Ruadhan Of Seasonal Tokens On The 5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency
An Interview With Fotis Georgiadis
Your emotions will betray you. When prices are high, you’ll be euphoric, and you’ll imagine that they’ll keep going up. When they’re low, you’ll be afraid, and you’ll think that they’ll keep falling. If you listen to your emotions, you’ll buy high and sell low. To make a profit, it’s necessary to prevent emotions from interfering with your trading decisions. You can do that by deciding on the prices at which you’ll open and close the trade before you start trading, and then stick to those prices.
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 Ruadhan.
Ruadhan is a cryptocurrency investor, miner and developer, who worked in physics, cryptography and finance before moving into cryptocurrency development. During his time working in the financial sector as a quant, Ruadhan specialized in automated strategies for trading equities. By combining expertise from multiple fields, Ruadhan has been able to create cryptocurrencies with unique investment properties.
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 worked in physics, neuroscience and finance before moving into cryptocurrency development. When I was in academia, it became clear to me that it’s necessary to have your own wealth if you want complete freedom to research the topics you want. When Bitcoin appeared, it was obvious that it was a good long-term investment, because Bitcoins become increasingly difficult to obtain as time goes on. Working in finance and investing in cryptocurrency gave me the freedom to pursue my own projects.
At the same time, studying the Bitcoin source code gave me the ability to use my own software engineering experience to create new cryptocurrencies.
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?
The Bitcoin white paper had a huge impact on me when it appeared. It was soon after the 2007–2008 financial crisis, and a lot of people, including myself, saw the need for a monetary system that didn’t require trust in financial institutions. I understood cryptography, so I knew that the new system would use digital signatures to transfer ownership of assets, but I didn’t know how to solve the problem of removing trust entirely. I could create a system where people would send each other IOUs for precious metals, but there would still need to be a trusted custodian who held the metals and redeemed the IOUs.
The Bitcoin white paper solved the problem in an ingenious way, using proof-of-work. Instead of being an IOU for something else, Bitcoins are payment in full. They’re not promises that can be broken. The limited supply and the increasing cost of production overtime gave them an investment value and supported the market price. Everything necessary for a complete monetary system with no need to trust intermediaries was there from the beginning, and the code was open-source and already working. Bitcoin was clearly going to change the world for the better over the coming decades. It was a very exciting time.
Is there a particular story that inspired you to pursue your particular career path? We’d love to hear it.
It’s the story of Bitcoin. The rate of production of new Bitcoins gets cut in half once every four years, which reduces the supply over time and ratchets the price up. That’s made Bitcoin a very good investment. I was motivated to start the Seasonal Tokens project almost entirely by thinking about the considerations of Bitcoin investors.
Bitcoin’s price goes through seasons because of the regular four-year cuts in supply. Seasonality is good for investors if they can harness it for profit. Bitcoin alone doesn’t have that capability, so I decided to create a system of cryptocurrencies that did.
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?
When we first started our community on Discord, we had an invite competition to attract new members and reward the people who were helping to grow the community. One of the winners was cheating, using an army of bots instead of inviting real people. We detected him and banned him from the server, but he didn’t like that, and he programmed his bot army to flood our server with rude and insulting messages. It took us a few weeks to find and ban all the bot accounts. It was an entertaining experience to be targeted by robots programmed to insult you.
The main lesson I learned was that there are a lot of scammers and it’s not always easy to guarantee that the members who join the community are real people, but I also learned that building a community can be a very funny experience.
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?
I’m particularly grateful to Sam, our community manager. I’m a technical person, so I was able to write the smart contract code and the white paper and put together the economic and mining infrastructure needed to get our project started, but I didn’t have a clue about how to build a community. He was able to use his connections and his networking skills to build a community of thousands of people, with a talented team dedicated to making the project a success. He clicked his fingers and suddenly we were thriving. It’s truly amazing how quickly crypto communities can grow when the right people are involved.
Are you working on any exciting new projects now? How do you think that will help people?
I’m working on Seasonal Tokens, which is a project with four cryptocurrencies whose prices oscillate around each other over the course of years. Prices that behave that way are very good for investment, because it’s possible to keep trading the more expensive tokens for the cheaper ones, which become the most expensive later on. That lets investors increase their holdings over time without the risk of making a loss, measured in tokens. By always trading tokens for more tokens of a different type, an investor can guarantee that the total number of tokens in the investment will increase with every trade and never decrease.
I think this will help cryptocurrency enthusiasts to invest in cryptocurrencies without gambling. Most people who start investing in cryptocurrencies end up trying to trade for profit, which is very competitive, and most people lose money. It is possible to make a solid return on your investment without taking on a big risk of loss, but it requires patience. There aren’t enough cryptocurrency projects focused on long-term investing.
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.
1. Institutional adoption of cryptocurrencies is just beginning. Nasdaq has started a push to allow institutions to invest in Bitcoin and Ethereum, and more cryptocurrencies are likely to follow. Regulators and lawmakers are taking cryptocurrency seriously. They’re gradually providing more clarity about what’s allowed and what isn’t, and strategies for protecting investors without stifling innovation are being developed. Until now, the mainstream financial community has been excluded from the trillion-dollar crypto market, but that’s likely to change in the coming months and years.
2. Permission less innovation. Anybody in the world with a laptop can create new cryptocurrencies that everyone can buy and trade, and they don’t need anybody’s permission to do that. Satoshi Nakamoto and Vitalik Buterin have totally transformed the world just by writing code. Changing the world with a good idea has never been easier.
3. Financial inclusion is very exciting too. A huge fraction of the world’s population has no access to banking services, and this is unlikely to change any time soon. Cryptocurrencies can give these people the ability to send and receive payments online, and they can participate in the modern economy using just a phone. Populations in Africa, Asia, Latin America and elsewhere who previously relied entirely on cash now have access to international trade and entirely new career options. It’s a technological development that could help bring billions of people out of poverty.
What are the 3 things that concern you about the industry? Can you explain? What can be done to address those concerns?
1. I’m worried that Bitcoin might become a weapon of war. The countries seeking alternatives to the US dollar for international trade are gradually realizing that using Bitcoin is easier than using their national currencies. Russia and Iran have approved the use of cryptocurrencies for international payments. Bitcoin is already playing a significant role in international conflict in the 21st century. The countries facing US sanctions will be able to use Bitcoin for payments, but the West will have greater power to control the Bitcoin price, if they decide that it’s necessary to do that. An end to hostilities and the restoration of normal commerce between Russia and the West would be necessary to allay these concerns.
2. I’m also concerned that authorities in the US and Europe might try to ban proof-of-work mining, without understanding the role that it plays in the economy. When handled well, proof-of-work mining can provide benefits to the economy and does no harm to the environment, but if governments adopt the wrong policies, it can cause economic and environmental damage. I think that regular communication between industry groups and legislators can help to keep the decision-making process informed.
3. Algorithmic stablecoins are worth worrying about too. These coins try to maintain a peg to the dollar or another currency, not by holding collateral, but by creating and destroying specific amounts of individual cryptocurrencies in an attempt to control the market price. These algorithms can work successfully for a long time and then go spectacularly wrong, like the Terra/Luna collapse earlier this year. They can grow to billions of dollars in market cap and then all that wealth can disappear. The regulators are right to express concern that this is a danger to the stability of the financial system. I think a new technical standard for algorithmic stablecoins needs to be introduced, with rigorous analysis of the stability of the system as its main component. This could come from government or industry. Investors would be able to have greater confidence in stablecoins that comply with the standard.
What are the “myths” that you would like to dispel about cryptocurrency? Can you explain what you mean?
One of the most persistent myths is that cryptocurrency can have no real value because it isn’t tangible or backed by anything physical. It’s not irrational for people to believe that, before they learn that it takes work to produce Bitcoins, and that they’re running out.
I think there’s been some confusion generated by the use of the phrase “inherent value” by commentators. It’s an oxymoron, because value is never inherent. Gold is valuable because we value it. The value isn’t in the gold itself. It’s in our relationship to the gold. We know that gold is hard to produce and is limited in supply. The world won’t be flooded with cheap gold tomorrow, so gold is likely to remain scarce and expensive.
That’s also true of Bitcoin. It takes more work to produce a Bitcoin than it does to mine an ounce of gold. Bitcoins are becoming harder to produce faster than gold is. We have to acknowledge that gold will remain scarce and expensive, and we have to acknowledge the same thing about Bitcoin. When we do that, we can see the value in holding gold or Bitcoin today.
How do you think cryptocurrency has the potential to help society in the future?
The obvious example is that people living in developing economies without access to the banking system will be able to buy, sell, and order online for the first time. They’ll be able to make payments to friends and family. Hundreds of millions of people are part of the world economy now, instead of being restricted to their local economy. That will have a great impact on growth and development in the coming years.
Another big benefit of cryptocurrency is that it allows people to invest and save without using depreciating fiat money or investing in stocks. Dollars decrease in value over time, so saving dollars doesn’t make financial sense. Without cryptocurrencies, people need to invest in a business, or in commodities, to avoid losing their purchasing power. They’re forced to speculate or watch their savings lose value. Bitcoin’s limited supply makes it a good unit of account for long-term investment, which makes it appropriate to use Bitcoin for savings. When coins were made of gold, saving money was a wise strategy. Cryptocurrencies can provide a way for prudent people to safeguard their financial futures once again.
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?
There’s an environmental and an economic challenge created when proof-of-work mining is combined with subsidized electricity. If there was a free market for electricity, then proof-of-work mining wouldn’t be a problem. Only the very cheapest electricity can be used to mine Bitcoins. Competition is intense. In most countries, it will never be profitable to mine Bitcoins, because of the cost of electricity.
It makes the most economic sense for Bitcoin to be mined at power generation plants. A lot of energy is wasted during power generation, and this excess energy can be used to mine Bitcoins and pay for operating costs. The price of electricity sometimes becomes negative, due to excess supply and insufficient demand. Using this electricity to mine Bitcoins, instead of wasting it, makes it cheaper to produce electricity, and does no harm to the environment.
The economic and environmental problems occur when governments subsidize electricity enough to make it profitable to mine Bitcoins. When they do that, some people will start mining, taking the electricity subsidy and converting it into their own wealth. This really does generate excessive demand for energy, consuming natural resources and pushing prices up, while taking wealth from the public to enrich individuals.
From your perspective what can be done to address or correct these concerns?
Ideally, governments would not subsidize electricity enough to make it profitable to mine Bitcoins. That would solve the problem very effectively. Banning proof-of-work mining won’t stop it completely but making it unprofitable will stop it.
For governments who want to keep the price of electricity below that level, the only current option is to ban cryptocurrency mining and spend ongoing resources to enforce the ban. They will be paying for the cost of enforcement, and the miners who remain undetected will be taking money from the public purse.
In the long term, I think the solution is to have approved appliances that can use electricity at subsidized rates. There’s no way to stop everyone from using electricity to mine Bitcoins, and there’s no way to detect Bitcoin mining. The only way to make electricity cheap, but not let people mine Bitcoins with that cheap electricity, is to have refrigerators, microwave ovens, and other household appliances come equipped with a tamper-resistant chip that allows them to make use of electrical power at a cheaper rate. Anything consuming power that isn’t an approved appliance must be suspected of mining Bitcoins and must be charged at a higher rate.
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?
It’s an attractive choice because you can make payments online without revealing your identity. This is obviously very attractive to criminals, but anyone who thinks that using cryptocurrency will conceal their identity if they commit a crime is mistaken. Bitcoin wasn’t designed to facilitate crime. It was designed to keep a permanent, public record of all transactions so that those who are lawfully empowered to execute warrants can successively unmask every individual in a chain of transactions until they find the person they’re looking for.
If you use cash, there’s no record of your transaction, but if you use cryptocurrency, it’s a matter of public record for all time, and you can be tracked down in the future. In the early days of Bitcoin, there was worry about whether governments would ban it. Satoshi Nakamoto designed Bitcoin well — governments actually welcome it, because it’s so useful to law enforcement for fighting crime.
From your perspective what can be done to address or correct these concerns?
I think these concerns have been handled well by the authorities so far. Governments around the world are accepting and regulating cryptocurrency, imposing know-your-customer requirements on cryptocurrency businesses, and prosecuting fraud. At the same time, they’re using blockchain analysis companies to identify criminals. The vast majority of today’s cryptocurrency demand comes from investors, and crime is a microscopic fraction of the economy.
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?”
1. Your emotions will betray you. When prices are high, you’ll be euphoric, and you’ll imagine that they’ll keep going up. When they’re low, you’ll be afraid, and you’ll think that they’ll keep falling. If you listen to your emotions, you’ll buy high and sell low. To make a profit, it’s necessary to prevent emotions from interfering with your trading decisions. You can do that by deciding on the prices at which you’ll open and close the trade before you start trading, and then stick to those prices.
2. Don’t chase crowds. Too many cryptocurrency rallies are simply pump-and-dumps in which large crowds all buy at the same time, driving the price up to an unsustainable level before it crashes back down again. If lots of other people are buying a coin, that’s a good reason to stay away from it. The only people who profit in these rallies are the very earliest buyers who get in before the price has risen noticeably. People who join in later are likely to buy near the top and lose a lot of money.
3. Invest for the long term. It’s possible to anticipate long-term changes in prices that play out over the course of years. For example, Bitcoin’s rate of production is cut in half once every four years, which makes it very likely that Bitcoins will be harder to obtain years from now. This kind of investing is based on inevitable market forces; you don’t need to speculate because it’s absolutely certain that Bitcoin’s halvings will occur and reduce supply. If you pick a promising coin and bet that it will succeed soon, you’re speculating about what the public will do, and there’s no certainty. The only way to make a big short-term profit is to risk a big loss.
4. Watch out for scams, rugpulls and securities. Anyone can launch a cryptocurrency today, and a lot of cryptocurrency developers intend to defraud the investors and run away with the money. The cryptocurrency market isn’t tightly regulated like the stock market. Make sure that the code has been audited by a reputable security company to ensure that there are no hidden vulnerabilities that would allow an attacker or the developer to steal funds. Even well-intentioned cryptocurrencies can lead to huge investor losses if the SEC later classifies the coin as a security. Proof-of-work coins and tokens that aren’t redeemable for anything else are likely to be classified as commodities, which are regulated by the CFTC, and are safer investments. Cryptocurrencies that entitle the holders to profits based on the work of others are more like shares in a company. They’re securities, and they’re heavily regulated.
5. Don’t trade for the sake of trading. Most people who trade cryptocurrencies for profit end up making a loss. Trading can be profitable, but you need to understand with clarity and certainty which currency you expect to rise in price, and how much, and over what time period. If you’re trading just to stay in the market, you’re likely to lose money. The people who trade and consistently make money always make sure that they have an edge over other investors, such as a better understanding of the technology.
What are the most common mistakes you have seen people make when they enter the industry? What can be done to avoid that?
When people start off in cryptocurrency, they tend to be very excited about the prospect of getting rich quick. This leads them to put all their money into a single risky project, and to chase crowds. They end up gambling instead of investing. Gambling sometimes pays off, but if you’ve made a lot of money by betting everything on a single trade, you’ll try it again and again until eventually you make a losing bet.
I think what’s needed is an introductory program for new investors that emphasizes the need for calm, careful research, and that gives people a clear understanding of the distinction between gambling and investing. Cryptocurrencies can be good investments, but patience is the key to success, and excitement leads people to make poor decisions. There needs to be a process that people go through that teaches them to calm their emotions before they put their money at risk.
Do you have a particular type of cryptocurrency that you are excited about? We’d love to hear why.
I’m excited about the possible future applications of NFTs. At the moment, NFTs are mostly used to dubiously claim ownership of intellectual property, which I think is going to run into trouble when an NFT is stolen. The courts will have to rule that stealing an NFT doesn’t make you the rightful owner of the property that the NFT allegedly entitles you to. So, the blockchains aren’t a true record of who legally owns what. The technological applications are much more interesting. An NFT can be used to open a physical door, start a car, decrypt a hard drive, or grant the holder access to a seat on a spaceship. There are applications beyond money and investment, and most of these applications haven’t even been imagined yet. We’ll see exciting developments and new technologies appearing over the coming years, and cryptocurrency technology will be used in every sector of the economy.
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. 🙂
It would be a worldwide movement for responsible investing. Most of the people in the world have no savings, and they’re forced to work for their entire lives just to make ends meet. That’s a tragedy, of course, but it’s not entirely irrational behavior. Saving fiat money doesn’t make sense, because inflation will take away the purchasing power. It’s better to spend fiat money now than later.
With the appearance of cryptocurrencies like Bitcoin that have a limited supply and a decreasing rate of production, it’s possible for people to invest without betting on a company’s success. There’s a new way for people to put money aside for their future that doesn’t involve speculation and doesn’t lose purchasing power over the long term. We have an opportunity to create a whole new generation of savers. Prudently saving money for the future is rational behavior once again, thanks to new technology. People can have financial freedom later in their lives, and they can use their savings along with their life experience to contribute more to the economy than they could by working.
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 🙂
It’s Elon Musk. There’s a very short calculation that fits on the back of an envelope that I’d like to show him over lunch. It derives the conditions under which spiking neurons can be legitimately interpreted as performing rational inference. Neurons in the cerebral cortex appear to satisfy these conditions. I believe that understanding the calculation will make it easier to decipher the signals recorded from Elon’s Neuralink chip.
Thank you so much for these excellent stories and insights. We wish you continued success and good health!
Ruadhan Of Seasonal Tokens On The 5 Things You Need To Understand In Order To Successfully Invest… was originally published in Authority Magazine on Medium, where people are continuing the conversation by highlighting and responding to this story.
