Jonathan Zeppettini of Decred On The 5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency

You need to understand yourself, and that the journey will be a never-ending learning experience. There are three traits you will also want to cultivate if you want to have any chance at success in my view: patience, discipline, and focus. As with any type of investing these will determine your outcome. I have learned a few things over the years that I believe to be fundamental for anyone wishing to navigate the space and avoid some of the major pitfalls.

Over the past few years, the Cryptocurrency industry has been making headlines nearly every week. Many people have gotten very wealthy investing or leading the cryptocurrency industry. At the same time, many people have lost a lot investing in the industry. In addition, more people have been scrutinizing the ecological impact of crypto mining, as well as its potential facilitation of illegal activity. What is being done and what can be done to address these concerns?

In this interview series called “5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency” we are talking to leaders in the cryptocurrency industry, as well as successful investors, who share insights from their experience about how to successfully invest in Cryptocurrency.

As a part of this series, I had the pleasure of interviewing Jonathan Zeppettini.

Jonathan Zeppettini (JZ) is International Ops Lead and Chief Evangelist for Decred (www.decred.org). Known to the community as “Decred Jesus”, he educates cryptocurrency investors and traditional portfolio managers on the benefits of Decred over competing digital currencies. He is also an expert source whose insight has been sought by reporters and investment analysts. An investor in traditional markets since the age of 12, he has worked for himself and retired at the age of 33. These days, when not evangelizing for Decred, he enjoys travel and meeting fellow entrepreneurs who see cryptocurrency as a catalyst for long-term cultural and economic change.

Thank you so much for doing this with us! Before we dig in, our readers would like to get to know you a bit. Can you tell us a little about your backstory and how you grew up?

I grew up in Canada and my educational background is very far from what I ended up doing as a career. I have a degree in political science of all things, which did not prove to have any use to me. I always enjoyed understanding how things worked as a child and taking things apart (even if I couldn’t put them back together). That curiosity led me to technology which became a hobby of sorts at a young age, and later to finance where unraveling the mystery of how money and markets function became my job as I traded equities and later futures. In 2010 I discovered Bitcoin which captured my attention as it was very compatible with the type of sound money principles that Austrian economics espoused. By 2017 I had retired from my previous trading career and was spending the majority of my time on Bitcoin as well as volunteering on Decred, which is another cryptocurrency that managed to captivate me.

Is there a particular book, film, or podcast that made a significant impact on you? Can you share a story or explain why it resonated with you so much?

I’d highly recommend that anybody who’s interested in financial markets start with a strong foundation of history, because you’re not going to be able to forecast what might happen if you don’t have any context. Although we like to think we’re all unique snowflakes living in unprecedented times, the reality is that pretty much everything that happens has one or more historical analogs. Knowing how those have transpired can be invaluable as an investor. Even if technology slightly changes how we do things and leads to time compression, you will still recognize common actors and themes.

One book that’s especially topical for the times we find ourselves in is Charles Mackay’s “Extraordinary Popular Delusions and the Madness of Crowds” which details some of the greatest financial bubbles throughout history. It’s an older title so it obviously doesn’t cover some of the famous contemporary bubbles we’ve seen such as dot com or housing. Nonetheless, it provides an amazing framework for understanding the speculative mindset and how human psychology leads to mania of different sorts. I strongly believe for example that cryptocurrency will become a bubble that dwarfs all speculative bubbles of the past, even though it is fundamentally useful and has staying power long term.

Is there a particular story that inspired you to pursue your particular career path? We’d love to hear it.

The idea of trading being like a game you play against an entire market is what motivated me to make that my career. I came at it from a position of arrogance and naivety, with the assumption that if I was smarter than the average market participant I would easily outperform. Years later it became clear that people who were often way smarter than me were often wiped out due to poor risk management or sometimes just bad “luck”. The main appeal is your compensation being entirely based on your performance and the uncapped upside potential.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

I thought formal education was a necessary step for a career and wasted three years getting a degree just so I could say I have one. One thing many people don’t appreciate is how fast you can pick up skills when you’re actually thrown into a situation and need to learn quickly. I’d strongly recommend that if you don’t need a degree, e.g., a certification in medicine or other hard sciences, then don’t waste your time trying to learn things in formal institutions at the pace of the lowest common denominator. Technology gives us the ability to scale education way beyond what antiquated institutions that are mostly focused on extracting rent can provide. Learn on your own, or go become an apprentice and work for free if you have to. In retrospect, that story is not funny at all, my apologies, but maybe it will cause others to consider the viability of other paths.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

People who freely make information available online are the ones I’m most grateful to. That’s sort of a broad group but I think the dissemination of knowledge the Internet makes possible is one of the most transformative things about our era, equivalent to the invention of the printing press in my view. One such group that was very helpful to me on my journey was the Mises Institute, they offer a huge library of books on economics that are free to download at mises.org.

Are you working on any exciting new projects now? How do you think that will help people?

Yes! I spend a good deal of my time volunteering on a cryptocurrency project called Decred which we describe as “money evolved”. It builds upon the concept of Bitcoin to create a coin that is governed by those who own it via a mechanism called a DAO (decentralized autonomous organization). The principle behind the coin is to maximize the financial sovereignty of those who use it.

In Decred your say is proportional to your “skin in the game” i.e., the amount of staked coins you hold in relation to everyone else. So, in essence the community makes important decisions about the future together. This straightforward system has a striking contrast to other cryptocurrencies where the question of “who’s in charge?” can often have a myriad of answers such as; the founders, the miners, people running nodes, developers, etc. With Decred there is no ambiguity, the stakeholders are in charge and make the rules that govern the protocol.

We see this as the fairest way to run a project. Those who have the most at risk get the biggest say and everyone who participates in the system is rewarded. Stakeholders who vote on blocks, consensus rules and how to spend treasury funds (which now top $100 million) receive part of the block reward as a form of income. In the end, even those who do not participate in staking and just hold the underlying coin are still beneficiaries of the wisdom of the crowd, which I and many others believe will make Decred highly successful in the long term.

Ok super. Thank you for all that. Let’s now shift to the main focus of our interview. The cryptocurrency industry seems extremely dynamic right now. What are the 3 things in particular that most excite you about the industry? If you can, please share a story or example for each.

* Governments are starting to accept that this technology is not going away. The US, in particular, seems ready to take a light touch on regulation to ensure the space can continue to innovate.

* In some cases, governments are promoting crypto directly. We’ve seen this in El Salvador where Bitcoin has become legal tender, and there is a similar initiative in Brazil which has been a leader in experimenting with blockchain technology. Brazil actually used the Decred blockchain to track donations in municipal elections.

* There has also been a big push to show the world that crypto can be a driving force for investment in renewable energy, which I believe we’re going to see more of now that mining is migrating.

What are the 3 things that concern you about the industry? Can you explain? What can be done to address those concerns?

* Regulation — The jurisdictions that are the most crypto-friendly will benefit disproportionately from the economic and technological progress it brings. We’ve seen countries like China pushing out miners and alienating talent. I believe this is a huge mistake and other states will capitalize on it.

* Greed — Too many people are focused on short-term profits and speculation. The industry is also rife with scams and tribalism that leads to infighting. If it gets too out of control and we fail to call out bad actors we will end up attracting more regulation.

* Fear — This is a new technology. If you go and look at what people in the media were saying about the Internet in the early 90s, you’d come away thinking it was this scary thing that might just be a fad and not worthy of investing your time to learn about. We would do well to make the space more approachable and do our best to educate people and debunk much of the sensationalism that media generates on the topic.

What are the “myths” that you would like to dispel about cryptocurrency? Can you explain what you mean?

The big one is that it’s a niche product and not a paradigm shift. Crypto is not going away. The old ways of doing things are the ones that will be phased out and replaced by modern and more robust technology. You can see examples of this with things like remittances, where legacy service providers were able to charge huge fees to their customers who were captive and relied on them in many cases to provide this essential service. Now anybody can buy Bitcoin for example and send it halfway across the world for relatively cheap in most cases and near instantly.

How do you think cryptocurrency has the potential to help society in the future?

Crypto has the ability to become a great disintermediating force for a large portion of the world population. Today many people are locked out of the global financial system because they do not have access to banking services. Those who do are often at the mercy of local government-backed oligopolies who are mainly focused on extracting the maximum profit possible from their customers. Crypto can provide a viable alternative to an antiquated system and act as the rails upon which newer systems are built.

Recently, more people have been scrutinizing the ecological impact of crypto mining. From your perspective, can you explain to our readers why the cryptocurrency industry is creating an environmental challenge?

All human activity creates an environmental impact. The problem most people have with cryptocurrency is that it is very transparent. You can do some simple math to know exactly how much electricity any specific crypto is using at a given time. This is in contrast to other systems like your bank. If you could somehow know how many trees are cut down to print statements and compliance documents, how many tons of fuel are needed for employee vehicles, or how much coal is burned to keep bank branches functioning (banks go where the customers are not where electricity can be produced with the lowest environmental impact), I doubt people would suddenly start protesting against their banks. They provide a utility and the market decides if the energy they consume is being well spent. It’s the same for cryptocurrency, which likely consumes orders of magnitude less energy than the old financial system it seeks to replace.

From your perspective what can be done to address or correct these concerns?

Education. I literally live in a place that has an enormous amount of excess hydroelectric production capacity (unfortunately it’s due to inept government planners) and that’s energy that can’t be stored. It can be used for something useful or left unused (wasted). Renewable energy is the answer.

Recently, more people have been scrutinizing cryptocurrency’s impact on illegal activity. From your perspective, can you explain to our readers why cryptocurrency, more than fiat currency, is seen as an attractive choice for criminals?

I don’t believe that is the case at all. It would not surprise me if 99% of all illicit activity was using traditional fiat currency. Fiat is widely accepted, highly liquid, and has very well-established methods of being used by criminals. In many cases, large regulated banks are working directly with criminals to help them launder their money (see the HSBC money-laundering scandal involving drug cartels). Crypto appears to be a niche that the media loves to focus on because of the novelty. In the vast majority of cases, good police work can catch criminals whether they used fiat currency or a cryptocurrency, even one that guarantees privacy.

From your perspective what can be done to address or correct these concerns?

I believe in most cases these stories are perpetuated because they seem exciting and attract the reader’s attention. They also distract from the larger fundamental issues that are harder to tackle, for example accepting that crime is always going to happen and investing in solving crimes or decriminalizing things that do not harm others.

Ok, fantastic. Here is the main question of our interview. What are “The 5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency?” (Please share a story or example for each.)

1. You need to understand yourself, and that the journey will be a never-ending learning experience. There are three traits you will also want to cultivate if you want to have any chance at success in my view: patience, discipline, and focus. As with any type of investing these will determine your outcome. I have learned a few things over the years that I believe to be fundamental for anyone wishing to navigate the space and avoid some of the major pitfalls. Crypto is an extremely young technology and we’ve really only begun to scratch the surface of the potential, both from a technology standpoint as well as from the angle of investment returns. Investors would do well to research the field deeply, construct a portfolio with a focus toward holding it long-term and making modifications around the edges when warranted. The gains to date have been astronomical in many cases. Avoid chasing hype and with a bit of luck, you can be well exposed to the future upside.
2. On the topic of hype, it’s important to distinguish between projects that are fully functioning and those that are simply making promises of a future product. With blockchains that have a long history of working such as Bitcoin or Decred, this isn’t an issue as they are already in production.
3. In a similar vein, it has become common for projects to do initial coin offerings or “ICOs”. These are akin to IPOs that most would be familiar with in the world of equities with some notable differences. The main one is that when a company IPOs they usually have a functioning product. This isn’t the case with ICOs. They are similar to venture investing as you’re buying the promise that the entity behind the project will use the raised funds to build their vision. As is often the case when incentives are misaligned, investors can be left holding a bag that turns out to be worthless or very different from what was promised on paper.
4. It’s also of paramount importance to consider whether or not the project you’re interested in even fundamentally needs its own blockchain or token to achieve its goals. It’s all too common for coins or tokens to be tacked on to an idea because they make it easier to entice investors and offer a compelling way to raise funds. Once again projects that do not take money from outside investors will often have a greater incentive to build what they promise.
5. You will also want to pay close attention to who is behind a project and how committed they are to succeed. Money is abundant in the blockchain space, the scarcest asset is developer talent. Always be sure to analyze the past contributions of developers to gauge whether they have the type of talent necessary to build the things they envision. In the case of a project like Decred, you can see a long history of contribution to Bitcoin among many of the developers and a valid application of technology to address both perceived shortcomings of the system they previously worked on, and a desire to create novel technology that would not be viable in their prior ecosystem.

What are the most common mistakes you have seen people make when they enter the industry? What can be done to avoid that?

Timing would be the big one, everybody expects the point they get in will be rock bottom and they will see only upside. If you have an aversion to volatility then I would say crypto investing is not for you. There are however plenty of other opportunities in the space. We’re talking about a technology that will be as important as the personal computer or smartphones. Learning how to use it and building skills can potentially be as lucrative as investing directly in it.

Do you have a particular type of cryptocurrency that you are excited about? We’d love to hear why.

There are mainly two cryptocurrencies I’m interested in — Bitcoin and Decred. I believe at this juncture it is financially irresponsible for investors not to have exposure to Bitcoin. It has been battle-tested for over a decade and deserves a spot in any portfolio.

I am predominately focused on cryptos that can serve a role as sound money and that is why Decred also caught my attention. It offers a different model to Bitcoin in that it can innovate at a rapid pace, add privacy and has a treasury. This makes it sustainable for the long term and helps overcome the tragedy of the commons issue that many other projects face in this space. Decred is also a truly decentralized project with no company behind it. It is controlled by an international group of “stakeholders” who decide how the project will evolve over time, as explained in this article. I would liken the creation of DAOs and the innovation they will bring about to the invention of the joint-stock company, which fundamentally altered the way economies are organized and allowed capitalism to thrive.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. :-)

I work on this every day, and simply it is decoupling money and its issuance from the state. Almost everyone agrees that free markets are most efficient and lead to the best outcomes for the greatest amount of people. There are enough examples of mass starvation throughout history as governments tried to centrally plan things like agriculture or their broader economies. And yet for some reason we accept centrally planned money in our everyday lives, which allows a small group of people to derive a disproportionate advantage over the rest of society due to their proximity to the money production pipeline or their insider status. Free markets should decide what money is as well as its value. When you manipulate the quantity or cost of money (interest rates) you in turn cause mispricing of everything that is denominated in that currency. We’re starting to see that become more and more obvious today.

We are very blessed that very prominent leaders read this column. Is there a person in the world, or in the US with whom you would like to have a private breakfast or lunch, and why? He or she might just see this if we tag them :-)

I like when people are principled and intellectually consistent, even when it’s not popular. As a student of history and particularly a fan of American history, I’ve always admired Ron Paul for his untiring attempts to keep the principles of liberty and individual sovereignty, which America was founded upon, at the forefront of public consciousness. As an aside, I’m equally impressed that he’s been a sound money advocate for decades, and while much of his efforts have been focused on gold filling that role, he has been malleable enough in his views to be pro-crypto. Many younger people could learn a great deal from him in my view.

Thank you so much for these excellent stories and insights. We wish you continued success and good health!