14 Oct 2018

Momentary Wealth in Cryptoland

I was sitting in a darkened corner of the office late one night in 2014 when I picked up on a conversation that would come to have a significant impact on my life.

The two people talking, John and Tom (not their real names), were an interesting duo because John was one of the youngest engineers in the company and Tom, one of the oldest. John had been hired out of high school from the competitive programming pipeline. Tom was a grizzled veteran who had helped BigCo set up its ranking system in the early days.

What piqued my interest was that it was Tom who was asking the young John for investing advice. John soon let on that he was very excited to turn 18, because then he could become an accredited investor. I didn’t realize what a big deal this was until Tom asked John if that meant that he had more than a million dollars in liquid assets and John said yes.

John explained that when he was at an olympiad camp one year, a bunch of people had been talking about Bitcoin, and he had bought some. In the intervening years, he had used some gamma trading strategy (? I don’t remember exactly what he called it. Vaguely remember being some greek letter, but I’ve looked this up and still don’t know what he was referring to.) and had multiplied his holdings several fold.

That same night, I researched Bitcoin, and being risk-averse, decided to dollar-cost average my way into some. I set up a weekly purchase of $50 for 10 weeks. The price back then was about $500, so I ended up with about 1 BTC.

A few months later, everything went south as Bitcoin dropped to $300+. One day while surfing Reddit, I came across a post for Ethereum which said that the pre-sale was about to start. I remember going to the Ethereum homepage and having no clue what it was. It was unnerving that the team had clearly put a lot of effort into making the homepage look nice instead of making it comprehensible. Despite my cluelessness, it didn’t seem like Bitcoin was going anywhere so I converted some of it into Ether.

I forgot about Ethereum until 2017, when someone told me that it was at $17. I didn’t know how much Ether I had so I didn’t think too much about it. But as the price started to rise, I checked the pre-sale receipts and realized that it was becoming a non-trivial sum.

Around that time, I went through a small episode because I had forgotten the password that I had used years ago during the pre-sale. I spent one frantic night trying variations of previous passwords and was immensely relieved when the account unlocked.

Then, a few months later, my car was broken into and the laptop which I used to control my account was stolen. I had just moved all my Ether into a new account whose private key was stored on the laptop, and I had not backed up the private key anywhere else. Little did the thieves know that they had a hundred thousand dollar laptop in their hands. I joked with my boss that I have would rather they taken the Prius than the laptop.

Perhaps fortunately, the laptop was a work laptop. I assumed there would have been a backup system, so I figured I’d get everything back easily. On Monday, I got into the office and found out that we had been switching backup systems over the past week. The new system hadn’t been activated on my laptop and the old system had been discontinued with only 30% of the hard drive backed up. Nevertheless, we recovered the 30% after some shenenigans with the vendor and found the private key sitting there safe and sound.

By late 2017, the Ether was worth enough for a single person to retire on, but I lived in a twilight zone where I alternated between planning what to do with the money and considering it fictitious video game money. My mom had a similar reaction, asking me if “this thing” could really be withdrawn as real money. I withdrew a small amount and stared in disbelief as my bank balance ticked up.

Not surprisingly, it took me a long time to decide that I should change my life in response to the money. One of my epiphanies was that the common advice to not let money change you is highly irrational. The spirit behind it, which is to not let money change your values, is commendable. But I had bought into the romance of the literal interpretation in which a wealthy person lives like a pauper and is celebrated for it. In reality, money expands the set of options open to us and to purposely ignore this when pursuing our life goals seems to be just as irresponsible as spending money that we don’t have.

My second epiphany was that spending money well is surprisingly difficult and is a skill in itself. I wanted to spend money in a way that compounded not necessarily just financially but also added more layers of meaning to my life. For instance, the biggest gain from my stake in Ethereum was the motivation to participate and learn about the space: I figured out how to use a splitter contract when Ethereum forked; bought some cool domain names in Ethereum Name Service auctions and wrote a contract for offering bounties to answer Quora questions. I wanted to find other opportunities like this. However, while there were many ways to use money to consume, I couldn’t find good ways to use money to create.

The third and most major lesson for me was that none of my problems in life were in fact due to a lack of money. It had been easy to put off seeking more satisfying work under the pretense that I needed more money to build a safety net. I used to fantasize that one day when I could retire I would do something cool and important. It was thus extremely jarring to arrive at the end of the rainbow and find the pot empty. Ethereum revealed the lie we tell us ourselves that money will make everything good. I realized that to do cool important work, I had no other choice than to go forth and try.

In 2018, the price of Ether dropped by 85%. I had barely sold anything so I ended up back where I started. But I have obviously been changed by this momentary wealth. I’m well aware that I misplayed my hand; I should have sold more Ether sooner. But the perspective I have gained has also been substantial and valuable so I am still satisfied with the outcome.

As I reflect on these experiences, the thing that gets me is how strongly money distorts our perception. Everyone tells us that money isn’t important. “Go pursue your dreams,” they say. But maybe this is one of those things that a person has to live through to understand. It makes me wonder how different society would be if we could temporarily and convincingly drop a lot of money into people’s laps.