Former Google Africa chief and Bitcoin ‘maximalist’ Stafford Masie provides some practical insights into how crypto currency fans can protect their investments in the wake of the FTX implosion – and explains the connection between the Bahama-based fraudsters and SA’s leading exchanges Luno and ValR. Masie also tells us why this is a watershed moment for Bitcoin, an event which will differentiate it from worthless ‘shitcoin’ copies that proliferate the crypto currency space. He spoke to Alec Hogg of BizNews.
Stafford Masie on the phrase ‘not your keys, not your bitcoin’ and what it means
This means if your Bitcoin lives on the exchange, if it exists only on Valr. I mean, you have to log on to Valr, log on to Luno, you have to log on to whatever exchange Coinbase, wherever you may be. The fact that the custodial aspect of your crypto is sitting on an exchange means you don’t have any control. So what you need to do, and this is what I’m advising everyone to do is, number one, test your exchange. So there’s two options. Number one, test the exchange. Look at the transparency, ask the questions. Farzam Ehsani at Valr has done a very good job on Twitter. Go take a look at his Twitter account explaining exactly how this works, and then take a look at what Luno is doing. They’ve done the exact same thing and go and investigate. And if you still have a level of discomfort or you want to try this – and I suggest everyone does this – is take your keys, take your Bitcoin off the exchange. And what I mean by that is you can get a hot wallet or you can get a cold wallet. A hot wallet is when you take your keys off and it sits in a software based Internet connection wallet. So there’s lots of wallets around. You can go do a Bitcoin wallet, go look at them around and you can send it to that wallet. But if that wallet sits in your possession and that’s where your Bitcoin lives, all the risks, it’s like having all your money versus in the bank. It’s in your pocket and you’re walking around with it. If you get mugged, your money’s gone. If you lose it, your money’s gone. So both sides of the coin have risk because your money’s on an exchange. there’s these inherent risks that we see now.
On the differences between a hot and a cold wallet
A hot wallet is connected to the internet and it’s subject to hacks. You can get hacked and things can disappear. And then you get a cold wallet and the cold wallet is as close to security as secure as you can get. Nothing’s 100% secure, but a cold wallet is something like a Ledger. There’s a company called Ledger so people can Google it. There’s a ledger device that looks like a USB stick. You get it in the mail and you open up a ledger account and you unlock this device and then you send your Bitcoin to this device and your bitcoin lives on this little USB stick in your hand. And I won’t go through the machinations of the security. It’s very simple. Step by step guide, go to their website, Ledger’s website and then put your keys on that. Now what I would do is challenge an exchange, not to draw your money out, send your money to an air gapped cold wallet. And that is a physical device not connected to the Internet that contains Bitcoin. And that’s incredible.
On the likelihood that people who bought Bitcoin through FTX could lose lose all their money
I looked at the creditor sheet and 80% of the debtors book is owned by, I think, I don’t know, like 50 people, and those people are owed over 4.5 billion, is my understanding right now. And I think what they have cash in hand inside of FTX, I think, is just over a billion. So it looks just on what we know right now that it’s highly unlikely that you’re going to get your money back. The folks that have lost on FTX, I don’t know how long this is going to take because remember, the FTX thing – and this is a weird thing – the FTX thing is not illegal. It’s fraudulent, but it’s not illegal because it is a business. The exchange is listed in the Bahamas. And in the Bahamas, there’s no regulatory framework to protect you.
If you’ve put your money on Luno and Valr during the FTX fallout
I think you’re safe. I like our exchanges. I like the people that are running them because I know some of the human beings. I know the management teams. I know the technologists in them. These are stand-up businesses trying to do the right thing and they are opening themselves up on a voluntary basis to be regulated. They are registering with the proper licensing bodies. They are doing all the things that are not even asked of them. And I think that’s a good thing. The challenge with exchanges, even though they may try to do everything, is they don’t take a look at their shareholding. Don’t take a look at their guarantee of funds that they claim, their proof of reserves. Take a look at the liquidity pooling. Take a look at how they’re enabling liquidity on the exchanges and who’s backing that liquidity. And I think that’s where you’ve got to scratch. And that’s where we’re seeing in this industry at the very edge, the leverage that’s happening. Leverage upon leverage upon leverage. And it’s usually to do with these liquidity partnerships. So, yeah, as much as they want to be good human beings and they want to do the right thing, I think are they exposed from a contagion perspective, from ripples outside of our borders that we can only answer fully once we understand who their liquidity backers are, who’s providing liquidity for every single one of the tokens that they have for the Bitcoin that they have, the ether, the Solana, all these crypto assets. Who’s backing that and where’s the liquidity coming from? I think if we understand that a little bit better, that will give us an understanding of where they sit. I mean, I’ve disclosed some aspects of the little I know. I don’t know if that’s of concern and I don’t know if there’ll be an FTX fallout all the way down here with these folks. Yeah, I don’t think so. But let’s see.
Given the impact on prices of cryptocurrencies, all crypto, including Bitcoin as a result of the FTX fallout, is this a buying opportunity?
My personal opinion? Yes. Can it go lower? Yes. But I don’t look at Bitcoin from a speculative perspective, as something that you own for no less than five years. If you’re going to own Bitcoin, own it for no less than five years, if you’re going to put money into Bitcoin, look at it every month and trade it and put it in the sector. I’m not a trader. I’m a pathetic trader. I tried it for six months of my life and I’m really bad at it and I’ve learnt that betting on the market overall in the long term, the general trajectory over years is always up because I’m just not good enough. So with Bitcoin I think it’s not dissimilar. I would not put my money into anything else. I think if your money is in Etherium and all of these other things like Dogecoin. I think just if you did an S1 filing on Ethereum tomorrow because it’s seen as a security Etherium is not a commodity. There’s a bunch of developers that’s a founder. They’ve taken the code and they’ve done things to the code as a unit executor that is an organisation. And if they did an S-1 finding and you took a look at how much this Vitalik Buterin and his cronies own, what’s the leverage that they have among themselves? How are they doing things there? I don’t know if Etherium today would pass an S-1 filing. That’s how you’ve got to look at it, whereas Bitcoin has no issues. As we sit here, my blocks are being mined every 10 minutes and it continues. No matter what the price is, it’s immutable. It doesn’t care for you and I. It’s mathematical. It’ll always be there. It’s immutable. Cannot be switched off. It has an issuance that is completely sovereign and it’s got a leak of just over one point something percent a year. It’s got a finite supply and it’s freedom. Ask the lady in Afghanistan today that can’t get paid because she can’t work because of the Taliban. But she’s getting monetary value through Bitcoin. Ask the people in Turkey sitting with the lira today. Ask the people in Argentina. Ask the people in Venezuela. Ask the people in Canada when the truck protest happened and they were deplatformed. Ask Kanye West – no matter what your belief is on antisemitism, he got deplatformed. There was a day he woke up and he couldn’t access his multiple billions because an institute could deplatform him. That’s a very dangerous thing. Bitcoin solves the problem. People ask what’s the use of Bitcoin? Bitcoin is meant for freedom. Bitcoin’s utility is the movement of value instantaneously across the planet without any intermediary, and it’s more secure than we’ve ever seen before.