December 19, 2024
Long before Bitcoin revolutionized digital currency, I was already exploring the potential of decentralized finance.
My curiosity about alternative financial systems began years before Bitcoin’s 2008 white paper, as I searched for solutions beyond traditional banking.
When I launched my first company in high school, I ran into a major obstacle: how to efficiently pay engineers I’d hired in Russia and India without excessive fees or delays.
In the early 2000s, international money transfers were slow, expensive, and riddled with bureaucratic hurdles.
Discovering eGold: A Glimpse into the Future
I initially turned to eGold, a digital payment system that allowed transactions backed by gold.
While revolutionary for its time, this platform revealed both the potential and limitations of digital currencies:
- Instant global transactions (when they worked)
- Asset-backed digital currency
- Regulatory challenges
- System stability issues
Traditional banks weren’t an option either. At 15, I had no easy way to send rubles or rupees internationally without running into account restrictions and high transfer fees.
The US banking system wasn’t much help either, lacking any mechanism for a 15-year-old to easily send rubles and rupees.
Bitcoin Discovery
Years later, after founding Mutual Mobile, I came across Bitcoin for the first time. The concept of decentralized, borderless transactions immediately resonated with me.
Here was potentially a more elegant solution for international funds transfers, not to mention a more durable currency than anything issued by a state.
In 2011, I bought my first Bitcoin through MT.GOX. The process was anything but smooth, requiring multiple steps and significant patience.
Fortunately, I managed to withdraw my BTC before the exchange collapsed.
After MT.GOX’s collapse, I was amazed at how difficult it still remained for the public to acquire Bitcoin.
Trading
In 2013, I contemplated starting an ETF to provide broader access for those wanting exposure to the crypto asset.
During my research, though, I discovered something interesting – a publicly traded Bitcoin Investment Trust called GBTC.
I was shocked to learn this fund was trading at a 100% premium to the underlying spot Bitcoin price.
That’s when I had an idea: why not arbitrage the premium? After reading through the several-hundred-page GBTC prospectus, I decided to short GBTC while going long on spot bitcoin.
The arbitrage strategy is to capitalize on the price difference between GBTC and spot bitcoin.
When the premium on GBTC is high (i.e., GBTC trades at a higher price than the underlying bitcoin), you short GBTC while buying the actual bitcoin, expecting that the price of GBTC will eventually decrease, bringing it closer to the spot price of bitcoin.
In short, it’s a way to profit from the discrepancy between the market price of GBTC and the actual price of Bitcoin by taking opposite positions in both.
This strategy effectively allowed me to accumulate additional Bitcoin for free once the premium on GBTC inevitably eroded.
Advanced Trading Strategies (2013-2015)
The cryptocurrency market’s maturation brought new opportunities for sophisticated trading strategies.
After this landmark trade, my interest in crypto only intensified.
Beyond investing in a prominent crypto hedge fund, I became fascinated with the concept of using crypto to incentivize useful work.
It was exactly this spark that helped give rise to my creation of the Freedom Network Token, which now helps facilitate decentralized inference for FreedomGPT.
The Future of Decentralized Finance
The journey from eGold to Bitcoin, to trading, and now to building decentralized applications has been a whirlwind.
But what excites me most is the future—how decentralized finance continues to evolve, offering solutions beyond what we ever imagined.
If the last two decades have taught me anything, it’s that financial innovation never stands still.
And just like in the early 2000s, the biggest opportunities are often hidden in plain sight, waiting for those who dare to look beyond the status quo.