She’s interested in the rabbit holes that random content can lead her down, just like how she and her brother used to explore as “internet children” of the 1990s. (She did add that she gives no credence to the non-PC aspects and conspiracy theories that live on 4chan).
Demirors is currently the chief strategy officer of Coinshares, a digital asset investment firm that has over $750 million in assets. Before joining the company, she helped found the Digital Currency Group and is also a founding member of the World Economic Forum Blockchain Council.
With this resume of interests, you may or may not be surprised the Demirors spent the first part of our talk speaking about the flaws in the current financial system, then waxed lyrical about the best sci-fi books to read in quarantine, and ended with a highly practical and slightly explicit diatribe about the importance of doing your own research.
CMC AGENT: What was your initial reason for getting into cryptocurrency?
DEMIRORS: I feel like this is the proverbial rabbit hole story that everyone has, like a rite of passage in the crypto space.
I got exposed to Bitcoin in 2012. My brother and I both are children of the internet. We came of age in the 90s, spent a lot of time in online chat rooms, online forums, playing video games. He had talked to me about Bitcoin before, I’d seen it but didn’t pay attention to it, and he started sending me more stuff about Bitcoin. I went on the internet, I went to Reddit and all of these online forums.
My initial interaction with the Bitcoin community — and at that point you have to remember, 2012, really small, still really, really oriented around these principles of self sovereignty. There was a strong overlap with the anarchy community, kinda like a free society community.
That’s when I started getting interested in it, I started reading more and more about it and did what everyone does, whether they got into it 10 years ago or just getting into it now.
The more I learned about it, the more I realized I had never really been a political person, and I didn’t think of myself as a political person. But I started to question and just think about it, what is the point of all of these things that we’re doing? I had come of age during the financial crisis. I worked on a trading desk all through university and then went into the financial sector after, so I had seen it firsthand.
I was the person, I was the rat on the wheel chasing the piece of cheese.
The thing that really struck me when I left that corporate career, I went to grad school, it was just a great quote. “Even if you win the rat race, you’re still a rat.” And I was like, “I don’t want to be a rat!” These ideals, this path I’m on, that’s not how I want to define my life. So OK, let’s do this Bitcoin thing. Let’s go. Here we are six years later. It’s weird. It’s great.
CMC AGENT: I’ve been following some of your tweets about the first US coronavirus-related bailout. Has the sheer amount of money involved in these bailouts changed or solidified your views about the traditional financial system and how it works as compared to cryptocurrencies?
DEMIRORS: As I look at the last two weeks, there’s two things that really stand out to me.
The first is if you look at all the language, we don’t live in a democratic society. We don’t live in a capitalist system.
We live in an inverted socialist system where taxpayers are bailing out hedge fund managers, bank CEOs and other executives. This isn’t capitalism, it is an absolute perversion of what Marx wanted.
It’s been happening for almost two decades now. It’s complete and utter bullshit.
What I think has been really interesting is everything that’s coming out of the Fed. Even [Fed chairman] Jerome Powell, he’s on
The Today Show. When in human history has the chairman of the Fed gone on a morning talk show? Clearly, these people are very concerned. It’s funny because the host of The Today Show, this woman asked him, “Some people on the Internet say that the Fed has a magic wand and just can print infinite amounts of money, conjure money out of thin air. Is that true?” And he says no, does this little raisin face.
But eight minutes into the interview, what he basically says is that we will never run out of ammunition. The federal government will backstop debt and we will pour capital into the system as much as is needed, where he basically confirms infinite quantitative easing.
What I’m hearing from our federal government is infinite, unlimited, unbridled. You look at Bitcoin…Finite. Capped. There is such a fundamental difference between the way that the US government treats its debt, just print, print, print, and the way that Bitcoin works.
CMC AGENT: HOW DOES BITCOIN FIT IN OUR ECONOMIC PROBLEMS?
DEMIRORS: Bitcoin is not the answer to the economic crisis we’re in. Let’s be very clear. Bitcoin does not fix this. For most people, they cannot afford to buy groceries, pay their rent, let alone buy Bitcoin. Buy Bitcoin is not an answer to the economic challenges we’re facing. But the properties of Bitcoin are being highlighted here the same way that the properties of gold have been highlighted for a long time in times of economic crisis.
Bitcoin is so unique in that it has its properties of being scarce, of having value due to its scarcity and only the demand for that scarcity.
The second thing that’s really interesting is just watching this breakdown of the system, where parts of the system that are not yet digitized, that are still living in the 1980s and operating on old systems, are fundamentally incapable of dealing with this crisis in a modern, interconnected world.
A great example here is when they
announced the passage of this bill in Congress. It’s going to provide relief to taxpayers, and there’s going to be a certain amount of money that’s given to each family as a result. Now, it’s going to take four months on average for checks, physical paper checks to reach people who need them.
And that, to me, is just an example of where the systems we rely on are fundamentally incapable.
This is a really big lag we’ve had, where information infrastructure has been revolutionized, and you and I are having this video conference, no problem. We have this amazing connectivity and compute capacity, but the ability to move money instantly doesn’t exist yet. The ability to transfer money digitally doesn’t exist yet.
CMC AGENT: You have a whole section of your website dedicated to a science fiction novel reading list. Do you have any recommendations specifically to be read in coronavirus quarantine?
DEMIRORS: I was actually thinking about this the other day.
There are two books that really stand out to me. One gets cited so often, but I think it’s still super relevant, is
Snow Crash by Neal Stephenson.
It’s about a world of the future where people congregate in virtual reality in this thing called the Metaverse. What’s really interesting about it, basically, is that there’s one person who owns all of the computing and connectivity. They own and control the underlying networks that people are utilizing to communicate and hang out in the Metaverse.
It just raises interesting questions as we move to this digital future. What are the implications for human freedom? What are the implications for our self sovereignty? There are a lot of interesting questions there. I recently reread it. I read it once a year or so along with
Dune. That’s another one I like to read at least once a year. You just find little takeaways each time.
Then the other one that’s less popular, but I think is a really phenomenal book, is by Charlie Stross. He wrote this book called
Accelerando: I highly recommend it, it’s a really weird book, Charlie’s a weird dude. I follow him on
Twitter. He’s hilarious.
He wrote this book that is basically about this crazy future where everything is a financial asset, including your reputation. There’s something like the equivalent of Twitter, where people have futures of themselves that are trading: every person’s reputation, or every person, has sort of a credibility score that’s tradable.
There’s three eras that the book covers. The first era where everything’s financialized, and everyone’s pricing their reputations. There’s a second era where we’ve now expanded into outer space. There are these lobsters that have AI — it gets very weird — but it’s basically an encapsulation of the paperclip issue.
CMC AGENT: What's the paperclip issue?
DEMIRORS: It’s this idea that we create an AI and we give it the mission of, “Hey, make as many paperclips as you can.” First, it’s going to start by making paper clips out of scrap metal, then will start making paper clips out of useful things. Eventually, what we’ll have is a world that’s filled with paper clips. This AI will travel to distant universes, take over distant galaxies and just keep making paper clips because that’s its mission and its purpose.
It’s this really interesting analogy, because a lot of it is about what happens as we become increasingly digital, increasingly interconnected. The asset that we deal in is information and data.
Information and data has mass. It has to live somewhere. It requires physicality, which is something people don’t appreciate.
Me sitting here in my house, my phones and my routers and my Wi-Fi, my computers — that is supported by a lot of physical infrastructure that makes that possible. Somewhere there’s electricity being consumed, silicon and there’s copper wiring, right. That never changes.
It’s just a really interesting novel about inherent capacity constraints, inherent limitations and why purpose is so important in how we design systems, particularly technology systems and particularly those that are no longer driven by human pursuit.
Sorry, I went on a little philosophical rant there. I believe the question is what is the point of all of this? It goes back to why I got into Bitcoin. If the point is money, fame and power, we might as well just give up now because those are hollow pursuits.
CMC AGENT: Have you run into a common myth in cryptocurrency that you could debunk for us?
DEMIRORS: Crypto is the Wild West. It’s unregulated. I’m like….first of all, no.
Having spent the last five years of my career in regulated businesses, regulated firms that are overseen by FINRA, the SEC, that pay taxes to the IRS, that deal with the Department of Labor, that deal with the Treasury and FinCEN, OFAC rules and the BSA— crypto is not the Wild West. Crypto is not unregulated.
There are parts of the industry and markets that are in jurisdictions that have less securities laws and less regulation. But this concept that people have that crypto is this crazy market where there are no rules, and people are just doing all sorts of crazy stuff…I find this so misleading because that’s the opposite of what’s happening.
Yes, inherently, inevitably there are bad players. Technology is a tool. I can’t dictate to someone how they use it. The beautiful thing about Bitcoin is it’s open and permissionless. I don’t have the ability to tell you what you can or can’t do with the open source code. I cannot censor who joins the network. That’s the whole point of an open, permissionless network.
Inevitably, there are gonna be people who use this technology to serve their end goal, and that end goal may not be something that our government finds palatable. And I won’t even go into the question of what’s legal and illegal, because I think that’s a whole other can of worms.
But I think a lot of what’s happening in the crypto space, and where the volume is and where people are aggregating, is primarily in more regulated, more structured markets, markets with rules.
I’ve been in this community professionally since 2015. We all talk to one another. We work really hard on trying to make the crypto ecosystem more resilient, more transparent, more secure, and to avoid the types of structural issues that we see in other markets, to avoid causing any end users and end holders of digital currencies pain.
There has been a lot of market reform that’s been led internally by participants in the industry.
When people say, “Oh, it’s a wild west, it’s unregulated,” I think that’s a huge disservice to all of the firms in this industry who’ve been working really, really hard to try to minimize the amount of pain that traders and market participants and industries experienced.
CMC AGENT: Do you have any “favorite” failures that set you up for better decision-making later on?
DEMORIRS: I don’t have a favorite one because I fail all the time.
What I go back to is…there’s this investor, Howard Marks, who has this great quote. He says, “There are two types of investors who lose money. People who know nothing and people who know everything.”
When I first got into Bitcoin, Eric Lombrozo, who was a Bitcoin Core dev, drew me this great chart. I think we were at a conference or something — the
block size wars are going on and things are really heated — and we’re sitting in a corner laughing.
He drew me a normal distribution chart where the x axis is time, right? Basically, where you start is you know nothing.
At the beginning of your Bitcoin journey, you know nothing. And then as you go along your Bitcoin journey, you get to this peak and you get a little bit arrogant. You’re like, “I know everything. I understand everything about Bitcoin, monetary philosophy, I know everything.” You can see it in people. They get really arrogant, maybe a little bit of hubris. Then as time goes on, you go back to your original state and you’re like, “Wow, I know nothing.”
What this to me really emphasizes is the need for humility, and the need to just always remind yourself that you are learning and nobody is an expert in everything.
Because I fail constantly and because I accept my failures and my flaws as a human, I am perfectly able and perfectly happy with failing all the time, learning and having people tell me I’m wrong. People are like, “Oh, you’re wrong.” I’m like, “Great. Tell me why. Help me be smarter.”
I think it’s reprehensible to know nothing and to be willfully ignorant, but I also think that it’s extremely arrogant to presume that you know everything, because we’re constantly learning. No one human possesses all of the knowledge in the universe and is capable of knowing everything. You have to constantly challenge yourself, and you also have to face the truth about yourself.
I try to live up to the values of the Bitcoin community, but there are times I’m an asshole, maybe I am part of the problem. It’s important to have those conversations with yourself, and to hold yourself to the same standard that you hold other people, because if you don’t, there’s no way that you’re ever going to improve or become more self-aware. Just maintaining that humility through constant failure is really important.
CMC AGENT: Do you have advice for people looking to get into cryptocurrency now?
DEMIRORS: Do your own research.
I think this goes back to the point around failure. A big reason we’re in the situation we’re in in our financial markets is because people don’t want to do the work.
Yes, the world is overwhelming, Yes, there’s a lot of information. Yes, some of it is scary. But fear is the path to growth. I think a lot of people avoid having to learn or understand things because they don’t want to.
People always ask me, “What coins should I buy? I want to make 10x my money. What coin should I buy?” And I say, “None, absolutely none.”
Please educate yourself, number one, and do your own research.
Number two, there is a lot of risk involved in cryptocurrency. There is technology risk in using the platforms, in holding these assets, custodying them yourself. There is the risk that you could lose your private key and forever lose access to your digital assets. There’s a market risk. These exchanges — again, some of them are regulated, some of them are more resilient — but a lot of the newer platforms or even some older platforms have had hacks that had issues with securities.
There’s platform risk, there’s counterparty risk, there’s market level risk, there’s asset level risk, there’s all the regulatory risk: there is a lot of risk in this space. This is a new space. It’s highly volatile, as we saw with the
price [of BTC] going from $8,500 to $4,500 in the span of twelve hours on one day [in March].
What I was told was, “Look, do your own research and don’t be an idiot. Don’t mortgage your house and put all your money into Ripple. Don’t do stupid s**t Just be practical.”
Treat this as any other risky asset in your portfolio, and if you want to put money in, don’t put in more than you can lose. Do not make financially reckless decisions because even if they work out well, you are going to deplete your emotional and mental energy just constantly worrying. Manage your own mental state.
Don’t go on f*****g Twitter and follow some crypto trader handle and try to do what that person is doing: it is not going to work for you because every person’s risk tolerance is very different.
When you do get comfortable with it, size it appropriately: if $100 feels like a lot of money to you, then start with $10, if $1,000 feels right to you, if you have $10,000 and that feels right to you, do that.
At CoinShares, we have exchange-traded products where you basically type in the ticker, you click and you buy Bitcoin exposure through our product. That’s a really easy, low touch, idiot-proof way to get exposure to Bitcoin. That’s the start of the journey. Then all the way at the other end is having, for example, a Casa account, using a key manager, having your own hardware wallet or having a non-custodial software wallet.
There’s this whole spectrum. You don’t have to start all the way at the cypherpunks end of the spectrum. It’s totally okay to start over here with just holding some Bitcoin via structured products in your brokerage account. Then slowly, as you get more comfortable, try out new and different ways of getting exposure. You don’t have to start over here at level ten thousand, start at level one and take the steps.
That’s my only advice. Maybe it’s not very helpful, but it’s very practical.
This interview has been edited and condensed.
