MAGIC INTERNET MONEY

Magic Internet Money

My Experience with Bitcoin, Crypto, and Blockchain?

This article is pure opinion and should not be considered financial advice. This is my experience only.

Introduction?

It was 2013 when I walked into the kitchen and a colleague mentioned Bitcoin to me for the first time. He flipped a pair of over-easy eggs in a new Teflon pan and proclaimed, “Bitcoin is the future!” I asked, “So what is it?” As it turned out, this was a difficult question to answer back in 2013, as it was not quite as popular; the information resources were not as abundant. I briefly looked into it. I thought, Hmm, magic internet money? Okay, umm, this sounds kind of lame and maybe a scam or something for gamers? I determined that there was too much speculation then, and with the flip of another egg in the pan, it fled my mind until March 2020.?

The beginnings of COVID are remembered for the distressing news, masks, and the threat of potential infection. I never thought I would watch The View, CNN, or Tiger King all in one day. Seemed surreal. I wondered, Are my industry and job secure? How will this affect my family? Friends? Coworkers? In general, as a nation and a world, are we prepared for this? I had just returned from Italy, where all this started making world news. Did I contract it there? I did have a wicked cold upon my return. It was like the beginning of some sci-fi movie. from the planet. Except the sobering reality was that it wasn’t. It was all too real and literally all up in our faces. We all took sanctuary in different ways and we're all forced to reevaluate and reflect on our perspectives and life experiences. In short, on some level, it changed us all and, therefore, changed the world. Financial planning became as critical as ever. COVID progressed. The hospitality industry got hit hard, and then just when you thought the wave was over, more negative effects appeared, and we adapted. We pressed on. We all went through the struggles together, and where there is a struggle, we often find strength. So many lessons were learned, and no, it's not over yet! But we are now better off than we were a year or two ago.

This time also prompted me to look deeper into personal finances to make sound, strategic decisions. Also, it just so happened that we just purchased a home and moved from Northern New Mexico to the High Rockies of Granby, Colorado. Making a large purchase right after watching the pandemic start to unfold was stressful. This point in time drove me to research Bitcoin, blockchain, crypto, and other investment types as ways to hedge my other assets. As I researched several different investment options besides the traditional ones, I came across Bitcoin again while browsing various investing platforms. My interest piqued as I remembered Bitcoin being worth about $350 in 2013 (when I first heard it mentioned) and saw it was now worth $6,000. I thought, Damn wish I had done more research back in 2013. But then I became curious. Why was this magic internet money worth sixteen times more than when I first heard of it? The first thing I found out was, to no surprise, it had just gone through a crash, as all markets were tanking. It reached a high of approximately $10K in January and February of 2020, and in 2017 it was $20K at its peak. I was used to watching my 401K slowly creep along like an injured snail. With minimal gains, it might not make it to the next branch after another major market crash. I needed something better. I needed something new. I needed something like the dot-com era of the ’90s. My path kept leading me to this new cutting-edge technology called the blockchain. I dove deep into research from that point on. I found that this new tech was truly disruptive and was outpacing even the internet boom of the ’90s. I was about to jump on a fast-moving train that was going through the peaks and valleys of any new tech. But I was on the train and was excited about the destination. A future of decentralized trust. Freedom from the wretched hands of greed and institutional overlords. The internet we all deserve. The payment system we all deserve. Blockchain had won my heart and ignited my curiosity.?

Being a chef who has traveled a lot and worked across the country, these moves have cost me considerable money. I looked at them as an investment in my professional development and education. I wouldn't change them for the world—but they were not cheap. I needed to take more risk, so I went down the rabbit hole into researching Bitcoin. In the end, we were not too late. In fact, as I am writing this, no one entering the market for the long term (four to five years) is late. You are still ahead of most of the world, even the most prominent institutional overlord. For once, you can front-run the big money. But don't ape into it, as they say. Do your own research. Plan and understand that volatility is present in all new technologies. Patience is key. Money is designed to go from the hands of the inpatient to the hands of the patient. As you read on, please understand this topic can be controversial at times. As one individual, I cannot stress enough that this is my experience. This is seen from my vantage point, and of course, the opinions enclosed are compiled by me as I try to take in and decipher this exciting new frontier that has unfolded before our eyes. As time moves forward, we will start to understand this technology differently and apply it to more and more applications. So please keep an open mind—and thank you for taking the time to try and understand.?

Forty Hours of Research: How I Came for the Money and Stayed for the Tech.

When I first considered Bitcoin, it took four to eight weeks to set up and acquire Bitcoin and forty hours to understand it.?

—Michael Saylor, CEO of Micro-Strategy

We will be educated if we have this mindset and don't rush to biased conclusions. So, we must again step into the time machine to look back to the 2008–2009 market crash. This is when the pseudonymous Satoshi Nakamoto—the person who created Bitcoin—witnessed the 2008–2009 crash and thought we could do better. We all remember this time as being filled with words such as Goldman Sachs, Leman Brothers, sub-prime mortgage home loans, Fannie Mae, Freddie Mac, unemployment, and cancellations. They shook all industries, not just the housing sector. In other words, our economy was a train wreck. This has a lot to do with the structure of our economy itself. Before one can understand Bitcoin, one must know money.?

What is Bitcoin? What is money? As I understand, money was product commerce, trading, and bartering. It was brought on by efficiency and logic. Cash is most often used today instead of exchanging a thousand pounds of potatoes for a new TV. Potatoes are complicated to transport. They also are only able to be eaten within a limited time. This makes potatoes an inefficient form of money. They are not a hard asset that holds value over time. Therefore, when you save money, you don't buy potatoes. If you want to invest in potatoes, open a fry stand and sell them for money. One can see why we needed a solution—a medium of exchange that carries transferable value over time and space. We as humans have tried many things for this: cows, salt, seashells, stones, and many more. Some were better than others. If the best forms of money are just sustained hard value over time, then gold would be an obvious choice. Over time, the price of gold has held relative value. Why is this? Well, gold has some properties that make it so. It is scarce. Since gold only exists on this planet in limited amounts, we know that there can only be so much gold mined from this planet. Because technology has not quite reached the point of mining asteroids, this holds true over time. When we examine this further and ask whether we will have this ability one day, We may speculate that the answer is yes. Eventually, Elon, someone, or something will go up in their rocket ship and pluck minerals from asteroids. For the time being, the answer is not in the immediate future. So, gold still provides good storage of value. You could buy a bottle of wine in Rome for approximately the same weight in gold as you could today, give or take a little. That's because gold was and is a scarce, hard asset. We cannot make gold. Gold is only created when stars explode. This makes it scarce in the universe as well as our planet. The issue with gold, however, is that it can’t be shipped or transported quickly, and mining gold is an expensive endeavor. If time is money and you rate your investment on time input versus money output, gold mining is not an enormously profitable industry, and it only is if you have the existing capital to start a mine.

Land, people, equipment, and infrastructure all add up and reduce the bottom line of mining. Wells Fargo made its money selling shovels and pickaxes, not mining gold. Because of this, the incentive to mine (increase flow) gold for the economy does not exceed the stock (existing supply) to the point the asset becomes worthless. The stock-to-flow ratio will come around again later as we apply this concept to Bitcoin. (If you would like to learn more on this topic, I recommend reading The Bitcoin Standard by Saifedean Ammous. This book breaks down money and Bitcoin in a more detailed way and, in my opinion, is a must-read for people who want to understand what they are investing in before they do it.)

We still haven't answered what Bitcoin is, but let’s add to the question. Why is it worth something? We have a monetary system that is centralized, controlled, and manipulated by people and powers. The solution? Take the control away from the governments and world powers and place it in a decentralized trust platform. Bitcoin is a decentralized trust platform. Bitcoin is also much more than just money. It is a network and currency. It is an app or decentralized application (DAP) on top of a network. You could use the network for other applications like voting. As this tech moves forward, new use cases will evolve out of it as we interact with it more and more. The beauty is that it is a base system that multiple applications can be built on. The Bitcoin and Ethereum (the second-largest blockchain by market cap) network is like Legos. It has the blocks used to construct other DAPS. You have nodes on the network; these are simply computers on the blockchain that contain the entire blockchain and validate transactions and send them back to the network. How I first thought of this in my mind was a simple drawing.?Three boxes with one line connecting them all.

The information here is correct by this node. So, move on to the next one. Here is your copy of every transaction ever made on the entire blockchain. Next transaction, please.?

Why was this my lightbulb moment? It’s because this was the point when I asked, “So, this is the lie that the banks get us to believe?” They keep your money safe and secure by validating that it's in their giant golden vault. In return for storing and validating your money, the banks give you 0.04% interest returns while they can lend it out to your neighbor at 17% interest. Sound fair? Bitcoin fixes this.?

Bitcoin enables you to have the same powers as the banks and the high-net-worth individuals by using the network to validate transactions instead of Brad the banker and his trusty polished-brass vault. In short, it uses a decentralized trust network to confirm information. You can take your money of choice, buy Bitcoin or even stable coins that are pegged to the value of the US Dollar, and stake them or put them in the blockchain's version of a savings account and earn anywhere from 5% to as much as 25% a year on your own assets. You can also lend out your money and earn even more interest. Need a loan? Place your token of choice into decentralized finance (DEFI), stake it, and take out a loan against it. In so doing, you will pay off your loan with the appreciated interest on the token. Your rate on the loan maybe 4%. The interest you're earning on your staking is perhaps 15%. Do the math yourself.

Use your appreciated asset to pay off the loan, effectively giving you tax-free money to do with as you please. The former Staples Center naming rights were recently purchased by crypto.com because they used a similar method. Now it's Crypto.com Arena. They paid $700 million for the naming rights and effectively paid it off in months as their token appreciated in value because of the publicity of the naming rights. Different, but genius! The high-net-worth individuals have been doing this forever with assets such as homes and life insurance policies. “But I don't have good credit!” I hear you say. On the blockchain, your credit score does not matter. That is reserved for the legacy finance world. What matters is the collateralized assets that will fuel your loan. Stake $100,000, borrow $50,000. Pay your expenses for the year, build your business, or even buy your Lambo. It’s freedom. Your assets, your choice. Assets overseen by you and maximized by you. No middle entity with their spool of red tape boxing you into a corner and reaping the rewards of your hard-earned money. Your assets, your rewards. No middleman. The people's network—controlled by them to benefit all its users.?

Why Is Bitcoin Worth Money?

The answer to this question is simple. Because people are willing to pay for it. Money is the communication of the perceived value of something. Where is the value? The value is the network itself, the user's security, safety, and immutability. Trade your inflationary money for deflationary assets. From an economic standpoint, we needed this evolution urgently as a society. Now you can invest your money into something that you can easily access anywhere in the world. This is one of the properties of Bitcoin that sets it apart from gold. It's the internet of money.?

Holding your money in dollars? You should plan to lose purchasing power year after year as governments continue to print money. They tell us that every year we have 3–4% inflation. In all actuality, this is around 8–10% if you are holding the US dollar. Other countries of the world, such as Venezuela (2,355% inflation), Zimbabwe (557.21% inflation), Sudan (163% inflation), continue to print money that devalues their own currencies. Zimbabwe prints a $100 trillion bill. This is more popular for politicians because they don't have to own up to raising taxes. Just print it and toss it in the massive money supply. The people that suffer are the users of the currency. Their money sitting in savings dwindles away without any effort or reward on their part. Also, to add to the chaos, these currencies have significant fluctuations. Your $100 trillion bill may buy a gallon of milk today, and tomorrow you may not even be able to purchase a pint. So much for holding value over the years. Many currencies don’t even last days. The currency of Argentina in 2001 and 2002 suffered from the overzealous money printing by persons in power. One day, the people of Argentina woke up and heard on the news that they could only withdraw $250 from their accounts. The Argentine peso was pegged to the US dollar. Horray! Let the money printing begin! This made the issuance of the Argentine peso match the US Dollar in value. This also made the government froth at the mouth with free money for themselves. Printing money increases the supply (the flow of units into the system). The money flowing into the system outpaced Argentine debt, and devaluation occurred rapidly. Protests, riots, and deaths ensued in the capital losses. Bankers were shamed as they walked into work. When we as people figure out that we are getting scammed and essentially robbed through these methods, we get mad. When you wake up to your savings account being worth 45% less in a single day, it tends to ruffle the feathers. Back then, Bitcoin did not exist. It certainly does now, and it fixes this.?

? Thirty percent of the world—2.5 billion people, rounding up—is unbanked. In contrast, 86% of the world has a smartphone or has easy access to one. Anyone with access to a smartphone can purchase Bitcoin or other crypto assets and even use their phone to place their assets into DEFI to gain double-digit interest on their savings. They can even earn more accessible access to the US Dollar or gold. Imagine the effects that this will have on the world. Suddenly, prosperity will be an option. This by itself is an enormous evolution for our planet. Once the network effect gains an even more firm grip, we will live in a freer world.?

So, where is all this going? Well, let's look at where we are to try to understand. First, big money has started to enter the market. Companies such as Micro Strategy and Tesla have entered by purchasing large quantities of Bitcoin and announcing it publicly. We most likely have other institutions that have put Bitcoin on their ledgers and have just not made it public. Secondly, we now have the country of El Salvador declaring Bitcoin legal tender. In the world market, other countries must respect their decree and accept payment in Bitcoin if they so choose. Finally, Jack Dorsey, the former CEO of Twitter, has moved on into the crypto sphere. He believes that the most important work he can do with his life is working on blockchain and crypto. This is just the latest news. This space is expanding at a higher rate than the internet. You must follow the narrative as it changes at a rapid speed. Keep focused on self-education and follow the big money, as we continue discussing below.?

Banks will attempt to adopt this into their legacy finance system, as they know that the tidal wave of decentralized freedom is here, and you must join in, or you will be out. JP Morgan, BNY Mellon, Citibank, Morgan Stanley, Goldman Sachs, ING, and Barclays, to name a few, have all started investing and setting up options for you, their clients. The best question, though, is, Do we need them? Who are they? The banks, of course. Well, in the short term, in my opinion, it's a big yes. We need them to introduce trust into the network. This entire space will need to siphon off the confidence in the old system, and we will need time to wean us off legacy finance. After all, we have been loyal servants to them for hundreds of years now, and it feels safe, cozy, but mostly, familiar. The ever-so-trusted pillar-lined halls of the Iron Bank will be your safe harbor! Plan for your future! With our empty promises of false prosperity. Bank with us! Give us your value for time earned. We will put it to good use, stacking the deck in our—I mean, your favor!

The Iron Bank does not understand but may one day realize everyone can win here! Bitcoin has a way of rewarding those who try and learn more. Banks will most likely try to offer "safe harbor" for your cryptos with slightly higher APYs. They will inevitably need to do more if they wish to still exist in twenty to fifty years. Banks of today may even become decentralized as they evolve. The blockchain isn't trying to get a bonus. It doesn't care about a house in the Hamptons, and it is not trying to keep up with the Joneses. It may inevitably give those opportunities to you if that's the path you so choose. It rewards trust, patience, loyalty, and education with a higher yield on your investment.

The halving cycle.

Bitcoin Is Too Expensive. I Can’t Afford It. Is it safe?

Year to date, Bitcoin is sitting right around $50,000. Bitcoin is divided up into smaller purchasable units similar to pennies on the dollar. Each Bitcoin is made up of 1,000 milliBitcoins, also called a satoshi, after Bitcoin’s creator. You can purchase Bitcoin in these units of measurement. One can technically purchase a satoshi today for 0.0005 cents. Purchase these incrementally until you stack a whole Bitcoin. But don’t wait too long, as the price is headed up.?

There are only 2.134 million Bitcoins left that are not in circulation. The scarcity of this asset is also what makes it valuable. Unlike gold, Bitcoin will never exceed this amount. Period. That means that only 18.86 million Bitcoins are currently available. Of the 18.35 million, some have already been lost—an estimated 30% of them. They are lost just like paper money, but instead of being the result of a lost wallet, they come from lost private keys (the number used to access your Bitcoin). The risk of losing your keys can be mitigated if you have large sums of money spread out in smaller digital wallets. Upon their initial entry into the Bitcoin and digital asset buyers club, most people often use a decentralized exchange such as CoinBase, Binance US, crypto.com, or another owned exchange. When you purchase on these exchanges, they hold your tokens for you in the exchange. Is this the way to go? Well, there is some risk of the exchange being hacked. Although, most major exchanges have some form of asset insurance that mitigates this risk similar to legacy finance. In my opinion, starting out this way is perfectly fine at the beginning of your investment journey. Some exchanges, such as CoinBase, have their own wallets. A digital web-based wallet takes your assets off the centralized exchange and places them into a web-based wallet with private keys that only you can access. The risk here is that if you lose your private keys, you lose access to your assets forever. A solution for this problem will eventually come to fruition, but for now, some people engrave their access seed phrase (a series of random words that gives you access to your wallet) on a stainless steel plate. You can even buy a lettered steel plate on Amazon with insertable letters that you can store in a safe place. You don’t need to use these every time you access your wallet, as most web-based wallets have passwords as well. It is not advisable to simply store these on paper, for obvious reasons. Arguably the safest way to store your assets is to remove them entirely from the web and put them onto a digital wallet, such as a nano ledger. This stores the keys to your assets on a small device that looks similar to a USB drive. There are many instructional videos on how to set all of the above up on YouTube. I recommend the YouTuber 99Bitcoins for easy step-by-step instructions.?

As I conclude this first segment of many more articles and interviews to come, I continue to be magnetically attracted to this erupting new technology and space. I am excited by the potential future it could provide for humanity as it becomes more entrenched in the world we live in. In the next segment of this journal, I hope to continue to research and decipher the ongoing innovation taking place. My continued pursuit of this information is not optional for me, as previously stated above. An in-depth study is essential and allows one to anticipate the next phase of development and get ahead of it. This is the fun part for me as well! It is my aim to also help spread this knowledge. I am now on a mission to shed much-needed light on the crypto space. I am excited to embark on this journey. If it helps a few more people to “get it,” I will wake up every morning knowing I have been a part of the evolution. Some next steps include diving deep into specific networks, such as Ethereum, and reviewing interviews with insightful professionals. This disruptive technology will no doubt change every industry in some way. I will seek to uncover and speculate on how it may change them, starting with my own industry, hospitality. Hospitality Industry is a massive collection with one of the softest curves of technology adoption. Much is needed here in our space. Much can be done here to make our industry thrive in ways we couldn’t even imagine prior to blockchain tech. I hope to capture and inspire others to read my take and then continue on the path. Doing your own research is essential. The thoughts of one person only contradict the most basic principles of blockchain. I encourage you to gather more knowledge and learn. I hope that as time passes, you create your own thoughts and keep passing things forward. I also strongly advise you to be cautious and verify your resources and fact-check your data before taking any action. Understanding the information before you and assessing the risk versus the reward is always a smart strategy. I will leave a few books and websites for you to start this process below. In closing, I would just like to encourage you to keep an open mind and be persistent and patient in your pursuit of self-education. Most importantly, find a medium that ignites your interest.?