Crypto From the Ground Up

Coins: the native currency

A coin is the native asset of its own blockchain. It's used to pay for transactions on that network. Examples:

Tokens: built on top of a blockchain

A token doesn't have its own blockchain. It lives on someone else's. Most tokens are built on Ethereum using a standard called ERC-20.

MON (Monad) is a token. LINK (Chainlink) is a token. They live on Ethereum's rails.

Why does this matter?

When you hold a token, you're exposed to two things: the token's own performance, AND the health of the underlying blockchain it runs on. If Ethereum has congestion problems, every token on it gets affected.

You don't "store" crypto anywhere

This trips people up. Your crypto doesn't actually live inside a wallet app. It lives on the blockchain — always. What a wallet holds is your private key: the password that proves you own a particular address on the chain.

Public key vs. Private key

Seed phrase (recovery phrase)

When you create a self-custody wallet, you get 12 or 24 random words. This seed phrase can regenerate your private key from scratch. It's the master key to everything.

Custodial vs. Self-custody

When your crypto is on Coinbase or an exchange, they hold the private keys. You trust them to give you access. With a self-custody wallet (like MetaMask), you hold your own keys — total control, total responsibility.

The fundamental problem

Different blockchains are like different countries with different currencies and no common language. Bitcoin can't natively go to Ethereum. They don't speak to each other. So if you want to use Bitcoin's value in an Ethereum-based app, you need a translator.

That translator is called wrapping.

How wrapping actually works

Step by step:

WBTC (Wrapped Bitcoin) is an Ethereum token that always equals 1 BTC in value. When you want your real BTC back, you burn the WBTC and the custodian releases the real Bitcoin.

Common wrapped assets you'll encounter

The risk with wrapped assets

Wrapping introduces custodial risk. Someone has to hold the real asset. If the custodian is hacked or becomes insolvent, the wrapped token could lose its peg. This is why cbBTC (Coinbase) and WBTC (BitGo) are more trusted — they're large, audited, and insured.

Bridging vs. Wrapping

These terms get mixed up constantly. Here's the clean distinction:

• Wrapping — converts an asset into a compatible version on the same chain (or uses a custodian to represent it on another chain)
• Bridging — actually moves an asset from one blockchain to another

In practice, bridging usually involves wrapping as part of the process. They work together.

How a bridge works

Base is an L2 — and that changes things

Base is not a separate blockchain in the same way that Bitcoin and Ethereum are separate. It's a Layer 2 — built on top of Ethereum, using Ethereum for security, but processing transactions faster and cheaper.

Bridging from Ethereum to Base is relatively safe because Base inherits Ethereum's security. Bridging between two fully separate blockchains (e.g., Ethereum to Solana) carries more risk because you're trusting a third-party bridge protocol.

Bridge risk

Bridges are one of the most hacked targets in crypto. They hold enormous amounts of locked assets and are complex to build securely. Notable bridge hacks have lost hundreds of millions. Rules of thumb:

• Stick to well-audited, high-volume bridges (Across, Stargate, Coinbase's official Base bridge)
• Never bridge more than you can afford to lose until you understand the specific bridge
• Check if the bridge has been audited and for how long it's been running

DeFi = Decentralized Finance

Traditional finance needs banks, brokers, and middlemen. DeFi replaces them with smart contracts — code that automatically executes financial functions when conditions are met. No human approval required.

The main DeFi categories

How liquidity pools work (simplified)

When you use a DEX to swap ETH for USDC, you're not trading with another person. You're trading with a pool — a pile of tokens deposited by liquidity providers (LPs). The LPs earn a small percentage of every trade that flows through.

The more volume through a pool, the more LPs earn. This is why Aerodrome on Base has become significant — it handles a huge amount of trading volume, meaning LPs earn meaningful fees.

Supply and demand — but with nuance

At the most basic level, crypto prices are supply and demand like anything else. But the mechanics underneath are different from stocks. There's no earnings report, no dividends, no PE ratio.

What actually drives value

• Utility: Does the network do something people need? ETH gets demand because you need it to use Ethereum apps. LINK gets demand because protocols pay to use Chainlink's oracle data.
• Scarcity: BTC has a hard cap of 21 million coins. Ever. That programmed scarcity is baked into the code.
• Network effects: The more people and projects building on a blockchain, the more valuable the native coin becomes (more demand for gas fees).
• Narrative: Crypto markets are heavily sentiment-driven. A credible catalyst (an ETF approval, a major partnership) can move prices dramatically before any fundamentals change.
• Token unlocks: If a project's team and investors are about to have locked tokens released, supply increases — and price often drops. This is why you're tracking MON's November unlock closely.

TAO and the AI narrative

TAO's value thesis is narrative-driven right now: Bittensor is building decentralized AI compute infrastructure. Its value is tied to the belief that AI inference and training will eventually happen on decentralized networks rather than AWS/Microsoft Azure. The Grayscale ETF catalyst you're watching would bring institutional capital into that narrative — similar to what happened with BTC when spot ETFs launched.

The full stack, visualized

What to explore next (in order)

• Bridge a small amount to Base — $5–10. Feel the process. Watch the gas. See how the transaction looks on a block explorer (basescan.org). This clicks everything into place faster than any reading.
• Set up a MetaMask wallet — just to understand self-custody. You don't have to move real funds. Just create one, write down the seed phrase, understand what you're holding.
• Read a block explorer — Go to etherscan.io and paste any ETH address. You'll see every transaction, every token, every contract interaction. It's the blockchain made readable.
• Understand one smart contract interaction — Try a token swap on Uniswap or Aerodrome with a small amount. Watch what approvals you sign, what the gas costs, how long it takes.
• Track impermanent loss math — Before ever providing liquidity, build a spreadsheet that models it. Given how you think, you'll want to see the numbers before risking real capital.

How this connects to SolWorks Phase 3+

Once you understand on-chain data — wallet activity, liquidity pool depths, token unlock schedules — you can start incorporating it into SolWorks as signals. That's the kind of edge most retail investors never build.

Terms cheat sheet