Adventures In Deep (Crypto) Space

Investing in digital – or crypto – currency is somewhat of a taboo in the FIRE community. Say Bitcoin and you are frowned upon. You want to be one of us?  Denounce your deeds of darkness! Repent your evil ways! Follow us on the true path to FIRE.

I exaggerate. But we do pride ourselves on making smart, low risk, long-term investment decisions that will get us exactly where we want to be. We invest our money in ETF’s, dividend paying stocks, bonds, real estate, crowdlending (okay, here’s another one that has us somewhat divided).

Our main virtues? Prudence, patience, perseverance. We never gamble. Right?

Bitcoin is a digital wild west. It doesn’t fit the FIRE narrative. We’re not fortune seekers, heading west to dig for gold, galloping into uncharted territory with shovels and firearms yelling ‘yahoo!’ We are the ones staying behind, shaking our heads over so much foolishness.

We seek safety, predictability. We mitigate risks.

But here’s the thing. I do want to go places no or not many people have been before. I want to insert a little adventure in my routine-stricken life. Embark on adventures, explore and take risks. That’s how you learn. You did that as a kid, so why not now? Yes, you may fall, you may get hurt, but you also learn. You get up and try again.

That’s all fine you may think. Just don’t do it with your money.

It makes perfect sense to put every penny to work, stay focused and take as little risk as possible. Our goal is not to make as much as possible, but to save enough to support us without the need for a paycheck. And it’s great to see my net worth reach new heights month after month (well it doesn’t always, but there is an upward trend). Do not get me wrong. It’s awesome that FIRE is getting closer and closer. But the journey isn’t what I would call an adventure. It isn’t supposed to be. It follows a rather straight, carefully laid out path. And it’s important. I want to reach FIRE and there is no doubt I will stay focused and keep my eyes on the finish line.

“I understand the allure of Index investing; It’s extremely simple, extremely passive, and from a historical point of view it’s extremely “safe”. It’s also EXTREMELY boring” – Nick from TotalBalance.

I need a little more (investing) adventure and that’s where cryptoassets come in. Or rather blockchain technology. 

Before you think I have lost it, been infected by some dangerous crypto virus, I only allocate a small corner of my portfolio to this asset class (currently less than 1% if I include my company shares, equity in my home and my pension). It does not affect the main strategy and plan for reaching FIRE.

What I am not doing

I am not blindly buying cryptocoins in the hope their value will surge and make me rich overnight (which would be comparable to traveling west during the gold rush, with nothing more than a shovel and hoping for quick and easy fortunes). I do hold some (fraction) of Bitcoin and especially Ether, but I mined the latter myself with my homemade mining rig (computer).

What I am doing

I am following initiatives in the blockchain space and look for initiatives and projects that would lead to potentially disruptive systems. Disruptive not only for financial institutions – i.e. bypassing banks for financial transactions – but a whole range of industries.

Blockchain is not only about exchange of value via let’s say Bitcoin (or the soon to be launched Facebook coin Libra) without the involvement of banks. Blockchain is a technology that will be the backbone of a whole range of decentralized, peer to peer, solutions.

There is enormous traction and momentum in the blockchain space at the moment. And a wave of decentralized solutions and applications (Dapps) is already washing over us. This will only increase in the years to come.

My approach is to support and invest in initiatives that I find interesting, promising, disrupting. But not as some sort of venture capitalist and/or angel investor. Not by putting fiat currency into a project in exchange for some ownership equity. And neither by purchasing traditional shares in ‘blockchain’ companies.

Livepeer

I have opted for something more unusual and decided to get deeply involved in the actual mechanics of a blockchain protocol called Livepeer, which enables decentralized streaming and transcoding of live video. It is extremely interesting. Not only from a technology perspective, but also from the perspective that there is an entire spectrum of use cases where this technology can fuel entirely new and potentially disruptive solutions.

More specifically, I buy Livepeer tokens – the protocol’s native, Ethereum-based crypto currency – and stake them with one of the video transcoders in the Livepeer network. Which earns me rewards in the form of newly minted tokens.

In layman’s terms, by bonding the Livepeer tokens that I hold to one of the transcoders, I essentially upvote this transcoder. The more votes a transcoder gets, the more work they get to perform and the bigger share of newly minted tokens they get (which in turn is good for me).

It may all sound a bit mysterious. But Livepeer is here and it’s live. It has been live for like a year now. And up to thirty transcoders (network nodes, computers) have been transcoding over hundred live events and counting. There is still a lot to do before popular adoption – the network is still in its alpha state – but an upcoming release of Livepeer will be a major step in this direction.

You may wonder why this is disruptive technology. What’s so new about streaming live video? Everyone does it already right?

Yes we stream live video, but facilitated by only a handful of big companies that can afford to own and run the raw computer power that is necessary for video transcoding and broadcasting. Companies that can censor content and dictate the monetization model. Companies that determine how big (or rather how small) a share of generated income you – the content creator – will get. A share they can change overnight.

Not so long ago YouTube changed their rules and policies regarding channels, content and displaying ads. As a result many people who relied on their channel generated income, saw their income being slashed. From one day to another. Nothing they could do about it.

With a decentralized, peer to peer network, streaming and transcoding live video will be handled by many different nodes (read computers). This provides for a potentially much cheaper and extremely scalable solution. And a new playing field for fairer monetization models that are negotiated between content creators and consumers. Without interference from some central party.

Performance

That’s all great Marc, but how do your investments in cryptospace perform?

I have decided to include my staking adventures here on the blog. I will treat it like any other investment and give monthly updates as well.

It should be entertaining to track this. An adventure, a true roller coaster ride with wild fluctuations in value, gains, rewards, etc.

But I am not seeking quick profits. I am not digging for gold. Rather, I support the idea, the technology. By engaging in this way I learn. And who knows what spin-offs may follow.

I am not afraid to jump (it’s only a symbolic one considering the fact I invest under 1% of my total net worth). Wanna join me?

How about you?

Let’s say I give you $10K (just for the record, I won’t). You have to make an attempt to let it grow, you have to invest it. But not in any of the traditional assets and asset classes. No stocks. No real estate. No crowdlending even.

What would you do with it?