Solana), but instead, we can stake directly: https://www.jito.network/staking/. Once you connect your wallet, the process is easy:
Once you finish staking, your JitoSOL will automatically adjust in price to account for the staking rewards plus some other MEV benefits that Jito accrues (don’t worry about it).
I’m sure all of you made it this far and have completed every step. If so, send me your wallet address and I will send you a special gift (for reals!). But, truly, try some of these steps at least and you’ll get a much better education on how crypto actually works and you will be in the leading 1% of global citizens in understanding.
“He will have in his own house… a console to which he can talk to his local friendly computer to get all of the information he needs for his everyday life like his bank statements, his theater reservations.”
-Arthur C. Clarke, 1974
Hopefully this kid was able to see Le Miz in 2001!
As always, thanks for reading. Send me questions and please share with your crypto curious friends.
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