Crypto Is The Wild, Wild West! Protect Your Investment. Part 4 With Vandross Idiake

[00:00:00.000] - Dan Paulson

What would the discussion be on crypto if we didn't talk a little bit about Sam Bankman-Fried? Vandros is going to enlighten us on what went wrong and how to protect yourself. Take a listen. So before we... Because I do want to spend some time talking about how can we use this in business? Everything from transactions all the way up to merger and acquisition, sales of business and whatnot. But before we go there, because I know somebody is going to ask this if we don't touch on it, how do you protect yourself from the Sam Bankman freeds of the world? Because I think there's been a kink in the armor there where this whole crypto thing is blowing up. He was the star child for it all. And then we realized it was a house of cards. And a lot of people lost their digital currency off that. So how do you protect yourself?

[00:00:50.460] - Vandross Idiake

Yeah. So to protect yourself, you first need to educate yourself, right? So I think a lot of people, yes, you can make a lot of money in the market. But the first thing that I always prioritize, especially to my clients, is safety, right? If you don't know what you're doing, you don't know how to be safe, how to protect yourself, understanding cybersecurity, understanding fission, understanding what exactly the system is and what you're getting into, right? Because what you're essentially doing is You want to buy cryptocurrency. So you're going to a brokerage, right? And that brokerage is basically facilitating the transfers and trade of cryptocurrencies, right? And it's basically creating a market, right? Where people are buying and selling. And the difference is you don't know if what they're telling you in terms of how liquid they are is true. You don't know if they're intermingling with customer funds or not. It all depends on the governmental body, right? That's basically supposed to be inspecting these things. The thing is you need to understand, okay, then where is that business located? That business was located in the Bahamas, we have TX. So you got to understand, okay, then who has jurisdiction?

[00:01:58.900] - Vandross Idiake

And so then you need to understand, okay, how thorough are they in their inspection process? And you need to understand the entire point of crypto is self custody, right? So it's in the word exchange. You're supposed to go there, exchange your fee out for crypto, and then remove it off of the exchange and then self custody it into your own private wallet. And that's basically another value proposition of cryptocurrency is you can store your own value yourself. It's like the way I describe it of a safe, a real physical safe, but put digitally, right? So you have your own safe, but digitally, that only you have the keys to and nobody can get access to them. So no matter what, they can't get access to it. There's no username and password. You simply just go on the Internet, download a digital wallet. It will give you a seed phrase. So it's not going to ask you for KYC information. It will give you a seed phrase or air quotations, a password, and it usually be 12 to 24 words. You write those letters down, and you keep that stored somewhere safe where nobody can touch it.

[00:03:07.130] - Vandross Idiake

And then after that, you have your own digital wallet. You buy your crypto on FTX, Binance, whatever exchange. You then take that crypto and put it on the digital wallet, and then no one else has access to it but you. So in the case of event that FTX ghost it, for lack of a better word, shit, you don't have to worry about that at all because you were smart and you took your value and held it yourself instead of giving someone else the responsibility of it. Because what's happening is you're trying to make these exchanges become banks. I call it Web 2.5. You know? And it's not Web3. It's not crypto. It's just how they run their business, that's another thing. That's not crypto-related. That's just a person that had a really bad business and was intermingling customer funds and was gambling with customer funds. And yeah, was using that. It was a complete huge scam. So they were saying they weren't intermingling with customer funds. And what they were doing was they were taking customer funds from the back end, and then they were loaning it out to their investment arm, which was Alameda Research.

[00:04:16.990] - Vandross Idiake

Alameda Research was gambling those funds on the market, losing it all. Then they kept repeating the process. Then they faked the liquidity that they had because they printed their own token. So they told them, Hey, we have this amount of FTX tokens on our balance sheet, which reciprocates this much amount of market value. So give us liquidity. So then they borrowed more money from other investments, other VCs, other investment vehicles. And then they never paid those people back. And it started this huge compounding effect. And it was a Ponzi at the end of the day. It was a complete Ponzi. And it was a poorly ran business. And that's what happened in FTX. But it's not Crypto. Yes, the business that they were doing was the buy and sell of crypto, but they could have been doing buy and sell stocks, and then intermediating with customer funds in the back end with that, too, as well. So this is why I prefer things more decentralized, decentralized finance, personal sovereignty, and you take your value and hold it yourself.

[00:05:21.260] - Dan Paulson

That's a great way to explain it. I think that's what a lot of people didn't understand about the whole FTX thing is that they were holding the crypto. It wasn't It was in your hands. It was in their hands. It's like a brokerage firm. You're expecting them to invest it wisely. They did not.

[00:05:37.720] - Vandross Idiake

Exactly. That's the thing that people thought that the digits on their screen is the same as the bank. They literally were operating as a bank. They were operating on very few percents of liquidity, the rest of it that they were gambling with customer funds with, but except they didn't have authority to do so, right? Right. And so that's what happened with FTX. So it's not crypto. Yes, crypto gets the bad name. And it's super unfortunate because there's a lot of people that are building... There's a lot of brilliant minds in crypto. They're actually building really cool stuff that solves a lot of problems and streamlines a lot of processes for businesses and for customers. But then you get the bad apples, and then those ones are the ones that get the headlines. And that's what the mainstream media is going to push is, Oh, crypto is bad and crypto is this. But that Bitcoin is still operating perfectly fine. The network didn't change. It's completely decentralized. So it has nothing to do with FTX, other than FTX bought a large amount of Bitcoin to supply to customers to start an exchange. That's it. Got it.

[00:06:41.070] - Dan Paulson

Well, let's shift subjects a little bit. We're not going to switch subjects, but we're going to shift them over. How do we use this in business? How is this going to be effective for, say, a manufacturing company that's trying to sell widgets, going to something like digital currency to manage their sales and their profit?

[00:07:02.320] - Vandross Idiake

Yeah. So what I would say is it's first and foremost, the tokenization model is not for every business, but for some businesses, it can be really strategic and where you can leverage different... There's so many different models. One of them that comes to mind for me in the industry that I think can be a little bit revolutionized is the gaming industry, right? That's one of them that I really, really look and see. It just It makes perfect sense because in the gaming sector, if you really understand the study of the gaming sector, they're already using tokenization models. The only difference is those in-game tokens stay in-game. So what if we could encrypt those tokens on chain allow people for the buy and sell of assets in the video game. For instance, people buy skins in the video game. They buy different weapons and different types of things within the video game to help their character, level up their character and The problem that you have in the video game industry, for instance, if you look at the fact that, okay, I started a character, he's at level zero, and then he gets to level, let's say, 100.

[00:08:11.070] - Vandross Idiake

And then you beat the game, then you can't rent You can't take that character out to somebody else and make money. You can't sell that character. You just have to buy a new game. And so you just become exit liquidity for the video game company at the end of the day, because that's essentially That's obviously what you are. But if you could tokenize the assets within the game, make them into NFTs, say, for instance, you could create an entire digitized economy, right? To where, okay, I can rent out my game when I'm not playing my video game anymore, or rent out my Not just my game, but also my video game character. I can sell different items and stuff that I'm getting within the video game and to other people that are very rare items. They're only a select amount people have because you have these type of things in video games. So that right there would create an entire economy, right? If you could put everything on chain and allow people then to create entire economies around the video game. And then you can, for instance, say, for instance, you have a lot of people that are in this video game.

[00:09:11.970] - Vandross Idiake

Say there's one million people playing this video game, MMORPG. And let's say you have a lot of people, a lot of traffic in particular areas in the video game. What if you could buy land within the video game and pitch it to advertisers to advertise whatever it is that they're selling on the video game. You know what I mean? As a way in which... And this right there could create and generate revenue for you. You could still play the game normally, but you buy land in strategic areas where there's a lot of traffic and people maybe can stop, maybe do some e-commerce. And this is the idea of the metaverse of trying to integrate these gamification models into these tokenization models and mix them together and make it immersive. So this is It's one area that I think for sure. And also, if you look at a lot of influencers, right? One way in which I think there's a couple of ways. Before I get to the influencers, there's another way, too, as well with NFTs, right? For those who don't know, those are non-fungible tokens, right? And those are also can be minted or for layman's terms, published on-chain, right?

[00:10:25.870] - Vandross Idiake

And you could strategically use NFTs as a way in which people can buy real estate. What's the issue with real estate right now? Well, the assets are through the roof. It's so expensive for my generation to buy real estate property. It was once what I think, this is an unpopular opinion, but I think it was a great investment for you guys as a generation. But I think for our generation, I just don't see it as a viable... Our generation also, we're a little bit more mobile, too, as well because of globalization. I'm not saying not to buy real estate, but I'm saying get your network to a certain level and then start looking into real estate. But right now, let's say you want to buy a $500,000 property, you would need to put, let's say, 20 % down. So you need to have $100,000 cash, right? Not so many people are that liquid. If you look at statistics of the amount of savings people have within my generation, it's not that many people that have $100,000 liquid cash to be able to invest in a half a million dollar property. So what you could do is you could tokenize the real estate, right?

[00:11:28.490] - Vandross Idiake

And you could, let's say, make it into Fips. So $100,000 for five different people, and they all have access to the real estate, and then they leverage the real estate as a rental property. And that way, you only need $100,000 in responsibility. You could then get 20 % for the down payment. And so that's $20,000. That's something that's more sustainable. It's something that's more realistic for our generation. And also, you could open it up to global liquidity. This is the main value proposition here, right? Because if you have your property And it's listed, let's say, in the States, but you basically tokenize it. And now you can... Anyone can have access to Ethereum, right? But not everyone can have access to US dollars. So if they can buy the NFT, then whatever yield you generate from that property can go directly. You can swap that directly into tokens and quickly distribute it out to the people who hold the NFT holders. And so it's a new form of business model that can be used and leveraged. So this is another way in which I think you could use it.

[00:12:31.070] - Dan Paulson

All right. Be sure to check out our fifth and final segment with Vandross coming up soon.