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The Risks and Rewards of Cryptocurrencies with Natalie Brunell

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“Privacy is different from secrecy. Privacy is really about protecting yourself and your information and everyone has a right to privacy. Secrecy is when you’re trying to hide something.” - Natalie Brunell Click To Tweet

There are significant risks to be aware of when using crypto and over the past two years, many tokens have imploded. As you choose to invest digitally, do your research and understand the commodity that you use. Today’s guest is Natalie Burnell. Natalie is the host of the #1 woman-led show in the bitcoin space, Coin Stories. She is a bitcoin educator, a frequent media commentator, and an award-winning journalist. 

“Be careful with newer companies. Many new companies will work out as this space grows, but I would always trust a company that has been around a lot longer.” - Natalie Brunell Click To Tweet

Show Notes:

“Look for companies that are Bitcoin only. They have chosen to focus on the one thing that has regulatory clarity. Everything else has so much uncertainty.” - Natalie Brunell Click To Tweet

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Transcript:

Natalie, thank you so much for coming on the Easy Prey Podcast today.

Thank you so much for having me. Looking forward to this.

Can you give myself and the audience a little bit of background about who you are and what you do?

I host the Coin Stories Podcast, which focuses on the intersection of Bitcoin and macro and global economics. I really just want to help the general audience understand this very new technology. I remember being very new to Bitcoin in about 2017 when I first heard about it. I was just like most people. I was like, “OK, well, this is digital, so clearly it can be hacked. I don't want to put too much of my money in it.”

I really didn't understand not only how Bitcoin and crypto worked, but I didn't really understand money, because we don't have good financial literacy in America, unfortunately. I studied really hard, I was a good student, and I did all the AP classes. I never learned things like what money printing is, why we went off the gold standard, what the impact of that is, and how fractional reserve banking works. I had to really go on a knowledge journey when I learned about Bitcoin.

Several years later, I'm really focused on it. My background is actually media. I was a journalist for more than 10 years. I was reporting on all of the things that I feel like now are reaching a really deep inflection point in our country: the growing cost of living, people not feeling like they can catch up, young people feeling they'll never be able to afford a house or assets, and just our society pulling apart and becoming more polarized, frustrated, and people dealing with a lot of spiritual and mental health issues. All of it really is connected to money and this lack of hope and dignity.

When I found Bitcoin, it was also a real transformation for me because I went from not having a lot of hope in the future to having a lot of hope. That's why I dedicate all my time, and I'm using my media skills to now focus on Bitcoin education.

That's awesome. While our conversation is going to be a little bit different than most of your conversations about Bitcoin and cryptocurrency—you’re not necessarily leading the charge on anti-scams and whatnot—but let's talk about the risks, the rewards, a little bit of those ebbs and flows, some of those scams, and some of the things that people are going to watch out for. What are some of the pros and cons or the risks and rewards of Bitcoin?

I guess we can start with the risks of the overall crypto industry, because it did take me a while to understand that Bitcoin is so unique, special, and very different from crypto, which is why we have a saying in this space: It's Bitcoin, not crypto.

Many of your audience members might have heard about the crypto implosions, everything from Celsius to FTX to BlockFi basically imploding over the last two years and running away with customers' money, which is really disappointing to see. I do believe in free markets, and they regulate themselves, but I don't want anyone losing their money because they trusted the wrong place, and because nefarious bad actors basically promised one thing and did something else behind the scenes.

What I like to tell people is that this is not very different from the early internet days. When it comes to the Internet, anyone can spin up a website. Anyone can go on there. Today, it's easier than ever. You don't even have to be a coder. You can go on one of these easy platforms and just spin up a website.

It's very similar in the crypto world. Anyone can create an issue, one of these tokens. That's why we see 20,000-plus of them on the market. Bitcoin is very unique and different because it's a commodity, which means it has no issuer. There's no team behind it that can influence the protocol, the technology network, and what's going to happen to it in several years, or how many tokens are going to be issued. Is it going to be more? Is it going to be less?

Bitcoin is very unique and different because it's a commodity, which means it has no issuer. There's no team behind it that can influence the protocol, the technology network, and what's going to happen to it in several years, or… Click To Tweet

It's immune to change, which is why it's so beautiful. Whereas most of the other cryptocurrencies are securities. There's an issuer. There's a team or a group of people behind it that can influence the protocol. Many times, they have issued themselves a lot of coins in an initial coin offering, and then they sold the rest to the public. It's very much like issuing a stock, which is why the SEC has so many issues with it.

Unfortunately, a lot of these companies also operated offshore, so very opaque. You don't know what's going on. I really urge people to be careful with crypto, because a lot of the tokens are scams.

I really urge people to be careful with crypto, because a lot of the tokens are scams. -Natalie Brunell Click To Tweet

Actually, I know that this might sound surprising if your audience is not familiar with Bitcoin: I actually see it as one of the most conservative long-term investments that you can make. I know it's volatile in the short term, you see these price swings, and it looks like a heart monitor. When you zoom out, the price performance has beaten out almost every other investment you could have made. I think it's one of the safest places, especially if you know how to take self-custody and how to manage your keys properly. I think it's literally one of the best places to store your money for the long run.

For me, one of the things I've always looked at is the heart rate, histories of crypto, and seeing these massive gains, massive losses, and going, “Do I really want to jump into that? That just seems absolutely crazy.” I feel like you can't go a week without hearing some, “Oh, I'm going to use a crypto to a rug pull that has been popularized by this group of people, then we were going to take all of our money and go home and go play somewhere else.” That, to me, is the scary stuff behind crypto.

We were talking a little bit about exchanges, offshore, regulated, and maybe unregulated. Can we dive into a little bit about that as to what are the pros and cons of each of those?

Generally, it's a red flag for me if a company is based offshore and offering all these different tokens or issuing a native token to the website itself. Obviously, maybe people were familiar with FTX. He issued his own token called FTT, which was basically a Sam Bankman-Fried coin. He issued as much as he wanted, and he gave a portion to his insiders at first. A lot of times, the price gets pumped and then dumped. A lot of people can lose money on that thing.

Generally, it's a red flag for me if a company is based offshore and offering all these different tokens or issuing a native token to the website itself. -Natalie Brunell Click To Tweet

I try to avoid anything that is offshore and dealing with all these other tokens. The biggest advice that I could give people is look for companies that are Bitcoin-only, because they have chosen to focus on the one thing that has regulatory clarity. Everything else, there's still so much uncertainty.

I try to avoid anything that is offshore and dealing with all these other tokens. The biggest advice that I could give people is look for companies that are Bitcoin-only, because they have chosen to focus on the one thing that has… Click To Tweet

What's going to happen with the SEC? Is Congress going to need to come in and pass a new law about digital assets? The truth is, we don't know what's going to happen with a lot of these. I would argue that many of them are not going to exist, especially if there's some new framework in place that makes it maybe the path more clear of how to register a digital security, which most of these are.

I would urge people to look for Bitcoin-only companies. I've chosen to bank only with Bitcoin-only companies because I think that they take far less risk. Also, look for companies that encourage you to self-custody, because that means they're not afraid of funds leaving their website.

They shouldn't be if their funds are backed one-to-one. If you're purchasing Bitcoin, that means they should have it on the back end. They shouldn't be doing anything like leveraging it, lending it out, which is what a lot of these crypto companies were doing that are now no longer in existence. Those are some of the things to look for.

A lot of these companies are regulated in the sense that some of them are already public companies that the SEC has given a stamp of approval, but that doesn't mean that the tokens that are on these platforms are going to be OK, because the SEC has filed many lawsuits. Just be careful. I would recommend Bitcoin-only companies.

Would one of the other warnings be any exchange that is making any promise of returns on your investment?

Yeah. In fact, when I was investigating the FTX saga, one of the things I came across was this deck that they presented to investors, because they got billions of dollars from venture capital firms who, by the way, did no due diligence. They signed on to give all this money without getting a seat on the board or anything, and they promised in that deck, basically, you're going to have 100% returns.

I forgot the figure, but it was just like there should have been more questioning, especially by folks who deal with money and investing all the time. It's just surprising that they just handed this amount of money to someone who is basically what feels like a college coed. You have to be very, very careful with something like that. You don't want them taking the customer funds and potentially co-mingling them, lending them out, and then promising you 5%, 10%, sometimes more, on the backend.

For me personally, it's always a red flag when someone is guaranteeing a return more than I can get on a money market account. Not to say that that's 7% versus 5%, “Oh, my gosh.” But anytime that someone's offering an order of magnitude more than what a bank does, it's like, “How are they able to do that when other institutions aren’t?” There's risk involved, obviously.

Exactly. There is no free lunch.

There is no free lunch. I like that. Do you think there's any more risk to using exchanges that have just been spun up versus exchanges that haven't been around for, say, 10 years?

Absolutely. I think you have to look at track record. There are companies that exist that are already building legacies in this space and that you can tell will be around for a long time. There are others that are new. I think that they will face the challenges of being a new company in the space and the competition involved. Some will survive and some will fail.

That's the beauty of capitalism, but you do want to be careful with newer companies. That's not to say that any of them are definitely not going to work out, because I'm sure there will be many, many new companies as the space grows and adoption grows, but I would always trust a company that's been around a little bit longer.

To me, that's one of the hallmarks that when someone comes to me and says, “Hey, I got approached by this person and put my money in their app or their exchange,” and I go look at the domain name and, “Oh, the domain name was registered two weeks ago.” I'm like, “Oh, that's not good.”

If you look at the world of startups, thousands of businesses start every single year. The majority of them don't work out and they have to close shop rather quickly for most of them. I think longevity is something that actually should stand out.

This is different from the retail banking world where maybe there's a new bank that opens up, but it's connected to the Federal Reserve System and it's FDIC insured. If something were to go wrong in that first year, you have that insurance. You don't have FDIC insurance in this space. If you send someone money and you don't know exactly where it's going, be careful.

When I was a reporter, before I left that job and became a full-time podcaster and content creator, I actually interviewed someone in the Los Angeles area who used a website that I had never heard of for crypto. The company was in the United States, but they were offering different tokens.

Somehow someone from Asia accessed their account, even though they claimed to have two-factor authentication. Someone from, I believe it was Malaysia, somehow entered that person's account, drained it of all of the cryptocurrency at the time—it was their entire life savings, they had about $30,000 in there; they were saving up for their children's graduation. It was a horrible story, and the company couldn't do anything about it.

I reached out, I talked to their CEO, and basically, they said there was some security breach. They don't know what happened, but the funds were moved and they're gone. They can't trace them.

That's awful. Those stories always just get to me when people lose life savings over no fault of their own. It's horrible.

You were talking earlier about self-custody and why there's an advantage. If I've got my Bitcoin on my device and it's not on the exchange, that there's a level of security behind that. What is self-custody and how does that work?

You actually made me think of something. Many of the times when you purchase Bitcoin on a platform, that company might be a custodian or they might trust another custodian. Essentially, they're holding Bitcoin. You want to make sure that they've gone through some accreditation that they have certifications and audits in place.

A good custodian will have completed something called a SOC 1, which is essentially an audit that gives them a certification that, hey, people know that they're actually custodying this pretty safely. There's, I believe, a SOC 2 level as well.

The safest, if you're up for just learning a few extra steps, is taking self-custody. The truly unique thing about Bitcoin is, for the first time, we have a digital bear instrument. You can actually take Bitcoin into your own custody, and no one can seize it from you. No one can confiscate it from you.

Not that this is frequent, but we saw about a year-and-a-half ago in Canada, the government was upset that people were donating to a trucker protest, and they froze people's accounts, their banking accounts, and tried to go after the Bitcoin and crypto that they owned.

If you have your money on a platform, what if that company decides to say yes to the government's request to basically freeze all of your money? That's the dystopian fear that a lot of people are starting to have. If you have bitcoin in self-custody, they can't do that because it's essentially the equivalent of having gold bullion in a vault or cash under your mattress. It’s yours wherever you store it.

You want to be very careful about this process because if you are to lose your private keys, there might be no going back and reversing that. Basically, you can self-custody through a single sig address, which would be a one private key situation. I don't recommend that because that means it's a single point of failure. What I recommend is collaborative self-custody, which is more of a multi-signature scheme; we call it multisig.

That means you're basically creating a two-out-of-three or three-out-of-five key setup. I have a key, maybe someone I trust has a key, the company has a key, but you need two to come together to unlock your bitcoin. It's not that the company with the one key can run away with your money. It just diffuses and distributes your risk, creates multiple surfaces so that you don't have just one attack vector. That's what I recommend.

Self-custody, I know it can seem intimidating, especially if you feel like you're not a technical person. That's how I was. It really isn't that scary or intimidating. It just takes a few steps to learn. Self-custody, like cold-storage wallets, they're not harder to use than a hard drive. If you can use a hard drive and put files from one place to another, you can use a bitcoin cold-storage device.

That's nice. I like that for those that are technically inclined. What about those that are not technically inclined and they want to get involved in Bitcoin, but they hear us talking about exchanges and are like, “Oh, my gosh, that freaks me out. And no, I don't know what a USB drive is. I can't even remember the password of my email. The last thing I want to do is have all my money tied up on a password.” If I forget it, are there other options that people can go to? I believe in January, the SEC approved some Bitcoin ETFs. Is that an alternative?

Yes. First of all, if someone does not want to take self-custody and no matter how many of us are trying to convince them, they say, “Absolutely not,” I would just say that you have to be willing to accept the fact that there is going to be some counter-party risk that you're taking on.

Going back to what I mentioned about the custodians, you can decide to trust a custodian, let's say in the Bitcoin company where you purchased your Bitcoin, but make sure that that custodian, again, has been audited, has a track record so that you feel safe and comfortable putting your funds there.

The other option, as you mentioned, are these new ETFs. They essentially wrap Bitcoin in this security wrapper. It's very similar to owning a share of a stock or a bond. A lot of people are familiar with the S&P Index ETF. SPY is the really popular one, or the gold ETFs.

That's absolutely an option, but just know that that is not owning Bitcoin. That means that the company, the issuer, owns the Bitcoin, and they're giving you a share certificate that says that you have a certain amount of ownership in the wrapped version of Bitcoin.

There are fees involved. They're not very high. The issuers are actually competing right now. Some of them even lowering their fees because they're all trying to race to get the top spot for liquidity and flows. It's not the same as owning Bitcoin in the same way that a gold ETF is not the same as owning physical gold, so you just have to be willing to take on that risk.

Someone had a very funny comment online. I'm going to try to remember exactly what it is, but honestly it's very similar. This person wrote that owning an ETF is similar to having a girlfriend, but you don't see her in person. She's in BlackRock or whichever company's apartment. They're essentially getting paid by you to watch her, and they're sending you a photo of her every time. I thought that was funny.

It sounds a little bit like foreign brides.

I just thought it was a really funny analogy because essentially, yes, they have the Bitcoin, they're watching the Bitcoin, and they're giving you a little receipt saying that you own a portion of this. But it's not taking self-custody; it's not the same.

One other thing I was thinking of is we were talking a little bit, and I hear people often talk about Bitcoin and more wider cryptocurrency as it's a financial privacy in that you can transact without anyone knowing who you are, what you're transacting with. Blockchain is a record, so there are some privacy issues there. Should people be looking at Bitcoin as a privacy move, or is it not a privacy move?

This is a really fascinating topic. It has many layers and nuances. I would say that Bitcoin offers more privacy than almost any other monetary technology. It's not perfect. It's not completely anonymous. It is pseudonymous. If someone does know a wallet address is associated with a certain individual, then they can track a lot of movements of money, which is one of the reasons why we in the Bitcoin space get frustrated that people say that, “Oh, it's only used for illicit activity.”

The truth is, I believe last year, $900 million were used for illicit activity in the dollar fiat world, the retail banking world, whereas $900,000 were used for nefarious illicit activities in Bitcoin. So very, very big difference. One of the reasons is it is easier to track. If you know what you're looking for, there are probably going to be better and better forensic analysts and investigators for blockchain as we go forward.

I am also passionate about the privacy aspect because you don't want all these corporations and companies to basically monitor all of what you're spending money on and then try to sell you ads. I just think that there hasn't been anything truly private within the financial world since cash. Bitcoin helps us get a step closer to that. But as soon as everyone starts monitoring everything, then you lose that, which is why Bitcoiners are working on tools, especially in secondary layers to try to create more financial privacy, because they don't want everything to be monitored and surveilled.

Right now, one of the problems in our current system and why Bitcoin is so great is to send any meaningful amount of money today, especially if you're sending it internationally, you have to go through an intermediary. You have to go through a bank, which is ultimately a corporation. It's tied to the government. They see exactly where that money is going, what you're spending it on, how you use it.

Everything is monitored, surveilled, and tracked. It takes days actually to settle on the back end. You might swipe your credit card at the coffee shop, but that doesn't mean that Starbucks or wherever you're going gets that money immediately. It actually takes days, sometimes even weeks to settle. There are a lot of frictions.

All the corresponding banks, that system is ultimately very fragile. Most of the dollars that are in existence don't actually exist. They're not physical. They're mostly just credit debt. I think it'll be interesting to watch how this evolves, because I do think that there's going to be a lot of pushback from governments who want to clamp down and not have financial privacy. I think we need to counter that.

I think there's going to be a large movement to potentially limit self-custody or ban it. I think we need to push back against that. This is a very evolving space. I think the more that people know, the more that they'll be empowered to educate their politicians or themselves, be out there with political advocacy work, because we want to make sure that when someone is passing a law, they understand this space and they're thoughtful about it, so you don't remove people's freedoms.

One of the things we had been talking about is if the exchange is incorporated and a company is in the US, do they have to apply the same banking laws in terms of Know Your Customer?

I believe most of the exchanges that operate here in the US have to be KYC. Like you mentioned, it's know your customers. Very similar to the process of opening up a regular bank account, they take certain information from you. Some people are totally fine with that. They're like, “This is not dissimilar from opening up a regular bank account, or how the process works of owning shares in a company, or buying a house.” There are a lot of disclosures, a lot of information's out there.

Other people in the space hate that. They want that to change. They don't want it to be Know Your Customer. They want it to be as private as possible. I will say that most people are compliant. They're not trying to commit crimes. It's unfortunate that so many times we see lawmakers want to remove people's freedoms and privacy for this tiny percentage of what bad actors have done. I think that's awful, and it's just an excuse to gain more control and clamp down on the rights of people. I'm against that.

KYC is something that a lot of people have gotten used to within the retail banking world, and most of the companies in this space are KYC, which means that they do know how much Bitcoin that you're purchasing.

This is going to get interesting, because let's say that they do ban self-custody, or they're going to tax Bitcoin at some crazy amount. Technically, again, let's say subpoenas or requests for information from these companies who need to be compliant and regulated could potentially know, “OK, John Smith purchased five Bitcoins on this platform. We don't know where it is now, but he bought five Bitcoins. We're just going to assume he has five Bitcoins, and we're going to send him a tax bill.” That's something that's not impossible.

I think that if they were to attack self-custody, also, there might be a few hoops to jump through in order to get the Bitcoin back onto an exchange. Again, if these exchanges are receiving Bitcoin from somewhere they don't know where it's from, they are contacted by agencies like the IRS. I have an example of that.

I know someone who mined a lot of Bitcoin very, very early on. They mined it. Mining Bitcoin is non-KYC. They wanted to sell some of it because they had a lot. They wanted to see some of that profit invested in a house, or I don't know what they were buying. But they moved it on to an exchange.

Immediately, that set off a flag. I believe the IRS contacted the company, or maybe it was just during the yearly check. They said, “Where did these funds come from?” The customer, my friend, was contacted by the exchange and he had to answer. “Where did these funds come from?” He said, “I was a miner really early. I mined it, and that's how I got it.”

I think at this point, they're just taking you for your word, but it's going to be very interesting to see how this evolves. People should expect that there are going to be government actors and people who are in positions of power who want to know everything that's happening in this space.

I can see that being very challenging if your friend was put in a position where, “I need you to prove that you mined these Bitcoins. Show us the purchases for the hardware that you use to do it.” It's like, “I didn't know I would need that five or 10 years ago. I didn't know about that. Do you want my electric bills? What do you want to see as proof?” That can get really messy.

I don't know if you saw this, but there's also a move by lawmakers today to ban coin mixers. For privacy reasons, again, imagine if we lived in a world where literally, you could just track how much everyone was worth. That's a very scary world. People could have significant security risks.

Again, if you know the addresses, or if there's information that's compromised in some way, you could potentially be walking around and someone knows exactly how much you have. There's been pushback against something called coin mixers or CoinJoins, which is essentially a tool that some people use to send their bitcoin in, and then a different address basically comes out so that it gets mixed. If you were to put coins in a jar, mix it up and then hand them back out because it's fungible.

I'm curious to see what will happen in that realm, too, because I don't think that most people who are putting their bitcoin into coin mixers are trying to commit a crime or doing it to be illicit. They're doing it to be more private, and there's already pushback with that.

I think it's the knee-jerk reaction of if someone's wanting privacy, they must be wanting to do something wrong. We know that that's not true, but that is often the knee-jerk reaction. People want privacy because they want to do something bad, which is not the case.

Exactly. I've said before actually at some of the talks I've given that privacy is different from secrecy. Privacy is really just about protecting yourself and your information. Everyone has a right to privacy. Secrecy is you're trying to hide something. There may be legitimate reasons why you'd want to hide something, but there's a difference. I think that government sometimes looks at the second and says everyone wants to hide from us. It's not that; we just want privacy.

Privacy is really just about protecting yourself and your information. Everyone has a right to privacy. Secrecy is you're trying to hide something. There may be legitimate reasons why you'd want to hide something, but there's a… Click To Tweet

I want to transition over to talking about the scam side of things and ask you some questions about that. Obviously, you've got a social media presence where you're talking specifically about Bitcoin but broadly about cryptocurrency. I've seen so many scams where either people are impersonating content creators or getting in the comment section and promoting stuff. What should people be watching out for in terms of how to identify posters, scams in the comments, and things like that?

Be very, very, very careful. For those of us who are public-facing and have a larger following, there are a ton of impersonators. Frankly, I've been really frustrated with some of these social media platforms because I report them, and sometimes they don't take these profiles down.

I have an impersonator right now on TikTok that has amassed more than 180,000 followers. I've reported them multiple times to TikTok; other people have as well. The account still continues to DM people and try to take money.

First of all, none of us are going to ask you for your money. We might be there with recommendations for certain platforms or promo codes you could use, but we're never going to say, “Hey, send me money.” That's a huge red flag.

I urge people to look for verification badges. On Twitter, I have my blue check mark. On Instagram, I have a blue check. Everything that is legitimate has a blue check, that means that the person is verified as who they say they are. Whereas all the impersonators obviously can't get that because they can't send in my driver's license to prove that it's me.

Just be careful when someone says that they're going to send you money. There are a ton of bots that are spinning up that are pretending to be Michael Saylor, who is one of the biggest personalities in this space and basically saying something like, “If you send me one bitcoin, I'll send you two.” He has a team that is working on taking those down. The second that they do, two more pop up. It's a game of whack-a-mole, so just be really careful.

If someone's DMing you asking you, “Can I help with your investment strategy?” No. Just report, report, report, especially if they don't have that blue check mark. Some of the platforms, I just choose not to really even use or engage with because I can't get a verification.

For example, I'm not active on Telegram. I've used it a couple of times here and there with people who only have that as a platform, but there are a hundred Natalie Brunells on Telegram. One thing that's sad is they have messaged people and extracted money from them.

I remember getting a Twitter message saying, “Hey, where are you? We're excited to hear you come talk.” I was in New York City at the time for a Fox Business shoot. I go, “I have no idea what you're talking about.” They said, “Oh, my God. We thought we were talking to you on Telegram. We booked you to come speak here.” They booked me as a speaker, and it was some fake person.

Again, if you send it to a crypto address, you're not getting that money back. You can't call Chase Bank and say, “Reverse that; that was an accident.” Your money's gone. Just be very, very careful. I'm glad you're shining a spotlight on this because these platforms need to do something. There are too many of these bots, fake accounts, and impersonators.

You talked about once you send your Bitcoin to someone, there's no oopsie button; there's no undo. I've seen a lot in the comments about people promising recovery of cryptocurrency. Any thoughts on that?

I've interacted with some companies that are trying to help recover people's funds, and they do that forensic analysis of blockchains to try to trace where the money went, sometimes successfully, which is amazing. But oftentimes, it's just too difficult because they've shot off to an address that no one knows who it's affiliated with overseas. The chances of getting your money back if you sent it to someone, and they basically just closed that address and sent it somewhere else, and they're basically not responding to you. It’s very difficult.

Again, it's not a situation where if someone takes your credit card, you call Chase Bank and you say that there was a fraud situation, they close that account, and reverse the charge. This is instant settlement. This is your money literally moving on a public blockchain that is global, that is permissionless, that is borderless. The second that you send it to that address, it will settle in the next max 10 minutes. If you didn't send it to the right place, you might never get it back.

It's like coming up to someone on the street and saying, “Are you Bob?” And they say, “Yeah.” You hand them a big stack of change and they walk away. You later find out that it wasn't really Bob. You're out of luck. Unless someone's got cameras and a whole bunch of other stuff, they're not going to be able to find out who that Bob was. Anyone claiming, “Oh, I can get your money back from Bob,” probably not real.

Yeah. I have a friend right now who actually clicked on some malware, and he had on his desktop a folder that contained some of his seed phrases and private keys. Because he clicked on that link, the hacker was able to access and see everything on his computer. He took that information and they took the money. He contacted one of these companies, and they've been trying to get the funds back, but they can't track them.

That's awful. I remember an interview I did with someone. His position was, “I have my computer that I do all my day-to-day stuff on, and then I have another computer that I do my finances on. The only thing I do on that computer is finances. It's powered off, unless I'm actively doing something. There's no email on it.” There's absolutely nothing else on that machine because he just wanted that extra space between finances and regular life.

You're lucky if you can do that, certainly. If you can afford a second computer, absolutely. Why not? Have one that is completely offline, don't ever connect it to Wi-Fi. In fact, I've done tutorials. There are ways of doing something called an AirGap cold storage wallet. I have a tutorial if anyone wants to go to my YouTube page, Coin Stories or Natalie Brunell, and I show you how to essentially move funds on or off your cold storage device, never connecting that device to the Internet. That device is never hooked up to anything connected to Wi-Fi or any type of internet.

There are ways to protect yourself. Obviously, it takes a little bit of extra technical know-how and steps. If you are able to have devices like phones or computers that aren't attached to the Internet, great. I think a lot of people obviously can't afford to do that. You just really want to be careful. This isn't losing a password and then requesting from the company to re-restore your password. This is your life savings. We want to take those extra next steps, which is one of the reasons why I highly recommend collaborative self-custody, because it puts you in a position where if something happens with one key, no problem. Again, you could set up a two-out-of-three key scenario or three-out-of-five. There are so many options with that, so you can disperse and diffuse any risk.

I personally think that's the best way because it has no counter-party risk. That's the beauty of Bitcoin. In its purest form, when you take self-custody, the bearer instrument has no counter-party risk. You don't have to trust anybody. It's trustless.

If you decide that you want to trust a company, you just want to make sure to do your homework, do your research, and make sure you actually trust them, because we have had the FTX's and the Sam Bankman-Frieds in this world, and he's not the last one.

The general financial advice to people is to diversify. Maybe you have some of this, some of that, some real estate, stocks, bonds, cash, all sorts of stuff. Do you recommend people diversify even within Bitcoin in the sense of have some here, have some there, to split up your risk? Or in your mind, does that just create more risk and more headache?

It definitely creates more hurdles. The other thing I think people should be aware of, and we can get into a very long conversation about this, I've done some shows about this, is someday, Bitcoin, the blockchain was built beautifully in optimizing for security and decentralization. There's a certain size to the blocks to keep it on a certain time schedule and issue in schedule, but that means that it can only fit so many transactions.

You may have heard in this space of this idea Bitcoin's slow. Bitcoin is slow, even though it's not, for a reason, because it's secure. It's meant so that the only way you can have decentralization is if everyone can run a node. Literally, anyone in the world can power up a very basic computer and download the whole ledger, which is the blockchain.

That's what Bitcoin was designed for so that you don't have to be some massive corporation with a ton of capital or a massive warehouse full of computers in order to run the ledger, because each block has so many transactions packed into it. Literally, anyone can do it.

That means that Bitcoin is not just scarce in the amount of units that it has, 21 million, Bitcoin is also actually scarce in that the block space is finite. As more people adopt Bitcoin, there's going to be greater and greater competition to fit in one of those blocks, each of your transactions, which means that fees will go up.

It's one of the reasons why people are building on layers and something like the lightning network to facilitate faster payments. It ultimately does mean that Bitcoin on the base layer, maybe 10 years from now, it could potentially be too expensive for the average person to transact.

What you don't want to create is a situation where you have all these UTXOs, unspent transactions. All these UTXOs, you've got one here, one here, one there. All of a sudden, to move just a single one of them costs you a couple of hundred dollars. The more that you can consolidate UTXOs, the better.

If you have everything in one address that's split into multiple keys, I think that's the safest and the most efficient route, because if something happens, then you only need one base chain transaction. You don't need to do a hundred of them. Some people don't realize that they have hundreds of UTXOs that they've created. That's going to be very expensive potentially for them.

I know we're getting in the weeds. I don't want people to feel overly intimidated, but just think of Bitcoin as being built in layers. The base chain is the bedrock. It is the granite under Central Park. You want it to be as strong, fortified, and eternal as possible, which it is. Then you can build on top of it in these different layers that optimize for privacy, optimize for speed, which is the beauty of Bitcoin. But no, I don't recommend creating a bunch of different addresses and keys.

Good advice. If people want to learn more about Bitcoin, what kind of training do you have available? What kind of information do you have available?

I have a podcast that I update two times a week. One is a short news update, which is about 10 minutes long, and another is more of a long-form interview where we get into all sorts of topics related to Bitcoin and the economy. It's called Coin Stories. It's on YouTube and every audio platform. We get more than a million listens per month, which is really exciting.

I'm also very active on X, @natbrunell, but look for the blue check mark. I'm going to be putting out some really great educational material very soon focusing on that 101 intro to Bitcoin content, because again, I really want to focus on getting more of the general audience feeling comfortable investing. At this point, you should be off zero. Have at least 1%–2% of your wealth, your savings in Bitcoin. Otherwise, you're going to miss out on the biggest asymmetric opportunity of your life.

Bitcoin is an incredible savings technology. That's what it's meant for. It's not to be looked at every single day. You don't check the price of your house every day, do you? You don't check it on Zillow daily. No, it's your long-term savings tool. I'm really excited to help people better understand it.

Bitcoin is an incredible savings technology. That's what it's meant for. It's not to be looked at every single day. You don't check the price of your house every day, do you? You don't check it on Zillow daily. No, it's your… Click To Tweet

That's awesome. We'll make sure to link to all your verified platforms so people can get to the right place. Natalie, thank you so much for coming on the podcast today.

Thank you so much for having me.

 

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