Identifying what is broken in crypto and personal finance

  1. Everyone should have access to knowledge
  2. A way for you to add to that body of collective knowledge
  3. A mechanism for defining trust
  4. There should be safer investing vehicles in crypto

I’ve been in crypto for a good few years now and I have participated at a fundamental level in these ecosystems by contributing ideas and code to things that I believe in. I understand why the systems are built and how they work. I’m currently helping to launch the Ultra blockchain network and I help run Scatter. This piece isn’t about either of those projects. Instead, this is about what Nathan and I have been building for the EOSIO Hackathon that is currently running.

The defining characteristics of our solution

As we still have a few weeks to go before the actual hackathon submission, and I’m not one to ruin a good surprise, I’d like to map out the edges of the concept without going too deeply into the details.

In a week or so, when we’re closer to the deadline — and nobody will have a chance to steal my thunder! — I’ll speak more clearly about the specific details of our solution.

For now, let’s talk about the characteristics we expect from this product

Everyone should have access to knowledge

We believe that people should have high-level access to knowledge about markets and projects. But, having a lot of knowledge is useless without a way to discern what is good and what is bad, so there should be a way to easily see which is which.

A way for you to add to that body of collective knowledge

If you are sharing valuable knowledge with the rest of the community, there should be a mechanism for built-in compensation as an incentivization method.

A mechanism for defining trust

Followers and other metrics like that are not an indicator of quality content, they are only an indicator of marketing prowess. When you are talking about getting sound financial advice, the only acceptable indicator is making a prediction and checking it against the market.

There should be safer investing vehicles in crypto

You should be able to invest your cryptocurrencies in a way that is safe and somewhat buffered from the volatility of the markets. What you invest in should be decided by other users who have a proven track record.

A product has a story

While speaking with a close friend of mine this past weekend, the topic of investment came up. My friend works as a mechanical engineer and earns, compared to the average salary of my country, decent enough wages. He managed to build his own house, his kids go to good schools, and he lives a fairly secure life with no shortage of food or other essentials.

But, as people tend to be, he is dissatisfied with this status quo. He is tired of working long hours for a middling wage, and doesn’t see that he has much room for career growth without setting out on his own. That, especially now during a pandemic that has shattered the global economy, seems to him like a foolhardy endeavor that simply isn’t on the horizon. He feels stuck and I can’t really blame him.

I know that many of us are in the same boat. We kind of just tread water until our time is up, and then we hope that we can have a few good years of well-earned rest and relaxation.

As I get older, this feels more and more like a sham.

Once in a while, I’ll mention what my brother and I are up to in crypto-land. My friend, and really most people, don’t really understand. They don’t get what money really is, how society is structured around it, and why crypto is so important. He’ll be curious, ask pointed questions, and in the end he’ll kind of sigh and say that he wished that he could invest his money in something that will give him a more free future.

Honestly, I don’t know what to suggest that he do because I don’t particularly like the choices that we are presented with.

Banks and investment firms sell access to financial products that will bring him a small yearly return, usually a percent or two above inflation. If he puts in a few thousand dollars a year (over a few decades) it will eventually grow, through compounding interest, to a sizeable nest egg.

The stock market is another place that people make a decent enough living, but the statistics for successful day traders are particularly abysmal. This paper, written in 2004 found that only 20 percent of day traders in Taiwan tracked between 1995 and 1999 made money in any six-month period, after considering transaction costs.

On the other hand, the crypto community is somewhere that many people are making big money, but it is rife with scammers, fakers, sleazes, and shillers. It is genuinely hard to find anyone that does anything akin to real analysis, or has an understanding of how a tech works and what the pitfalls and gotchas are. For those that do, they generally don’t share that information because there is little incentive for them to. That’s understandable: it’s a lot of hard work that would be painful to share for free with others online.

  1. Work a solid, salaried job and retire on the minimum at 67.
  2. Invest via traditional banking or investment firms, slowly accrue a nest egg over decades.
  3. Invest in stocks and be lucky to break even.
  4. Invest in crypto and get scammed, suckered, and rekt because he doesn’t have the technical background to tell good tech from bad.

These are terrible choices!

There is, of course, another facet to all of this. The choices that my friend has are not the same choices that someone who is already wealthy does. They have access to much better investment advice and vehicles, and because they will be investing more, they will have much higher returns.

A new way forward for personal finance

I think that Nathan and I have a solution for how to level the playing field substantially. Next week we’ll go into a bit more detail about our specific solutions and tease a bit more about the brand, the UI, and what our roadmap will be for 2021.

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