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Understanding how Blockchains, Cryptocurrencies, and NFTs Work, with Courtney Stephen

Presented by Wealthsimple

Welcome to The MapleMoney Show, the podcast that helps Canadians improve their finances to create lasting financial freedom. I’m your host, Tom Drake, the founder of MapleMoney, where I’ve been writing about all things related to personal finance since 2009.

There’s no doubt you’ve seen the headlines surrounding cryptocurrencies like Bitcoin, Ethereum, and most recently, Dogecoin. And now, NFTs are all the rage. But do you really understand how any of it works? My guest this week is here to lay it all out for us.

Courtney Stephen is a pro athlete with the Hamilton Tiger-Cats of the Canadian Football League, but after listening to my interview with him, you will find out that he is much more than an athlete. Though he has played over 100 games as a pro in the CFL, Courtney is best known for his work in the community & his passion for teaching all things related to financial education.

I love this discussion with Courtney because he methodically walks us through how cryptocurrencies and blockchains work. He touches on a little bit of everything, such as what makes bitcoin so secure, how blockchains work, why companies like Coinbase are so important for the crypto movement, and what a non-fungible token really is.

If you’re intrigued by cryptocurrencies and NFTs, but feel like you need to know a lot more about them before getting involved, you don’t want to miss this episode. My only regret is that we didn’t have more time to talk about football.

Our sponsor, Wealthsimple, believes that financial independence should be available to anyone. That’s why they have no account minimums, meaning that you can get started investing for as little as one dollar. Don’t delay any longer; invest online by visiting Wealthsimple today.

Episode Summary

  • Blockchain technology explained
  • Why hacking the blockchain is so difficult
  • Bitcoin has a limited supply
  • How to hold bitcoin – non-custodial vs. custodial
  • Each blockchain has its own properties
  • Why the move towards centralization is so important for crypto
  • Non-fungible tokens (NFTs) explained
  • NFTs are not a get-rich-quick scheme
  • Where bitcoin fits in your portfolio

Read transcript

No doubt you’ve seen the headlines surrounding cryptocurrencies like Bitcoin, Ethereum and most recently Dogecoin. And now NFTs are all the rage. But do you really understand how any of it works? My guest this week is here to lay it all out for us. Courtney Stephen is a pro athlete with the Hamilton Tiger-Cats of the CFL. But after listening to my interview with him, you’ll find out he is much more than just an athlete. Though he’s played over 100 games as a pro in the CFL, Courtney is best known for his work in the community and his passion for teaching all things related to financial education. 


Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. Our sponsor, Wealthsimple, believes financial independence should be available to anyone. That’s why they have no account minimums, meaning you can get started investing for as little as one dollar. Don’t delay any longer. Invest online by visiting today. Now, let’s chat with Courtney… 


Tom: Hi Courtney. Welcome to the Maple Money Show. 


Courtney: My pleasure. How are you doing? 


Tom: I’m doing great. It’s great to have you on. I’m a big CFL fan but, unfortunately, it doesn’t fit the topic of the podcast. I wanted to have you on to talk about your other passion, which is all this Blockchain, Bitcoin and NFTs. I don’t know if it’s starting to show my age where I just don’t understand this new stuff, but it seems to be going over my head a little bit. So just to hop right into it, when it comes to something like Blockchain, for years I’ve heard, “We’re the Uber of this… We’re the Airbnb of that…” but now I hear, “We’re a bank but we’re on the Blockchain,” or “We’re a credit card and we’re going to use Blockchain.” I don’t know what that means. Can you start right there with just the basics? What is this whole Blockchain thing about? 


Courtney: There’s been a lot of popularity lately around cryptocurrency. And when you think about Blockchain technology, that is the main function that people are seeing exist on the Blockchain right now. Crypto is separate from the Blockchain, but with the Blockchain we can think of it as like the third iteration of the Internet. The first version of the Internet was simple. It gave us the ability to transfer information quickly. People used to go door-to-door selling encyclopedias because you had to have that 26 volume Britannica in the house if you wanted to debate whether a green frog was poisonous or not. You really had to have a thick, 1,600-page book. But the Internet gave us the ability to search and send information very quickly all around the world because of the Internet protocol they designed. Then when we had broadband Internet and mobile phones come about, that brought around Internet 2.0, which gave us the ability to distribute influence so it wasn’t necessary for you to go to TSN for your sports highlights. You didn’t have to go to ABC, CBC or NBC or the main broadcasting network to provide you with your news. You could go online and get news from your favourite YouTuber, maybe somebody on social media, live video, or podcasting. A lot of these distribution channels were amplified by the second wave of the Internet. Now, we can look at Blockchain as a third version of the Internet because it allows us to decentralize the transfer of value. One thing that has stopped people from really separating themselves from the traditional financial rails where you send money from Canada to the U.K., you’re going to be using the traditional banking payment rules like the Swift Network. Or if you use a Visa card when you’re on vacation or at the mall, there’s going to be a certain payment rail that money transfers on. But the Blockchain, and how we’re seeing it used with cryptocurrency, is a way of using a distributed network that has a ledger—somewhat like a bank, keeps a ledger of deposits and withdrawals. And the way they do that uses secure cryptography to make sure that nobody’s double-spending their money or creating any fraudulent transactions on the network. Blockchain is a distributed, redundant, consensus-driven, ad-only, cryptographically secured, open network. I can go through each of these words and break them down and you’ll see how that creates a powerful Internet 3.0. If you want me to, I can walk you through them step-by-step. 


Tom: Yes, if you could. It would help because we’ve done past episodes about Bitcoin and I get that side of it but I want to understand this part of it. What makes this so attractive for finance? If you can break it down somewhat, that would be great. It might help explain why this is supposedly the future of everything. 


Courtney: Right. Totally. We can talk about what money is and why Bitcoin is amazing for what it’s trying to do. But before that, let’s talk about the Blockchain. First of all, what it is, is a network of computers instead of being one supercomputer in the cloud or a central location. It is distributed. That’s the first thing we have to know about the Blockchain. You have things like Amazon Web Services or Azure. These are big data centers where if you’re running a blog or an online store, all the information inside of your customer registry including all the transactions is stored in a central location. The Blockchain takes the opposite approach and it actually distributes the information all across an entire network of thousands of different computers. There is no single point of failure in a Blockchain. There are actually many computers that have a redundant copy of the same information. It’s a distributed network and it’s a redundant network. So if you and I are both nodes (that’s what they call these computers) on the network, your computer is going to have the exact same ledger of transactions that my computer has, and it’s the same with every other computer. So when somebody tries to do a transaction on the network, the first thing they’re going to see is, for example, Tom is sending money to Courtney. He had $100 and he’s trying to send $50. Did you guys see that the last time he had a transaction, he had $100. So he actually has that $50 to send. It through the network and everybody is going to have to come to a consensus. So when we say it’s consensus-driven, they’re basically checking with each other. You have the record. I have the record. Everybody has the same record. So if you tried to make a transaction, we should all come to the same agreement on the amount of value that is changing from one person to the next. So far, that’s the first three words; it’s distributed, it’s redundant, it’s consensus-driven. And it is add-only. That means you can’t go back in the past and change anything. You can only add new information to this ledger. If there ever was an attempt for somebody to do something fraudulent, they would have changed that on one single computer. But in order for it to really make it into the network, it would have to be changed on every computer. To change that on every computer would take a massive amount of computing power. And people don’t have the funds, the capital, to literally get enough computing power to undo the entire network, which makes it more secure. You can only add new information that gets validated through that consensus mechanism that we talked about. So is distributed, redundant and consensus-driven, and it’s add only. Then it’s cryptographically secured. Without getting super technical, basically, cryptography is codes. You can have a book with 300 pages, different words, titles, pictures and they put it through an algorithm and it gets crunched down to a code that is a fixed length, say, 26 alphanumeric characters, capital, lowercase letters and numbers. You can take any amount of data and crunch it down to be this string of 26 to 30 characters. That’s what cryptography does. It takes all the data that’s in these transactions from all of the blocks in the Blockchain leading up to right now (and what’s new ) and stamps it out as this thing called a hash. On the latest block of the Blockchain, there’s a 26 to 30… I don’t remember specifically, but it’s a 26 character hash that represents all of the data that came beforehand. If you were to change one letter or one punctuation mark or one capitalization of any aspect of that data, the entire 26 letter string of characters would have to change. So that cryptography lets you know that if anybody is going to try and manipulate the network, there would be a way to check and say, “Okay, something has changed here. We need to go back and figure out where it changed.” So we’ve got the distributed part which is in a spread-out network. The redundant part is that every computer on a network has the same information. The consensus-driven aspect is where we all have to agree before something is added on. And it’s add only so we can’t go back in the past and change anything cryptographically secured. And the last part is that it’s an open network. While I can see your public address, I can’t see what your name is. So if I know that I’m sending money to you it will say it’s Tom at I’ll be able to see your address, but I won’t be able to know your personal identity, your age where you live, what you do. None of that kind of stuff. I’ll just be able to see your address. You can think of it like email where only you know your password but anybody can know your email address. And that’s how the Blockchain works. You can see the founder of a Ethereum. His name is Vitalik Buterin. There’s been news articles that say he is the first Ethereum billionaire. And the reason they can say that is because they can know what his wallet address is. They might not be able to access it because they don’t have the private key, but they can see the public address. And that’s a part of the Blockchain that’s really cool. There is a lot of talk that the Blockchain is used for all this illicit activity and things like that. But it’s actually a lot harder to track illicit activity with cash than it is on the Blockchain because every single transaction is validated and then permanently stamped onto the Blockchain. Just to sum it up, it’s distributed redundant, it’s consensus-driven, add only, cryptographically secured, open network. And that’s what allows us to actually send value back and forth and have confidence that there’s no fraud being committed. Nobody is double-spending their money. And overall, you can trust the transactions that are happening. And that’s what’s making Bitcoin really such a hot topic. It’s because it’s leveraging this technology to become a form of an asset. I wouldn’t call it a currency, but it’s a new form of an asset that is supported by the Blockchain.  


Tom: That’s where I’ve had problems with Bitcoin. I’ve been asked for probably four years now, should I be investing in Bitcoin? I’ve always said, no. It’s not an investment (in my mind at least) but it doesn’t mean you can’t make money from it. I can make money with Lotto too or craps tables. It’s great as an option to make money. I just have a hard time putting it under the definition of an investment. A few of the things you mentioned help me put it together because this idea of adding to the blocks, that alone makes me understand literally the words Blockchain. It’s a chain that you’re adding to. And the other thing that I was interested in was the security side of it… the fact that all these computers have to match up. It’s not just one computer that you’d have to hack. You’d have to hack the majority of them, right? You’d literally have to hack at least 50 percent to make sure that you’re the majority opinion on those numbers? 


Courtney: Exactly. And that’s something they call a 51 percent attack. And so without getting super technical, the way they designed it is, in order for you to add a block onto the Blockchain, you have to earn the privilege. On the Bitcoin network, you earn that privilege by doing something that’s called a proof of work. The proof of work basically uses a bunch of very, very complex math equations to run through millions of different scenarios to try and find this one number. And once it matches up with this number, the first computer on the whole network that finds that number wins the opportunity to mint the next block on the Blockchain. But the thing is, you want to mint the next block because you get a reward. And that reward for that miner, the computer that digs through all the data and finds that string, that special number, that needle in the haystack… you want to find that because when you mint the next block, you get rewarded with a certain amount of Bitcoin. And that’s how a new Bitcoin is put out into the economy. It’s from those block rewards. In order for you to mint a block that has incorrect data in it, before that block gets crushed down and turned into a hash like we talked about, the majority of computers on the network still have to come to an agreement that, yes, this transaction can fit into the next block. They agree, that based on the ledger they have in their records, this seems like a valid transaction. At least 51 percent of the computers in the network have to come to that conclusion. And then whoever won that proof of work challenge, they get to compress all the transactions within a 10 or 15 minute time window and make them the next block that goes on the Blockchain. And the miner, like I said, gets the block reward, which is a certain amount of Bitcoin that now goes into circulation. 


Tom: Going back to mining, I remember Bitcoin being something like $200 at the time. Off the top of my head, it was in 2013 or something like that. I’d hear people talking about it. They’d pop into a computer store to get some parts and these guys are buying multiple video cards and talking about mining and how they’re going to get a Bitcoin for $200. It seemed like a lot of hassle but I wish I had started that because I could have earned my way into it. Is that still something that exists? Can a regular person do mining or is this all huge companies at this point? 


Courtney: Well, there’s definitely a lot of huge companies who are involved in mining because, as you can imagine, it’s like a video game, right? If you have a slow computer that doesn’t have a really strong computing power then you’re not going to be able to go as fast and crunch as many numbers as quickly. It’s going to have a lower probability of you actually finding that needle in the haystack. People want to get more computing power to give themselves a greater chance of winning the Block reward. You’ll see companies like Marathon, which is one of the biggest publicly traded Bitcoin mining operations. I think they trade under the symbol MARA if anybody wants to look it up and just see what I’m talking about. They are a publicly listed company and all they do is mine Bitcoin. So the amount of computing power you have directly correlates to the chances you have of getting the next Block reward. But there’s something built into the network so that there can’t be just one person taking over everything. I think it’s every week or at least at relatively frequent time intervals, the difficulty of finding that secret number increases. The difficulty is adjusted based on the amount of computing power in the network as a whole. If, for example, the power went out in all of the Eastern hemisphere and half of the computers go down, after about a few days the Bitcoin protocol would adjust the difficulty to make it easier to mine the next Blocks because there would be less computing power online. Conversely, let’s say some super billionaire says he wants to try and take over and get all the computers in the Western hemisphere. He wants to buy them all so that he can take over and do a 51 percent attack. As soon as you buy all that computing power, a couple of days goes and it’s going to recalibrate and it’s going to get much harder to find that key. It keeps a programmatic release of the new Bitcoins going into circulation. There will only ever be 21 million Bitcoins in circulation. Right now there’s about 18 million and change. It’s debated, but between three and six million Bitcoins have been lost forever. Whether people have forgotten their password, they’ve lost the physical device that it was on or the device was damaged and they didn’t have a way of recovering it. Because it’s a programmatic release and we can see where the finish line is, people understand that this is not necessarily a fixed supply. It’s almost like a decreasing supply if you look at it over time because people aren’t trading Bitcoin or spending Bitcoin the way that it was intended to be when it first started out. If you read the Bitcoin White Paper, which is basically a document that outlines the problem Bitcoin was created to solve and the way that it intends to solve it in the abstract, it says that it was created to be electronic cash. But, because of its scarcity and the demand that’s growing, because of its weight to hold its value over time… I know it’s volatile, but we can address that in a second. Because of all of these things that make it a very desirable asset to hold, people aren’t transacting with it on a daily basis. So, over time the value of Bitcoin is continuing to increase. It’s not actually a currency as much as it’s an asset if that makes sense. 


Tom: Yeah, for sure. I like what you pointed out about the idea that it’s actually a decreasing number because as people get locked out of their accounts because they don’t know their password, it’s going to be a case where it just gets less and less. That is another one of the concerns I keep having, you get this Bitcoin wallet, and if you forget your password, too bad, there’s no other way around it. Is that right? 


Courtney: Well, yeah. There are two different ways that you can hold Bitcoin. You can have it in a custodial way, which was the way it was intended to be because it’s a permission list network. There’s multiple different Blockchains. There’s more than one Blockchain. Each cryptocurrency has its own Blockchain. The popular ones are Bitcoin. It has the Bitcoin Blockchain. Ethereum is a Blockchain and the currency on Ethereum is called Ether. Another popular one is called Cardano. That’s a Blockchain and the currency is called ADA. So each Blockchain has its own properties and it has its own varying levels of different properties like security, decentralization, scalability, speed that all vary on different metrics. But Bitcoin, specifically, was designed to be decentralized and non-custodial. But because it is very popular and people see it as a store of value as well as alternative use cases. Say, for example, you bought Bitcoin at $200, like you said, and now it’s worth $70,000 Canadian. Instead of selling that Bitcoin and creating a taxable event, you might want to borrow against it. That’s an alternative use case. So you’re using it as collateral for a loan. Because of all these different ways people are using Bitcoin now, you might want to use it in a custodial way. You might want to go through a centralized organization that does the KYC (know your customer) verification to set up an account the same way you would set up a brokerage account when you’re buying stocks, mutual funds or ETFs. They’re going to go through all the “know your customer” anti-money laundering things so you can have the digital assets tied to your taxes, basically. That’s the main thing. But once you’re inside of a centralized custodial account, then you don’t have to worry about losing a password because you’re going to have tech support or customer support you can call. So, when you see the IPO of a big company like Coinbase, that’s a big moment in crypto history because it’s a move towards centralization. Some of the maximalists (which is what they call themselves), the people who were really in Bitcoin from 2009 when it started, back in the days before it was a popular thing might not be as excited about Bitcoin going mainstream. But in order for it to really reach its full potential, there has to be some kind of rules of regulation around transacting with Bitcoin; how you use it, knowing who has it and who’s moving it around. And that also gives the potential an opportunity to grow into itself. You don’t have to necessarily worry about losing your keys if you go through the right method of buying and holding your Bitcoin, which would be a centralized way. Now, if you are a little bit more tech-savvy or maybe you’re more of a libertarian and want to hold your own assets, be your own bank, then there’s plenty of ways you can do that outside the jurisdiction of any central entity. But there is plenty of people in both parties. 


Tom: It’s still very interesting to me how this all comes together. Blockchain seems to be a fad lately. But one of the things that’s come up that I wanted to ask you about is what is this whole NFT? Can you explain what that is? This has added a whole new level of confusion for me. I was just getting Bitcoin and now you can have rights to an album or a piece of art. It seems even more new and odd to me. 


Courtney: Yeah, it’s really cool, honestly. I’m glad you asked. The NFT, the technical term is a non-fungible token. The short form is NFT. Two of the richest Bitcoin billionaires are Tyler and Cameron Winklevoss who are famous for their fallout with Mark Zuckerberg and the Facebook thing. Their Bitcoin, I’d say, are leaders in the space. They own a big brokerage. I don’t even know if it’s a brokerage, but it’s a custodial called Gemini. They also bought the biggest NFT marketplace and it’s called Nifty Gateway. So you could call it NFT. You could call it a nifty. But what they really are is something that is separate from Bitcoin because Bitcoin is a Blockchain that has certain parameters that make it very secure, reliable with a limited supply. Makes it a great store of value in all of those things. But its counterpart of the big two. Ethereum was started by a guy named Vitalik Buterin, who was actually working for Bitcoin magazine. He knew all about Bitcoin but it didn’t allow him to manipulate the code on the protocol to do some of the creative things that he wanted to do with it as a computer programmer so he created Ethereum to allow computer programmers the ability to write decentralized applications on top of this protocol. It wasn’t just sending money back and forth. You could actually write a piece of code and then put that out onto the Blockchain. And that piece of code would have run autonomously without any person’s oversight. This little piece of code is called a smart contract. I’ll get back to the NFT but you need to know what a smart contract is in order to understand what NFT is. The smart contract is what makes Ethereum so powerful. It is actually the most highly used Blockchain. And because these smart contracts give you the capability to do things such as you create a decentralized exchange where you can now go in and swap your tokens or coins without having to put your name in an order book without saying, “I’m waiting on a bid or ask of this amount,” you can create a decentralized organization. You can create an asset that is pegged to the US dollar. Or you can create these non-fungible tokens using a smart contract and they can have all different kinds of properties on their own. A non-fungible token is non-fungible because you can’t replace one with the other. If you think about the common example is a piece of gold. If you bring a gold bar to the bank and put it in a safe deposit box and you come back six months later and you get a gold bar that has a different serial number on it, you’re not even going to bat an eye because at the end of the day, a gold bar is a gold bar. They are fungible, just like a dollar bill or a loonie or a toonie. They’re fungible. No one cares. But if you put a Michael Jordan rookie card (which is one of one) inside that bank vault and you come back and now all of a sudden, instead of a Michael Jordan rookie card, it’s a Michael Jordan card from his second year, you’re going to say, “Hey! Who took my Michael Jordan?” With non-fungible tokens, each individual token is on the Blockchain has a specific asset where its ownership, its scarcity, its serial number in the collection, its history of ownership— it’s not even just who owns it now, but who owned it in the past and how much they paid for it at each transaction— all of this stuff is publicly verifiable, which allows us to create digital assets in a way that we wouldn’t have been able to before. It’s like this picture you see over my shoulder. It’s not a famous picture but you would be able to go on Google and find a copy of this. You wouldn’t be able to trace the ownership of this photo back to your digital address though. There’s no way of verifying that you own this. But me, I would have the ownership rights to this based on a non-fungible token that would match up with this real-life actual physical piece of art. So non-fungible tokens can be used in many ways. You can program them for when they’re sold to give a royalty back to the original creator. You can use a non-fungible token as something that gives you access to a live event like a concert ticket. Every seat in the stadium has a different serial number so that would be a real-world application of NFTs where you get an NFT and it’s a digital collectible that you don’t have to worry about the corners getting bent or the ink wearing off after five years like a ticket would. It would actually give you access to a specific seat in a stadium. NFT is really just a digital asset where it’s scarcity is defined and its ownership is 100 percent traceable and verifiable. 


Tom: You mentioned the idea of the stadium. I’ve heard about people using NFTs as bonuses on book launches and music where it would be like a season pass at a stadium, but truly just for one event. Its value could potentially rise up until that event. But unfortunately, past that date, if no one ever used it, it would be on the devalued list at that point. Do you see a future with things where the value of an NFT would continue to increase? Well, maybe not the great example I gave with a certain date to it, but maybe something else? 


Courtney: With any market, I think there’s going to be people who are trying to arbitrage. If you think a cell phone is undervalued then you’re going to go somewhere these cell phones are selling for cheap and you’re going to buy them and go to a market where there’s a high demand and try flipping them to make a profit. Right now it’s such a hot topic with everything that’s going on with cryptocurrency, Bitcoin hitting all-time highs. It’s just in the news media. People who have not done any research at all and trying to make a quick buck are jumping in. And when there is that influx of demand and a limited supply, we know that the forces of economics are going to push the prices up. Of course, there’s going to be some people who make a lot of money and that’s going to make a lot of headlines. But on the other end of that, there’s going to be a lot of people were left holding the bag on assets that really have no value. What we have to understand is where is value derived and is it something that comes from the popularity of the artist? If we’re talking about strictly art, most of the artists who end up having their paintings in these very expensive galleries, there’s a story that goes with the character or the painting itself. It’s not just anybody that can crank out a cool picture and make it worth a million dollars. So much of the art that we see now that’s selling for millions and millions of dollars, I feel is going to lose value. But some of these projects will continue to gain value. I don’t think we can throw a blanket statement on it and say one way or the other. But we just have to understand that there’s a lot of people right now who are trying to take advantage of the situation. Where we can look for opportunities to really find a useful application of the NFT technology are things like royalties in music, access to events, and different applications. For example, maybe you and I want to buy a house. I don’t know if this exists right now at scale, but maybe there’s a way for us to fractionalize ownership of the house using NFTs. Maybe you’ll own 80 percent of the house and I own 20 percent of it. That’s something that we can validate and I could transfer ownership almost like shares of a publicly-traded company, but we would be using Blockchain technology and NFTs to do the same thing. Depending on how creative things get, I think that’s the limit. I just warn anybody out there not to try and get rich quickly, do some homework. Study them. Make sure any projects you’re looking into or researching, vet the people who are putting them out there and think about their track record of the past. If there is somebody who did something else that was of value, then that’s a good sign. But if they’re just coming onto the scene now and the first thing that they ever did was create an NFT, chances are, five years from now that project is not going to be worth the electricity you used to look at it on your computer. There’s definitely a little bubble action going on but there is going to be some real winners in the long term. 


Tom: And it seems like something that would be so much harder to value because each of these NFTs are quite unique compared to Bitcoin. You can say, “Okay, everybody’s paying this amount for Bitcoin,” because there is a common price to it. But with these NFTs, you’d have to look at it individually. Your sports card example is perfect. I get that. I’ve had hockey cards, comic books and everything so it’s a very individual thing. You’ve got to see what that “one thing” is worth. 


Courtney: And it’s very subjective, too. I wouldn’t necessarily pay a lot of money for a baseball card of a player I don’t know but I would pay more money for something like an autographed poster of LeBron James because I’ve watched his whole career from when he got drafted through however many championships he’s won. Whereas, if there’s a player in a sport or maybe there’s a singer in a genre of music that I don’t listen to, maybe there’s a small group of 100,000 people who are big fans who would pay a lot for that. So I can say it’s worth nothing but if those people say that it’s worth something, then guess what? It’s worth something, right? Value is actually something that is discretionary. Like there’s an argument to say that gold is actually worthless. The only reason why we use gold in the financial system is because of all of the minerals we find in the earth, gold is the one that one you cannot fake. There’s different metals that you can blend together to have 10, 18 or 24 karat gold. You can vary the alchemy of the gold but you can’t just make gold the same way you can make iron. That’s one thing. And too, it takes a lot of effort to refine gold so there’s a level of scarcity with it. And just over time, we realize that it’s hard to transfer gold around. That’s why they used to use gold for the big stuff. Other than that, they might have used silver or some other form of currency. Eventually, they realized gold was not portable or divisible so they just needed to keep the gold somewhere safe and use something like an IOU where they’d say, “I’ve got 100 ounces of gold in this vault. I’m going to give you this piece of paper. That’s the ownership rights that you hold on to. It now is yours.” And that’s basically how we got to using a central bank and fiat currency. Well, it didn’t become Fiat until eventually, we started giving out more IOUs than the actual gold that was in the vault. Once those became decoupled, we are allowing the people who now are controlling that central vault to say, “All right, we can give out as many IOUs as we want because it doesn’t matter how much gold we have.” And that’s the beginning of a story of why so many people are passionate about Bitcoin. It’s because we went through this crisis in 2020 and saw that a third of all money ever in existence was printed in 2020 or some incredible number like that. People are just sitting there wondering how such a blatant misuse of the monetary policy that is absolutely destroying the savings that everybody has worked so hard to accumulate? And you’re just going to go out there and all of a sudden raise up to how the price of houses by10 percent? Raise up the price of meat by seven, eight percent? Raise up the price of vegetables by five percent? Raise up the price of gas by “X” percent? And my money is in the bank gathering half of a percent at best. That’s why you’re seeing some of these big corporations taking a lot of that cash they had in their reserve and allocating a small portion of it to Bitcoin. Even if you only had a five percent or three percent allocation to Bitcoin, the 200 percent compound annual growth rate over the last 10 years that Bitcoin has put on display, obviously these trees don’t grow to the sky, but at five percent in their allocation, they’re looking at the risk-reward profile and seeing that it’s well worth the risk and volatility for me to put this in there and stand a chance against the inflation that is stripping away for them billions of dollars of value that they’ve worked hard to accumulate. So their shareholders, once they’re on board and they understand the technology, don’t have a problem with them putting a small allocation towards an asset that is a store of value and not necessarily a gamble or a short-term trade. It depends on what you’re getting into it for and how much you’re really trying to put your net worth towards in that asset class. Obviously, you shouldn’t be. The position sizing in your portfolio is directly correlated to the volatility of the asset. The more volatile asset, the smaller position sizes you should have. And that’s just the fundamentals of investing. I know this is kind of off-base, but when you look at the use case for Bitcoin or anything cryptocurrency, you really have to ask yourself what this is doing for my portfolio? And if it’s just speculation, then let it be speculation. Look that speculation in the face and call it what it is. But if it’s a store of value, if it’s an alternative asset class that gives you a diversified risk profile— if it’s something to offset or be uncorrelated from the other assets that you have moving around, then it can be that. And that’s why many people are gravitating towards Bitcoin instead of all these 4,500 other crypto assets. 


Tom: I’m glad you explained it that way, that you don’t just get Bitcoin and quadruple your money in whatever amount of time. It’s this idea of storing an asset. And the currency side of it, I realize that’s a big one for people that are into Bitcoin, too. Like you said, the governments can play with their currency to the cost of inflation and everything else and it just devalues your money. If you’re sitting on cash in your mattress or its sitting in your bank account earning nothing, you’re really a victim to inflation when all these big changes happen. I much prefer looking at Bitcoin that way where it’s just sort of an inflation hedge. In the press, it seems like this is being sold as a bit of a get-rich-quick scheme. 


Courtney: Yeah, but that’s because those headlines are going to sell. But if we look at it realistically, I’m not an economist, but you have to do a little bit of the homework if you’re really going to invest in anything. I don’t know if it’s Peter Lynch who said it, but “know what you own and why you own it.” If we look at gold, it is a commodity. It is something that’s value is determined on its supply and demand characteristics. And the volatility of gold is something that allows it to be decoupled from equities and fixed income assets. So people tend to put gold or other precious metals into the portfolio so that they can smooth out the overall volatility of their portfolio as a whole. Gold has a total overall market cap of somewhere between $10 and $11 trillion. We’re looking at the whole entire Bitcoin market cap, somewhere like 1.2 or 2. It’s like not even close. It’s like one-fifth or one-tenth of what gold is so, if you’re looking at Bitcoin to be something that gets you super-rich, it’s still going to take you a long time. And even if you put all of your money in there, it’s going to be a bumpy ride. You’re better off looking at Bitcoin through the lens of gold and seeing how gold affects a portfolio. Not to say that the exact same thing, but they serve a similar purpose. It’s a way for you to add a different asset with a different risk profile into your portfolio. And it’s not for everybody. Just like growth stocks aren’t for everybody. Just like small-cap stocks aren’t for everybody and maybe fixed income assets aren’t for everybody. It’s just a different asset that is out there for people to do their research on, to understand how does it fit into the economy and how does it fit into their profile. How does it fit with their risk profile? I get to see my portfolio and risk profile. But if it doesn’t fit for you, then that’s okay. I think a lot of the cryptocurrency conversation is very heated in that if you don’t invest in Bitcoin, then you’re an idiot. Many people are forced to one side or the other because of news headlines when in all actuality, I think we should all be taking a step back, give ourselves a chance to learn, hear out all sides of the story and make informed decisions because, ultimately, we have goals of financial independence, retiring and having a life that is to be lived on our terms. If there’s an opportunity to include something in that plan that’s going to get you there, maybe safer, maybe sooner, maybe with less bumps along the way then it’s worth hearing it out in full. And that’s kind of where I came from in my approach. It’s like everybody’s talking about it. Maybe there’s something I don’t understand so let me see what the hype is all about. 


Tom: This has been great. Thanks for walking us through this because I already feel much better about it. Just the idea of what it is and how it works. Just to hear the Blockchain side of it instead of it being a number kind of thing. It’s nice to know what’s behind all this. Can you let people know where they can find you online? 


Courtney: The best place to connect would be on my website, Or you can find me on YouTube at TheMoneyGameFinEd. I usually try to post there. Other than that, you can find me on social media but the website is the best place to go.  


Tom: Awesome. Thanks for joining me on the show. 


Courtney: Thank you. 


Thank you, Courtney, for explaining so thoroughly how Blockchains, cryptocurrency and NFTs work and for sharing some tips on how this should be considered as part of an investment portfolio. You can find the show notes for this episode at Do you know you can watch videos from our past episodes on YouTube channel? If you’re interested, you can check them out at Make sure to hit the subscribe button while you’re there. Thanks, as always, for listening and I look forward to seeing you back here next week.

When you see the IPO of a big company like Coinbase, that’s a big moment in crypto history because it’s a move towards order for (crypto) to reach its full potential there has to be some kind of rules and regulation around transacting with bitcoin, how you use it, knowing who has it, and who’s moving it around. - Courtney Stephen Click to Tweet