How we survived 5 years in the most dangerous market in the world.

In a past life I ran Tinker, the top cryptocurrency trading company of the mid-2010s. We traded billions of dollars worth of bitcoin and other currencies, and frequently topped 20% of all trading in the markets. The technology we built is now open source as part of the Gryphon Trading Framework, but many of the lessons from those years were not code, and are broadly applicable across many domains.

Taking risks in a domain with catastrophic events. To win, you have to survive. Code for this simulation at the bottom.

Exchange failures

  • Exchange founders go rogue and steal our money
  • Exchange gets hacked and hackers steal our money
  • Exchange gets shut down by authorities and funds are frozen

Directed Attacks

  • Our trading servers are hacked
  • Our laptops or phones are hacked or stolen
  • Founder is kidnapped/mugged and forced to hand over the keys

System Failures

  • A bug in a trading strategy makes a bunch of bad trades and loses all our money (e.g. Knight Capital)
  • A bug in our accounting logic causes our p&l numbers to be inaccurate, and lose money while we think we’re making money

Market Risks

  • The price swings rapidly while we’re in a big opposite position
  • Huge price drop causes company inventory to lose value

Expect the worst to happen. Plan how to survive it.

From this idea flowed hundreds of decisions about how to run the business, from how we chose what strategies to run, to how we set up our monitoring systems, to how we set up our information security. The starting point for how to approach any risk in our company was the assumption that our worst fears would come true.

Case Study I: The day a bug almost gave away all our money

One night in 2015, I was winding-down watching Buffy the Vampire Slayer at about 2am. My phone buzzed and I glanced over to see the home screen covered in PagerDuty alerts — I was on call that week. I got over to my desk quickly and saw that we were bleeding money at a disturbing rate: about 0.1% per minute. We’d be down 10% by the end of the hour. It was instantly clear that this was the worst trading error we had ever encountered, and if we didn’t stop it the company would be dead by the morning.

Case Study II: Trusting people you don’t trust

Every month a new headline like this
  1. Must have fiat currency deposits and withdrawals
  2. Must have a human contact we can get on the phone within a day

Details < Approach < Understanding

I’m sure I have four or five other case-studies I could turn into posts of their own. The details are interesting because they seem to be the answer to the title “How we survived five years in the most dangerous market in the world” As I’ve hammered home already, the reason we got the details right was because we had the right approach. Expect the worst to happen. Plan to survive it.

CEO at Tinker, Blockchain, Waterloo & SF