What a time to be alive. I asked a machine to provide me with a template to reflect on the year, and now, I’ll do just that.
Personal Reflections: Our family grew to four with the addition of our son, Brayden. Our daughter Michaela is now three and a half years old, and the “time flies” cliche becomes emblazed in my skull a little more each day. I became an uncle, we moved to a new town, and the silver lining with Covid-19 became apparent: I could spend more time with my family and experience a work-life balance I never experienced before. And speaking of family, I was able to make another small dent in the universe by rededicating my childhood school, and renaming it in honor of my grandparents who were Holocaust survivors.
Professional Highlights: I achieved some of my financial childhood dreams with the sale of two of my companies, TULA and Troops, to incredibly iconic companies with Proctor & Gamble and Salesforce (and Slack). But the best part? The people that helped me build those businesses also had life-changing events. There is something incredibly rewarding about building a platform that lets other people do their best work, and seeing it come to fruition is one of the greatest gifts there is. This is one of the reasons I’m so drawn to entprenuership. And if that wasn’t enough, I went on a wild goose chase trying to free some crypto coins from a hard wallet, backed a bunch of amazing founders, and doubled down on beauty with another business I’m excited about called DIBS Beauty.
Challenges and things that keep me up at night: One of my grandfather’s best friends past away. He too was a Holocaust survivor, having survived Auschwitz. I used to think, “one day they won’t be here, and they won’t be able to tell their story.” That day is here. And as their voices diminish, the drum beat of anti-Semitism gets louder and louder with incidents and hate crimes being at an all-time high. Against this backdrop, we have a recession, a population with insufficient education and understanding of history, an economic environment that provides incredibly ripe conditions for scapegoating, and people with pulpits willing to use these conditions to their benefit at the expense of humanity, decency and democracy. We’ve seen this movie before. I’ve been warned about this movie before. Only now, I wonder to what degree my kids will experience this movie.
Looking ahead: I mix these things and more together and I’m still the most optimistic I’ve ever been. We have rockets launching into space and landing on floating barges, artificial intelligence driving cars for us and creating generative images on the fly, gene editing being commercialized, energy being created using nuclear fusion, and the list goes on. I believe that our political institutions will continue to erode, but I’m also confident that founders and innovation will outpace our self inflicted wounds. As one example, while politicians debate things like climate change for political theater, entrepreneurs will develop products and services that people will love (e.g. Tesla) and also produce benefits needed to combat climate change. In short, the spirit of American entrepreneurship will continue to win out.
Conclusion: Despite the hardships and global conflicts that exist, and yes, there are a lot, it’s never been a better time to bet on yourself and try to be a change agent for good. It’s easy to get hung up with the million and one broken things going on, but we each have an opportunity to make a difference in our own lives and the lives of others. The question we should all ask is, how do we do that? And with the year coming to a close, what will our New Years’ resolution be?
For me, I’ll continue to invest in myself, invest in my family, and be a change agent for good. Seems like an appropriate and simple list.
Yes, I had $2 million dollars locked away on a crypto-hard wallet that I couldn’t access because of a forgotten password.
But let’s start from the beginning…
In 2013 I started to learn everything I could about the world of Bitcoin and cryptocurrency. It was clear that a new “internet of money” was being born.
I started reading, writing, buying, and experimenting with the world of Bitcoin and everything around it. I almost started a company with the premise of letting people more easily buy and sell Bitcoin. I’ll add that one to the woulda, coulda, shouda list.
As we now all know, a few years later the ecosystem started to pick up. More people were getting involved, including some of my friends.
One of those friends had been making a living as a professional poker player. Instead of only trading cards and chips on digital poker tables, he now also started to trade various cryptocurrencies on a number of exchanges.
I was however busy with my day job building startups and didn’t have time anymore to focus on the crypto world. But, I still wanted to get in early on some of the emerging, off-the-beaten-path technologies that most people hadn’t heard about yet.
So in 2018, my friend Jesse and I were chatting and decided we should make a larger, more concentrated bet on an alternative coin. I would transfer him the money and he would buy and hold the coins for us.
And that’s exactly what we did.
On January 18, 2018, I sent my friend 2 BTC, which at the time was about $12,500/BTC. And with my 2 BTC, and his 2 BTC, together, we bought about $50,000 of a different coin called Theta at about $0.21 per token. This seemed a bit crazy at the time since the logical, sensible part of our brains told us we were basically lighting money on fire.
This is what lighting money on fire looks like.
“Someone’s sitting in the shade today because someone planted a tree a long time ago” – Warren Buffet
That was my plan.
To buy and hold, and not look at it for a very long time.
A few weeks go by…
We get a notice from the exchange where we had purchased and been storing our Theta coins. The exchange was about to shut down because the Chinese government was putting them out of business. Apparently, the Chinese government was working to ensure they had much more control over Bitcoin and the ecosystem. If we didn’t pull our coins and tokens out of the exchange by a certain date, we’d lose it all. I guess that’s China for you.
So we had to move the coins. We asked…
“Should we keep them?”
“Sell them?”
We decided to keep them. HODL!
Jesse bought a Trezor One hardware wallet and moved the coins onto the device for safekeeping. A hardware wallet is sort of like a digital lockbox for cryptocurrency, where the private information is stored within a physical electronic device. It looks a bit like a USB stick. We managed to move our coins mere minutes before the exchange disappeared.
Life went on.
I forgot about the coins and really the rest of my crypto holdings for that matter and just got back to work on my business.
And then…
Prices crashed. It was a nuclear winter in crypto land.
My $25k was now probably worth a few pennies on the dollar and at that point in my life, I just didn’t want to deal with the emotional roller coaster of big swings in the crypto markets. I had enough on my mind with work and didn’t want to be distracted and stressed with these insane markets. I wanted to sell off all of my positions and just ignore the crypto world for a bit.
So I asked Jesse to transfer me my coins so I can sell them and be done with it.
“I can’t do that.”
I asked, “What do you mean you can’t do that? Just send them or sell them.”
And then he said something that would set us off on a wild adventure:
“I forgot the password!”
You see, this is remarkable for two reasons. First, Jesse remembers everything. He remembers all of our friend’s license plate numbers from high school. After all, he plays poker for a living playing 8 tables at a time, knowing the odds, and remembers how probably dozens of different players play the game. In fact, one of the first places we heard about Theta was from another poker player!
Secondly, if you guessed the password incorrectly too many times, the device self-destructs. I mean, it doesn’t actually blow up, but the entire contents erase and our coins would be lost forever! The good news however is if you forget the password, you can always restore the device using a recovery seed which is basically a 24-word passphrase. Jesse wrote this down on a piece of paper while originally setting up the Trezor, but it got thrown away by accident along the way.
We were screwed!
At this point, I was almost relieved. After all, the investment basically went to zero and in many ways, it made living with that shitty investment decision a little bit easier to stomach.
I forgot about the coins and went on with my life again.
Until…
The nuclear winter in crypto land was over. Prices started to go up again.
Our $50k was back to about half.
Prices went up again….back to $50k.
Now we figured we should really try to get this wallet open.
“Dan, you’re an electrical engineer. You can figure it out!” I should have paid more attention in class because there was no way I would figure this out. And even if I did, I had absolutely no time to even try.
At this point, I had convinced myself I would never see the money again so I ignored it.
Prices went up again!
$75k.. $100k…$200k!
At this point, we decided to get a bit more active to figure this out. Jesse started googling the earth to find people that could help.
We found engineers that allegedly hacked this wallet before, but they weren’t interested in helping.
$400k!
We found a few engineers who seemed like they could pull it off but they either flaked, weren’t interested or ran into obstacles quickly. Some of those engineers were even engineering professors from my school.
$800k!
Finally, we found some guys in Switzerland who claimed they had done this before. They seemed like they could actually pull it off. The problem now was that I needed to meet them in Paris at their secret lab and Europe was shut down due to COVID. For a few weeks, we went back and forth trying to figure out how we could rendezvous in Europe to pass off the wallet but the combination of the shutdown and not being able to physically go to the lab to watch them hack the wallet made the prospects of this working a bit grim.
Group chats with our friends were becoming ridiculous. I told Jesse if we couldn’t find a technical way to free the coins, we’d find a chemical way to free the coins. As in, we’d go away for a weekend and I’d feed him hallucinogens until he remembered the password.
We found another engineer in Portland. He was a part of a famous hacker group back in the day and testified on the Senate floor saying, “Yes, we can take down the internet in 30 minutes.” We had been exchanging emails to see if he could be our guy to figure this out and free the coins.
He bought some hardware and special devices, made a few calls to some friends in the hacking world, and off he went, trying to hack an exact make and model of our Trezor to prove he could do this.
This is the solution Joe came up with to hack the Trezor wallet.
Over the next few weeks, he went to work and would update us on his progress.
$2.0mm!
I said as soon as he could prove success, I’d book a ticket out the next day to come to meet him in person with the wallet. We also talked about the fact that if he could actually pull this off, he could offer these services to many more people like us that are locked out of their wallets. In addition, we agreed that we’d have to film this hack because one way or the other we would have to tell this story.
It would either be a triumphant story or a miserable and expensive story, but either way, we were going to document the whole thing.
And sure enough, I eventually get an email with something to the effect of…
“I did it!”
The next day, I drove to Jesse’s apartment, picked up the wallet, and booked my flight to Portland to meet the hacker, Joe Grand.
The rest they say is history…
After two days in Portland, spending a few hours in his lab performing the attack on the wallet, he freed the coins!
At the time the wallet was officially hacked and unlocked, the total value of the wallet was about $2.5 million dollars.
At the lowest point, it was about $20k. At the highest, it was just over $3 million.
Joe is now making his services available to anyone that is locked out of their wallets with a new company called offspec.io.
Did we sell the coins? Yes, we sold some.
The rest? We put on another Trezor and locked it away.
And that’s my story about how I had $2mm locked on a crypto wallet.
And you can see the whole thing go down in this video.
The discussions that are happening around Bitcoin feel a lot like those from the early days of the internet. It’s like when my parents asked me about AOL dial-up. “Who is the computer calling? Now the questions are, “what are these Bitcoins and can I see what one looks like?”
I discussed this topic with a handful of Bitcoin entrepreneurs and Bitcoin investors and so I figured it made sense to lay out some high level thoughts on Bitcoin for my own sanity and hopefully yours. To start, I think there are two important ways to think about Bitcoin.
1. Bitcoin as a currency.
2. Bitcoin as a technology.
Bitcoin as a currency. Like all things throughout history, we know that change is inevitable and currency is no different. Once upon a time forms of money included cattle, salt, shells, and precious metals. As time went on the world evolved and so did the currency that went along with it.
As Thomas Friedman would say, today the world is flat. Our telecommunications make it dead simple to communicate and transact with anyone, anywhere around the world at any moment in time. In short, Bitcoin is a new currency that was designed for this new world. In this video, Eric Vorheese does an excellent job explaining the evolution of money and why the characteristics of Bitcoin, as compared to gold and our dollar, make Bitcoin such an intriguing form of currency for a digital world. That analysis look something like this:
Scarce?
Convenient?
Secure?
Central backing?
Gold
Yes,there is only so much of it in the earth.
No,it’s very heavy.
Kindof, depending on where you store it.
No, no single authority owns gold.
US Dollar
No, the government can print money, which they often do (inflation).
Yes, its lightweight paper.
No, it can be counterfeit.
Yes, the government provides its full faith and credit to the US dollar.
Bitcoin
Yes, only ~21M bitcoins will ever be created.
Yes, it’s digital.
Yes, it’s secured by math puzzles that only super computers can solve.
No, like the internet, it’s not owned or controlled by any single entity.
Only time will tell if Bitcoin can survive as a currency but fundamentally, it makes sense to me that there should be a currency specifically designed for a hyper connected, digital world.
Bitcoin as a technology. To fully understand what Bitcoin can mean as a currency, you must also understand how it works at the technology layer. This video does a nice job explaining the technicalities of Bitcoin, but the core innovation of Bitcoin is that there is a public ledger that is very secure because of some complicated math. Albert Wenger of Union Square Ventures describes it this way:
At the heart of bitcoin is a fundamental innovation: a distributed public ledger. A ledger in accounting is a book that you cannot edit once you have written in it. Instead, if you have made a mistake, the only way to fix it is to add another transaction to the ledger that undoes the error. As we know from accounting fraud, problems arise when people figure out ways to transact without recording it in the ledger or making ex post changes to the ledger (this is why Quickbooks isn’t really an accounting system). The bitcoin ledger is the so-called blockchain which uses the fact that there are many copies of it that are broadly distributed combined with a fair bit of math to ensure that once a transaction has been recorded in the blockchain that transaction can not be changed after the fact. There is no other widely used protocol in the world today that accomplishes this: with bitcoin anyone can make a statement (a transaction) and have this be recorded in a globally visible and fixed ledger.
Years ago, information was controlled and distributed by single entities. This is why media conglomerates and newspaper companies were so powerful. When we talk about how the internet disrupted those companies, we are really saying that new protocols created the disruption. The protocols provided a way to send and receive instantaneous information without anyone’s permission. The protocol behind Bitcoin is providing the same type of disruption only instead of sending information without any third-party involvement, we are now able to send money without any third-party involvement. In essence, we are democratizing money and rewriting the rules for how commerce can be conducted.
This creates a tremendous amount of opportunity. Naval Ravikant, CEO of Angel List published a piece in Wired magazine about the future possibilities of Bitcoin. Here is a clip:
Just as the web democratized publishing and development, Bitcoin can democratize building new financial services. Contracts can be entered into, verified, and enforced completely electronically, using any third-party that you care to trust, or by the code itself. For free, within minutes, without possibility of forgery or revocation. Any competent programmer has an API to cash, payments, escrow, wills, notaries, lotteries, dividends, micropayments, subscriptions, crowdfunding, and more. While the traditional banks and credit card companies lock down access to their payments infrastructure to a handful of trusted parties, Bitcoin is open to all.
So will this Bitcoin thing work? Is it a good investment? Should you buy some Bitcoins?
I have no idea. But what I do know is that this feels very much like the first time I signed on to AOL and that to me is very exciting.
