Start Here: Blockchain Investing Basics

Wall street sign.
Where Wall Street meets New Street.

Why do we invest?

We invest because we want financial freedom. Independence. We want to control our financial destiny.

In previous generations, you counted on your employers to take care of you: work for 30 or 40 years and you’d get a nice gold watch and a pension. Those days are over.

Today, we have to carefully build our own wealth, to protect our own future. The good news is, it’s something we can all do. Wealth-building is a skill, and skills can be learned.

Blockchain investing is a new type of wealth-building, where you are in control of your own money.

You can still work for companies, just don’t expect the companies to marry you. (The average job lasts just over four years.)

You can still keep money in banks, just don’t expect the banks to look out for you. (When was the last time your bank called just to say hello?)

You can still have hope in government, just don’t expect the government to look out for you. (They can’t even manage their own budget.)

Fortunately, blockchain investing makes it easier than ever to control your own money. In fact, that’s the whole point: it is financially empowering because you control your own money.

Stock market

There are two separate money systems, which we’ll call the “stock market” and the “block market.”

  • The stock market is the old-school legacy system of centralized banks, stocks, and cash – the system that most of us use today.
  • The block market is the better, blockchain-based world of decentralized wallets, cryptocurrencies, and digital money – the emerging system.

The block market is eating the stock market. But this will take time. (It’s a big meal.)

Financial freedom means mastering both of these systems – the block market and the stock market – in order to gradually upgrade your investing from the old-school stock market to the new block market. Freedom to move between the two systems: that’s financial independence.

If all this seems daunting, don’t worry – we’ll show you how to get started, step by step.

Traditional investors thinking bitcoin is a fad.


Your Money Works Harder

There’s another reason we invest: our money has power.

When our money sits in a savings account, earning virtually zero interest (which means we’re actually losing money after inflation), it’s like an unemployed worker that’s watching Netflix and playing videogames all day.

When we invest our money in companies we care about, it’s putting that money to work. (Work is good.) When we invest, we give those companies money to work harder: to produce more value for the world.

And producing value is key. We’re investing in companies that are making stuff, or doing stuff, that is making the world better. Good work creates value. That’s what we mean by “value investing.”

This applies to both the traditional stock market, as well as the new block market. Plenty of blockchain companies are creating valuable products and services in which we can invest: those are the places we want to put our money to work.

Gambler cat always loses


Value investing also means investing in our values. We would never, for example, invest in a company that runs casinos. Gambling destroys value, by training people to think they can get something for nothing. Gambling is not investing, so why would we invest in gambling?

There’s plenty of gambling in the stock market, as well as the block market. Many people try to “get rich quick” by jumping on the hottest cryptocurrencies or tokens, hyping them on Twitter, then selling them at a quick profit. Long-term, this is a losing strategy.

We’re after long-term winning strategies: building a life of health, wealth, and happiness.

To get there, we want to put our money to work, where it can actively add the most value. That makes our money more valuable – quite literally, as our investments grow, and we gradually achieve a life of financial freedom.

Hand shake
Teamwork makes the dream work.

Building a Better World

Wealth is not a zero-sum game, where one person takes money at the expense of someone else.

There is no fixed supply of money, with only so many slices of the pie that we must all fight over.

We don’t have to rob the poor to feed the rich.

This may be hard to believe when you look at your bank account, which certainly does have a fixed number. But the truth is, that number can grow as you and your investments find new ways to add value.

There is no limit to wealth, because there is no limit to the ways to add value. There is no limit to the products and services that can be invented and developed. There is no limit to the human imagination, and therefore there is no limit to the wealth we can build.

However, today there are limits on who has access to the wealth. Those outside the system are kept in generational cycles of poverty by relying on payday loans and check cashing services. Many more have their wealth siphoned away by banks through overdraft fees and ATM charges.

You're telling me banks are good?

At the other end of the spectrum, you have wealthy traders who make even more money by creating new types of “virtual wealth” like derivatives and swaps, generating a lot of Monopoly money but very little value.

In this sense, the rich do get richer (because they have more knowledge about how the game is played, and access to money to play the game), while the poor get poorer (because they don’t understand how the system works, and don’t have the money to get started).

There’s a better way.

Because there is no limit to value that can be created, there is no limit to who can participate. The promise of blockchain investing is to level this playing field, by creating a financial system that is fairer.

The new financial system – the “block market” – is faster and better. It is taking over the old financial system – the “stock market” – which is clunky and slow. This has huge implications.

A generation ago, people communicated by mailing handwritten letters and making expensive long-distance phone calls. Today we text, email, and videoconference continually. The flow went from slow, sporadic, and expensive to instant, constant, and cheap.

The flow of money is following the same path.

Sending money, investing money, exchanging money – it’s still clunky and slow, like snail mail. Blockchain makes it instant and fast. That’s changing the economy, as radically as the internet changed communication.

That means everyone is getting access to the global economy, the ability to invest, the ability to lend and borrow money. This is a game changer.

But first, we have to learn to play the game. That’s why you’re here.

The roadmap to financial freedom.

The Basic Skills

Before we start our journey as blockchain investors, there are a few steps to getting our financial house in order. If you haven’t done these basics, do not pass Go, do not collect 200 bitcoin.

Get out of debt. Don’t put money into bitcoin until you’ve paid off all high-interest debt. (You can use Dave Ramsey’s debt snowball method, which has been proven to work – or you can look at alternatives for tackling debt.)

Note that some types of debt are “good,” because they increase your net worth (like a mortgage) or your value (like a student loan, which helps you get higher paying jobs). Other types of debt are “bad,” because they do not increase your wealth or create value (credit cards are the most common culprit).

First, decide which debt is good and which is bad. Then pay off the bad debt, before you do any investing. You’ll save money on interest fees and service charges – which you can reinvest into paying off even more debt, until you’re debt-free. Then you’re onto the next step.

Build savings. The idea behind savings is that you have a financial cushion in case the unexpected arises (and these days, the only thing to expect is the unexpected). Six months’ living expenses is the usual recommendation for dealing with unexpected job loss, medical bills, or other financial emergencies.

A good rule-of-thumb budgeting tip is the 50/30/20 rule, popularized by Senator Elizabeth Warren. Think of your money in three buckets: 50% should go to monthly necessities (your “needs”), 30% to discretionary spending (your “wants”), and 20% to your financial goals (building financial freedom).

Under this plan, that 20% should first go to paying off debt, then into building savings, then finally into building investments. And here’s where we come in.

Develop steady drip investments. After you’ve paid off debt and created a small savings reserve, then you can start to focus on investments. The best way of doing this is with a steady drip plan (also called dollar-cost averaging), where you auto-withdraw a small amount each month into a mix of investments.

The key word is “mix.” Some people get so excited about blockchain, they dump a lot of money into bitcoin, which is not recommended. Instead, you want a mix of traditional and blockchain investments (both the stock market and the block market).

The simple way is to use our Blockchain Believer’s Portfolio, which has performed very well over time. Once you have a flow of monthly payments going into an investment account, there are more advanced investing strategies that you can learn as well, as you have time and interest.

Pay off debt

The Advanced Skills

Once you have gotten free from debt, built a cushion of savings, and started a flow of regular payments into an investment account, then you can add higher skills to build more wealth.

Learn how to analyze blockchain investments. Because blockchain investing is so new, there are more opportunities to make money (as well as lose money!). By learning some basic principles on what makes a successful blockchain project, we can get better at identifying successful blockchain investments.

Getting into blockchain investing is like getting into a mountain range full of gold deposits: plenty of opportunity to build wealth, but you need to know where to look, how to dig, and what to do with the gold once you have it. Like anything else, blockchain investing a skill – and skills can be learned.

Our Blockchain Investors Scorecard is a good starting point, as is our book Blockchain for Everyone: How I Learned the Secrets of the New Millionaire Class. You can also check out our Read and Grow Rich reading list of the Blockchain Illuminati.

Customize your portfolio. As you find the occasional nugget of gold, you can add those investments to your overall portfolio. The idea is not to chase every hot tip or promising idea that you see, but to make careful long-term investments in a few promising opportunities.

We emphasize quality over quantity, meaning we’re not short-term traders – we’re long-term investors. Warren Buffett encourages investors to imagine you have a lifetime 20-slot punch card: every time you make a big investment, you punch the card. Once it’s filled up, you’re done.

Approaching investment with the “20-Slot Rule” means that we wait patiently, and we say “no” to a lot of potential investments – so that we can say “yes” to a promising few. It also requires that we think long-term: one punch card for life means that we think of building wealth over a lifetime.

Track, monitor, and reinvest: We have to measure how far we’ve come. This can get tricky in the world of blockchain: tokens can be hard to track, and easy to lose. It’s not only easy to misplace your blockchain holdings, it’s easy to lose wealth through hidden fees and roller-coaster markets.

If you haven’t already, invest in personal finance software like Quicken, Mint, or You Need a Budget. These are really built for the legacy financial system – not the new financial system – but you can create separate accounts for your blockchain investments and track them like traditional investments.

Because the blockchain market can be such a roller coaster, it’s also important to reallocate your portfolio twice a year, to be sure you’re maintaining your overall percentages. (Do it twice a year on dates that are easy to remember, like January 1 and July 4 – our newsletter will remind you.)

Health wealth and happiness

Health, Wealth, and Happiness

Money is not an end in itself: it’s a means to an end. The end is a balanced life, rich with experiences, full of meaningful relationships and meaningful work.

The research suggests that money does buy happiness – but not for the reasons we think. Sure, more money allows us to buy more stuff, but material goods only provide brief pleasure, then fizzle out. (Mo money, mo problems.)

It’s that higher income levels allow us higher aspirations.

Studies show that more wealth allows us more freedom. Freedom to pursue our highest goals and ambitions. Freedom to live our dreams, to create more value for the world.

Let’s be clear: we don’t need money to be happy. But it’s hard to focus on improving the world when we’re worrying about our next meal. When we have plenty, on the other hand, we can share with those who don’t.

When we finally get financial freedom, in other words, we can literally share the wealth. Let’s do that together.

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