Retiring on your Crypto-Bag: Is it Feasible?

I'm Andrew Levine, CEO of Koinos Group, and in today's episode of the Koinos Group podcast I discuss crypto and retirement with the founder of gFam. This is definitely not investment advice, just our personal opinions.

The Value of dApps

The real value of blockchains lies in their ability to deliver decentralized applications that are powered by smart contracts. These should be software products that add value to people's lives by integrating fungible and/or non-fungible tokens.

The fungible tokens will generally function as a kind of in-game currency, and the non-fungible tokens will generally function as digital collectibles (unique in-game items). Note that I am using the term "game" in the broadest sense of the word. Another way to think about these assets is that when properly integrated, they can turn any application into a game while providing people with opportunities to acquire a stake in the various products that they use in a frictionless manner.

The gamification of digital ownership is exactly what will enable these applications to deliver superior user experiences.

Know the Risks

One of the big mistakes I see people making is thinking that because crypto is somehow different than the stock market, that they can become some great investor. But if you're not able to have success investing in the stock market, what makes you think you are in crypto which is 10 times riskier (at least!) than the stock market?

Considering how risky this space is, I think it's a much better approach to focus on finding projects that are building products that you want to use. It seems obvious, but how often do you see people advocating for some token that they fully acknowledge they do not understand or see the value in personally? This is almost all I see!

Many seem to have been convinced that someone else might find a product valuable, and if they could just understand all of the technical mumbo jumbo in the whitepaper, or if they were capable of engineering a blockchain (or parachain), well then they would get the value proposition.

Retirement Strategies

Don't forget, we're talking about retirement. Betting on volatile cryptos isn't a sustainable retirement strategy. When it comes to retirement strategies you're looking to put your capital into things today, that will become so valuable at some point in the future, that you will be able to live off of that asset.

You're not looking for assets that are going to pump-and-dump, you're looking to acquire a stake in the projects that are going to provide long term value to you and people like you. If digital assets are incorporated properly into an application, then they should be making that application more appealing.

You should want to use that app, and it's the application developer's job to leverage these new kinds of digital assets to entice you into using the application and reward you for adding value whether it's just by remaining a user or more complex actions like referring friends or contributing data (e.g. content).

Capturing Exponential Value

You shouldn't have to find the good long term investment strategy in crypto, it should find you. You definitely need to be open minded and looking within the space, but if a project can't figure out how to create a product that you love using, or at least you think you will love using once it is released, what makes you think that they will be a good long term guardian for your capital?

The beauty of digital technologies is that they can grow in value exponentially. This means that if you get involved in the right one, then they should have so much growth that they can provide a high yield return to their investors.

Staying Power

The biggest problem I see is that I don't really know of any projects whose token economics have achieved that level of sophistication, nor have I seen any projects that have demonstrated that they have the long term staying power that is needed to provide value in the context of retirement.

We're still at the stage where people are claiming that they are going to build an amazing decentralized application, on some unknown platform that can support a great user experience, and here's this token.

What I don't want people to be thinking is, "I'm 55 and I'm going to put money in this token because these people are making promises that they can't keep, but maybe the price will moon so I'm gonna pray that there's someone else I can unload this token on, make a bunch of money, and retire on that." It's not a good strategy and it's not good for decentralization.

Inherently Trustworthy Solutions

Blockchain platforms enable developers to build solutions that are inherently trustworthy because the most critical code is stored on an immutable ledger and executed by a decentralized network of computers. If a project is asking that you trust them to deliver something incredibly difficult to achieve at some point in the future, then that's a huge red flag.

That's why my favorite example application as of late is CubDefi, which is related to LeoFinance. I have no stake in either of these applications, and to be honest I don't even use them, but I'm pretty busy doing the whole "CEO thing." What I like about CubDefi is that they primarily copy-and-pasted established smart contracts and used them to power their front-end application to provide valuable features to their users. Since they understand that fees are a massive barrier to entry, they chose the Binance Smart Chain because it has low transaction fees.

Personally I'm not interested in using the BSC but I certainly don't begrudge an application developer for understanding the obvious fact that fees are a massive barrier to entry that guarantee a terrible user experience, which is precisely why we're building Koinos to be the first blockchain with free accounts, free transfers, and free smart contracts.

Recap

To recap, there's really no reason to think about crypto any differently than you would any other investment that you're making for retirement other than taking into the account that everything is so new, and therefore extremely risky. Where there is risk, there is also opportunity. There may be projects in development that will achieve exponential growth (I happen to believe Koinos is one such project) but, ironically, the best way for you to identify those is if they resonate deeply with you personally.

When one is dealing with this much risk, it is only reasonable to assume that your investment will likely to go to zero. If the odds are good that you're going to lose these funds, and the purpose of these funds is to provide for your retirement, then the only projects one should consider investing in are those projects that are building something that will add value directly to their lives and to the lives of people like them.

In this sense, they aren't investing as much as funding a potentially world-changing product, and massive returns over the long term are the reward for taking that risk. Because cryptocurrencies can be distributed even before the product is launched (for example KOIN is being distributed through proof of work mining prior to the release of the Koinos mainnet). This makes acquiring a stake more accessible, but with that accessibility comes risk, and the potential for outsized returns.

To learn more about Koinos, go to koinos.io and if you'd like to explore Koinos integration, email [email protected].