The Canadian Investor - Life after pro sports, DeFi, NFTs and Bitcoin with Courtney Stephen

Episode Date: September 9, 2021

During this interview, Courtney and Simon start by discussing his career transition from being a CFL player to his new role with the Hamilton Tiger Cats. We then discuss several crypto related topics including Non-Fungible Tokens (NFTs), Decentralized Finance (DeFi) and of course Bitcoin.   You can find Courtney on twitter @TheCStephen . https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital See omnystudio.com/listener for privacy information.

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Brayden won't be here. I'll be interviewing Courtney Stephen, who's a former CFL player. So Courtney, welcome to the podcast. Did you want to just quickly introduce yourself? I know we talked a little bit on Twitter. I know that recently you did a career transition. So you went from a professional CFL player, and I'd like you to just go over that a little bit. Just give us a little bit your background and basically when did you start thinking about that career transition and just tell us a bit how it happened. Yeah, so I appreciate you inviting me out. I've

been a long-time listener, first-time caller, as they always say. Yeah, so I played in the CFL. I was drafted in 2012 when I was still in university. I came out and played my first year in 2013. So I actually, over the course of close to 10 years, I played seven seasons. It's been an amazing journey, just traveling. Football from a young age brought me all over the place. I mean, I played growing up just outside Toronto, played in a city called Brampton. I went to Wilfrid Laurier University, played in the NCAA. You know, I played in the biggest football games, Orange Bowl, Florida. Then I made it up to the CFL, played seven year career there. All through the while of playing football, I experienced a lot of different things along the way. At first, when you're younger, you just think about making it to play at the highest level.

And that's really your aim and your focus. about making it to play at the highest level. And that's really your aim and your focus. But then once I made it to the NCAA, I made it on scholarship and I was really like living out that dream. That was so close to just actually fully realizing that dream, which I think I actually did realize at that point,

you know, because NCAA D1 is like a big thing for, especially a young kid in Canada growing up. So in my fifth game in the NCAA, I actually tore my ACL. It was one of those things where you focus everything in your life on one specific goal. And then when that thing is kind of taken out of the picture, you have to rethink, like, what am I if I am not this? And what is my purpose? And what do I want to do? So I'd say from that moment, it was kind of the beginning of everything else that's transpired since. So I bounced back from

that injury, obviously in college, I played seven years as a pro. I played another college season after that injury. But since then I took a very entrepreneurial journey to figure out what I wanted to do and to basically create my own CV to like build my own resume. Because as an athlete, you're dedicating so much time to your craft that you don't necessarily get the work experience, the career experience that a lot of other people who you might be going to class with that they're developing, right? So long story, but the point is when I got back to Canada after college, I started a youth mentorship program that basically took the lessons I had learned on that journey from Canada to the U.S. to the pros. And I distilled it down into a 10 to 12 week program that I taught the youth.

And I found like it was very gratifying. I got a lot out of seeing a light bulb go off in a young student athlete's head and just teaching them the skills and showing them potential pitfalls they may fall into. From there, I just continued to do more work in the community and I continued to learn how to operate in a business. And so when it came time for me to transition careers, there's a few other things that I did on the side to continue, like I said, padding my CV and building up skill sets that would allow me to have options when I transitioned inevitably out of football. But much of the experience that I built leading into this new career that I'm doing is stuff that I basically taught myself from sharing my football journey. So when I left football, I'm a big time finance guy.

I love investing. I love everything that has to do with money, economics and all that kind of stuff. So I actually have my Canadian securities course. I got my life insurance licensing. I got all those kinds of things just kind of because I wanted to have that in my back pocket. But when I finally hung them up, it wasn't finance. I actually had an opportunity to continue working in the community with my pro team that I played for for so many seasons. So now I'm a director of community partnerships with a professional sports team. And the only reason why I was able to stick my foot in that door and get that opportunity was because of the experiences that I built for myself while I was in my primary career.

So just thinking ahead and not necessarily knowing that this specific job would come, but knowing that there were certain skills I needed to develop, certain experiences I needed to have, and certain cachet network, and certain things I needed to get exposed to along the road that would open doors for me in the future. That's great, Dan. Follow-up question on that. I wanted to, if you have a word to say to maybe some younger listeners that are maybe at the top, whether it's football, hockey, baseball, whatever the sport is, and we just

saw the Olympics, obviously they called them amateur athletes, but they're pretty much full-time athletes. How important is it for them, especially maybe the ones who get early on very high salaries, they can get caught up in the moment. So what, what kind of advice do you have for those younger athletes when it comes to being financially savvy? And that's really, as you know, the theme of our podcast, we want to help people being financially savvy and independent. So what kind of advice do you have that to those maybe younger athletes that would be listening to the podcast? And definitely one thing I recommend for any athlete, whether you're coming out of college

or whether you're, you've got the opportunity to play professionally, or if you're like an Olympian or whatever, and you've got your full-time focus on money, there's one thing that all athletes share and it's that our career lifespan is much shorter than that of somebody who's not dependent on their physical gifts to put food on the table. So one of the main things that I tell a lot of the younger people that I work with, or the people I've played with, or people who take the time to ask me questions is that leave with something to show for it. whether that's paying down your student debt so that when you transition to your next career, that your expenses are more manageable, or maybe

it's saved for that down payment so that you can actually invest in something that's a hard asset, or just open up an investing account, start contributing because not every employer has a retirement savings plan. Or if it's just stretch your money, don't spend it all while you have it and think ahead, have a career transition fund. Because when you have some money set aside, it allows you to take the opportunity that best suits you and not the one that is just available to you right now. It's almost as if you're preparing to use your emergency fund, but it's not an emergency. It's a planned event. So instead of having to pick the first job one month out of retiring from football,

I was able to actually weather the entire pandemic, which was like about a year and a half and weigh the pros and cons of going back and playing versus what I might want to do otherwise. And I wouldn't be able to make a decision and wait for the right opportunity if I didn't have something set aside. So plan for the future, have something to show for it and wait for the right opportunity if I didn't have something set aside. So plan for the future, have something to show for it when you leave the game. That's really great advice. And before we get on to crypto, because that'll be our big discussion today, how does the body feel at 31 and having played pro football? Because I've had a slew of injuries. I'm very active. Obviously, I'm not a professional athlete, although sometimes I like to believe I am.

I mean, as you get older, obviously things start to break down. So overall, just curious, how does the body feel? You know what? The crazy thing is, is different things that ail you when you're not playing. Because when you're playing, it's like therapy every other day. It's like massages. It's a cold tub. It's a hot tub and stuff like that.

So I feel a lot better not running head into people for a living. I'll say that much. My neck, my head, my shoulders feel a lot better. But it's weird things like your hamstrings get tight. You know, you roll out of bed in the morning and you feel like you really got to stretch. You know, so I'd say I never felt better, really. But it's just you got to take care of yourself. Right. You can't completely take your foot off the gas because at the end of the day, you ran around for a couple of years, a few years, like me, I played football almost 22, 23 years. You don't just shake that off, right? So you got to keep doing the maintenance. Yeah, exactly. That's it. I keep telling my fiance that it's

all about the maintenance. As you get older, you have to like, less is a bit more, but totally agree. So we're going to switch now to our crypto discussion. We'll finish off with Bitcoin, but we haven't really talked on the podcast, Brayden and I, about NFTs and a little bit about DeFi, decentralized finance, DeFi. So we'll start off with NFTs. Can you explain to our listeners what NFTs are just so they get a general sense of it? Because I know a lot of our listeners may have seen some headlines, whether it's on CNBC or whatever financial mainstream media that they're looking at. And it's obviously all the art pieces that are selling for crazy amounts of money. But if you can just tell people, you know, how do NFTs work?

Yeah. So NFT stands for a non-fungible token. Something that is fungible, it means that you can have one and I can have one and we can swap and it wouldn't really make a difference. Just like a dollar bill or a gold coin, for example. Like if you put a gold coin in a vault and you come back and it's a different gold coin, it's not really going to bother you because they're fungible. They're the same. But a non fungible token is more like it's unique, right? It's something that it is one in a series of many, and it has maybe a serial number, like a baseball card or some kind of trinket that's in a collection, right? So there are verifiably scarce digital assets. That's what an NFT is, right? And they come in many shapes and forms, but the most popular of which is these art pieces,

like you mentioned. So there's a number of marquee collections that people who are really big in the NFT community hold in high regard. So some of the popular ones that people can do their own research on would be things like Crypto Punks, which they look like Nintendo you know, Nintendo characters. They're not like very beautiful or like super technical. It's just like 8-bit drawings with like pixels and they're selling for like hundreds of thousands of dollars. But the thing is about the NFTs, the thing that makes them valuable is the verifiable scarcity, right? So yes, you can screenshot a picture of one

of these things, but you can't have a claim of ownership on it that is verified and immutably stamped on the blockchain unless you actually own it. And that's what really has been driving the demand for these is the fact that for once people actually have the ability to stake a claim on something that is digital. And as an NFT, you know, you can see the application in art or collector's items, like an NBA top shot, which is basically basketball highlights that people are able to collect and trade. But there's other applications for NFTs that might even be more practical, something that an everyday person might find value in. For example, a concert ticket.

We could see something like that being an NFT where every seat in the arena is unique. So section A, row B, seat number 10, that's going to be a specific ticket. And you may have an NFT for that ticket. And the cool thing about it is because they're software-based, right? You can write some types of programs into these different assets. So for example, you know, usually go to a hockey game or a basketball game. There's somebody standing outside the stadium selling tickets on the night of the game. Yeah, the good old scalpers, right?

The good old scalpers. Well, if they were selling NFTs, one cool thing about them, they're programmable, right? They run on something that's called a smart contract. And that's basically a piece of computer code that would allow a percentage of the profit from every resale to go back to the original creator. So if I was the Toronto Raptors, maybe I sell 10,000 tickets, they're all NFTs. And then some people resell those 10,000 tickets, I would have the potential to continue gaining more profit or a percentage of whatever those tickets are resold for every time they change hands. And that's some of the real world power of NFTs that I think is really the most exciting about that technology. Do you see NFTs potentially disrupting companies

like Spotify, even stock exchanges with tokenized stocks, for example, you mentioned maybe a StubHub could potentially be also disrupted. So do you see NFTs, I don't know, 5-10 years from now, really disrupting those kind of middleman companies? Well, you know what, I don't know necessarily if they disrupt or if those companies adopt the technology and find a way to build it into their business model, because there's a huge potential for those who move first and do things well. And I think a huge part of why many things take a while to catch on is because of the user experience. We're so used to holding a physical ticket, but with things now like Apple Pay, where you can have a wallet in your phone with your tickets for your flight,

or Tim Horton's gift card, and a whole bunch of other things right there in your phone. I think if there was a company like Apple, for example, that was working with a StubHub or working with a Spotify or a Shopify, and they were able to integrate NFTs into something that we already know and we're familiar with, then that would be a way for them maybe not to disrupt, but to add a serious amount of value to the people who are already customers. I know Shopify, I believe that they have some type of value to the people who are already customers. I know Shopify, I believe that they have some type of integration already for people to sell NFTs, but the platform in which you sell the NFTs has to be on a blockchain because you're using cryptocurrency to buy them. And then when it changes hands, it goes from one crypto wallet to the next.

So maybe Shopify is the front end and you don't actually see any of that technical stuff happening on the back end. And that would just speak to the first thing that I mentioned, where it's really about user experience, right? People don't care about smart contracts and technology. They just want to know, do I have a one of 100 of this item? Can you prove to me that this is verifiably scarce and make it easy for me to interact with it, show it to my friends and build a collection? So the companies that successfully create that user experience, whether they let you know that the backend is all blockchain and smart contracts, or whether they just make it completely seamless and you don't know the difference,

I think those are the companies who will really take advantage and push themselves to the forefront of this new technology. Oh, that's interesting because I always thought potentially, you know, especially I always think about music, musicians, singers, and you always think about them and say, oh, they could create their own NFTs with their songs and then just completely bypass Spotify, for example. And I, sorry, Brayden, I know he owns Spotify, so he'll probably be thinking I'm bashing on him a little bit, but yeah, I always had that, that perception. That's a good point. And you know what, there's some platforms that are more decentralized platforms that allow people to actually share some of their music as NFTs.

I think one is called Audius and you know it's specifically catering to the type of musician that you're talking about right so yeah there could be some room for disruption and whenever you put power in the hands of the actual artist that's a big development because for many years we know that the record companies are the ones who are pretty much scraping the majority of the profits off of the creative that these artists are doing. So, you know, we've seen a trend of a lot of musicians have been going independent over the last 10 years. And that just basically means they're making their own music, they're distributing their own music, they're marketing their own music and they're keeping the rights to their music. to their music because, you know, if you don't actually own the rights to your music, then you're not free to do concerts and resell tickets and benefit fully from what you've

created. So I think there's opportunity there. If artists can figure it out, man, that's a huge advantage. And I think there's a lot of room for them to make a huge profit because you wouldn't even have to sell a million records to make a million dollars because the economics, the unit economics would be so much improved. Yeah, exactly. So no, that's a great overview on NFTs and hopefully people understand a little more what they could be used for. And they're still very new. So we could see a lot of developments in the years to come.

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and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality

co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at Airbnb.ca forward slash host. That is Airbnb.ca forward slash host. Now I'd like to transition to decentralized finance. If people start hearing DeFi, that's one of the things that they're dabbling in crypto space, they'll hear a lot about it. So if you can explain what DeFi is, and what the risks are associated with that, and especially the risk part, because I know you tweeted today about Polygon. Is that it? Polygon, Ethereum, and Binance Smart Chain got hit today. Yeah, exactly. So if you want, I know it's a few questions in one. Polygon, Ethereum, and Binance Smart Chain got hit today. Yeah, exactly.

So if you want, I know it's a few questions in one. So first of all, what is DeFi? And then what are some of the risks? And obviously, maybe touch on the Polygon and Ethereum and BC as a Binance chain as well. Decentralized finance basically is part of the entire ethos of crypto, right? Decentralized finance just means there's financial services that are not dependent on some kind of intermediary, like a banker or broker, right? So you can do things like borrowing, lending, staking, and yield farming or liquidity mining. And I'll explain what that is. But these are four of the basics of decentralized finance.

Borrowing and lending are things that we're already very familiar with. But to borrow and lend without somebody in the middle mediating, that's something we haven't had the ability to do up until now. But because of the same type of software that I mentioned earlier with NFTs, it's called a smart contract. There's people who develop these protocols that work on top of the blockchain. And basically you interact with this software and there's no human being involved. It's really just two parties interacting with software in the middle. So once the code is written and it's deployed on the network, it just exists there.

It's like a website that somebody built and nobody's maintaining, but even more powerful. So you can deposit some of your assets and other people will have a demand for those assets and they will borrow them. And basically they pay an interest rate and you would earn an interest rate. So it's very simple borrowing and lending through a decentralized protocol. But then you have other things such as staking. Now staking, when you have certain networks like Ethereum 2.0, for example, in order to secure the network, people put up their crypto assets as a type of collateral to secure the network. Because if anything goes wrong, then the collateral is at risk. So the more collateral that is there,

you can consider that network more secure. So when you put your crypto into a staking pool, you gain rewards every time that a new block is minted, right? Proportional to the amount of crypto that you deposit into the staking pool. So without getting too deep into it, it's basically like a CD or basically like a GIC. You deposit your crypto in, it's locked for a certain period of time. And then during certain intervals, you're going to get an interest payment of sorts. And that's what staking is. And then liquidity mining is actually one of the more exciting ones, I'd say, that people really are drawn into DeFi about. And this is when, if you were to trade stocks, there's an order book. People put in limit orders to buy Amazon

when it reaches $33.50, for example. And there's a book of a whole bunch of people who have buys and sells in this order book. But like I said, there's no central party in decentralized finance. So there can't be an order book because you're not supposed to have to sign up and KYC or do any of those things. You're just supposed to be able to show up with your wallet and interact with the protocol. So what they use is something called an automatic market maker. And that's one of these smart contract protocols where basically there is a pool of assets in equal proportion, right? You might have Ethereum and USDC, which is pretty much a US dollar coin. Yeah, a stable coin. Yeah, exactly. So there might be a pool that is the USDC and Ethereum pool. If you deposit into this pool and you provide liquidity into this pool, other people will come and trade their USDC for Ether or they'll trade their Ether for USDC and there'll be a small transaction fee. provided the liquidity that allowed other users to trade between that pair,

the liquidity providers get a piece of that transaction fee. So you're basically putting your assets in a pool, holding them there for a while, and then earning those fees as other people transact. So those are the four main pillars of DeFi, lending, borrowing, staking, and then liquidity mining. Now, I'll stop there. Maybe you have some questions, but then I could talk about maybe why some of those are safer or more risky than others. No, you explained it really well. Obviously, I've done some research on DeFi as well. I've not used it just yet. So I've only used kind of somewhat third parties like LockFi, for example. I've used them in the past, just because one of my buddies, a big DeFi supporter, and he dabbles in that space all

the time. But yeah, it's still risky in my view. So I'm still kind of holding back a little bit. And obviously, with Polygon today, the news that came out. So do you want to talk about us a bit what happened with Polygon and just the risk that people can encounter if they want to try d5 yeah so to be fair this is probably the most risky way to put your crypto to work for you right and there's a number of reasons why in different ways that you choose to go about it right so of course if you're going to be providing liquidity to a pool, for example. Right. The first thing is without anything catastrophic happening, if I put Ethereum and I put USDC into a train pool and the price of Ethereum goes crazy, When I withdraw my assets that I deposited, I may not get back the exact same amount of what I deposited because you get back the same ratio of what you put in.

So if the ratio in the pool goes off tilt while they're deposited, then you're at risk of withdrawing and losing something here or there. People still tend to use these because maybe you're getting more fees than what's at risk of being lost. But that's just something to keep in mind. It's called impermanent loss. And that's something people could look into on their own. It's a little bit technical, but that's one thing that just comes with the territory. Could it go technically the other way though? So you provide liquidity and then the price goes down. So technically, you kind of kept your value because at the end of the day, it's what you put in, right?

stable because if you have two volatile assets together in the pool, then you're increasing the risk that when you withdraw, you're going to be off kilter with the ratio of what you deposited. And there's some great articles that really go into depth. And I think it's one of those things that once you see an example, it makes more sense. So I know Binance Academy has some really good blog articles that just explain things. Even if you're not using it, it's just good to look into it so you can see examples. When there's numbers around, examples are best, right? And there's some really good videos on YouTube too. I've seen quite a few that are very, you know, they explain it very well. You know, you might have to rewatch it a few times, but it's all good.

They still give the content really well. Right, right. But then two other things I would mention is that one, if you're working with a centralized exchange, like a BlockFi, or one of those ones like Coinbase or whatever, and you're staking or you're lending or borrowing, the problem there is that you're relinquishing your private keys. So you don't actually have full control of your digital assets when you work with a centralized exchange, right? Now there's a trade-off there.

Like, yes, you can have customer support that you can call if something goes wrong and you can file a grievance with a person on the help desk. And a lot of people find solace in that. Like, so DeFi isn't really for everybody. And that's why they still have the CeFi, centralized finance. So you can get some of these benefits without taking some of the other risks, which I'll talk about in a second. But you have to understand that the risk that you are taking is that you're giving up your

private key. So the problems there is that maybe you will have delays and withdrawal. Maybe you wanted to actually spend your stuff. But the platform itself is going to say, you know what? It's going to take us 24 hours, seven days, three days to withdraw your funds. Or you can see something like what happened with Binance is that earlier in the summer, they just shut down operations in Ontario completely.

And so now if you have your funds in Binance, you're going to have to pull them off anyways, because they're giving you a letter that in 30 days from now, we're not going to be doing business in your jurisdiction. So just different things that can happen. But the real, real risk here, I would say is if you're going to be interacting with these DeFi protocols, it's just software. It's just software. And the people who write this software, once it's deployed, it is as it is, right? There's no updating it or anything unless there's a complete hard fork, which means that they put out another one and just tell everybody to stop using the original, start using the 2.0. But once it's out

there, it's out there. So that means that if there is a bug, if there's a loophole to be exploited, if there is any gaps in the security, then they're out there for the world to take advantage of. is any gaps in the security, then they're out there for the world to take advantage of. And that's what we saw today. There is a protocol that's called Poly Network. And so Poly Network is an interoperability protocol, which basically means that whether you have assets that are on the Ethereum blockchain, on the Binance Smart Chain, or on Polygon Chain, you're allowed to have a swap between assets that are on different blockchains. Now, without getting too technical, that's like basically saying, you know, if I have assets in Canada and I have assets in the US, I can just swap them easily without any problems. And now that's like a bad metaphor, but that's just like an easy way of

understanding it if you're not crypto native. But having these level of complexity in the software that they're writing, it leaves many, many possible attack vectors if everything is not completely airtight. And so what happened was somebody who was a malicious actor found a way to basically create transactions that were not real. And they were able to withdraw $611 million worth of crypto assets from Binance Smart Chain, Ethereum, and Polygon. And this stuff is all out in the open because, as you know, the blockchain, it's a public ledger. Everybody can see what everybody else is doing, but it's pseudonymous. So we can see an address, which is just a string of letters and numbers, is moving funds from point A to point B, but we don't know who that person is, but it's happening right before our eyes. And so what happened was this person was able to drain a certain amount of ether,

a certain amount of dye, a certain amount of dye, ship coin, a whole bunch of different things. And they basically are now exposing a lot of the weaknesses that are in some of these DeFi protocols. Now, I'm not telling anybody what they should or shouldn't do. But in my personal opinion, I have looked at DeFi as something that is very attractive because the yields that you can get are huge. Some of these protocols are promising 20, 50, 70, 80, 100% APY. And you're thinking, I'm at EQ Bank getting 1.5%.

And I can deposit my stuff here and get 100% return APY, like, why would I not take that opportunity. But then you have to understand the risks that comes with it is also that there's a lot of people out there who are much better with computers than I am, who are spending all day long, trying to find that one backdoor to exploit some of these protocols. This is something that is common, because there's another very popular interoperability chain called ThorChain, which allows people to swap. Instead of just within the Ethereum network, you can swap Bitcoin for Ethereum. And ThorChain was exploited twice in two weeks just last month for $10 million. Now, there's still a lot of people who are very,

very adamant that this DeFi space is the place to be. And for some people, it is. But you just have to really understand what you're getting into if that's the game that you want to play, because everybody loses money in DeFi before they make money, whether it's because you didn't understand how transaction fees work, or whether it's because maybe you're using the wrong tokens at first, and you didn't really understand what the good ones were, or you invested into something that really wasn't worth money. Everybody loses before they make money at DeFi. So if you're going to get into it, just make sure that you do your research and you understand the risks that you are taking. Yeah, no, that's great. And just to clarify for people who are not

for the acronyms, APY, it's annual percentage yield. And KYC is know your customers. So when you open an account with a broker, for example, they'll get your information, they have to know you. So there's a lot of terms that you'll hear in DeFi. And I guess one last risk too, and you can comment on that is the dreaded admin keys. So I've read quite a few protocols. People say, oh, make sure you know whether they have admin keys or not. Could be a good thing, could be a bad thing. Like, what are your thoughts on that?

Would you mean that the people who created the protocol can just basically take over and dump tokens or undo something that was done? Like what happened with Ethereum back when the DAO was hacked? Yeah, exactly. I know some protocol are fully, you know, there's no admin keys. I like that's just something obviously I'm still doing research on, but I know that's one of the risks people say, whether it's a good or bad thing, maybe they can make changes if something like this happens for Poly, but on the other end, it still gives some control to the original developers. Yeah. A lot of protocols claim to be decentralized, but it's weird to me that you could claim to be decentralized, but still have a marketing budget or still have a business plan

or still have a core team that's working on improving something that they have a stake in. So for example, Ethereum is very popular. And I'm not here to knock anybody. I'm only here to just talk about the past, right? Because I've owned Ethereum before in the past. But one thing that has happened was before a lot of these coins are available to the public, they sell them privately to investors. So it's similar to before a company IPOs, they'll give shares to investors and those investors give them the seed money that they need to hire different people in the company. And so this is how Ethereum was created, right? They had something that's called pre-mine, which means that they made a whole lot of Ethereum and then

they sold it to people for a very low price to raise some money. And then that helped them kickstart this whole blockchain. And then as they were going along, they had something that was called the DAO. And that's basically a big pot of Ethereum tokens, a big pot of money, you will say, where people were keeping things in one place and that was giving them say in decisions that were going to happen, right? Basically, they had skin in the game and that gave them a right to have input. Now, somebody found a way to hack the DAO and extract a lot of value from there. And to speak to your point about the admin keys, people who were victim of that saw fit for them to basically divert the blockchain

from going down that path of them being victims. And they basically reset things so that now they could get their coins back and they could start all over again, but patching the holes in the software. So I just use that example to say that, and you can look it up if you guys are interested, So I just use that example to say that, and you can look it up if you guys are interested, it's called the Dow hack. It's just to say that not everything that is claimed to be decentralized is completely decentralized. There are some people who are still in control of some of these protocols, some more than others, right? And in the beginning, many of them, they have to start off centralized because how is it going to get off of the ground, right? Other than having a team of people put it together, launch it to the public and keep it

afloat until it catches on as a network effect. And I think that speaks to the mystique and the power and the network effect of Bitcoin, because it's really the main cryptocurrency for a reason. And part of that is because the person who invented it, nobody knows who they are. They never stuck around. They really just communicated through a forum with a few other people who were in the know at the time. They deployed this piece of code that at the time, it was a finished product as it was. And there's been improvements to it. But if anything ever happened to Bitcoin, it just happened. There was no going back and resetting and trying all over again. So it was really the truly original decentralized network. And I think that's why some people gravitate to it.

And that's why it's the most widely propagated cryptocurrency around the world to this day. That was a really good transition over to the Bitcoin topic. Well done. So yeah, let's talk about Bitcoin. So we can start off with volatility. So obviously, anyone who's been following the space, anyone who's been listening to the Canadian Investor Podcast or following you on Twitter or me, they'll know that volatility is there. And I don't hide it from people. I say, look, if you can't handle volatility, you probably don't want to be investing in Bitcoin as much as I believe in Bitcoin and its future outlook.

So do you want to elaborate a bit more on volatility, kind of some of its causes and also how people can mitigate that volatility? Because for a lot of people seeing a 50% drop, which is not that unusual for Bitcoin, it would be something pretty scary. Yeah, it's definitely a part of the ride. And you got to understand, right? Like Amazon has suffered a 90% drawdown in its lifetime. So when you are a new on the block, there's something that is called price discovery. And that's when everybody is trying to decide what is this asset worth, right? So when the asset is moving through this initial price discovery, as you can see, usually when something IPOs, even there's going to be the highest amount of volatility when the market is trying to settle on, like, what is this worth, right? We saw that with, for example, the latest one that I can remember was Coinbase, right?

Or even Robinhood debut at a certain price and they're up or they're down, right? But it rarely ever comes out at a price that everybody completely agrees on. So there's either more sellers or there's more buyers. And with Bitcoin, there's so many factors that the price discovery is evolving day by day. So that's one reason that contributes to the increased volatility. Two, you got to think that Bitcoin has a low flow. So what that means is of all the Bitcoin that's in circulation, right now, there's about 18 million and change Bitcoin that have been mined. And there's going to be about two and a half million more that will be mined over the next 120 years. So of those 18 million Bitcoin, some of them are

lost forever. And the amount that are available to buy on exchanges is about 13% of the total circulating supply of Bitcoin. So it's not that when I buy, it's going to take away from 18,000 off the market. I'm taking away from that 13% that's available. So the price has moved more because less and less is available for people to buy. When there's a smaller pool available, the price can move higher and lower easier. Another thing too, is that in crypto, there's a lot of highly leveraged traders. And this is something they've been pulling back on a little bit more recently, but for a long time, it was normal on Binance. I know across fees, you can probably still do it, but they had up to a hundred times leverage trading.

They got it down to 20, right? I think now is that- Right, which is still- It's still pretty crazy. Yeah, for people not familiar with that, it means that just a 5% change would basically have you liquidated with your leverage if you do 20x. Exactly. So when Bitcoin is ripping on these, it can move 5%, 10% in a day, no problem. And when people are putting on shorts or they're going on 5%, 10%, 20x, and then the price moves in the other direction, that's going to cause a lot of buy or sell pressure. And it's this kind of thing that cascades down. So that adds to another layer of volatility that you're not seeing in a stock market because there's no circuit breakers in

crypto. Whereas when we had the pandemic, we saw the stock market was dropping like a rock. There's circuit breakers, which is when the NYSE or the NASDAQ are going to actually halt trading and let all the orders get filled so that we can try to prevent a catastrophic drop. And this is something that they've learned in the equities markets from past experiences where there's been massive crashes or flash crashes. The stock market has dropped a terrible amount in one day and it really can destroy a lot of the market. So they have circuit breakers, but those don't exist in crypto, right? It's a truly free market. Another thing too is that there's not a lot of institutional ownership. So there is some, and it's increasing day by day,

but institutions, when they buy, they tend to buy big lots, which means a lot, and they hold it for a long time. And that creates stability in the price. So we're seeing a market that is dominated by retail. And retail tends to be a little bit more emotional. And they're buying and they're selling more frequently. But as adoption picks up, remember, Bitcoin can barely go see a double A movie, right? They can't, they're like, what, 12 years old? Yeah, yeah, I think so. Was it 2008? Yeah, yeah.

Yeah, so it's one of those things where it's like, Bitcoin's a baby still. And as adoption picks up, we're going to have more people who are holding on to it and not selling as much and the price will stabilize. And then also one other thing too, is that miners,

people who are the companies that mine Bitcoin, what they do is they make a profit from putting blocks on the blockchain and collecting transaction fees. So in order for them to pay the light bill, they have to sell some of their Bitcoin. So there's a consistent sell pressure from the miners in order to fund their operation. So there's many factors here that contribute to high price swings, FUD in the media. FUD is a funny word when you get into crypto, it stands for fear, uncertainty, and doubt. So there might be a FUD attack. There might be a political risk. There might be this country that announces they're going to start accepting it, this company here. So between the headlines and between the actual underlying network and how it works and how the industry works, there's a lot

of factors that play into the volatility. So the three things that I say for people is, first of all, if you're going to deal with Bitcoin, manage your position size. And that's just in any investment, right? If you have a high volatility asset, and that's something that volatility is the range of prices that an asset moves through, right? So something that on a single day would be $5 and $15, and the high and the low compared to something that might be $9 or $11, the wider the price range from five to 15 is higher volatility from nine to 11, it's a lower volatility. So when you're dealing with a high volatility asset, you have a smaller position size because you don't need as much exposure to get a big effect.

The second thing I would say is instead of trying to time bottoms and tops, just dollar cost average, because then you're smoothing out the ride and you're giving yourself the best probability to get a little bit at the low, a little bit in the middle, a little bit at the high, and it's going to smooth out that ride for you. And it's also going to mitigate your FOMO, right? You're not going to feel like you're missing out because you got in already. And then the last thing I say is buy to hold. You don't want to rent your assets because if you hold your assets for a little while, you have to auto, right? That's it, right? You got to hold. You don't want to rent your assets because if you hold your assets for a little while, you have to make that sit, right? You got to hold on for dear life. That's the only way to do it and enter it with a long-term mindset that regardless of what happens in the next five to 10

years, I've already in my mind envisioned that this is going to a certain place, right? So for me, for example, I have no doubt in my mind that it'll be a quarter million dollars per Bitcoin. So I just discount that back to today. And whether it's 29,000 or 45,000 or 53,000, that's a rounding error. We're talking about something potentially 5Xing. So hold on to a dollar cost average and manage your position size so that you can sleep at night. Yeah, exactly. onto a dollar cost average and manage your position size so that you can sleep at night. Yeah, exactly. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs,

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That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network.

You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Exactly. And I love the dollar cost average strategy. Obviously, we've talked about that a lot on the podcast. I think personally, it's also good for your mental health because you don't have to worry about trying to time the market. And anyone who's tried to time the market, usually you can get lucky once or twice, but you won't get lucky over the long run. But I wanted to transition, you mentioned FUD, so fear, uncertainty, and doubt. And I thought it'd be a good topic because

people that may want to dabble their toes into the Bitcoin space that are listening may not have started. I'm sure they'll hear some friends and family talking about trying to tell them, well, why would you invest in Bitcoin? What about the environmental impact? What about government regulations potentially shutting down Bitcoin? What about the fact that Bitcoin is used constantly by criminals? And obviously, I don't believe all these things. I'm just saying them because I think those are probably the three biggest fuds, I would say right now on top of my head. Yeah. Yeah. Well, in terms of the criminals thing, it's kind of funny because the number one medium of exchange between criminals is the US dollar,

right? Because no one knows where a dollar comes from or whose hands it's been in or anything like that. There's no way to track it. But on a blockchain, every transaction, like we said, it's publicly posted for everyone to see. And so for you to get that money off of an exchange, you're usually going to have to go through some kind of payment gateway sooner or later. So it's a lot harder for a criminal to move crypto around than it is for them to move duffel bags of money, right? So for that, I'm not really sure where people got that idea from. I think because we have these colonial pipeline hack and certain things like that that happen in the news and they claim to want their money in crypto. But then at the end of the day, they end up getting caught because then they try to extract their money from through Coinbase or something like that.

It's like great robbing a bank and asking for a helicopter to get away and then saying helicopters are bad. To me, it's like the logic doesn't really add up because if we looked at it that way, then we wouldn't be using regular dollars in the first place. And then to speak on energy consumption, and it's worth talking about, and I think it's good that people have spoke on it because it makes you think about certain things, things that we take for granted. What's the difference between energy production and consumption? Because I know in Ontario and Quebec, the vast majority of energy is powered by hydro, like water. Regardless, it's just a matter of if you're able to capture it and use it. Whereas opposed to in China, where some of the Bitcoin miners had their mass exodus, a lot of them were using coal power. And that's just because of the nature of the country. I think China is about 70 percent coal powered.

So that mass exodus from China could potentially have good effects for the environmental impact of Bitcoin in the long run. good effects for the environmental impact of Bitcoin in the long run. I know that there was a group of people who came together to kind of combat this narrative called the Bitcoin Mining Council. And they did a study that found up to somewhere around 65% of the entire network currently might be potentially run on renewable energy. And the only reason why I say potentially is because they were only able to actually survey 35% of the miners in the total network, which is a pretty good sample size when you think about it. So as it stands, if you consider that close to arguably half of the network is run on renewable energy, that's one of the greenest industries bar none in the world. And if you want to talk about some other industries that tend to consume a lot of power,

bank branches and ATMs consume 4.7 times more than the Bitcoin network. The military in the US, seven times more than the Bitcoin network. And then some funny ones like refrigerators in America, 10 times more than the Bitcoin network. So there's a lot of arguments to say like, yes, it uses energy, but much of the energy that Bitcoin uses, because you can set up a container, like a shipping container with a bunch of miners in it, anywhere in the world that there's energy. So if there's stranded natural gas, or if there's a waterfall in the middle of the jungle, all you need is a satellite to connect to the internet and you set up some miners. And if you're able to harness that energy that people couldn't

otherwise get to, then the utility of that energy is greater pound for pound than say the amount of energy you'd be using to power your heater in your house or your television that stays on all day long for 365 days a year. I think the unique nature of how you can mine Bitcoin pretty much anywhere on the planet, it gives developing nations an opportunity to make use of a lot of their natural resources that otherwise they wouldn't have the infrastructure to capitalize on. So for example, in like many of the African nations, they might have geothermal or they might have wind or hydro available, but there isn't the infrastructure laid or there wouldn't be the ROI on laying the infrastructure to get it from where the source is to the closest densely populated

area. But if you're able to set up Bitcoin mining there and use that energy to generate profit, because a lot of these miners are running gross 80, 85% margins, because literally you have a small handful of employees and there's a bunch of machines that you just have to turn on and maintenance now and then. They're very profitable businesses. And then you can actually turn that energy into something you can export, which is a Bitcoin, right? So the dynamics of the energy, you have to think about one, what is the energy cost of the dollar that we're using now, right? What is the energy cost of the military that we use to protect our dollar now? What is the energy cost of

the oil and the gold that we're digging out of the ground now? And is the utility of those greater than potentially creating an asset that lives on a global monetary network that's giving unbanked, disenfranchised, and oppressed people an opportunity to have access to immutable property rights and peer-to-peer transactions without middlemen cutting off 10%, 15%, 20% of every transaction that their family is sending back money from abroad. I mean, to me, Bitcoin's utility is greater than any argument of its power consuming too much, in my humble opinion. No, no, I think that's a great point, because we take credit grant, especially being in Canada, you know, we have access to banking accounts and all these different things.

But people tend to forget that that's not the case for probably the majority of the world, right? So Bitcoin is a great way to do that. And I was going to add for the energy aspect as well. I love that you put it in context with other things. You tend to hear a lot about Bitcoin using more energy than this small country and things like that. But I think I like putting it into context versus other things, whether it's the traditional financial system, or like you mentioned, the military, I think it pales in comparison. And just to add some numbers to what you were saying for the money laundering, I did a little bit of research for

our interview too. So I pulled some data from the UN that they say an estimated 2% to 5% of the global GDP is connected to money laundering. So that's on the low end. Their estimates is $1.5 trillion. And in 2019, Chain Analysis reported that criminal activity represented about 2% of all crypto transaction volume or roughly 21 billion. So that puts things in context a little bit. I mean, I know we've heard that in the States and with the Senate, specifically the whole money laundering thing. So I just wanted to give that piece of information to our listeners. So if someone tells them that they can kind of fight back with that a little bit. And also, if you want to look for sources, because like I'm just a guy on a podcast, like you can go and look up the data yourself.

I will caution people like, you know, the news, they have to put out news every day. So look, look more for people who do studies and provide data and research, right? So one economist and analyst that I really like is her name is Lynn Alden, L-Y-N Alden. And she does a great job going in depth and really talking about some of the macro effects of some of these things. And she's not just like a Bitcoin person. She's truly like a macro analyst. And Bitcoin is just something that makes sense to her.

And then there's another guy named Nick Carter. He's really good. He goes in depth. And you might see him on CNBC sometimes or some of these channels. The last person I would also mention too, if you want to look for some resources and all these people are on Twitter, that's where you can find that they're pretty available too. But somebody named Alex Gladstein, he writes for Bitcoin Magazine and he often illustrates the impacts that Bitcoin has

internationally, things that we don't necessarily see every day and things that we might take for granted. But he talks about people who are protesting for democracy in China and how their bank accounts get canceled. And the only way they can receive donations is through something like a peer-to-peer network like Bitcoin or people in Nigeria who are limited on the amount of currency they're able to exchange for foreign currency. So they actually have to hold on to a NIDA that is losing its value faster than they would want it to. And so Bitcoin has actually become the largest peer-to-peer network in Nigeria, in the world, in Nigeria, because of those kinds of restrictions. So those three people, they have a lot of great research. And

if you want to learn more, those are some people that I've tapped into. No, that's great. Definitely. I was familiar with most of them. Nick Carter is probably one of the best ones for sure. I'll probably finish with this last topic just because I'm starting to get close to my bedtime. So it's almost 10pm. I'm starting to get tired. I usually wake up around 6am. So it is definitely getting a bit late for me. So let's finish off with real world use cases for Bitcoin. So whether you want to talk a little bit within that about the Lightning Network, or I know, you know, potential store of value.

I've talked about that a lot on the podcast before. International remittance versus the U.S. controlled SWIFT system. Censorship resistant, like you mentioned a little bit, property rights, open access system. So do you want to pick a few things from there? Yeah, you nailed it. I'll just say a couple pieces. Like for me, one of the lowest hanging fruit that I see is the international remittance, right? For a lot of countries, they have something that's called a brain drain, and that's where the most talented people, they leave the country to go find work in another nation. So instead of commerce and instead of the economy bringing in money and increasing the GDP, they leave and the GDP is heavily affected by the money that they send back to their family.

So one example of this is a small nation called Tonga, right? A Polynesian nation. And I think somewhere like 20 or 24% of their GDP is made up of international remittances. So when people go to the USA or they go to the UK or Canada, and then they send money back to her family, it generally has to go through maybe a Western Union, or something like that money transfer service. And there's different mechanisms built into that money transfer that are skimming value all along the path, right? So first of all, not everybody in Canada, the US, the UK, or Tonga might have access to a Western Union or to a bank or have a bank account. So that's just one thing that many of us do, but we have to also recognize that some people don't.

So access is one thing. And then secondly, when you're paying a flat fee to transfer, plus you're paying a conversion rate, if you're sending, for example, only $100 and maybe $86 gets there, that might not sound like a lot, but that might be 14% of the money. And that could have a huge impact on people and that could have a huge impact on the total gross domestic product of a country. So being able to preserve the value of money as it's transferred internationally is something that is huge. And for Bitcoin, as long as you have a cell phone and internet access, that's the lowest hanging fruit. So you can send $50 or $50 million for the same fee. So the cost of your transaction, it doesn't scale with the size of the transaction.

That's one of the most appealing things. I can send money to my nephew in the States or my brother in the States. And depending on the traffic of the network, I might pay 50 cents for that transaction. Now, if the network is very busy, then it can cost up to $20 or $30. But when we're talking about securing, for example, a million dollars, in the past, sometimes the fastest way to get a million dollars from Canada to the UK might have been to get on a plane with it in a bag and fly it over there, because they're going to have so many checks and balances to make sure that you actually got that million. So when it's done on

the blockchain and everything can be verified peer-to-peer, and you can see the transaction happening in front of your face, you can see the confirmations and you can see the hash number and you can see the receiving wallet address, there's no point in time where you're thinking about, maybe I should call the bank and check to see how come my money didn't arrive there. Two to three business days is not something that exists in Bitcoin. And then on top of that, if we want to talk about not sending a huge sum of money, which would be comparable to like a swift transaction, but maybe like me and you are, we go on a vacation and we're both in Jamaica, right? And you came from China and I came from Honduras and our other friend came from Toronto and we're in Jamaica and we want to have dinner, but we want to split the bill,

right? We're doing international transactions, but it's a small amount of money. That's when something like the lightning network is literally undefeated, which is basically a layer on top of the Bitcoin base layer that allows for instant, nearly free transactions. And so I can send as little as one cent to somebody, and it might cost me one sixth of a cent or one fifth of a cent to send that money internationally. And it's instant, right? So for the people who say that Bitcoin is too slow or Bitcoin is too expensive, it depends on what you're trying to accomplish. There's definitely a tool for that. But I think those are two that I'm most excited about in terms of real world

use cases. And like you mentioned, that's not even touching on countries where they don't truly have property rights. Imagine being a refugee trying to flee your country and you're trying to bring everything you own with you. I can put my Bitcoin into a 24 word phrase and memorize it in my brain and bring it with me over the border. No one can take that from you. And that's the type of thing that people who have been fleeing countries for who knows how

long would have loved to have access to, right? You literally can store your Bitcoin in a 24-word phrase and keep it in memory. You could write it on a piece of paper, of course, but that's a different type of property, right? And nobody can take that from you. Another thing, and I'll leave it at this, Bitcoin is the ultimate sound money. There's only ever will be 21 million and no one can do anything about it. The reason why so many of my friends, I'm 31. We were talking about this before we started recording. I'm about to move into a new house, but I'm very fortunate because many of my friends

the same age are having a hard time getting into the housing market because the price of a house in 2021 is much greater than the price of a house was maybe five years ago. In Toronto, the average detached home in the first quarter of 2021 was somewhere close to a million dollars. And for somebody who's a few years out of college, maybe working by himself, maybe there's two people, that's a large... Even to put 20% down on a million dollar home, you're going to be forced to stay in a one bedroom condo or rent, which is nothing wrong with that. But if that's not your goal, then there's a barrier that we need to discuss. And the reason why that barrier exists is because of the way that the monetary policy is set up. As the M2 expands, which is the total amount of money

and close to money instruments that are in circulation as it expands, a lot of fallout comes with that. We're talking about wage inflation, price inflation, and asset inflation. And as all of these things become more expensive, we need an asset that is going to keep up with that inflation. And Bitcoin is the answer. Yeah, yeah. And just a little comment about the house. The house price is going way, way up. I think more importantly, too, is wages has not kept up with that. And that's why your example, it's so hard for people now

to get into the housing market. But on that point, it was really great to have you come over and join me for an interview on the Canadian Investor Podcast. Courtney, if people want to find you, where exactly can they find you on Twitter or do you have other projects going on?

And the best place to reach me is on Twitter. I'm also on Instagram. My handle is The C. Stephen, S-T-E-P-H-E-N. But yeah, man, I'm there. I'm usually talking about football. I'm talking about finance. I'm talking about Bitcoin. But yeah, stop by, say what's up.

Love to chat. Appreciate you having me on. Simone is awesome. Okay, perfect. Thanks a lot for coming on and everybody, we'll talk to you next week and thanks for listening to this podcast. The Canadian investor is not to be taken as investment advice. Braden or Simon may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions.