Never invest what you can’t afford to lose. Cryptocurrency is still very new and the prices are being discovered. There is very little stability in coins that aren’t backed by an external asset. The coins with the most potential for gain are ones with a significant potential for loss. The smaller a coin’s market capital is, the more whildly it fluctuates from a few trades. These are the coins that can have the biggest gains percentage wise, but also the biggest losses. You can 10x your money, or you can end up with one-tenth of your money. This is the very first thing I tell everyone who asks me about crypto investments.
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 Rob Zel.
Rob Zel is a serial entrepreneur and programmer of just about everything imaginable. He first got started in cryptocurrency in the early 2010s, mining Bitcoin when it was only a few dollars. He founded bitni.com with the goal of creating an exchange that was privacy focused and super easy to use without even signing up.
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?
I was homeschooled, and I think this gives me a totally different perspective than most people. I had to be completely self-motivated and self-disciplined in order to be self-schooled. The result was an 11th grade reading level in 2nd grade, in addition to being a grade ahead. No doubt, the skills from homeschooling translated into entrepreneur skills. I regret not learning how to program until around age 18. While I consider myself to be a good programmer, it would have been easier to learn at a younger age.
I got into cryptocurrency in the early 2010s and was hooked. Although I was still focused on developing AI for years, I eventually switched all my efforts to crypto.
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?
I am a fan of video games with extremely deep storytelling and characters, like the early Fire Emblem, Tales Of Symphonia, Valkyrie Profile. I thought maybe I would be a writer for video games like these, but as I progressed through a degree in game design, I got more into the development side of things. I haven’t had time to game in many years, but I don’t think I am missing out, as games these days no longer seem to have the storytelling depth as the ones I came of age with.
Is there a particular story that inspired you to pursue your particular career path? We’d love to hear it.
I was inspired by video games to pursue a potential career in game design, and eventually I learned to program indirectly as a result of that, since programming knowledge is necessary for making games.
There’s a lot of entrepreneur stories I find inspiring. Steve Jobs founding Apple in his parent’s garage comes to mind. Bill Hewlett and Dave Packard founding HP in a shed.
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?
I don’t know if it’s very funny, but it’s definitely annoying. The number one mistake I make when programming is the copy-and-paste error. In an attempt to save time, copy some code that other new code will be based on, but forget to properly adapt the old code to the new code.
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 am extremely grateful that I have several examples of successful self-made entrepreneurs within my extended family. While I haven’t relied on them for direct help, just their mere existence helps me convince myself that I can do it too.
Are you working on any exciting new projects now? How do you think that will help people?
I am always working on improving bitni.com. I completely rebuilt the frontend from scratch this spring. Long term, I would eventually like to create our own cryptocurrency. Whether it will be a token built on top of an existing platform, or a completely new platform and blockchain written from scratch, remains to be seen.
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.
1) Cardano launching smart contracts could be something to watch. They don’t just rip off the code of better programmers like all the other me-too coins. So that means if the cardano developers write a smart contracts platform, it could be significantly better than what is already out there.
2) El Salvador becoming the first country to recognize a decentralized cryptocurrency as legal tender. This was a long time coming, and is a huge step forward. Adoption of a cryptocurrency at a national level massively speeds up adoption at the end user level. The more countries that follow, the more rapidly cryptocurrency will gain users. It is possible some countries could end up being total safe havens for cryptocurrencies, and serve as a global hub of operations.
3) 4th generation cryptocurrencies are coming. It will be very interesting to see what new features they bring. More privacy? More governing decentralization? More interactions with data outside the blockchain? We’ll see.
What are the 3 things that concern you about the industry? Can you explain? What can be done to address those concerns?
1) Attempts at increased over-regulation could hurt the industry. Most politicians seem to be in the pocket of the dinosaur financial system, so that is what their policies are based on. The old financial system is doing everything it can to survive in the age of decentralized peer-to-peer finance, which means trying to shut down or hinder the technologies making it obsolete.
2) A chilling effect from the crackdown on ICOs has damaged the industry. There seem to be less new cryptos launched than a few years ago. It’s possible that the previous cryptos launched via ICO will be grandfathered in, but launching new ones will be extremely difficult. Most governments have no problems with ICOs, it’s just a few out-of-control power mad regulators in a few countries. So ICOs may be possible in the future through anonymous decentralized autonomous organizations, using the same peer-to-peer principles as cryptocurrency itself. These organizations would not be incorporated in any jurisdiction, and simply exist purely “in the cloud” as an anonymous peer-to-peer network.
3) Centralized exchanges are becoming the new banks. The whole point of crypto is that everyone is in control of their own finances. Putting all your funds in some centralized wallet defeats the purpose of crypto, which is supposed to be decentralized finance.
What are the “myths” that you would like to dispel about cryptocurrency? Can you explain what you mean?
There is no proven rule in economics that economic value must necessarily be a physical object. Luddites are clinging to this myth, that only a rock like gold has value, but not a stake in a global computer network. An internet famous economist, let’s just call him “Peter”, has been predicting the economic collapse of cryptocurrencies for years, based on a misunderstanding of the value of network effects and an economic fallacy that value must be tangible.
How do you think cryptocurrency has the potential to help society in the future?
By not needing banks — not local, and especially not central. The average person has a hard time saving enough to plan their lives and retire at the rate fiat-currencies lose value. Fiat-currencies destroy savings and ruin long term financial planning. Cryptocurrency changes this and gives anyone who wants the ability to preserve their wealth. Not only that, cryptocurrency cuts out the middleman in protecting wealth, as significant quantities can be stored by the end user and need not be stored in a vault. Cryptocurrency could be a massive aid to the FIRE movement (Financial Independence, Retire Early).
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?
Only 1st generation cryptocurrencies like Bitcoin have an energy consumption problem. Proof-of-stake coins eliminate the problem, and use a tiny fraction of the energy compared to proof-of-work. Proof-of-stake uses no more energy than credit cards.
From your perspective what can be done to address or correct these concerns?
If the Bitcoin developers are never planning on switching to proof-of-stake, other more energy efficient coins should be promoted instead. If Bitcoin refuses to upgrade because it’s influencers want it to be a religion instead of a technology, it is like idolizing incandescent lights instead of switching to LEDs.
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?
I am skeptical that a higher percentage of cryptocurrency transactions are criminal than fiat-currency transactions. Are Mafias all around the world switching to crypto? Are muggers now asking for private keys instead of physical wallets? Isn’t it interesting that criminal cartels still seem to prefer laundering physical cash fiat-currency through banks (this is according to numerous mainstream news reports).
I doubt the dinosaur financial system has a problem with dubious financial activity itself, as long as they get their cut, what they have a problem with is any financial activity they can’t take a cut from. Legitimate crypto activity makes them mad because they are excluded from taking a cut of it. So they try to emphasize whatever bad activity they can find in crypto, while ignoring the orders of magnitude more crime that still exists in fiat.
Cryptocurrency was invented to reduce illegal activity — theft. The whole purpose of cryptocurrency is to eliminate theft as much as possible. The amount of theft cryptocurrency could put an end to is probably equivalent to a significant percentage of world GDP. Fiat-currency is the opposite of cryptocurrency, it’s purpose is to facilitate as much theft as possible. When Fiat money printers take gold and silver out of circulation, when they inflate the currency and make it worthless, that is theft on a mass scale.
From your perspective what can be done to address or correct these concerns?
The number one thing that can be done to address these concerns is by pointing out that the same bad stuff happens in fiat currency every day, except on a scale probably 100 times greater. Then point out how cryptocurrency stops theft every day. Privacy-coins end thievery by making it impossible for the thief to even know there is something to steal.
Yes, some crypto transactions are used for bad stuff. This ranges from small vices such as people buying pot on the darkweb, all the way to actual serious crimes such as heists of exchanges. But the good stuff brought by crypto outweighs the bad stuff by so many orders of magnitude it is worth it in the end. There is no way the crypto genie will ever be put back in the bottle, so we may as well enjoy all the good things it’s brought.
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?” (Please share a story or example for each.)
1) Never invest what you can’t afford to lose. Cryptocurrency is still very new and the prices are being discovered. There is very little stability in coins that aren’t backed by an external asset. The coins with the most potential for gain are ones with a significant potential for loss. The smaller a coin’s market capital is, the more whildly it fluctuates from a few trades. These are the coins that can have the biggest gains percentage wise, but also the biggest losses. You can 10x your money, or you can end up with one-tenth of your money. This is the very first thing I tell everyone who asks me about crypto investments.
2) What percentage of the total supply of coins do the founders own? This is one of my own personal metrics and I haven’t really seen it much elsewhere. How much of a cut of the maximum supply of coins is fair for the founders of a cryptocurrency to take for themselves? Probably no more than around a 15% tip. Satoshi Nakamoto took a cut of like 5% of all potential Bitcoin. Steer clear of coins where the founders created the majority of coins for themselves out of thin air. Coins where the founders own 80%+ of the supply themselves are scams, period. In the era when most coins were mined, this was called a pre-mine.
3) Is the coin based on original technical research, with original codebase, or is it a clone of another coin’s codebase with perhaps a few variables tweaked? Dogecoin is nothing more than a clone of Bitcoin’s codebase with, according to the developer himself, just a few hours of work modifying it. Is that worth 40 billion dollars? If the developer spent 2 hours “making” Dogecoin by tweaking a few variables in Bitcoin’s codebase, that amounts to 20 billion dollars per hour of work put into it. That’s probably the most expensive hourly wage of all time. Look, I can make “Rob-coin” by tweaking a few variables in Bitcoin’s codebase, can someone give me billions of dollars? Most clone-coins have very little long term prospects.
4) You only lose when you sell low. If you’ve truly picked a long term winner, you must have “diamond hands” and not sell even if there is a dip lower than when you bought. Most recently: After I bought a significant quantity of ADA at 2 dollars, it went down into the 1.90s. I felt a little nervous, wondering if I had made a mistake, but I had “diamond hands” and didn’t sell one coin. Not long after it went much higher.
5) Have no hesitation in pulling the trigger when the time comes. Cryptocurrency moves fast, much faster than most traditional investments. There is a very limited time window to make effective trades. The opportunity is not open forever, and it has to be taken seriously. Example: The moment I heard smart contracts were confirmed for Cardano, I jumped on it.
What are the most common mistakes you have seen people make when they enter the industry? What can be done to avoid that?
1) They fall for scam-coins because they didn’t do the proper research, or even question the long-term usefulness of what they were putting their money into.
2) They panic when their coin goes down and sell for a loss, which is a big investing no-no.
3) They don’t host their own wallet. These people are still in the mentality of the dinosaur financial system, where you entrust an institution to store your money. To them, these centralized exchanges that host the user’s wallet for them are like a “bank”, that takes care of your money for you. The whole point of crypto is that everyone is their own bank.
Do you have a particular type of cryptocurrency that you are excited about? We’d love to hear why.
I personally kind of like Cardano because it has some really brilliant minds pushing it forward. They publish peer-review papers, they write their own original code, and it drives the industry forward instead of just ripping off others’ work and re-branding it like me-too coins.
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. 🙂
Something that maximizes recognition of the full sovereignty of the individual. Philosophy has to be the guiding and uniting force of such a movement. The philosophy of freedom is something I personally have been working on as a side project for a very large part of my life. Someday I hope to release a book on the philosophy of freedom.
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 might be interested in meeting the founder of Cardano because he was also homeschooled.
Thank you so much for these excellent stories and insights. We wish you continued success and good health!