Transcript:

Intro (00:01):

Do you struggle with what it means to be successful in your retirement? Trust us. You're not alone. Welcome to the Retirement Success in Maine podcast. Here, you'll go in depth with GuidancePoint advisors, investment consultants to hear stories about how retirees in Maine are navigating a successful retirement. Get insight into the inevitable challenges of aging and define what a successful retirement looks like.

Ben Smith (00:26):

Welcome everybody to the Retirement Success in Maine podcast. My name is Ben Smith and with me as always is the blockchain to my savings bond, the guy who keeps us grounded even when the financial world seems to be floating in the cloud, my co-host, Curtis Worcester.

Curtis Worcester (00:43):

Wow. Sorry, I was taking that all in for a second. There was a couple good ones there, Ben, but happy to be here. Today I think we're going to revisit a topic that we last spoke on a few years ago, but I think we're probably overdue for this one.

Ben Smith (00:58):

Exactly. And I know I was throwing blockchain savings bond, cloud. I was throwing all the terms at you. But back in episode 41, we had a conversation that was equal parts fascinating and future focused. We dove into cryptocurrency. And for many retirees, it felt like something that was really far out on the fringe. Since then, it's become more mainstream. Bitcoin ETFs are traded on the stock exchange. Major financial firms are building around blockchain, and even your smartphone probably has a crypto wallet option.

Curtis Worcester (01:29):

Yeah, it's exactly right, Ben. And with all new tech comes new questions and maybe some new risks. We have questions like, what are stablecoins? Or what's this new idea of tokenization and finance? And just really what's changed when it comes to scams and security around crypto assets.

Ben Smith (01:50):

And if you're wondering whether all this matters to someone living on social security and required minimum distributions in Maine, the answer might surprise you.

Curtis Worcester (01:58):

Yeah, exactly. And so to go into this topic again, you might say we've brought back somebody who helped us build a really solid foundation on the topic about five years ago, actually, and someone who's deepened his expertise since then.

Ben Smith (02:13):

So our guest today is someone who has lived and worked at the very center of the evolution of cryptocurrency and digital finance. His past roles include market strategy at BitStamp, one of the world's largest crypto exchanges, compliance and blockchain forensics at Circle and Polanx, and senior securities trading at Fidelity. He even worked for the Federal Reserve Bank of Boston, where he co-authored the groundbreaking Project Hamilton White Paper on central bank digital currencies. He's back to help us explore what's new, what's next, and what retirees should understand about this changing space. So please welcome Tyler Frederick back to the Retirement Success in Maine podcast. Tyler, thanks for coming on the show.

Tyler Frederick (02:53):

Absolutely. Good to be back with you guys. It's hard to believe it's been that long.

Ben Smith (02:58):

Yeah. I'm like, geez, I didn't even know we were doing this for five years is the first thing I would say, but appreciate coming back. And I know it's been five years since we came on, but love to get a little recap of what you've been up to professionally since we last talked in episode 41.

Tyler Frederick (03:14):

Yeah. When we left off, I was working at the Federal Reserve on that project Hamilton work that you mentioned, and really that work was trying to push the limits. Theoretically, if the Federal Reserve were to launch a digital dollar, what sort of scale do you need? And so we were using some of these crypto blockchainy technologies and trying to push what they were capable of as far as throughput. After that, I went back to the crypto industry for a few years, and then now I'm currently at a company called Radius. We're a startup, and it's actually many of the same folks who worked on some of that federal reserve research. We're focusing on making digital currency payments extremely fast, extremely cheap. And we're thinking with the AI boom and all this sort of thing, you're going to have machines making micro payments potentially to other machines.

(04:05):

It's a brave new world, so you're going to need infrastructure that handles massive scale. So as you mentioned, we're always keeping an eye on blockchain, stablecoins, all the stuff that we're going to be talking about today, and we're pushing that performance to the max here at Radius.

Curtis Worcester (04:19):

Awesome. Yeah, that's great. And again, I know Ben just went through it. Again, you've worked with the Federal Reserve, you've worked for major exchanges, even compliance and forensics. I guess all of that encompassed, what's the common thread that kind of keeps you personally engaged in this crypto space?

Tyler Frederick (04:38):

It's a great question. I find finance fascinating and I find technology fascinating, and I think crypto's naturally the convergence of the two. There you go. I think a lot of people forget about the tech story of money and finance. One of the reasons that the United States became such a major player as far as the financial system that basically runs the entire world is we were the first major country to digitize wires, and that made it easier than ever to move money in the United States, cheap and easy, and that allowed capital to move more freely and all this. And it goes back further than that. But money's always been a technical game. But I think in, let's say the last two, three decades, we've seen tech take off like never before. Compare streaming a movie on Netflix to driving down to Blockbuster and getting a VHS tape.

(05:37):

Absolutely. So you can move data like that, but money still largely moves on the same rails that it did decades ago. Yeah, there might be a fancy wrapper around it like Venmo or Cash App or what have you, but you're still under the hood using ACH and wires and cards like form factors that have been around for decades. And really this whole crypto blockchain stablecoin conversation is how do we make money move like data?

Ben Smith (06:04):

Andntella, that makes sense because you think about it, even just things like, again, like an ACH or writing a check and that a bank needs to then still verify fronds from a different bank and it takes them a week or maybe a couple weeks to verify that the funds were actually there at the bank that's on the same banking system, which seems very, again, to what you just said, very antiquated in this day and age that you guys really can't talk and really know that that money was really there or not. So really, really interesting there. But want to hear from your vantage point, obviously when we were talking in 2021, there was a lot of this cryptocurrency was new and we're talking about this as, again, wasn't new, I guess in some cases. And to a lot of the population that was hearing about it, it seemed new, but what's been the biggest shift in how the public and institutions view cryptocurrency since 2021?

Tyler Frederick (07:02):

I think you see a lot more acceptance of at least the major cryptocurrencies as an asset class, as a potential diversifier. And I really don't think we need to look much further than we have ETFs all over the place now, and they're being offered by major ETF issuers. These aren't fringe parties. And it was remarkable when the ETFs went live. You had seven or eight ETFs tracking the same asset all going live on the same day. So everyone wanted to get into the pool and you watch the news, you see talking heads and cryptocurrency is right in there amongst commodities and some of the other kind of alternative investments.

Curtis Worcester (07:44):

Yeah. And I think you're spot on there, Tyler, when you talk about just the general acceptance of it. And just Ben and I, in our conversations with clients five years ago, we say it, and I think there's a little bit of a, "Oh, I don't want to think about that. " And now we have people coming to us and saying, "What are we doing about it? Where can we do it? " Not to dive too far into that, but it certainly is something that I think people talk about now much more openly, which is great. I guess I want to transition and really get into our conversation today. And maybe for someone who didn't catch our previous episode with you or somebody who's just kind of new to crypto in general, can you just give a little refresher on what cryptocurrency is? I know that's probably a loaded question, but maybe a quick kind of 10,000 foot view and then how it compares to more traditional currencies that people may be familiar with.

(08:35):

Yeah,

Tyler Frederick (08:35):

It's a great question. So I guess maybe a little thought experiment might help. So let's say I wanted to launch my own currency on my computer, my own digital currency. Conceivably, I could just have a laptop and an Excel spreadsheet and just track balances myself. Conceivably, that's all you need. You need a ledger and who wants what? One of the problems is let's say my laptop runs out of battery or my wifi goes out. Well, no one can reach my machine, so that's a problem. I can't update my ledger. So first, you probably want to distribute the network. So I can run backups and have those located on different computers all around the country, all around the world. So even if my machine runs out of battery or my machine loses wifi connection or what have you, one of these machines is around. So you want it distributed, you want a bunch of different nodes.

(09:33):

Well, the problem remains, if I just launched this Excel spreadsheet on my laptop, I can go in and update the balances, which is no bueno. You don't want to trust one single party who has read, write control over the ledger. So what you probably want to do after that is distribute who has the authority to update the ledger and make sure that you don't need to trust any one party is going to manage that ledger correctly. You want to remove trust. And really that was the central innovation in Bitcoin. Bitcoin allowed two mistrusting parties, so two people who don't trust each other to transfer digital currency. So there are nodes, and when I say nodes, I mean copies of the ledger. There are tens, hundreds of thousands of copies of the Bitcoin ledger and other cryptocurrency networks all around the world. And you can run your own node, you can do it on a laptop or even simpler of a device for a lot of networks.

(10:36):

And you can check everyone's balances, you can confirm that updates being made to the ledger are being done appropriately. And how updates are made is via adding new blocks. So we haven't talked about the word blockchain yet, actually. So blockchain means a chain of blocks. So transactions are batched together into blocks, and those are added to the network sequentially, and those are all linked chained together cryptographically. So you can guarantee that a chain back in history hasn't been changed because the cryptography all lines up. And that's where mining and validation comes in. We often hear those terms thrown around. Mining and validation is the process of adding new blocks to the chain. And that's a competitive thing that it's done by miners and validators competing to be the one to get the right to add the next block to the chain, and they're rewarded with transaction fees and coins and stuff as reward for their efforts.

Ben Smith (11:45):

So Tyler, can you just take a moment too, and just obviously what you described is a decentralized independent system, just contrast that to, okay, here's the US government and we have US dollars and we're transacting in US dollars today. And kind of compare and contrast that system and why maybe Bitcoin or cryptocurrency became a alternative forum there, because I think that'd be helpful to understand as well.

Tyler Frederick (12:18):

Yeah. So we contrast cryptocurrencies with traditional Fiat currencies that are managed by the Central Bank and Treasury of whatever country. So for us, Federal Reserve and Department of the Treasury, between them, they controlled the supply of money. And when Bitcoin in particular was first taking off, it was during the financial crisis. So there was a lot of skepticism about the financial system. In general, we've especially felt it the past handful of years, but there's concern about inflation. So really a lot of the early days of cryptocurrencies was concern about government mismanagement of the money supply. So the thought process is, well, why don't we make our own currency, the early cryptocurrency community, why don't we make our own cryptocurrency and just have it be a deterministic monetary policy? That is, you don't have a committee of people tweaking interest rates and determining what the money supply is going to be.

(13:14):

Let's just have it embedded in code and let's see where it goes from there. And all the different cryptocurrency networks, all the different blockchains, they kind of have their own different monetary policies associated with them, so they have different approaches to that, but definitely a different approach than dealing with a trusted entity whose job is to manage the money supply.

Ben Smith (13:35):

So I'll just point out as well as I think what you just said is here's the US government and maybe there's citizens that have a distrust over the value of the US dollar for devaluing this over time, which maybe by inflation's happening, but you could also maybe look at third world countries that maybe have very unstable governments and then unstable economies. And if all of a sudden your government fails and all your life's work and savings has been in that one currency that then it becomes worthless, then maybe my life's work and financial savings has become worthless. So having maybe another system that you could go to maybe outside your own home country might be valuable as well. So I wanted to point out a few uses there. But Tyler, since we of course last spoke, as we talked about crypto's currency becoming more mainstream with ETF listings, as you said, and institutional involvement, you're seeing this becoming more asset allocated and investment policy statements from, whether it be endowments or foundations or pension plans.

(14:38):

And it's becoming an asset class on its own, but can you distill this back to everyday investors? So what do all these developments really mean for everyday investors, especially retirees here in 2026?

Tyler Frederick (14:52):

So it is an emerging asset class. And one of the key words I would say is emerging. With traditional asset classes, we have decades of history. We can look back and the whole past performance isn't a guarantee of future results, but you have much more history looking at the stock market, the bond market, the money market, all that stuff. And with cryptocurrency, you really don't have that. Now that's an appeal to some people because theoretically that means more upside, more risk, more return theoretically. So I think it's certainly something to consider adding to a portfolio. Some people look at it as a diversifier, an uncorrelated asset class or less correlated or what have you. It is still extremely risky. So especially in the context of retirees, that's definitely something to ... We've seen a significant drawdown from Bitcoin's highs a few months ago. We're down ballpark 50%.

(15:54):

A lot of cryptocurrencies are down significantly more than that, and that's been a cycle that's happened repeatedly. So if people are interested in jumping in the pool, I would urge them to be careful and kind of look at the history of this thing. If you do it, do it responsibly.

Curtis Worcester (16:11):

That's great. I really appreciate that. And one thing, just to kind of keep going here, Tyler, one thing that I think you suggested for today's conversation was Stablecoins. So I'm assuming that's a term that might be unfamiliar to a lot of our listeners. So could you just kind of explain to us what are Stablecoins and why are they an important part of this kind of crypto ecosystem?

Tyler Frederick (16:35):

Yeah. So in contrast to Stablecoins, we sort of talked about how volatile cryptocurrencies are. Sure. So the idea behind Stablecoins is to get some of the benefits of blockchains and cryptocurrencies without the whole volatility piece. So Stablecoins, as the name implies, aim to be stable. They run on top of these blockchain networks. So Ethereum is a big one. Base is another one. Solana's another one of these networks, and the stablecoins run on top of these networks. Now, one of the very neat things about cryptocurrency is I can just go on my phone and create a wallet just like that, create a bunch of wallets if I want to, and then I can sling you funds. And depending on the network, it can get to you in a second or 10 seconds, definitely less than a minute. And if we contrast it with the wire process, if anybody's closed on a house recently or what have you, that's a stressful, you're like, it's in process and I have no clue what's ... I just hope it pops out at the other end.

(17:40):

In contrast, blockchains and cryptocurrencies, you have a lot of visibility into what's happening with that transfer and it can happen pretty quick. So with Stablecoins, the idea is to have a stable asset that can transact in the same sort of seamless way. So you can just create a wallet and you can receive digital dollars. And most often these stablecoins are tied to dollars. There are a couple big ones, Tether and USDC. So Tether is issued by Tether. USDC issued by Circle, which is now publicly traded. So that's the idea you get the ease of use of cryptocurrencies, but tied to a dollar. And I guess how the asset, how it's tied to a dollar is these companies keep assets, oftentimes debt instruments, oftentimes short-term debt like money markets, they keep those assets off chain. So you would send money to Circle, let's say, through the traditional financial system, and then they would mint you USDC tokens, which could then circulate on various blockchains as dollar equivalents.

Ben Smith (18:48):

Right. So essentially what I'm hearing you say is that you're trying to remove this volatility, as you previously said, of cryptocurrencies that can go spike way up and all of a sudden I had more than I thought that's great, but also they go down by 50% and boy, I thought I had a whole lot, now I have less than what I thought I have. So the stable part of, okay, there might be distrust of the US dollar and we're pegging to that. But now what we've done is we're using the speed of the network essentially to deliver things more quickly and we're able to use the network on the technological sense that maybe is off the old rails that we're using on the financial end. So appreciate that, Tyler, there. So also want to hear, we're hearing a lot about this term called tokenization and tokenization of finance.

(19:38):

Can you explain what that means and how we might see things like stocks, bonds, even real estate become tokenized in the future?

Tyler Frederick (19:47):

Yeah. So tokenization of finance means essentially blockchainifying a lot of the stuff that we see in traditional finance. So we've talked about how it's pretty quick and easy to send cryptocurrencies, pretty quick and easy to send stablecoins. Really, all you need is a wallet on your phone. Obviously you'd have something more robust if you were an institution. But if we think practically, when you place a trade in your brokerage account, that trade doesn't settle immediately. And when we say settle, if I place a trade right now, market's open, I can't actually take those dollars out of my brokerage account until the trade settles. Most often that's the end of the next business day. So that, again, contrasts with the whole, with blockchains, you can just send funds instantly. Now, there's a lot of history. There's a lot of processes and procedures built into why settlement doesn't take place instantly in the traditional financial system, but there's a lot of thinking about what if we could replace a lot of these antiquated processes and do a V2, version two, using what we've learned in the blockchain and cryptocurrency world.

(21:02):

So it doesn't require integrating cryptocurrency per se, but using some of these technical principles that we've learned from what blockchains and cryptocurrencies have taught us, some people have started thinking about the promise that holds.

Ben Smith (21:16):

And just bringing that back is, I'm just kind of thinking back a couple years ago, it feels like, and maybe it was more than that, but to settle a stock security was, if I trade today, it's two more business days on top of it. So literally take three days for you to receive the funds that you traded, and especially if you traded on the open at 9:30, you're really looking at three full days before you actually would get your funds. And to go down to T+ one, I was doing back flips at T+ one. I was like, "This is great." It's like, next tomorrow we can get this. This is great. But I can see where, Tyler, from what you're saying about tokenization, we might not even realize this on the front end that, hey, we were able to design this underlying system that was able to essentially verify the security and the underlying cash both sides to make sure that they're there, we can deliver it, and all of a sudden you're going to get cash into your account.

(22:14):

Maybe it's still, maybe it's end of day, but you could see where the compression of time continues to move so that it becomes more and more instantaneous, which I feel is the theme of what you're describing to us from just not cryptocurrency, but the tokenization part, the blockchain part, that is really kind of what's happening is this we're getting more and more instantaneous from a transactional sense.

Tyler Frederick (22:41):

I think that's right. I think that's a very real possibility that a lot of the benefits that we see from blockchain end up happening behind the scenes. And I think that's been one of the challenges for people who interact with blockchains is you need to know a lot about the underlying network and to kind of grock whatever it is you're doing, and that's not a good user experience. So I think the ideal user experience is making the underlying infrastructure basically as invisible as possible. I kind of think about when you turn on the faucet in your house, you don't want to be thinking about the pipes. If you're thinking about the pipes, that means that something's going wrong. You want the infrastructure to be invisible.

Ben Smith (23:25):

Yeah. Love that.

Curtis Worcester (23:26):

Oh, that's really good. That's really good. I want to change gears a little bit on you, Tyler. So back when we last spoke, again, it was five years ago, so 2021, I think a pretty big public critique of cryptocurrency was the environmental impact going into things like mining and that due to the energy usage. Fast forward to today in 2026, it seems like that environmental impact critique may have shifted towards AI and people saying seeing AI as this new energy hog. How has that conversation around infrastructure and power evolved in the crypto space in the last five years?

Tyler Frederick (24:10):

So Bitcoin's the last major, really the only major cryptocurrency where mining still exists. And I guess we can talk about mining a little bit. Mining is when, as we talked about previously, miners compete to be the next one to add blocks to the blockchain. And when you win that right to add blocks to the blockchain, add a block to the blockchain, you get mining rewards. So you get Bitcoin, newly minted Bitcoin, and you get a certain amount and it's dictated by the protocol. So it's again, trustless, it's just in the code and all that. That reward declines over time. If anybody hears about the halving or the having in the news, that's what that's talking about. So the mining play is essentially like everyone's competing for the same reward and winning the right to make the new block requires energy to do some of these computations.

(25:07):

So you want to get your costs as low as possible to obviously maximize your margin. Bitcoin mining can basically be done anywhere. So it usually, water flows where the ground's low, it flows to where the ground is lowest. So a lot of Bitcoin mining, just naturally given competition, capitalism, all that stuff, it tends to head where energy is cheapest. Now this tends to be places ... People forget about how ... It's actually difficult to move energy around. So it's costly to transmit it. So a lot of Bitcoin mining happens where there's a lot of energy production and not a lot of energy consumers. There's excess supply of energy. This so happens to often be renewables, actually. So for a lot of these reasons that a lot of the energy happens to be renewables, it can be turned on, turned off. So if consumers in the normal economy need a lot of energy for whatever reason, Bitcoin miners can be turned off without really any harm to the network.

(26:13):

Kind of for all these reasons, it's become less of a talking point, to your point, I would say publicly. And then the trajectory, it's sort of flattening and over time there are going to be less rewards. There are other challenges associated with that, but we'll leave that aside. For AI, the talking point's going in the opposite direction because everyone's seeing the kind of parabolic trajectory that AI is going through. And unlike Bitcoin mining, it's not optimal to just plop a data center down in the middle of nowhere where energy is cheap. For AI plants, data centers, you want to be where internet is good and where consumers are actively engaging with these AI platforms. So it's a whole different apology. So I think we're going to see a lot more about AI. I think that's going to become a major issue. I wouldn't be surprised at all if it becomes a political issue because you're going to have AI data centers competing for the same electricity that households are consuming.

(27:18):

And once some people say we're already starting to see it, but once we start to see price impact, like data centers driving up the cost of electricity for average folks, I think inevitably politics gets involved. So anyway, that's where I see some of that stuff going and we'll see how it plays out.

Intro / Outro (27:36):

Yeah.

Ben Smith (27:36):

Well, and you can start seeing some natural conflicts there too, where if we're located in the Northeast and inevitably is cold in the Northeast in the winter, and there's enough people that have switched some of their heating systems to be electrical away from oil and electrical grid prices go up on you and now it's less economical. But I want to go switch back to natural gas and oil. And if you have a Middle Eastern encounter that's happening that's driving up that too, man, there's a lot of vice that's happening there on people's wallets from a price perspective.

Tyler Frederick (28:12):

And those switches can't happen overnight either. So there's just friction and even switching some of these things over. So we'll see how this evolution plays out over the next ... I don't know. AI moves so fast, we'll see how it plays out over the next few weeks, I guess.

Ben Smith (28:28):

That's a good point.

Intro / Outro (28:29):

Yeah.

Ben Smith (28:30):

So Tyler, of course, as crypto grows, cryptocurrencies grows, so do the scams. And I know, of course, we being advisors ourselves have heard a bunch of these scams, but love to hear your take on what types of fraud or misleading schemes are you seeing today. And then second part of that question is, if I'm a retiree today, how do I spot the difference sometimes between a scam and a legitimate opportunity?

Tyler Frederick (29:00):

Yeah. And in past lives, I've worked in compliance at crypto companies, so we've seen a lot of this stuff. One of the good ways to think about cryptocurrency and stablecoins, really anything that happens on these blockchain networks. Think about them like digital cash, meaning if you forget your password and don't back it up, that's gone. If you lose your wallet with a hundred bucks of cash in it, that hundred bucks is probably gone, unless some good Samaritan fines you or what have you. So if you lose your password, it's gone, and if you send it to somebody else, it's gone. So if you put a hundred bucks of cash in a wallet and somebody deceives you and you mail that hundred bucks to them, you're not getting that hundred bucks back. Think about cryptocurrency in the same way. You need to be very careful whom you trust.

(29:51):

There are many, and this is a challenge for any new technology because it's hard to understand how it works when it's so novel. So It's very easy for people to just use slick terms, throw around technological jargon and earn people's trust. We see this time and time again. So be very careful about people who guarantee you a certain rate of return. That's textbook way to entice people. A lot of people psychologically manipulate people and they get them to feel bad for them or sometimes you have scams involving romance as kind of remarkable as that sounds. And then they con the person into sending them quantities of cryptocurrency. So I think it's especially dangerous. If people want to custody their own Bitcoin, meaning have a wallet on your phone and hold the Bitcoin or Stablecoins or any other cryptocurrency on your phone, it is up to you to secure that.

(30:54):

And I think especially if it starts to become any meaningful quantity, that's something to really wrap your mind around. One analogy back to traditional finance that most of us are familiar with, many of us hold gold ETFs or other precious metal ETFs. Many of us do not custody gold bars in our house. Good point. So one of the good things about having ETFs available is people can get price exposure to this asset class if they want it without as much of the operational risk of actually managing these assets on a certain device. So I would say certainly buyer beware. And if you take the plunge of actually custodying your own Bitcoin, think about it like now you have a digital wallet and a bunch of digital cash in it and all the risks that go along with that.

Ben Smith (31:41):

And to that point about, just think about if you did have gold coins and gold bars or whatever, and then you got to go invest in a safe and you got to go invest in making sure that obviously nobody knows about it. So you want to make sure that there's no publicity around anybody in your friend network or something that knows that you're storing all this money in your house because that's going to make you a target.

Tyler Frederick (32:05):

And just on that point, one of the interesting things about cryptocurrency is with physical gold, somebody needs to make it into your house and extract it. With digital currency, if you put your private key, which is the password to your wallet, if you just store that in iCloud or Google Drive or what have you, and a hacker gains access to your system, that can be gone instantaneously without you knowing it. And that's a very common way. Hackers, if they get access to somebody's system, they just have tools that look for cryptocurrency private keys so they can snatch it out from under you.

Curtis Worcester (32:39):

Yeah.

Ben Smith (32:40):

So I was going to ask- Yeah,

Curtis Worcester (32:42):

I was going to

Ben Smith (32:42):

Say- I was going to ask a companion then to that, Tyler, because I think this is something that's being talked about a lot right now is quantum computing. So not only, "Hey, you did all the steps we talked about. We don't have our key anywhere. It's not on a backed up on a cloud and we have it secured and nobody else has it. " But can you just kind of walk through this risk of A, what quantum computing is and maybe the risk to maybe our keys here and how maybe that could destabilize some of maybe our personal wallets.

Tyler Frederick (33:18):

Yes. So cryptocurrency blockchains, they involve very fancy mathematics called cryptography, hence the name cryptocurrency. And usually you have a public key, which is often ... I'm going to oversimplify a little bit, but a public key, which is known as an address, that you usually put publicly, hence public key address. And that's what you give to people when you want them to send you money. So think about it like your email address, right? That's public. Anybody can send you emails to that email address. Cryptocurrency address works the same way. Then you have a private key, which is essentially the password. If you want to send funds, you need the private key and you need to do a cryptographic fancy mathematics signature to prove that you own these funds. So again, kind of think about that as the password to your email. If you have the password, that's what allows you to get in and read emails and send emails.

(34:16):

So a lot of that relies on not being able ... So if you have the public key, you must not be able to guess the private key or you're in trouble.That's what cryptography is all about. The risk of quantum computing is that these super powerful computers designed in different ways can break down and figure out the link between the public key and the private key. So the danger is if networks and people don't react that quantum computers will figure out all the private keys and spend and they'll spend to wallets that they own, that they control. These are things that developers for all of these networks like the Bitcoin networks, like the Ethereum network, are thinking about this is not, knock on wood, this is not a risk that we see emerging tomorrow, but it is something that is rapidly approaching. It is something foreseeable.

(35:11):

So this is where it kind of becomes a coordination problem because there's no head of Bitcoin. There's no head of Ethereum for better or for worse. So it becomes a coordination game between these networks and whatever solutions each respective network rolls out, users might need to update wallets and all that jazz. That is one of the advantages of working with a custodian, somebody who's holding your assets for you is that's their problem. Now you need to trust your custodian, but if we're using anybody major and reputable and all that, they're going to react to that in all likelihood. And again, that's the advantage of using ETFs because you're not custodying your own cryptocurrency, but that is a real risk, but it's a foreseeable risk coming down the road.

Curtis Worcester (35:57):

Gotcha. Real quick on security before I move on to my next question. So let's just say cryptocurrency 101 here, somebody's listening, somebody decides they want to custody their own cryptocurrency. What's kind of the best practice on the private key side of the house? So I heard you, I know we said iCloud. I think a lot of us, myself included, probably put a little too much faith in the secure Apple password keeper on my phone, for example. What are the best practices there? Am I writing it down and putting it in a safe? What are you seeing there for private key safety?

Tyler Frederick (36:34):

The ironic part is yes. A lot of the private key safety practices and mechanisms and all that become a lot like old school, like physical security mechanisms. So yes, if you create a wallet on your phone or on your computer, you want to back up that ... So this is the challenge because you want to back up the private key because if you lose it, then your funds are gone. So you need to keep it, but you cannot keep it in an easily accessible place. A lot of times there are wallets that give you 12 keywords and if you know those that get you back into your wallet. So yes, you probably actually want to physically write those down in a book or somewhere. And probably if it's a meaningful amount of money, again, if it's more money, you probably want more hassle to get at it.

(37:26):

If it's less money, probably less hassled. But if you're storing any meaningful amount of funds on there, you probably want to put that in a fireproof safe or something like that. There are companies that sell kind of metal looking cards and you can etch your seed phrase into that so it doesn't burn up in a fire. There are companies that make physical hardware wallets. So a lot of them look kind of like a flash drive, but they don't have their own network connection and you need to plug them into a computer in order to spend the funds. So as came up earlier, you can spend a lot of money on a safe to store your gold. Same thing with crypto wallets. You can spend money on dedicated wallets to help you keep your funds safe.

Curtis Worcester (38:12):

Got it. I appreciate that little tangent there, but just security and scams lead to more questions. So I'll keep moving now where we're headed in the show. And so do you think retirees need to invest in cryptocurrency? I know we're not on this show to start dishing out a bunch of financial advice, but do you think cryptocurrency is something retirees should be investing in, or is the bigger takeaway maybe understanding underlying technology and how that might shape their overall financial lives?

Tyler Frederick (38:46):

Yeah, I think definitely one of the dangers of cryptocurrency is thinking about it like a get rich quick scheme. And that's the same with any investment opportunity. Thinking about looking for get rich quick opportunities is a great way to get ripped off. So I encourage everyone to not think that by putting a certain amount in Bitcoin, you're going to go from a poor place in retirement planning to a brilliant place overnight.

Intro / Outro (39:16):

That's

Tyler Frederick (39:16):

A recipe for disaster. I think if you have a financial advisor or anything like that, there are a lot of tried and true investment principles to ... That's your starting point. Your starting point is not get rich quick with crypto. There's the whole willingness and ability to take risk thing. So I think definitely depending on where each person household is with their retirement planning, some people can have the ability to take more risk. Some people probably want to play it on the more conservative side, as we've talked about. It's a very uncertain, risky asset class. I do think it's helpful to be aware of where all this stuff is going. I think more and more you're going to see digital currency, whatever precise form that takes, digital currencies affecting more and more companies, more and more places, sectors in the economy. So I think it's a good topic to know and be aware of.

(40:09):

I think for the scam conversation, it's certainly good to be aware of what you're dealing with so that you're not just blindsided by a random too good to be true opportunity. But yeah, I think in certain situations it can be helpful, but that's definitely a case by case basis would definitely encourage people to consult with their financial advisors on that.

Ben Smith (40:30):

So Tyler, I want to then ask a go forward question because again, we've been talking about the contrast of several years ago to today and kind of how it's changed, but let's now turn the mirror over here and look down the road a bit. So maybe from a Mainer's perspective, what are some more realistic and practical ways that they might encounter cryptocurrencies or blockchain everyday life in the next few years? Because I think we're starting to see cryptocurrency ATMs and you're like, "I don't know anything about this, but I see it at my local hardware store. They got a cryptocurrency ATM. I don't even know what that is. " So talk about maybe going forward, how we might see everyday person start interacting here.

Tyler Frederick (41:17):

I wouldn't be surprised if a lot of it happens behind the scenes. Sort of going back to our discussion earlier about you probably don't want to see how the plumbing works. Whenever you're turning on financial news and people are talking about the financial plumbing, that means things are not going well. So it's probably going to be a lot on the invisible side. You're going to be using your payment apps, like your cash apps or your Venmos or whatever. And perhaps some of this stuff becomes more invisible behind the scenes. Some of these companies like PayPal have talked about making your PayPal balance spendable as stablecoins. So maybe you don't even realize that some of this stuff is being facilitated by the Ethereum network or whatever network, but it just lands in your friend's account in a few seconds and you're good to go. So it wouldn't surprise me if a lot of this is invisible.

(42:10):

It certainly wouldn't surprise me if some of these cryptocurrencies continue to be looked at as kind of a general proxy for market sentiment and all this. Similar to how we see gold and silver, we tend to see cryptocurrency more on the speculative end, but I think there's a lot of potential innovation here in making money move more easily. I think a lot of that will be under the hood improvements. I certainly don't think that every Mainer needs to go out and download wallets and start slinging around cryptocurrency and stablecoins, or they're going to miss out on something big. I think a lot of it will happen behind the scenes.

Curtis Worcester (42:52):

Yeah. That's a really good answer there. Go ahead, Ben. Sorry.

Ben Smith (42:56):

Nope, that was it.

Curtis Worcester (42:57):

Yeah. So again, I was just going to say, I like that answer there because I think back to even our conversations about settlements and things, right? Maybe they feel it in their normal financial accounts, just like you're saying there. So I really appreciate that. So we've kind of reached the end of our conversation, Tyler. I do have one final question for you. You are now on a unique list of returning guests. So you have heard this question before, but I'm going to ask it again for both the listeners who maybe didn't tune into episode 41, but also want to give you an opportunity because as we've just spent time talking about how cryptocurrencies evolved, perhaps your answer to this question has evolved too. So I want to ask you, again, we're a show all about retirement success. So I want to ask you your personal definition of retirement success and again, maybe how it's evolved since the last time we spoke.

Tyler Frederick (43:49):

Yeah. Retirement success, so we all need to work to pay the bills and put food on the table and all that. And I think when we think about retirement, we're thinking, what if we removed that constraint? What could my life look like? So I think we always need to keep that in context because I think some of us fall into, I just like to see the number go up in my account and that becomes a fixation. And that's not why we do this. That's not why we plan. We plan so that we can live life without the constraint of needing to work a job to put food on the table for us and our families. So where are your priorities? That's what I would say. And I think we can always evaluate. We should always evaluate where our priorities lie. And if you haven't thought about that, if any listeners haven't thought about that, I would encourage them to.

(44:46):

I know for me, if you removed that constraint from my life and I just had more time to focus on what I wanted to focus on, I would be spending more time at church, like serving people. I would spend more time with my family and do trips and all that. So definitely encourage everyone to take inventory of what our priorities are because it's so easy for all of us to kind of get off track.

Curtis Worcester (45:12):

Yeah, that's a great answer.

Ben Smith (45:13):

Good answer. Yeah. Tyler, well, thanks for coming on our show. Again, I know this is a ever evolving thing and sometimes I think we hear it and people obviously talk about it at networking cocktail parties and stuff and cryptocurrency like, "Oh yeah, I'm all over it, but I don't even know what this is. " So good to get a little of maybe not a 100 level, maybe we went 102 today and just kind of get an update on where things are, but also just start building that fundamental level of that we're going to all talk in the same place. So appreciate you coming on and love to have you come on maybe sooner than five years from now, because I'm sure cryptocurrency and another year will be, I'm sure, in a very different place. So love to have you come on and maybe explain to us again where things are at maybe in 2027.

Tyler Frederick (46:09):

Awesome. Happy to. Thanks for having me.

Ben Smith (46:11):

All right. Thanks, Tyler. Take care. Well, this was a really great uptake to get. Cryptocurrency obviously might not be something that retirees or any one of us jump into head first, but it is really important to know, as Tyler said, what's happening around us,

Intro / Outro (46:27):

But

Ben Smith (46:27):

Also from a scamming perspective. I think there's, and you hear stories in the newspaper and somebody was told to go to a cryptocurrency ATM at their local convenience store and wire money out or crypto money out and stuff like that is just good to get a sense of what it is and where it's at. I

Curtis Worcester (46:47):

Was going to say, I also think, I know we focused on it a lot today, but the infrastructure behind it is always super interesting to hear about too. And how, again, you may not own cryptocurrency or may not want to own cryptocurrency, but the network around it and behind it, it sounds like maybe bleeding into our more traditional currency lives. So that's always super interesting to hear from Tyler's perspective as well.

Ben Smith (47:10):

Yeah. And just think about the speed of things that we encounter on a daily basis of somebody wants to go buy a car and they need money to buy that car and they got to take money out. So one, they got to trade maybe in some of their investments and then they got to move the investments to a bank account. And that takes a few days to verify. And then they got to send the check to the dealer. So if you had all these pieces, just boom, boom, boom, boom, boom, how much quicker those sorts of transactions would be. Again, you want it to be secure, which I think is part of why it's slow, is to make sure that there's security there and everything can be verified. But again, I think that's an interesting outtake of this conversation is I think the speed of execution of these things are going to continue to go increase.

(48:00):

And I think that that could be a very positive thing for all of us, especially our economy, is that the more our economy can transact, the more it can grow, and that influences things too. So we'll have a little bit more resources for you on our website, and this is episode 121, one, two, one. So if you go to blog.guidancepointllc.com/121, you can see more of the episode there, the transcript, a little bit more on Tyler there, but we really appreciate Tyler coming on the show. Good to catch up with them, but also hear what's happening in the cryptocurrency world for us personally. It's just good to know and for you as well. Hope you got something out of it. So appreciate you tuning in and we'll catch you next time.

Outro (48:48):

Ladies and gentlemen, you've just listened to an information filled episode of the Retirement Success in Maine Podcast. While this show is about finding more ways to improve your retirement happiness, Guidance Point Advisor's mission is to help our clients create a fulfilling retirement. We do financial planning so that people can enjoy retirement and align their monetary resources to their goals. If you're wondering about your own personal success, we invite you to reach out to us to schedule a 45-minute listening session. Our advisors will have a conversation with you about your goals, your frustrations, and your problems. Make sure you check out GuidancePoint advisors on our blog, Facebook, and LinkedIn, and you can always check out more episodes of this podcast on iTunes and Spotify. And of course, keep on finding your retirement success.