June 2021

Wallets + Exchanges

I set up my first cryptocurrency wallet about a decade ago. I’ve done it a dozen times or more since then and it’s still confusing. Since about half of those wallet setups have happened in the last 6 months and the number of people asking me how to do it is growing every day I thought it would be helpful to document and explain some of what I’ve learned along the way and hopefully help smooth out some of the learning curve speed bumps. I’ll be talking about Ethereum Wallets and Mac/iOS apps though much of what I’m saying should apply elsewhere too as a lot of it is browser based as well.

The first and most important thing to understand is that Wallets and Exchanges do different things. Though since some exchanges offer wallet services and some wallets now have built in exchange options it gets messy quick. So while there is overlap, I try to think of (and encourage others to think of) them as separate things. Hopefully the following will de-mess-ify things a bit.

Public/Private key: This is what everything is built on when we’re talking about cryptography and cryptocurrency. Very simply: Your public key is your address that you give people so they can send things to you, your private key is the secret thing you keep which allows you to receive what is sent to you. If you loose your private key, you loose access to your assets.

Wallet: As the name suggests a wallet holds your assets, however this gets immediately confusing as your assets are not actually inside your wallet, rather your wallet keeps your private keys so that you can access your assets which are on the blockchain. Remember that with public ledgers/blockchains the ongoing updates just document who holds/owns what but there’s no asset actually traveling to you (like an email) rather the assets are being allocated to different wallets all the time on the blockchain, and if you have the private key to a wallet with an asset then you can choose what to do with that asset – such as send it somewhere else. This is why if someone gets ahold of your private keys they can steal everything from you, and why a wallet that protects your private keys is so important.

Wallets are either custodial or non-custodial, which means either you hold your own private keys or a company holds them for you. This is where the the saying “Not your keys, not your coins” comes into play as technically any assets you have in a custodial wallet could be seized, frozen, stolen, lost, etc and there’s nothing you could do about it, and there’s also risk of policy change at any given moment so the operator of the custodial wallet could decide that you have a 10 day waiting period on any withdraws or impost a limit on how much you can move around per day and since you don’t have your own keys you are 100% at the mercy of the people running that software. As a benefit though if you don’t have your own keys you cant lose or forget them. With a non-custodial wallet you manage your own keys and make your own decisions. Of course if you are sloppy with your security and someone else gets ahold of your keys you can still lose everything, but for a lot of people the risk of losing things because they made a mistake themselves is much easier to accept than the risk of losing everything because of legal or business decisions happening outside of their control.

Metamask is the most popular non-custodial wallet largely because it’s just a browser plugin so it’s really simple to set up and use. If the idea of having a wallet in your browser doesn’t sit right with you, Rainbow is my favorite non-custodial iOS software wallet (which will require you to do some pairing / QR Code scanning to sync with websites). If you want a totally separate air gapped hardware wallet then the best bet is really to buy a Ledger. Though if you are just getting started that might be overkill depending on how much crypto you plan to buy and/or hold. All three of these options have partnerships with exchanges that allow you to buy crypto assets from inside the wallet. Here’s where it gets a little confusing, Coinbase Wallet is also a non-custodial iOS software wallet, which is a different thing than Coinbase which is an exchange that offers a custodial wallet service, similar to Binance or Blockfi or Crypto.com. Coinbase and Coinbase Wallet are owned by the same company and can be set up to work together, but can also be used separately or independently.

Exchange: The primary function of an exchange is, again as the name suggests, to exchange your crypto assets for other crypto assets. Centralized exchanges require you to move assets from your own wallet to theirs first (or buy them directly through their system) while de-centralized exchanges (also called a DEX) will just connect to your own existing wallet to authorize the transaction on the fly.

Coinbase, which I already mentioned, is an example of a centralized exchange. To use Coinbase you need an account, and you likely have to go through some KYC (Know Your Customer) verifications like uploading your ID and proving you are who you say you are and you live where you say you live. You’ll need to either buy crypto assets through Coinbase (and depending on your level of verification you may only be able to buy a small amount each day) or send assets you already have to Coinbase before you can do any kind of exchanges on Coinbase. Uniswap is an example of a DEX. To use Uniswap you just connect your wallet and make your transaction – Uniswap doesn’t need to know anything about you. Coinbase only lets you exchange some assets and offers some level of protection, while Uniswap lets you exchange anything and you are on your own. There are different reasons why either option might be better for you for any given situation but that’s a different article and for the moment let’s just recognize that most people will likely end up using both options at different times for different things.

That was a lot, I know. But you now understand this better than probably 99% of the population.

There’s a few more things. While Metamask is fast and easy, you really don’t want it to be your only wallet. You’ll want to keep enough in it for transactions and impulse buys, but for anything more significant it’s probably better to put it somewhere else. That’s why I like the Metamask + Rainbow combo (or + Ledger if you are getting serious). But here’s some things to note:

When starting any of these apps you will be given the choice to add a wallet or create a wallet. If you have a wallet already and want to use the same one then you will choose “add” and then you’ll need to put in your seed phrase. Wait, what’s a seed phrase? When you create a wallet you will be given a seed phrase (a list of 12-24 words). THIS IS SUPER IMPORTANT. Write it down. Protect it. That seed phrase will allow you to rebuild your wallet should you lose access to it. It will also allow anyone else to rebuild your wallet if they are trying to hack you – so don’t put it anywhere someone else might get it. Don’t put it online, don’t put it in a shared note app, don’t put it on a post it note on your monitor. Lock it away somewhere safe. Treat it like a secret password to all of your money, because that’s what it is.

Rainbow will let you add or create several wallets which you can switch between easily for different purposes. Metamask will only give you one wallet, though it will allow you to create different “accounts” which are subsets of the one main wallet. That’s super confusing, I know. Let me draw you a picture:

Don’t ask me why it’s like this, companies just do weird shit ok?

It’s likely that you’ll want a wallet that is accessible from Metamask AND Rainbow, so create it first with Metamask and then using the seed phrase add that to Rainbow. If you do that in the other direction, Rainbow first and then add to Metamask it will replace anything you previously had in Metamask. Trust me here, it’ll save you a bunch of headaches later. Metamask first, then add it to Rainbow. I know more than one person who accidentally wiped their Metamask wallet because they tried to add another wallet later and couldn’t remember where they wrote down their Metamask seed phrase. Just to keep adding more layers of confusion there’s also a Metamask iOS app which you can use to import your Metamask wallet from you browser and that will allow you to authorize various websites from it’s built in mobile browser as well. That might be too much for right now, but just know it’s possible.

That was also a lot, I know. And there’s so much more, but that’s enough to get you going and allow you to start using Web3 websites which use a wallet instead of a login for your account management. Also, having a wallet does not automatically mean having crypto, so you’ll still have to get some, but that’s a whole other thing that I’m not going to walk you through, though Coinbase is probably the thing most people use at least at first. So if you are just starting, you can start there.

Collectors + Investors

I woke up this morning to messages from several friends directing me to this tweet, asking my thoughts. Unsurprising, as anyone who knows me probably knows I’d have more than a few thoughts on something like this. I started thinking of snarky replies or gotchas that I could cleverly post and trust me dear reader, there were many that came to mind. But the more I thought about it, and read the replies from artists who seem to be bending over backwards to agree in hopes that the tweets author might check out and buy their work, I thought it would be better served with a more thoughtful response to illustrate why this is so problematic. Also, I would like credit for my display of maturity and restraint in not just posting a snarky reply. Sean from 20 years ago is wondering who the hell has hijacked his blog right now.

As an art dealer, I would refuse to sell art to someone who came in to my gallery and made a statement like this. I don’t say that hyperbolically – when I had a gallery this was a topic that came up from time to time and we were unapologetic about refusing to sell work to anyone who asked questions like “how soon will I be able to sell this and double my money?” or “do you have anything that will match my couch?” Additionally I’d actively and vocally advise artists to avoid selling work to someone with this approach because while a sale might be nice today, in the long run buyers like this will most likely make decisions later that will negatively impact the artist. And if you think of art as a long term thing, as I do, selling to a buyer like this is basically failing the marshmallow test. This is investing in the art and not in the artist. To me, the artist is always more important than the art. As an art dealer, I wanted to develop long term relationships with artists and watch them grow, and help out where I could. I wanted to look back on my life and the careers of artists I worked with and be proud of what we did together. This artist-first approach wasn’t always the best decision for the profit margin of the business but it allowed me to sleep well at night, and that 15 years after the gallery closed I still count many of the artists I worked with as close friends tells me I made the right decisions. As a dealer, I worked for the artists not the collectors. I wanted the value of the art to go up just as much as anyone else (and it has) but I deeply believe that this happens much more reliably by making decisions that are in the best interest of the artist, and selling to someone who only sees art as an investment simply isn’t.

As an artist, I would be disappointed to know that someone bought my work and didn’t want to be thanked for it. I would be sad to learn that they didn’t have any interest in supporting me or my efforts. This statement is both hurtful and dehumanizing. It says that this person sees artists as nothing but a factory to crank out things which will make them money. Amusingly this is one of the reasons I eventually got out of the technology start up world, which I wrote more about in The Interest Driven Life, but I couldn’t stomach having meetings with venture capitalists who didn’t give a shit about me or my dreams or my goals and only wanted to know how much money I was going to make them, and how fast. Now, I’m not knocking this kind of investing approach – I just think there are ways to do it which don’t hurt people. Invest in shitcoins or flip some Bored Apes. That doesn’t hurt anyones feelings, or make anyone second guess their life choices. I guarantee you no one at LavaLabs is going to be suicidal because someone is rage tweeting that their Meebit hasn’t doubled in value yet. Pure investors don’t understand (or care about) the difference between artwork and a collectable, between individual artist and for profit company.

For most artists I know, just admitting you are an artist is unspeakably hard. It’s a position filled with self doubt, insecurity and questioning choices, but deep down we do believe in our work and our vision and have to trust that somewhere out in the world someone recognizes and connects with that. I make art to tell stories, and find connections, and find communities, and build relationships. Not to make some investor money. I do recognize that I’m in a position of privilege to be able to turn down sales that I don’t think are a good fit, to people who I don’t like. Not everyone can do that, but that’s also why I try to forge the path so that it’s easier for the next group of artists. And I’m pretty sure I can confidently say that standing here at 46 years old, everyone who has bought my work in the last 20 years has done so because they either wanted to support me personally or because my work meant something to them personally – and I’m deeply thankful for that. I would sell my work to someone who loved it and planned to keep it forever over someone who was hoping to sell it at a profit any day.

As an art collector, I despised buyers with this kind of an attitude. Selfishly, because they usually had more money than me and would buy things I loved and it pained me knowing they didn’t actually care about them. I much prefer the Vincent Price / Dennis Hopper approach which comes from recognizing the value that the artists bring to the world, to culture, to society and trying to support that. I forget where but I saw Hopper speaking once and he said something like “If you do it right, being an art collector means you are just a care taker” going on to say that he saw his job as protecting the art he bought until the “real art” world recognized it and made space in museums for it. He says something similar at the end of this short video. He viewed collecting art as documenting a culture and a community. I visited his house in Venice Beach once and and stepped over carefully rolled up Basquiats in order to get a better look at framed photographs by artists I’d never heard of hanging on the walls. His love for the art and for his friends was unquestionable, and it made me feel so much better about my own collection which is almost entirely work by friends. Some of whom I knew before I bought the work, some of whom I became friends with after buying the work. To me, those relationships are so much more valuable than any individual piece of art, but often the art is a physical representation of that relationship. The context is different but I’m reminded of the lyrics to Softcore by Jawbreaker which accuses “They just want the wrapping, They throw away the prize.” As a collector who values and appreciates the culture and the community, it pains me to know that work is sold to people who don’t care about any of that. I understand why it happens, but I don’t have to like it.

To be clear, I don’t think this is a zero sum topic. You don’t have to care about the artist, or your investment. Someone can care about both the value of their investment and in the artist that created the art, and I’d wager to say most people buying art fit into that category. But a comment like the one above represents a hard far end of a spectrum which I can only sum up as “bad.”

When we’re talking about NFTs, which we often are these days, there is a tendency for investors to lump everything together. They see no difference between something created by hand or something created by an algorithm. This illustrates their deep misunderstanding of both art and NFTs. I think this is actually a dangerous mindset which can actually harm artists and communities, and would recommend steering clear of buyers with this approach. This is a brand new world and the collectors who love the art and want to build the community are still showing up every day. Let’s embrace the people who want to build something together with us. We don’t need to make sacrifices to make people who don’t care about us rich.

Blockchains As Social Archives

I’ve been thinking a lot about the transparency that comes along with transactions happening on-chain. Especially with art this takes some big steps to demystify a lot of what happens behind closed doors in the traditional art world, and the benefits to artists are obvious. While this doesn’t solve every problem, it’s the right steps forward for many. Shining a light onto this part of the business takes a lot of the power away from the dealers and puts it directly into the hands of the artists. It also makes the collectors who are more interested in flipping work a little easier to spot. Obviously this makes some dealers and collectors uncomfortable, but that’s how you know it’s progress. When the people who have traditionally held power start seeing the cracks in their structures, they start complaining.

Conversely, this is also really good for the collectors who are focusing less on the investment and more on the artists. The philanthropists and art lovers. Public ledgers make it much easier to know exactly what an artist wants and needs for their work without having to navigate through multiple layers of middlemen which has typically been the case. Even when dealers would put artists and collectors into direct communication, many were afraid to talk “business” out of fear of alienating a gallery or dealer who might feel threatened or cut out, and thus losing that resource for the future. Again, not every problem is addressed, but this is movement in the right direction.

But I think there’s an even more interesting aspect that hasn’t been widely discussed. We all know that the blockchain provides concrete provenance for the work, we’ll now be able to see everyone who owned the work going all the way back to the moment the artist minted it, or look ahead and find where something ended up. This is exciting because artists often lose track of where work goes once it enters the secondary market, unless the new owners are committed to being public about it, which many aren’t. We’ve all been talking about that for months, but another potentially fascinating detail is the ability to see everyone who ever tried to buy a work. The losing bids, the rejected offers – those are on chain too. At the moment we’re focusing on acquisitions and winning bids, but the story that gets us to that point is far more layered.

Imagine being able to look back in history and see everyone who ever tried to buy a Warhol, or a Basquiat, or a Haring – before they were popular. We know who ended up with the significant works, and work is being done by their foundations to fill in the blanks, but that focus is entirely aimed at knowing where those works are now. But consider how interesting it would be to be able to see the unsuccessful offers. To be able to cross reference those people and find someone who tried to buy work from all three of those artists, but didn’t. Then, being able able to see what work they did buy. Are there artists from that area that have been flying under the radar all these years? Did someone repeatedly get out bid by a specific rival? Were artists supporting each other?

I’m thinking about these on-chain transactions, documenting the bid history as a snapshot of community. Let’s talk about right now. A number of artists who are selling work in the NFT space are talking about how they are reinvesting their proceeds back into the community. They are putting some % of the crypto they make from sales back into the market by purchasing works by other artists. It’s been obvious to anyone paying attention that there is a huge (and important) overlap between people selling and buying work. Collectors are also selling their own art, artists are also collecting their friends work. That’s powerful today, but how about in the future? Think 20 years from now, being able to look back on a sale today with a bidding war between friends. This is evidence of a social network, and the power of a community. This of the forensics this will allow as well – being able to see the exact moment that an artist started gaining momentum. Or pinpoint a single collector who funded an entire group of artists with a buying spree, and how those artists in turn lifted others up with them. We’ll be able to see friend groups and shared interests – and divergences. Again, that’s pretty interesting today but it monumentally more so if a relatively unknown artist today blows up in the coming years.

Today we’re focusing on what all this changes and what is suddenly possible, but it’s all new in so many ways and I think we’ve only scratched the surface on how much this all will really change. I can’t wait.