Victor Hogrefe of Blockspace Solutions: “Only invest what you’re willing to lose”

Only invest what you’re willing to lose. Is that 5 percent or 10 percent? More? Less? It will depend on the person, their background, investing time horizon, etc. Over the past few years, the Cryptocurrency industry has been making headlines nearly every week. Many people have gotten very wealthy investing or leading the cryptocurrency industry. At […]

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Only invest what you’re willing to lose. Is that 5 percent or 10 percent? More? Less? It will depend on the person, their background, investing time horizon, etc.

Over the past few years, the Cryptocurrency industry has been making headlines nearly every week. Many people have gotten very wealthy investing or leading the cryptocurrency industry. At the same time, many people have lost a lot investing in the industry. In addition, more people have been scrutinizing the ecological impact of crypto mining, as well as its potential facilitation of illegal activity. What is being done and what can be done to address these concerns?

In this interview series called “5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency” we are talking to leaders in the cryptocurrency industry, as well as successful investors, who share insights from their experience about how to successfully invest in Cryptocurrency.

As a part of this series, I had the pleasure of interviewing Victor Hogrefe.

Victor is the Co-Founder and Chief Business Officer of EonLabs and the CEO of Blockspace Solutions. He has helped others to get started with using cryptocurrency.

Victor studied Philosophy and Computer Science at the University of British Columbia, The University of Washington and Harvard, after which he delved into Bitcoin app development and started a successful cryptocurrency OTC exchange in Vancouver.

Thank you so much for doing this with us! Before we dig in, our readers would like to get to know you a bit. Can you tell us a little about your backstory and how you grew up?

EonLabs started a bit over a year ago, with my CEO, Chen Li. Cryptocurrency trading is increasingly popular, but it’s also in a bit of a gray area. Most financial firms dealing with traditional investors, using traditional investment strategies, don’t have the expertise or process for it. We wanted to take it a step further and had an idea for an AI system that could trade crypto futures profitably, effectively without the input of a human being. We invested 10,000 dollars in buying the computing power we’d need to even attempt this, built the technology and have been testing it with a very select group of investors (including ourselves — we’ve put our own money into it.) The result? A 530 percent return on investment over the past year or so, which is incredibly good compared to the S&P 500 and even compared to Bitcoin during its own crypto bull run.

Prior to being with EonLabs, I was a cryptocurrency investing consultant and made a lot of people a lot of money doing that. I quit when we got so good that grandmothers started approaching, wanting to spend their life’s savings on Bitcoin. That’s when I knew it was too frothy and it was time to get out.

My educational background is a mix of computer science and business management. When I’m not traveling on business or calling up possible clients or partners, I spend a lot of time thinking about the crossover between cryptocurrency, economics, politics and philosophy.

Is there a particular book, film, or podcast that made a significant impact on you? Can you share a story or explain why it resonated with you so much?

The Lex Fridman podcast, or really- anything to do with artificial intelligence is a podcast I’d watch. I particularly enjoyed the recent one with Max Tegmark. He’s a physicist and AI researcher at MIT. Their conversation ran the gamut from whether AI can discover new laws of physics to consciousness and creativity. We’re only beginning to really understand what AI is capable of — and also getting a sense of its limitations. This obviously pertains to EonLabs, where our approach using AI is having very significant results for our customers.

One way to make sense of what I’m hearing and reading is by doing my own writing. When I publish my thoughts on cryptocurrency, blockchain and finance, this forces me to think more clearly about what the future may hold.

Is there a particular story that inspired you to pursue your particular career path? We’d love to hear it.

About 5 years ago, a friend from university called me, asked me if I’d heard of Bitcoin. I was vaguely aware of it, but didn’t know much about it. He sent me some Bitcoin. I sent him some. Both transactions happened within a couple of seconds. And I realized that with Bitcoin, you could do that with 1 dollar or 100 million dollars. It would make no difference. It seemed very cool — and that’s the moment that got me started on my journey.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

Smart is good. Good with people is better… or, maybe it’s fairer to say, you need both.

In my first business, right out of university, I partnered with someone who had extraordinary intellectual gifts and an insatiable hunger for knowledge. We worked on a startup together.

There were hints for a while that he had been burning bridges with people in our network. I saw it for myself at a meeting. A friend of mine actually walked out of the meeting.

At the time, it was stressful, but looking back, it’s a relief that I was able to recognize the issue and deal with it (In this case, by moving away from that project.) Smart people can be extremely valuable for certain kinds of work, where radical thinking and creativity are paramount. But if you mix these traits with ego and aggression, it’s a recipe for disaster.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

I met my current co-founder at one of those tech industry mixers that were so common before the pandemic. We got along and he seemed to know what he was doing. Soon enough, we were working on a project together, developing a social media app running off of blockchain. It was a pretty cutting-edge opportunity at the time. Even though that project never got funding in the end, I saw how he worked. And it worked for me, too.

I’ve been lucky enough to meet many brilliant people in my career. It turns out that a lot of them have odd habits. They drink a lot, or do psychedelics. I don’t want to generalize, but a lot of entrepreneurs in the tech and blockchain industry specifically are cowboys and eccentrics, so they may be especially prone to the pitfalls of ego and personal instability. My co-founder doesn’t go in for drama. He produces consistently — and that one trait makes him special. On a small startup team, it’s a great thing to always be looking forward to your next conversation with a trusted colleague.

Are you working on any exciting new projects now? How do you think that will help people?

Right now, we’re throwing all we’ve got at growing our partnerships with financial firms who have investors who are interested in alternative investing strategies.

It’s fair to say that the EonLabs cryptocurrency futures trading system is not ideal for your average retail investor who might have a mutual fund or ETF, or maybe some stock they inherited. But the lessons we’re learning now about how we can build an algorithm that outperforms human beings can probably be applied more broadly.

Beyond crypto futures trading, you can imagine algorithms that simply help large segments of the population to manage and grow wealth. And this progress may happen in a way that has been closed off to those who don’t have a high net worth. For now, rich investors with “money to spare” in high-risk, high-reward alternative investing modes are effectively the testers for something that might really help a lot of people down the road.

Ok super. Thank you for all that. Let’s now shift to the main focus of our interview. The cryptocurrency industry seems extremely dynamic right now. What are the 3 things in particular that most excite you about the industry? If you can, please share a story or example for each.

For people who don’t have access to a traditional banking system, blockchain-based alternatives can be a life saver. These people can transfer internationally without going through the banking system, which is slow and terrible.

  • One aspect that people don’t appreciate is that cryptocurrency is an instrument of last resort. Bitcoin is not a currency. It is a commodity. Think about how quickly we can send emails — but sending currency doesn’t happen as fast. It’s electronic, so there’s no reason for this to be so hard. (slow, terrible). We can send emails, but not currency. And it’s electronic. There’s no reason for it to be so hard. For instance, I tried to pay for something from Bangladesh recently. It was impossible through the banking system, but I could pay for it instantly and easily in Bitcoin. It was a couple of hundred bucks, so not a giant transaction, but it gives you a sense of the situation. In countries that are politically and economically unstable, people are significantly overpaying for crypto (because people are desperate to have that money) and that’s where the raw transactions take place. So, having this kind of freedom is exciting.
  • Another exciting element of this is the whole conversation around decentralized finance. What does this even mean? What can we expect? There’s a lot of change happening right now. For instance, I know that Bitcoin is the big name in cryptocurrency, but it may be that the Ethereum ecosystem takes over. We are expecting exponential growth, where it becomes the number-one cryptocurrency. (In crypto circles, there’s already a meme around this: “the flippening”. Eretheum does everything bitcoin does, and a million other things.
  • Whichever cryptocurrency becomes dominant, it will be interesting to see how the current complaint about Bitcoin is addressed. Right now, it’s slow to develop and adapt. Suggestions for protocol improvement take years to implement. They react conservatively to changes and these changes are tested a million times. There have been some improvements in the last 5 years, but it’s backstage. For the end-user, it’s pretty much invisible.

What are the 3 things that concern you about the industry? Can you explain? What can be done to address those concerns?

First, there are growing pains. The mainstreaming of cryptocurrency is now leading to more calls for cryptocurrency investing channels. Institutional investors on Wall Street are some of the biggest investors around. That’s fine. Institutional investors are sophisticated firms that can afford to take high-risk bets (and they have strategies to mitigate miscalculations.) However, it is inevitable that as normal, retail investors look into this, some of them may not really understand the risk-reward calculation for cryptocurrency. I got out of advising colleagues about how to get into cryptocurrency trading when senior citizens started coming at me with their life’s savings. I think this frothiness in the marketplace may get better before it gets worse. Some less scrupulous advisory firms or consultants may take advantage of prospects who are really not the best fit for this kind of speculative venture.

There’s also the problem of echo chambers. We’ve seen this amplify hugely in the age of social media and digital tribes, where you only listen to people who think the same way as you, whether that’s about Apple vs. Google smartphones, movies or politics.

People who are blockchain ecolites are hammers and everything they see is a nail. They want to apply it to everything — especially real world assets.

This leads us to the Blockchain Oracle problem, which is not well understood outside of crypto elite circles. Blockchain was supposed to take out the middleman — but with smart contracts involving real-world assets, you have a challenge: how do you create a network that agrees on a set of information without there being any clearing house or authority to clear that information? There is a mechanism to deal with this, but by using Ethereum or potentially other cryptocurrencies, you can actually just avoid the problem entirely.

What are the “myths” that you would like to dispel about cryptocurrency? Can you explain what you mean?

As I mentioned before, Bitcoin is not a currency. I think a lot of people, including a lot of people who currently own Bitcoin, don’t necessarily understand that. Cryptocurrency is a commodity. And blockchain, the technology it is built on, is an elegant solution to certain kinds of problems.

That leads me to the second myth, which is that blockchain is a solution to every problem. It’s not. I know that this may sound strange coming from an entrepreneur who founded a trading system for cryptocurrency futures.

You might think I would be drinking the same Kool-Aid as a lot of other crypto enthusiasts. But an entrepreneur must be realistic. Only rare people like Steve Jobs could ever get away with having their own reality distortion field.

How do you think cryptocurrency has the potential to help society in the future?

Cryptocurrency provides a lot of benefits. It’s about maximizing privacy, freedom and control over your own wealth in a way that isn’t so easy to realize using fiat currency.

Let me give you a bit of context so that makes sense. Technology right now is centralized and totalitarian. You don’t need 10 Facebooks or 10 Amazons. You can just have one.

Now, you put politics in the mix. They have the power to insert surveillance into spaces people wouldn’t want or put limitations on privacy. Especially in regard to currencies, the government tries to get rid of cash, because they can’t track it as easily. They can have all the control.

The rise of cryptocurrency and blockchain is the one counter-trend. It promotes decentralization, which stops these trends around companies and governments from getting too dangerous.

Recently, more people have been scrutinizing the ecological impact of crypto mining. From your perspective, can you explain to our readers why the cryptocurrency industry is creating an environmental challenge?

The price of electricity dictates everything. The value crypto gathers is larger than that. But a lot of that electricity comes from hydroelectric dams that would go unused. But it is a lot. In every transaction there is a risk of affecting a third party.

From your perspective what can be done to address or correct these concerns?

Ethereum is going to work on a proof of stake based system that would stop crypto mining. That way, we no longer need to deal with the Sudoku problem that requires so much computing power and the electricity to run the process.

Recently, more people have been scrutinizing cryptocurrency’s impact on illegal activity. From your perspective, can you explain to our readers why cryptocurrency, more than fiat currency, is seen as an attractive choice for criminals?

The Darkweb is based on Bitcoin and Monero. But so are US dollars. With any technology, there will be legitimate use cases and ones that are less legitimate. As an analogy, many people run their companies off their smartphones these days. Criminals also use smartphones…

From your perspective what can be done to address or correct these concerns?

Bitcoin is an open ledger. Is not as anonymous as people think.Once the connection between the transaction and the person is made, it can be tracked. If you’re doing something dodgy, there are always ways to get caught.

Ok, fantastic. Here is the main question of our interview. What are “The 5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency?”

  1. Understand the risk. Sometimes, crypto has fallen 70 percent. Be prepared to lose that. It could happen within 2 weeks. Price drops of 15 to 20 percent have happened many times.
  2. Only invest what you’re willing to lose. Is that 5 percent or 10 percent? More? Less? It will depend on the person, their background, investing time horizon, etc.
  3. How to access it (a.k.a. If you don’t have the private keys, it’s not your crypto). If you have crypto in some exchange account or you have a user account on some website and it says you own crypto… you don’t have it. They have it. If something happens to that company, it’s gone. The only way to own it is to have the private keys of that cryptocurrency. Most crypto wallets, when you get the wallet, it will instruct you to write down the 12 to 24 seed words that generate your private keys for you. Those are essentially your cryptocurrency.
  4. Crypto futures trading. About 90% of people who trade lose money — and that’s among the people who claim to know what they’re doing. Humans are emotional. They can trick themselves into doing things that are unwise. If you don’t know what you’re doing, do not. Take a long term approach. If you are thinking “Am I a good trader?” You’re not. Even professionals can’t beat the market. In fact, this was our inspiration around the EonLabs trading system. Let the machine do the work for you. Forget trading and invest in the asset itself.
  5. It’s often a hassle to convert crypto to money and vice versa. And the banks are very opposed to it. They may freeze your account or even throw you out. If you can’t withdraw your assets when you want to (eg. You bought low and now you want to sell high), then you’ve got a problem. Make sure this works before you really get going with cryptocurrency.

What are the most common mistakes you have seen people make when they enter the industry? What can be done to avoid that?

I think this is common to many industries: people think that they need a big team to make an impact. One of the cool things about technology is that the marginal cost of production is virtually zero.

A good software product can just grow and grow. In our case, whether our clients manage 1 million dollars or 100 million dollars with our system makes almost no difference to us. Staying small and lean has huge benefits for a tech startup.

Do you have a particular type of cryptocurrency that you are excited about? We’d love to hear why.

Ethereum, which seems to have great potential. As a decentralized open-source blockchain, you can run applications and smart contracts. This goes beyond what you can do with Bitcoin.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂

Decentralized, Anonymous Stablecoins. The ability for people to use a price-stable crypto currency that is not dependent on central banks and governments, across borders and without barriers to entry would bring great amounts of economic freedom to billions of people. This is especially true in countries that have bad financial services, are corrupt, or whose currency is hyper-inflationary. Anonymity is a feature ensuring that people can transact without sanction, and without having their financial behavior tracked or their assets frozen. Of course governments will cry “money laundering!”, but of course they don’t want to lose control over currency, so they will say anything.

We are very blessed that very prominent leaders read this column. Is there a person in the world, or in the US with whom you would like to have a private breakfast or lunch, and why? He or she might just see this if we tag them 🙂

I’d love to talk with Elon Musk, Peter Thiel, or Warren Buffet.

This was very inspiring. Thank you so much for the time you spent with this. We wish you continued success and good health!

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