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Investing

Page history last edited by rsb 1 week, 4 days ago

      1. To Be Added
      2. On Investing
        1. Audience/Motivation/Warnings:
        2. A few methods/principles/terms we will use:
          1. Active Management / Active Trading / Active Investing
          2. High risk investing
          3. Diversification
          4. Value Investing
          5. Rebalancing
          6. Historical Analysis, Total Returns, and Backtesting
          7. News Cycles and Trading
          8. Bots and High Frequency Trading
          9. Speculation
          10. Leverage 
          11. Yield
          12. Alpha & Beta
        3. A few common crypto terms
        4. A few types of crypto investments and their characteristics
          1. Cryptocurrencies and Utility Tokens - mostly TBD
          2. Other curated lists of cryptoassets
        5. Common trades
          1. Options/Futures
          2. Yeild, annuities and equivalents
          3. Public equity/Venture Capital
          4. Private equity
          5. Funds
        6. Trading and intermediation
        7. Examples of more Complex Trades
          1. Actively managing high-risk, high-yeilding cryptoassets
        8. What to do when you are in a tight spot
        9. Putting it all together
          1. Your best practices 
          2. Your index fund
          3. Your passive income fund
          4. High-risk value investing
          5. Finding and evaluating nascent cryptoassets
          6. Your rebalancing system
          7. Active trading v. rebalancing 
          8. Your Reminder to learn and earn as a primary strategy
      3. Taxation:
        1. Timing and capital gains:
        2. Important tax explainers:
        3. Useful tax tools: 
      4. References:
          1. People you must follow:
          2. People and communities you should probably check out:
          3. Newsletters, Podcasts, Blogs, Youtube channels to follow, etc.:
          4. Recommended Books, Reading lists:
          5. Information from Exchanges:
      5. Addendum/Forewarned/Malarkey/Philosophy
        1. Environmental Concerns:
          1. The ethical calculus:
          2. Delegated ethics:
        2. Doing things on Purpose:
        3. Learning First:
        4. Downsides:
        5. Most of us are investors:
          1. Consider the end game:

       

       

      "The first principle is that you must not fool yourself and you are the easiest person to fool."
      ― Richard Feynman


      Status:

       

      Very alpha - barely getting started - maybe 10% of the needed info is here.  I'm trying to find methods and information that are accessible, and broadly applicable.  For the sake of all that is good in this world - don't invest based on this page alone.  I'm literally riffing off the top of my head stream-of-consciousness-style ahead of discussing this with someone.   I'll try to lead in with further warnings.  What I need to do is focus this thing down and shrink it into a smaller article. 

       

      To Be Added

       

      • Importantly - you will NOT maximise profits if you follow the advice herein - the goal here is to improve your knowledge and skills, have a full life to yourself outside investing, and make some profit as well.
      • Important tool for estimating how fees might affect your investment contributions: Investment frequency calculator.
      • this amazing MIT OCW class on portfolio management - covers so many of the common terms and practices in investing - fantastic summary.
      • Awesome video from Andreas on DeFi risk, risk in general, and a little mention of portfolio management.  The categorization of risk types that Andreas spells out there are important to incorporate.
      • Need to consider overall portfolio management, briefly, and rewrite a bit to account for that, then focus harder on the high-risk value portfolio, and the passive income fund.
      • Rewrite the malarkey section at the end, and the first section, condense, and include the common wisdom from Andreas on investing in skills not coins - all of my strategies are "learning first" and I really need to recognize that.
      • Sooo many new funds.  Need to look into some of the major ones that I haven't used: centralized ones like grayscale, etc. somewhat decentralized ones like piedao, etc. - maybe I can provide basic categorization/explainers. Update: o.k. this is out of hand - there is NO WAY I'm going to be there person who lists the thousand or so funds that just got created in the last few months.  I'll have to find the people who do that and list their lists and comment.  I'll look at a few funds of each major type and come up with some kind of categorization. Ex: 500+ new index funds.  There are also indices now of average returns for crypto hedge funds like the HFR blockchain composite and cryptocurrency indices.
      • Clarify crytpoassets term and keep searching for consensus on terminology.
      • Social Recovery Wallets: https://vitalik.ca/general/2021/01/11/recovery.html
      • Note some tools like buidlhub for integrating Dapps with notifications, etc. 
      • Not sure how much basic tutorial stuff I need to include on DLT systems design and features - probably need to link out to a bunch of stuff, on currency (SoV, UoA, MoE), design (consistency, security, liveness - CAP theorem) - I guess the target audience might want to have a lot of good backgrounders, so I should work up some kind of reference list.  Not sure how to organize it, either.  The terminology section might be a good place to link off, and the rest could be linked from representative projects.
      • There are some macro issues that keep coming up again and again - I don't want to completely blow them off, but I also want to restrict the "knowledge-first" thesis to exclude macroeconomics as much as possible - I'll accept some precepts and then point to some experts for commentary, like lyn alden on inflation and bitcoin as an "emerging store of value" All of this points to a long-term investment strategy - no one looks at crypto as only an "inflation hedge" or a "risk-on investment"- you can't just bet that short or even medium term macro indicators will be reflected in the price of most cryptoassets - and historic correlation rarely pans out.

        

      On Investing

       

      Here I am going to discuss investing in cryptocurrencies and their derivatives.   My goal is to maximize my personal knowledge and skill, while making a profit, helping projects succeed, and having plenty of time left over for my day jobs and other activities.

       

      Specifically, I will focus on assets for which ownership can be cryptographically verified on a trustless digital ledger, and for which counterparty risk can be evaluated to a reasonable degree of certainty.  I can't find a great industry term for that grouping, so I'm going to call those cryptoassets (I might change this later, though).

       

      Cryptoassets are often roughly equivalent to, or a feature-enhanced version of, traditional investment assets.  In fact, most traditional assets are becoming cryptoassets. 

       

      Because the basic principles of portfolio management have not changed tremendously since cryptoassets came into existence in the 2000s, and because cryptoassets are typically part of a portfolio of other types of asset, a large part of this document will concern traditional investment principles, and traditional investment assets.

       

      I don't really invest to make as much money as possible.  My bottom lines are: Learn useful things and participate - Make money - Be ethical.  I'm going to be as opinionated as I am experienced - so some strong ones and some meh - but there is a thesis here: Learning first.

       

      This is not investment advice.  I hear that's a good thing to say, just before you give investment advice.

       

      Audience/Motivation/Warnings:

       

      About the audience:

       

      Here I assume you are familiar with some common investing terms and know something about cryptocurrency, but you aren't regularly reading books and running experiments. 

       

      I also assume that you want to spend a lot of time learning, and enhancing the capabilities of your own mind, rather than simply trading or finding the latest hot speculation - investing should minimally interfere with the rest of your life, and, hopefully, enhance it.  I will advise on learning-first strategies.

       

      I also hope that you are doing this for a purpose other than just accumulating stuff. 

       

      If you fit the audience profile, then this document might be of use to you. 

       

      A few methods/principles/terms we will use:


      Before I describe cryptocurrencies et. al.  I'm going to describe several principles/methods/terms that I think are pretty commonly known and relied upon, and describe them all here, functionally, in plain english.

       

      Active Management / Active Trading / Active Investing

       

      Investopedia definition of Active Trading.

       

      Active trading generally means trading opportunistically to take advantage of short-lived market discontinuities. 

       

      Passive trading generally means investing via a process, often in broad indices, and holding medium to long-term (over a year).   

       

      For purposes of this document, we'll just say: active trading = active management = active investing = we don't do that until we have more knowledge.

       

      It is easy to say that if you maintain discipline in a system that requires you to hold assets regardless of short term price fluctuation, you will NOT be actively trading.  That's where we want to start. Learning first.  Knowledge first.  Active later.

       

      O.k. cool.  You can skip past the rest of this section, but if you need more convincing to avoid early active management, here is a quote from "Pioneering Portfolio Management" by David Swensen, followed by some expansion on the subject:

       

      "The correct strategies for investors with active management expertise fall on the opposite end of the spectrum from the appropriate approaches for investors without active management abilities. Aside from the obvious fact that skilled active managers face the opportunity to generate market-beating returns in the traditional asset classes of domestic and foreign equity, skilled active managers enjoy the more important opportunity to create lower-risk, higher-returning portfolios with the alternative asset classes of absolute return, real assets, and private equity. Only those investors with active management ability sensibly pursue market-beating strategies in traditional asset classes and portfolio allocations to nontraditional asset classes. The costly game of active management guarantees failure for the casual participant."

       

      Active management can be fun and highly profitable, and I'll talk about that a lot later on, but I  am going to suggest a primarily passive strategy at first, and a somewhat more active one as you become more knowledgable and capable of succeeding with more active trades.  

       

      I'm just going to hammer that drum periodically - the only way I know of to invest successfully with active portfolio management is by putting the time in to gain real understanding - and you need to know where you stand.  Yes, there is a general intelligence factor - but you can't assume you will magically become as proficient as someone who has spent years studying this stuff in less time than they did - there are plenty of smart people investing.  You should be willing to buy into the idea that understanding more about financial systems, and performing more analysis on your future financial activities, all else being equal, is correlated with greater financial success - even if you don't know what the limits of that correlation are.  I haven't reached those limits, so I don't know what they are, either.  As far as we are concerned here - more analysis equals more success.  That applies to your business and personal finances equally - half-assing your analysis and projections is always good enough while you are lucky, and until you drive yourself and others bankrupt.  You will just have to invest within your capabilities and expect commensurate outcomes. 

       

      High risk investing

       

      Venture capitalists do something like this: invest a dollar in each of a hundred different small businesses, where each business has a 1% chance of returning significantly more than 100 dollars in profit to the venture capitalist over a given period of time.  If they are correct, they should achieve a high return.  When you feel reasonably sure that one out of 100 investments will return far more than 100 dollars for each 1 dollar invested, it might be o.k. to invest a little money in each of them.  In making a high risk investment, you accept that you might lose 100% of the amount invested in that asset up front.

       

      Expertise, study, and knowledge are extremely important in this type of investment.

       

      Diversification

       

      "Diversification is a hedge against ignorance." - Warren Buffet

       

      One strategy to achieve stability in portfolio value over a long period of time is to invest in a wide variety of assets whose relative change in value are "uncorrellated" - that is - historically the set of assets do not change in value in the same way at the same time (if some are down, otheres If these are correctly chosen, those investors should always have a portfolio that has, collectively, a stable value over a long time relative to all other assets.  

       

      Expertise, study, and knowledge, are made somewhat less important by diversification of this kind.

       

      Value Investing

       

      Value investors look at the "intrinsic value" of investments.  If an investment is selling at a discount compared to the value of it's cash flows, then they consider buying it.  It's not that simple, of course.  Calculating intrinsic value can be as simple as "assets minus liabilities", or you can calculate based on historic and/or future earnings, discounted as necessary.  We (I'm going to use "we" to anthropomorphize(usage?) most investors in crypto) don't usually look at cash flows when investing in cryptocurrencies, but we sure do look at them when investing in exchanges (centralized or decentralized) and companies that trade in cryptocurrencies. 

       

      With cryptoassets, we do a similar thing to value investing from time to time - we look at the "utility" value - the value that a utility token or a cryptocurrency, offers to it's owners.  In many cases, you must own some of a token, say, ETH, in order to carry out some business or financial transaction.  This evaluation is hard to do, but you can make some statements and calculations about "utility value".  Importantly, assets with utility value are rarely a total loss - implicitly there is someone out there who wants them for actual usage value, not just speculation.

       

      In traditional investing terms, value investors in cryptoasset markets are performing Fundamental Trading or Fundamamental Analysis - they just don't use the same metrics.

       

      Value investors are often looking for bargains by doing the math first.  This can be incredibly difficult with new technology aimed at new markets.  That's not all they look at, of course, a cryptoasset with serious problems, and a terrible effective current ratio, run by a team with a strong track record of solving those kinds of problems, might still be a bargain.

       

      Rebalancing

       

      Say you have several asset classes (groups of investments that are correllated), but each asset class is only loosely correllated in terms of value relative to some baseline - lets call them financial stocks, currencies, utilities, and collectibles.  You believe that the intrinsic value of each of the will go up over time, and that you bought in below the intrinsic value in at least the majority of them.  You put an equal amount of money into each class to start with.  Let's call that your investment fund.

       

      If you read a book like Michael Edlesons Value Averaging, it will tell you that you might be able to make a bit more money over time, by "rebalancing" your portfolio - periodically looking at the performance of each asset class, and selling a bit of the ones that have made gains, while buying a bit of the ones that have lost value - so that each asset class is again worth close to the same amount.  That's a method of rebalancing.

       

      Michael Edleson suggests that most people might add a bit of externally raised cash in each period to the fund - buying in at whatever the cost is at the time - adding to the asset classes that are most depressed - a version of "dollar cost averaging". 

       

      This is particularly interesting because this is how many people save - by putting a little bit away each month - and rebalancing according to rubrics similar to those the book Value Averaging recommends, or simply dollar-cost-averaging, or following some other, similar system. 

       

      The discipline of systematization can often remove some of the emotion from investing, and reduce the time involved.

       

      Conservative rebalancing in a systematic way is not the same thing as active management - it can be done with very little understanding of individual assets.

       

      TODO: probably need to take a look at the current state of balancer and other automated leverage systems.

       

      Historical Analysis, Total Returns, and Backtesting

       

      If you look at almost any investment class over a long time line, and compare to FIAT currencies, you will see impressive relative gains. 

       

      The DJIA index, for instance, over a couple hundred years, has made impressive gains against the USD and other FIAT currencies, with periods of no longer than 15-20 years, depending on how you measure it, of stagnation or decline.  The periods of stagnation or decline are a warning that you could be in that position again, of course - having to hold for 15-20 years before you see a positive return.  Because those stocks also return dividends, the Total Returns exceed the gains made in price, particularly if the dividends are reinvested.

       

      Cryptoassets share some common return characteristics with stocks.  There are mechanisms built into some of them that can return additional monies to those who hold them for a period of time.  In many cases, crypto exchanges have implemented the same technology that stock exchanges have implemented, helping customers to reinvest dividends.  ETH can be "staked" which returns "rewards"  to the "staker" over a period of time.  So can Polkadot.  For example: As of this writing, the exchange Kraken can reinvest DOT rewards automatically, which it cannot do with ETH - these differences exist due to differences in the staking tech of a given change, and due to the way exchanges implement things.

       

      One wonderful aspect of cryptoassets is that even those that are not decentralized typically have their activity recorded on an immutable ledger.  Reliable historical data is wonderful for testing investment theories, and there is no better asset class to use for this purpose. (This accessibility of data is also, incidentally, why the entire worlds of computer science and economics have descended upon the study of cryptoassets.)

       

      I use backtesting as a method of gaining insight to certain rebalancing and active management theories, but never to technically trade.

       

      News Cycles and Trading

       

      Obviously news affects asset prices.  If a company just had a major victory or setback, then your value assessment of that asset might change, triggering a rebalancing for you.

       

      This king of information is usually traded on by insiders first, then, ultimately, reaches news outlets and disseminates slowly, often over many days, to retail traders.  If we are talking stocks, then if you are reading about it in the news, it's too late - it's been priced in.  

       

      The situation can be quite a bit better for cryptoassets.  A lot more valuable information might be pegged to a chain, and teams are much more accessible to talk to.  So you can find reasons for mispricing from on-chain data, confirm it, and act on it, before it hits the news, without insider trading!

       

      I think you should read crypto news - but trade, as much as possible, on your own work.  That is the learning-first approach.  Instead, with cryptoassets, see if you can *verify* the news - try the product - run the numbers yourself - look for errors in the news - you *will* find them.  I'll try to drop some examples in here.

       

      As a cop out, there are countless articles on the effect of news cycles on assets and they are fun to read.

       

      Bots and High Frequency Trading

       

      There is some opinion, here.  A level playing field in investing is one in which only public knowledge and tools are required to compete equally well (modulo your brain). 

       

      High Frequency Trading (HFT) seeks to gain advantage by algorithmically trading assets at a higher speed than the majority of the market, if not the entire market.  This is a competitive area that usually involves a firewall of competitive advantage that can only be gained by the wealthiest and most technically savvy corporations.  It's legit.  It works.  It's incredibly unfair and often manipulative of markets, and I don't recommend trying it at home.  

       

      Neither do I recommend writing your own bots to trade on your behalf.  I will simply say that I have seen many bots created to inform decisions that were really helpful, but of the half dozen or so people I know who have spent a lot of time writing bots to help them *automatically trade*, I don't know anyone who made money allowing the bot to trade on their behalf in the long run. 

       

      The main reason for this is that you are always in a highly competitive game that requires re-coding your bots to just achieve the same profits you had yesterday - it's basically the most competitive time and materials programming job you ever had.  Ask reddit.  Successful bots are usually viewed as market distortions to be compensated for.

       

      Speculation

       

      Speculation, strictly speaking, covers most investment for profit.  The strict definition is not very useful, so, colloquially it is understood to mean high-risk investing without strong evidence of intrinsic value, or for short-term gain. - I'll stick with the colloquial definition.  Most would agree that day-trading, the practice of buying and selling an investment within one day, often based on news reports and technical indicators, fits neatly into speculation. 

       

      Reasonable folks might disagree, but I lump technical traders, amateur quantitative analysts, day traders, and amateur automated traders in with the colloquial speculators.  I won't cover or recommend speculation, here.

       

      Leverage 

       

      TBD - here's a Great article - probably should keep this section brief and have lots of references.  Leverage is the way you make massive gains when you are experienced enough and have a reasonable amount of security.  It's also the way you get rekt as a new trader.  Not going to suggest leveraged trades in this document.

       

      Yield

       

      Alpha & Beta

       

      A few common crypto terms

       

      A few types of crypto investments and their characteristics

       

      In this section I am just going to cover some of the highlights of cryptoasset characteristics - to give you a feel for what you should learn about each asset type - how these things are used - and how they are different from each other. 

       

      I won't cover any asset in-depth.  Instead, if you read this in-order, I'll try to tell a story of the development of these asset types.

       

      I won't cover a zillion assets - maybe just 20 or so to give you the highlights.

       

      Just in case you skim or ignore the rest of this section, the TL;DR, in as kitchy and memorable way as I can manage, is that you need to understand the Software, Team, Utility, and Financials (STUF?).  Each of these assets is effectively running Software, built and maintained by a Team of people - and each of these assets is Used for something and interacts with the world of Financial markets in some way.   To evaluate one of these, then, you need to understand the Software design, the Team of maintainers, the Utility of the asset, and how it interacts with Financial markets.  (Oh, god that's bad and I need to change it.)

       

      Cryptocurrencies and Utility Tokens - mostly TBD

       

      Cryptocurrencies are often viewed as money-like instruments - things that don't have a strong utility beyond the traditional uses for money - MoE, SoV, UoA. 

       

      But that's really a thin view of any digital asset - almost all cryptocurrencies have some utility value other than MoE, SoV, UoA that is a significant factor in it's evolution - even if it's the joy of telling your friends about a cute meme that you participate in. 

       

      Bitcoin is a good example of something I would put in the category of a  cryptocurrency.  It's got a lot of uses, but it's largest use is as MoE, SoV, UoA.

       

      Utility Tokens are typically consumed in exchange for services.  You can use FileCoin or Tfuel to store and distribute data, GLM to buy compute cycles when you need computing power, etc.

       

      To complicate matters, many tokens can be used for currency usages (MoE, SoV, UoA), and for utility purposes, and can also be used to generate passive income.  So...it's going to be hard to recategorize this section.

       

      All of these cryptoassets will be analyzed partially - focusing on the most interesting aspects of each.  In some cases, I'll link to a more complete analysis by myself or someone else.

       

      Bitcoin - the genesis - tbd

       

      I was first made aware of the Bitcoin whitepaper in 2009 via a cryptography-focused meetup held in various places in California.  It took a few reads, but once you get the concepts, you will never stop thinking about that paper - it has been an introduction to myself and many others to first principles economics - knowledge-first investing - and the intersection of game theory, economics, and decentralized systems. - it was the first time that I am aware of that economics became interesting since the first human writing put down centralized ledgers onto necklaces, stones, and papyrus - and it's obviously using a vastly more powerful substrate - the 2009 internet.  The general theory of consensus-on-write decentralized ledger systems provides so powerful of a conceptual framework that it has begun to change it's own substrate - and yeah - resource sharing does seem to drive that from time to time - keeping track of shit with beads made people think there has got to be a better way.

       

      Dan Held discusses BTC Yeild strategies - pretty cool that he is so familiar with the risk of socialized losses on different exchanges.

       

      Ethereum - world computer - tbd

       

      Lots to write about here.  Maybe link back to history - cypherpunks, Nick Szabo blah blah, Vitalik Buterin blah blah

       

      Major changes, by EIP, up to the current switch to deflationary base asset with 1559 - there were some interesting governance influences that could be here. 

       

      Possibly link out to resources describing reasons that decentralized governance pushes things toward resource collection rather than resource distribution.

       

      dYdX - tbd

       

      TBD - dYdX is a feature packed DEX that implements Snark-based L2 scaling.  Lots to cover here.  Risks on l2beat listing.

       

      Dash - proposal systems

       

      The most interesting things about Dash were it's governance and proposal systems.   

       

      Dash was probably the first crypto project to really demonstrate the idea that governance could be highly effective if it was decentralized, systematized, and formalized, including the funding mechanism - almost from the very start of the project.  Similar decisions to ones that the Bitcoin core team would take years to debate were decided in a day.

       

      I feel DASH is the ignored spiritual progenitor of modern DAOs - it brought home that adding some automation to decision making offers clear advantages.  Since then, a lot has been written on this general topic. 

       

      Alongside the Dash proposal system, of course, there is a team and a community that you would need to know and believe in before you invest in the project with your time or funds - but understanding the automated decision-making capabilities of a project will forever be important. 

       

      Dogecoin - memes have utility

       

      Oof - this is a weird one - I won't be describing it in terms of digital ledger tech - but you just can't look away.

       

      Doge is a Bitcoin fork that had arguably negative utility as a currency (randomized chaotic payouts, etc.) but TONS of utility as a counterculture conversation piece.  Crowdsourced investment pumping is probably not new, but I feel like Doge took it to another level.  

       

      Although Doge is clearly worth a mention, if you try to analyze Doge from an investment or technical standpoint,  Doge will have you staring at your navel and wondering what the world has come to.  

       

      Aping into ironic markets is just not a good use of time and space in an investment tutorial, so lets talk about a related investment class to Doge - art.  (FYI, Matt Levine (Bloomberg reporter) has better analyses, that are way funnier, of Doge and Shib.)

       

      If you know how to invest in art, then you might know how to invest in Doge.  It's fun to own and trade and talk to others about, and if the conversations are compelling, then that often leads to more interest and higher prices.  In that way, Doge and Shib are similar to digital art pieces, many of which are now traded as NFTs. 

       

      If you want to trade art as NFTs for profit, then I think Giancarlo is your best bet as of this writing for a tutorial - I listened to 90% of his videos to date - it's just good clean fun.  That's all I have to say about memes and art, but I'll come back to NFTs as they are general purpose serialized tokens that have other purposes.

       

      Monero - tbd

       

      Ripple - tbd

       

      Theta

       

      Interesting Utility token with a clear product and a fairly traditional team and legal structure.  One of the few tokens I documented my notes for in this wiki.  I did some basic analysis myself, and read the reviews by a few other reliable people, as well as tried to use the token for most of it's intended purposes.  Here are my notes on Theta - they represent  the level of analysis you want to go through prior to investing in a token, if not more.

       

      Steemit  - tbd

       

      Brilliant use of oracles - not the best whitepaper, but just a cool system.  Worth writing about the whitepaper here. 

       

      Compound - Borrow-Lending Protocols

       

      This is where I need to talk about yeild farming.

       

      Uniswap - tbd

       

      FileCoin - tbd

       

      Sushi - tbd

       

      Ohm - and other DeFi2 reserve currency systems (MIM/Reserve)

       

      If a protocol can offer a compelling incentives to investors, accumulate it's own reserves, and maintain sustainable protocol controlled value, *with* a compelling utility case like Olympus Pro, then that protocol is only limited by the scalability of it's utility case, the security of it's contracts, and the competitiveness of it's incentives.  I spent some time studying Olympus, so that page is worth a read if you are considering investing in OHM at the time of this writing.  Pretty much the prototype PCV DeFi2 system.

       

      Yearn - tbd

       

      Curve - tbd

       

      Alchemix - tbd 

       

      Alchemix is really interesting.  Need to exercise yearn and alchemix to write this up.

       

      BitDao - and other private investment funds controlled by DAOs.

       

      PieDao - tbd

       

      KlimaDao - some work done - more tbd

       

      Solana - tbd

       

      Polygon - tbd

       

      Avalanche - tbd 

       

      Rari.fuse - tbd

       

      Dai - tbd

       

      Pancake Swap - tbd

       

      Need to show some success and failure cases of stablecoins - the utility value - and briefly mention why pegging to FIAT makes you at best as stable as FIAT.  Article on the Iron Finance Lesson

       

      Other curated lists of cryptoassets

       

      DeFi pulse has a curated list of defi projects with short descriptions

       

      That's the end of the section on cryptoasset dives.

       

      Common trades

       

      Options/Futures

       

      Call Options

       

      Put Options

       

      Yeild, annuities and equivalents

       

      Loans

       

      Loaning an asset out is a reasonable way to get some yield.  Not too different from renting your tractor out to your neighbor in exchange for a tiny part of their crop.

       

      To loan your cryptoassets, generally speaking, you have to go to exchanges you trust, or people you trust, to find opportunities to lend, so start there.  That said, /u/ashtonlaszlo built this nice google sheet of interest rates you can get by loaning your crypto on various exchanges - this stuff changes really quickly and that sheet cannot always be correct.

       

      The risk factors of locking an asset up and loaning it out generally include third-party risk and contract risk.

       

      I'll like out to some howtos for basic loans and a few more complex DeFi yeild strategies that involve loans in the section, Your Passive Income Fund below.

       

      Mining

       

      Staking/Validation

       

      Public equity/Venture Capital

       

      Exchange IPOs

       

      Private equity

       

      Funds

       

      Private funds

       

      Public funds

       

      Trading and intermediation

       

      Everyday Financial Services

       

      At this point, most everyday financial services (Paypal, Cash App, some banks) offer a few of the major cryptocurrencies for purchase or transfer to another user account on the same platform, but (AFAIK) not for transfer off-platform (they keep your cryptoassset keys and you have to trust them). 

       

      So, we're getting there as a society, but the custodial nature of these is not ideal, and they won't help you do much other than get exposure to price movement of a few major coins with significant counterparty risk.

       

      Exchange Trading

       

      Facilitated Private Trading

       

      TBD - need to get up to date with this

       

      Nostalgia: Back in the day (2010-ish) we had an excellent way to trade between individuals relatively securely: btc-otc.  All you had to do was get to know pseudanonymous folks on IRC, #btc-otc, and work with the community-supplied open source bots and GPG to build reputation.

       

      Today, there are lot of "local" trading services - third party intermediaries where you can list your interest in trading in-person, like Localbitcoins, Paxful, HodlHodl, Localcryptos, Localmonero, Mycelium local trader, CoinATMradar.

       

      I think private trading was easier in 2010, actually.

       

      Private trading with a colleague

       

      TBD - This is not particularly complicated, but you might want a legal contract.  Here's a google doc I whipped up - no warranty.

       

      DeFi

       

      Prediction Markets

       

      Examples of more Complex Trades

       

      Actively managing high-risk, high-yeilding cryptoassets

       

      Prediction Markets - Tales from the election 

       

      Yeild Farming: Example 1 

       

      What to do when you are in a tight spot

       

      Need to sell something but you predict it is undervalued - covered calls - seeking alpha article

       

      Putting it all together

       

      I am optimizing for long-term risk-adjusted expected return (capital appreciation) AND a regular return on capital (yield).   That means I'm looking to generate some income each month, and still end up with more than I started with.

       

      It is likely that you will have other goals, or apply some other filters or productivity formulae to your investment decisions - perhaps to mitigate environmental risk.  Those are outside the scope of this particular article.

       

      On day one, I'll assume that you don't know anything that is not on this page, and I'll assume that a lot of what you have read is unclear.

       

      That means that you have done no analysis - so, as was mentioned at the start, you'll start with passive management - and you'll start with a diversified portfolio.

       

      Because of that, you might want a low-risk, broad-based, low-overhead, cryptoasset index fund to give you some exposure to the market and to get you started.  Importantly, this portion of your portfolio can be built almost solely on data, without much understanding of individual assets - you can get started early with this.


      Your best practices 

       

      Since all cryptoassets are digital, you need to learn how to protect digital things, and evaluate risk in some cases.  You also need to know how to use "wallets" and their associated "addresses" and "keys".   There is a lot of good info out there on this, but I'll set the minimum bar and give you just enough info to get started.

       

      Here is something I wrote to someone who asked me how to get started with a centralized exchange, and whether they should have a metamask wallet first, or what:

       

      You're doing the right thing.  Centralized exchanges serve a couple purposes for you:

       

      Always:

       

      1) Your onramp/offramp from FIAT/crypto

       

      Sometimes:

       

      2) A place to store crypto if you trust them (but you have to mitigate exchange failure risk and authentication risk)

      3) A place to use for trades or yeild services from time to time, if they are a good deal for you.

       

      Since you need them for the first thing (onramp/offramp) and you need to get familiar with the risk mitigation on those, you should start with a centralized exchange.

       

      Get a little bit of FIAT into a centralized exchange (I don't know <deleted> options, is FTX an option?), and buy a little crypto with that FIAT (recommend some ETH and BTC if you are just experimenting), giving you a pool of FIAT and a pool of crypto.

       

      Set up 2FA with google authenticator on your phone.  Take a printout of the QR code you have been given - you need to save those in case you lose your phone.  Make sure that works.  I have three phones because I like to import certain google authenticator keys to the other phones as it is convenient.  Set up a second centralized exchange if you can, and understand the fee differences between the two - how much it costs to get FIAT on, purchase, sell, and pull FIAT or crypto off.

       

      Outside of that, self custody and decentralized exchanges should be your next step and learning experience.

       

      You're going to want to learn to send from a centralized exchange to your Metamask wallet (or other wallet), use a hardware key (buy one) as a second factor on your metamask wallet, and feel comfortable with that.  Back up a metamask wallet, and restore it, using a password database and the second factor.

       

      That's all the fundamental, boring, mini-game security crap that you have to go through to start working with crypto.  Then we can go into yeild and defi.  

       

      -Rich

       

      In actual fact, you can get crytpocurrencies via various local P2P methods, but that can be introduced later, and might never be necessary.

       

      Managing Centralized Exchanges:

       

      Custodial exchanges store your crypto.  Non-custodial exchanges make a swap happen between your wallet and someone elses, without storing your crypto.  

       

      Centralized exchanges (Cexs) generally have proprietary infrastructure and a command and control structure within a governmentally approved legal entity.  Decentralized exchanges (Dexs) are generally non-custodial and run by non-proprietary infrastructure (smart contracts), although they may have the same legal entity and government regulation that a Cex has.  Big difference: *Most* Dexs  don't do KYC/AML - a lot of that happens because either they are just flying under the regulators radar, or they are based in a governmental jurisdiction that allows that, or they genuinely don't have a government sanctioned legal entity behind them.

       

      Exchanges are generally good places to exchange things (although not always).  They are not always great places to store things (although it's an acceptable risk for many and can be mitigated somewhat). 

       

      For a variety of reasons, deposits or withdrawals could be delayed when using an exchange - sometimes for hours, or days, or weeks, months, or years - plan accordingly - make sure to take the things you need off of an exchange well before you need it. 

       

      There is a widely varying risk of exchange hacking based on the exchange - check out the exchanges history and team.  A common strategy for people who want to keep a lot of cryptoassets on custodial Cexs for a while is to spread the risk across the two or three exchanges you trust the most and that can make the trades you need (ftx, coinbase, and kraken, for instance).

       

      Exchanges, by nature, deal with a variety of assets.  No exchange support personell will be expert in all of those assets, or in the workings of the exchange.  Due to rapid growth, almost all support personell at large, centralized exchanges, are unable to keep up with reading the exchanges own documentation, and offer very little, if any, real support to customers.

       

      Random tips:

       

      For a Cex, I have to assume you are o.k. with KYC/AML and keeping your government abreast of your activities.  Read through the exchanges documentation a bit.  Explore the feature set around security features.  Turning on all of the security you can, getting the highest level of approval/ID you can from the exchange will help things go smoothly in Cex-land.  If you have external wallets that you are managing securely, whitelist their addresses before you attempt to withdraw crypto to them, you can always pull the whitelisting later - this will all help reduce delays.  Support people probably can't help you - but exploring the feature set, testing it, and understanding it, certainly can help you.

       

      Managing Wallets:

       

      Just the random tips for now:

       

      The state of crypto wallets as of this writing is....not great.  Software wallets are buggy as heck, and it's too easy to lose hardware or paper wallets.   Desktop operating systems are really vulnerable, phishing attacks are constant, and all kinds of exchanges and projects are getting hacked, sometimes via inside agents.  Still, there is a lot you can do.

       

      Big risks for me are either losing a password or decryption key, or losing a hardware wallet.  There is some risk that my password will be obtained by a bad guy, but I just haven't had that happen, and I have lost passwords, so that's my threat profile.  Yours may differ.

       

      Metamask tips:

       

      • If you are making transactions with Metamask, sometimes failed transactions cause the transaction counter to get messed up, and it could look like your funds are gone, but they are not.  Settings|Advanced|Reset the wallet - counter is reset.
      • Often the Infura node that Metamask gives you free service on gets bogged down, and your transaction doesn't go through.  To solve, you have to remove the eth mainnet and add a new mainnet, with a more reliable eth node - because you can't have two eth mainnets listed in networks.  Here's a video on configuring a metamask node provider.

       

      Using a second factor:

       

      Trezor, etc.  Need to link out to some good tutorials on this.

       

      Using hardware or paper wallets:

       

      Using lots of encrypted json files:

       

      This is not a terrible idea.  You can use a trusted encryption program, the openssl cli, for instance, to encrypt a wallet json file and put a copy of that file in a few places.  It's less likely to get lost than your hardware wallet, as you have lots of these files. 

       

      TBD - oh, god this is going to take a while.  Lets see if Andreas has a video...yes, but there are so many. It's just going to have to put a summary together. - TBD

       

      Your index fund

         

      So, to get into the market initially, I am going to recommend two things:

       

      1) You make your own broad-based, low-overhead, cryptoasset index fund. 

      2) You invest a tiny portion of your total investable assets.

       

      You will learn a ton by doing this, set yourself up for future investments, and have a ton of fun.

       

      So lets build it.  We'll include assets from equivalent categories to traditional investments - 

       

      TBDs:

       

       

      Your passive income fund

       

      The next thing to experiment with, and put a small amount of value into, is a Passive Income Fund.  You want a regular return on capital, to beat, at least, other conservative TradFi investment vehicles that offer the yeild (bank saving accounts, government bonds, etc.).

       

      First thing to do might be to watch Justin Brams video on Eight types of yeild in DeFi.  I was so impressed with that video that I put together a page of notes on DeFi Yeild based intially on that.  I also included some data from his video on the five best ways to get a yeild on ETH.  I think those two combined make a nice case study.

       

      TBD - earning from staking, loans, and other reward systems 

       

      High-risk value investing

       

      This is the fun part.

       

      Individual investments, if you are a value investor, should be invested in with more than just data - you should understand the position of the investment in the world, and predict it's relative value - you need to really understand the assets.

       

      The bar was lowered to creating valuable assets by Bitcoin.  New cryptoassets get created every day and the market cap of the industry grows year on year as cryptoassets eat other asset classes.  This means that there are a huge number of new "startup" assets to invest in, many of which are largely decentralized, and have tremendous potential.

       

      If you never get interested in analyzing individual cryptoassets, you shouldn't build this portfolio.  If you do, then as you learn more about cryptoassets, you will begin to feel comfortable analyzing whole categories of assets together. 

       

      You might compare, for instance, all of the decentralized CDNs and file storage systems over a period of time, from an investment standpoint.  Or you might compare all of the virtual land protocols and their cryptoassets.

       

      I'll touch here on the characteristics of decentralization again.  The decentralized assets do better largely because they are more disruptive. TBD

       

      Also need to describe some of the commonly analyzed components of crypto projects - not too different from analyzing a small busines:

       

      Team:

       

      Product:

       

      Economics:

       

      Strategy:

       

      There is an element to evaluating strategy that is something like futurism.  Of course, the best way to predict the future is to make it.  If you can build a successful project, then go for it.  In the meantime, if you cant make things faster than anyone else / add value faster than any one else, then you have to keep track of what everyone else is building and use combimatorics to figure out what is coming next.  If you approach that work with a learning first strategy, you will gain a good feel for how you can approach new markets when it comes time to build something.

       

      The best way to learn a lot about what can be built in the future is to keep trying the things that are purpose-built as tools.  Products and tech with open and composable APIs, open-source software, and teams that are helpful will be vastly easier to work with, and those tools will get used if they are remotely useful.  Not so with the opposite - closed products with permissioned APIs, poor composibility (eg. read but not write), and teams too busy to engage on a technical level.

       

      Find those building blocks, use them, build with them, engage with those teams.  You will see the future open up, and you'll know which building blocks to invest in.  

       

       

      Finding and evaluating nascent cryptoassets

       

      You can find lists of new token offerings pretty quickly online by looking at lists of them:

       

      https://coinmarketcap.com/ico-calendar/upcoming/

      https://icodrops.com/

      https://www.coindesk.com/ico-calendar/

       

      But those usually aren't where you will find the projects with the most potential.  

       

      The projects with the most potential will either be looking for investment through direct sales of tokens, angel/venture capital, or they have already sold all their tokens long ago and they are in a deep development phase, and few people can predict their real value. 

       

      Build stuff, use stuff, and you will find you need early-stage projects - and can invest in them (you might even get airdrops because those are usually sent to addresses that use and build stuff).  Best case - EARN tokens in new projects by helping the project substantially to succeed by the sweat of your brow - allowing the project governance system to compensate early contributors fairly.

       

      A note on ICOs and IEOs.  Direct ICOs are a reasonable thing to participate in -- ICOs are commonly sales of tokens directly from the organization funding the offering, first come - first serve.  IEOs (initial exchange offerings on centralized exchanges) are simply ICOs that are sold through an exchange.  The exchange takes a fee, and only allows the people they favor to buy - it definitely feels like a scam when you try to get in on an IEO and the exchange says it favors those who spend a lot of money on their exchange - I avoid IEOs in general.  ICOs over decentralized exchanges usually have none of the unfairness of IEOs, although they certainly can in some Dex's that have centrally controlled knobs through a DAO, making them a dex with a little "d".

       

      IDOs (Initial DAO offerings) are a different beast.  All of them are implemented differently, but they are typically highly decentralized and egalitarian.  If you had a chance to get in on the Klima IDO, you would probably be sitting pretty right now.

       

      Your rebalancing system

       

      Fundamentally, I want you to guard your time.  You want a strategy with some process.  You don't want to be checking prices and getting tons of price action alerts.  

       

      If you can make long-term investments that allow you to rebalance once a quarter, or once a year, then you can limit your mini-game time-wasting activity in investing, and free your mind up to learn and build things instead.

       

      Rebalancing means you have a balance that you want to maintain - often that means certain percentage of your investments in high risk, medium risk, low risk, etc.  So every so often, you look at your investments, and if you see that you one of them has entered a different risk category, or has increased to a larger percentage of your portfolio than you would like, you sell some of it, and buy some of the assets that 

       

      For tax purposes, rebalancing once a year often makes a lot of sense (long v. short term cap gains in the US and some other places).  I recommend you start out with that in mind, but, practically speaking, you are unlikely be able to invest just once a year.

       

      Adding new assets to your high risk portfolio is going to keep you busy in research and learning.  Building things and participating will help you find those.  After a year of holding them, you might change your mind about whether they are high risk, or whether they are worth keeping at all, and make adjustments accordingly - note: that one year anniversary won't come on a "rebalancing date" - it will come one year from the time you had to jump on that high risk investment - so you might have many times a year when your calendar shows an "anniversary" of investing in an asset, and you can consider rebalancing any assets other assets in your portfolio that have been held for one year at that time.

       

      That's the way I work it to protect my time and still keep the fundamental principles of rebalancing in practice.

       

      Active trading v. rebalancing 

       

      Covered above - TBD - might want to move that to this section to identify where in the "active" spectrum you can implement various passive reallocation schemes, how much knowledge you need to implement limited profit taking and re-investment based on analysis, and add crazy-ass day trading at the far end - a scale is in order.

       

      Your Reminder to learn and earn as a primary strategy

       

      As a reminder, it is far more useful to work for crypto than to spend time investing - investing can be a means to learn, and learning is a means to earning - get to work on some projects, or start your own!

       

      Taxation:

       

      This can be a complex topic, and highly dependent on your country of origin, so you absolutely do need to come to an understanding of the tax systems and regimes that you are under.

       

      In many jurisdictions, you will be taxed differently based on how long you hold an asset, on the gain or loss itself (whether you sold for more or less than your cost basis), on dividends, and on interest or other income derived.   You will need to evaluate each type of "taxable event" if you want to understand how to minimize your tax exposure.

       

      I can't cover this exhaustively with the amount of finger-energy I have, but I can give you a few things to think about:

       

      Timing and capital gains:

       

      In the US, there are higher federal tax rates for short-term (less than one year held) capital gains, and lower federal tax rates for long-term (more than one year held) capital gains.  The incentive is against speculation.  Partially for this reason, many US residents, myself included, generally invest for one year or more whenever possible, in any investment.   This affects your rebalancing schedule - you can only rebalance assets that have been in your portfolio for over a year unless you are taking a loss or accept a high tax rate on the profit.

       

      For value investors, sticking exclusively to long-term cap gains sets up a cadence that is quite pleasant to work with and lends itself to systematization - you want to invest in things that you have enough confidence in that you believe they will be at a higher value in one year, because after you invest, you probably won't consider selling it for a year.   You can invest at any time from your cash pool into investments, and consider it again at any quarterly rebalancing appointment that you have over one year out - just put a note in the rebalancing calendar appointment when you invest.

       

      Important tax explainers:

       

      Andreas on the most common US tax Disaster - in any regime in which your losses are not deductible from your gains, either across year boundaries or otherwise - you either must never have losses (impossible) - or reserve immediately on sale a conservative amount of gains into a account for the governmental taxation service (possible - but not always simple).

       

      The cryptotax subreddit can be useful.

       

      Useful tax tools: 

       

      Cointracker is quite useful for tracking your cryptocurrency transactions across exchanges, and will generate a US tax report for you for around 100 per year.  It has monthly fees based on the number of transactions you make, but they are fairly reasonable.  There are a lot of competitors.  Koinly has a very incomplete crypto tax explainer that just covers a few basic things.

       

      References:

       

      People you must follow:

       

      Simply read everything these people have ever written and listen to everything they have ever said, and keep up.

       

      Andreas Antonopoulos - website - youtube - podcast - twitter

       

      Vitalik Buterin - website - twitter - reddit

       

      People and communities you should probably check out:

       

      Justin Bram -  his youtube channel and the Defi Innovation discord.

       

       

      Newsletters, Podcasts, Blogs, Youtube channels to follow, etc.:

       

      This is all optional stuff - just sample things and stick with what you learn the most from:

       

      Newsletters:

       

      The Defiant

      The Block 

      Week in Ethereum News

       

      Podcasts:

       

      Unchained

      The Defiant

      Coindesk Markets Daily

      Unscrypted

      Epicenter

      Bankless

       

      Blogs and other:

       

      Coinmonks - sometimes has excellent, relevant articles, but quality and relevance to you will vary greatly article to article.

      Chainalysis, Kraken, Coinbase, all have newsletters that not that important but sometimes have real nuggets.

       

      Analysts:

       

      For the most part, analyst groups provide poorly researched price predictions - but once in a while, if you visit a lot of them, you might get a useful data point or a well written article on a cryptoasset.

       

      Binance Research

      Trading Beasts

      Capital.com

      Gov Capital

      Digital Coin

      Wallet Investor

      Crypto News

       

      Charting tools:

       

      These are more useful for active traders, but once in a while you can get some insight that you can't get off of simpler free tools like the excellent coingecko.  Sadly, none of the charting tools do what we want them to do in the crypto markets, yet, and none of them can keep up.

       

      Dune - really excellent dashboards and analytics - fantastic free stuff - building your own charts requires some SQL knowledge - Norwegian company.

      Nansen - useful for NFT analysis, which I don't do.  Sometimes useful to get a feel for the distribution of a token among addresses.  I've used it a few times.

      TradingView - this is more useful for FIAT FOREX and stock market stuff - I only use it for alerts on occasion - very sophisticated programmable platform - great for people who like to draw on graphs and test investing strategies that are algorithmic, none of which I do.  (Update: Actually, coingecko offers alerts now, so I might stop using tradingview altogether.)

      Coinmetrics has some neat features - it's nice for doing things like showing correlations

       

      Recommended Books, Reading lists:

       

      A few books I read that helped me understand how some successful investors think:

       

      Value Averaging - Harvard endowment - accessible - how a pro systematized investing into a regular, disciplined process.

      The Little Book of Value Investing - Berkshire - accessible and short - calculating intrinsic value and comparing two things.

      Pioneering Portfolio Management - Yale endowment - textbook style - how a pro thinks about investments.

       

      Information from Exchanges:

       

      Some of the better exchanges have some useful information for people new to cryptoasset trading.

       

      Coinmetrics order types

      Kraken intro to trading

      Kraken trading glossary

      Coinbase has a ton of wonderful tutorials for customers, they even pay you a small amount for every tutorial you complete.

      Ledger X has practical explainers on how to make BTC covered calls and options

       

      Other reading lists:

       

      Ask Economics subreddit reading list

       

      Addendum/Forewarned/Malarkey/Philosophy

       

      So, this section can be ignored.  I just felt compelled to write it.

       

      Environmental Concerns:

       

      We have one huge problem in the world right now: It's on fire.  I know that this is true - I have seen the fire.  Anyone who denies that either hasn't seen a fire tornado, yet.

       

      So, should you invest in bitcoin, or a company that uses it to do things, or a company that encourages it's use?

       

      First, Bitcoin uses energy.  Lots of energy.  There is a lot of debate over how much, and it's not simple to calculate.  There is some debate over whether more good is being done by using that energy to carry out this function, or more bad.  TBD - links to this debate. Crypto Carbon Ratings Institute

       

      The ethical calculus:

       

      Decide whether you think it is good or bad to use energy to secure value (hopefully this involves some calculation). How much energy can be spent on self-sovereign ownership systems?  How will you measure the per-unit efficiency of those systems compared to the existing systems in place to serve the same purpose?  Do you know what the advantages of these new systems might be, and have you decided that for yourself?  Could they have some extreme influence on governance that is positive or negative?  

       

      If it's bad to use more energy than X on a per transaction basis for Bitcoin, then ask: Should you focus your time on defeating any ecosystem that uses more than X, or should you focus on making renewable energy vastly more efficient or heavily used?

       

      If you should focus on defeating high energy utilization systems, instead of any of those other things, then focus on that.

       

      Delegated ethics:

       

      If you simply trust Rich (Rich loves the third person), here, who is a crayon-eating ex-jarhead, you will decide that it is fine to invest in all of these crypto projects, because they are a drop in the bucket energy-wise, and the solutions to climate issues have very little to do with proof of work systems (out of scope, but I follow some things). Rich wants to focus on making renewable energy more effective and broadly used, and building the capability of the human race to completely control the climate of any planet in the solar system, and the governance and incentive systems to get that done right.

       

      Rich does not get listened to, much.  There are probably three unique readers of anything he has written on any given day. 

       

      Elizabeth Warren does get listened to, and she says Bitcoin is evil because of energy usage, among other things - but, although Rich loves her dearly, she doesn't know what she's talking about in this case. 

       

      So, there you have it.  A large portion of the general populace will not invest in proof of work systems on ethical grounds. Rich will invest a tiny portion of his personal assets in such systems and ecosystems.  Ask me more if you would like to discuss or convince me otherwise. 

       

      Doing things on Purpose:

       

      If you are investing to buy things you don't really need, then maybe you should stop.  Learn about something else.  If you are investing primarily for the benefit of others, then maybe you should set goals - how much money should be given to what cause or person - and track your progress.  If you find you are hitting goals like that, you will be on top of the world.  If you find you are spending money on yourself, stop.  It' just not worth it.  Do something productive.

       

      Learning First:

       

      There is a strong confluence between the research involved in many investing strategies and general education. 

       

      By learning to invest in cryptoassets, you are likely to be learning at the cutting edge of society and technology - think that way. 

       

      Andreas makes that argument well. 

       

      It should be obvious that simply day trading, rinsing and repeating the same action, or, perhaps spending time finding people to invest on your behalf, are activities that financialize your mind, but that do not enhance its capabilities to analyze and create. 

       

      Analyzing any complex system - some of the better crypto projects out there - trying the code - learning from the team - and investing once, allowing your system to rebalance itself periodically, is going to improve your mind and open doors to meaningful capabilities outside of investing. 

       

      It's up to you.

       

      Downsides:

       

      We all start out wanting to work on what is meaningful, but we need resources, so we gather them, as needed, so we can get to that meaningful, productive work. 

       

      At one point I gathered too many resources.  I use some of them to allow me to do meaningful work.  I use the rest to allow others to do meaningful work.  (I'm a huge fan of Victor Frankl, so if I can help a person into a situation in which they can healthily engage in meaningful work, I generally feel pretty good about it.)

       

      I achieved my definition of "financial success", primarily through investing.  For me, personally, investing entailed learning enough about systems to predict the relative value of some things - better than most others - and capitalizing on that knowledge - repeatedly - over many years - until my financial goals were achieved.  It also involved some luck, but we should assume average luck - if your luck is bad enough, you can't live long enough to succeed as an investor - or in any other capacity, for that matter.

       

      This might be obvious, but there are a couple downsides to this type of financial success that are worth mentioning. 

       

      One downside to financial success through investing - it opened me up to exposure to hateful commentary that came exclusively from those who did not bother to learn much about the systems I learned about - mostly from former investment bankers - and other people who don't know they are already using cryptoassets.  It's not just disingenuous investment bankers that will ridicule an investor in cryptoassets, though - some really nice folks will have a negative knee jerk reaction to anyone who makes money through investment - no matter how many other jobs the investor works - "investor" means scumbag in some circles. 

       

      Fortunately, acceptance turns ridicule into knowledge, so that downside is a transitory, relatively unimportant thing - hopefully the advanced warning makes it even easier.

       

      A much more significant downside - there is a genuine opportunity cost to learning about financial systems - you will probably keep your other jobs/careers, and those may suffer as you put time into investing - and there is, of course, no guaranteed payoff - even if you are successful - it was at a cost.

       

      The opportunity cost is the most serious concern for me.   It's easy to underestimate.  If investment becomes all encompassing, one could easily "financialize" their life, stop learning, never make time for charity, and thereby cease to be productive at all.

       

      For me, I look at investing in cryptoassets as both a way to make money and a way to understand systems that I am already interested in working with.  There is a synergy there, so I keep working at least part-time on related systems engineering and business issues.

       

      That's important to consider.  In general, I think investing in cryptoassets fits my informal background in computer science quite well - anyone with a comp-sci or math background may have a leg up.  Anyone can learn a new skill, given infinite time - but if you don't have an interest and a related background - you might be many years behind those who do. 

       

      Practically speaking, time-boxing your investment efforts on a given day is a great way to keep investing from taking over your day.  If you only allow yourself to work on or look at your investments on certain days, and take weeks off at a time, you should be in good shape.  Rather than use a timer, I find that time-boxing efforts like investment studies to an entire day is more productive.

       

      Most of us are investors:

       

      Even if you don't want to collect too many resources, it could happen to you.  It is almost unavoidable, sometimes, to gather too many resources.  

       

      I suspect that most people who gather too many resources do so not from their hourly rate, but from investing - often inadvertently.  For instance - you might just want housing - shelter - a roof over your families head - so you work and gather and you get that security - and then, years later, by no fault of your own, you find yourself with many more resources than you can ever reasonably use due to appreciation in the value of your home - you're not evil, but you are an "investor".

       

      In any jurisdiction I am aware of, investing in real estate entails investing in, and supporting, a system that clearly favors the rich - a system rigged to support the wealthy.  Unsurprisingly, fare more people find it acceptable to invest in that system than in any system in which fewer people invest in, rely on, or plan to invest in.   I invest my time in understanding systems that are "less rigged" -  in which I believe knowledge and understanding are more important to individual performance than they are in "more rigged" systems - such as real estate markets.   I hereby authorize you to call any system, about which most people do not understand how it is rigged, and in which the powerful can hide information on it's workings from most of the players, rigged. 

       

      Systems based on digital ledger technology typically offer a level and scale of transparency and verifiability that was not commonly available pre-bitcoin.  Accept as an axiom that a transparent and verifiable financial system can only be rigged in full view of the public, and therefore can only be rigged in a way that can be understood prior to participation.  Since 2008, these systems have exploded in popularity, and we have learned a tremendous amount about how these systems are rigged, and how to ensure that participants can detect rigging, pick up their assets, and move to a less rigged system - this has never been so easy  - and it makes study, knowledge, and understanding the primary factors in financial success in these systems - diminishing the advantage of pre-existing wealth and political power.

       

      Finally, you might want to have a way to limit how many resources you are squatting on, so, there is another thing to be prepared for...

       

      Consider the end game:

       

      Enough.  You might want to stop investing at some point, and transfer most of your assets to other people or organizations - or you might choose to keep investing, and cycle the surplus off the top to others regularly.   Why should you suck up resources - why should you decide who gets to do meaningful work, and who suffers without resources?   

       

      There probably isn't a great answer to those that is not rooted in your ego. 

       

      This is super serious stuff.  Egos drive *overconsumption* on resources that you will never need and that could be meaningfully used by others - like owning a home far too big for you.  Worse, it might even drive you to *blatantly waste* resources - like owning a home that is empty most of the time.  There is a complex relationship between fear and ego that turns people into unreasonably selfish beings - it's horrible for the rest of the world.  If they were less fearful and more thoughtful, they might want to live in a decent world - all things considered - there should never be a vacant house when someone needs one to live in.

       

      Be forewarned that it actually takes a lot of time to figure out how to transfer resources productively and in a manner consistent with your ethics.  I failed more than I succeeded for a few years.  The ability to make charitable transfers is something that you probably want to start working on as soon as you see that you will have more resources than you can use - look forward to them like you look forward to any other good work.

       

       

       

       

       

       

       

       

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