From Ancient Rome to Modern Crypto Assets: Lessons in Risk Management

Big risks can make you soar, unmanaged risks can make you collapse.

Written by: Bryan Daugherty

Compiled by: Block unicorn

Preface

• Clear objectives can effectively control risks
• Great risks can help you soar, unmanaged risks can lead to your collapse.
• As you climb, the room for growth will diminish, and you should reduce your position when the risk outweighs the reward.

Cryptocurrency and history are two of my passions. I can say that 80% of my waking hours are spent on these two topics. I've noticed that many of the people we remember aren't the ones who "succeeded" through good risk management. Usually, they are the ones who keep raising the ante until they collapse in an alarming way. Julius Caesar, Do Kwon, Alexander the Great, and Sam Bankman-Fried all acted in a similar way. An insatiable appetite for risk has brought them to the top of the industry, and that same appetite has led to their failures. The best performers in the long run are the few who are able to switch between risk-taking and risk-aversion as circumstances change and goals are achieved.

This article first explores two important adventurers and managers in ancient history, as well as their corresponding figures in the modern cryptocurrency industry. We will discuss some gamblers, the arrogant, and those who truly adjust their bets according to their goals, lowering risks appropriately after achieving those goals.

The Original King of Betting: Gaius Julius Caesar

Caesar was a mid-class Roman aristocrat who built his career with great charisma, superior strategy, and – most importantly – huge debts. He worked his way up the ranks, eventually rising to the rank of consul, but instead of waiting years for each position, he took on huge risks and debts to speed up the promotion process. After becoming consul at the age of 41, in order to avoid legal and financial reckoning, he increased his leverage and through bribery, and was appointed governor of Gaul in 58 BC for a five-year term. At the time, his debt amounted to about 10% of Rome's annual tax revenue—about 133,333 soldiers' monthly salaries, or about $333 million today. (* The conversion formula assumes that a Roman legionnaire earns an annual salary of 900 Sesters, which, when simply calculated, is equivalent to the salary of $30,000 for the average soldier in modern America.) ）

After maximizing leverage, Caesar invaded Gaul. Failure means bankruptcy, exile, or execution. During the siege of Alesia, a reinforcement of 250,000 men approached from the rear. Any sane general will withdraw from the camp. But Caesar's meteoric rise to prominence not only had the confidence of hubris, but more importantly he had no choice: he was mired in debt, both financial and legal, and his tenure as governor (which gave him immunity) was coming to an end. So he doubled down on his bets, held his ground, and built an additional outer wall. Now, about 70,000 Romans face about 320,000 Gauls. (** These numbers of soldiers are estimates provided by ancient Caesar and may be exaggerated.) ）

Alesia is a fortified city in northern Gaul, and it is the last stronghold of the Gauls led by Vercingetorix against Roman rule.

Caesar won. Gaul was conquered. This victory resulted in him a great fortune – at least on paper – but much of it was locked up in illiquid assets (mostly slaves). As the governor's term drew to a close, the Senate issued an ultimatum: "Go back to Rome and take responsibility for your crimes (and debts)." Caesar always seized the opportunity he saw, and the consequences could be considered later. Now it was "later", and he felt that he had no choice. Again risking his life, he led a legion across the Rubicon, declaring that "the dice have been rolled" (Alea iacta Est).

The Rubicon River marks the local boundary of Italy, crossing it means declaring war on the Senate.

No one expected this bold and unprecedented move. Rome had no garrison; He captured the city, fought a civil war, and won. He is now the sole master of the Roman world. But he was not satisfied, and he set his sights on the title of "King of Rome". Ignoring Kelly's criterion (you should only bet on the portion of your capital proportional to your advantage, beyond which it will inevitably lead to long-term bankruptcy), he once again went all-in. This last transaction blew up his account: instead of receiving an email from Binance, he was stabbed twenty-three times in a row by a group of veterans. The risk appetite that propelled him to the pinnacle of power also cost him his life.

The Rise of Octavian

After Caesar's death, he adopted his 18-year-old nephew Octavian, but Caesar's general Mark Antony prevented the inheritance. Octavian used the inheritance as collateral to borrow approximately $2.5 billion—about 750% of Caesar's original debt—to enhance his reputation and raise an army. This seems like Caesar 2.0, but it is a calculated move with a clear objective: Octavian is pursuing a clear goal, not playing for the sake of the game.

Octavian was renamed Gaius Julius Caesar, and later became Gaius Julius Caesar Augustus. Roman names are very complex, so in this article we will refer to him as "Octavian."

He knew that stagnation could mean death; taking on debts and risks gave him the chance to survive and succeed. He won more civil wars—first against the Senate, then against Antony. After becoming the sole ruler of the known world, he realized that the returns on further risks were diminishing. He refused the title of "king" and chose to be called "first citizen" (princeps), publicly showing respect for the Senate while secretly manipulating everything. After achieving his goals, he transformed from a high-leverage risk-taker into a conservative administrator, ruling Rome for forty years and establishing a dynasty that lasted nearly a century.

In every journey, clear goals can effectively control risks. If you don't know what "victory" is, how can you win? Goals will keep shifting unless you fix them.

Continuous gambling can lead to addiction; whether out of necessity or pure pleasure, we constantly find reasons for more risks until we become our own greatest enemy.

Do Kwon

Similar to Caesar, Do Kwon was born into an elite family in South Korea. He built his career through personal charm, strategy, and—again emphasizing—massive leverage.

The Terra/Luna reflexive stablecoin system he created relies on perpetual debt. For every dollar the system absorbs, it incurs more debt, so there isn't enough capital to end the game. Every UST milestone is achieved through borrowed capital; Unlike Caesar, Do Kwon had no "Gaul" to conquer - no calculated bets, just leverage for the sake of leverage. He took the risk to the end, and ended up in a cold prison cell in Montenegro. Something that cost Caesar his life, also made Do Kwon lose his freedom.

Do Kwon was arrested in Podgorica on March 23, 2023, while attempting to flee to Dubai using a fake passport.

Sam Bankman-Fried (SBF)

SBF, the founder of the bankrupt exchange FTX, used customer funds to support the platform, purchase global influence, and finance various adventurous projects while living a lavish lifestyle. He raised $1.8 billion, pushing FTX's valuation to $32 billion, and maintained direct contact with Washington. Like Octavian, he took enormous risks with a mindset of dominating the world. But while Octavian learned from Caesar's fatal overreach, SBF did not: he went all in time and again. If he had pulled back in time, he could have paused the fraud and slowly filled the gaps in FTX's balance sheet; but he doubled down and ultimately lost everything. His ending did not have to be so tragic.

SBF entered the court in New York in 2023.

Zhao Changpeng (CZ)

CZ bets everything on speed and regulatory gray areas. He raised funds for Binance through ICOs in mainland China. Binance fully capitalized on regulatory arbitrage: allowing deposits and trades without KYC, listing trading pairs at will, and offering 125 times leverage on obscure trading pairs - it could be said that he is running a casino.

The rebound in the future is obvious and unavoidable. CZ's bet is that he will grow large enough to make it all worthwhile and have enough capital (including financial and political capital) to mitigate the consequences. This reckoning comes in 2024 when he is sentenced to 4 months in a minimum security prison in the U.S., and Binance is also forced to pay a $4.3 billion fine. It can be said that SBF seeks leverage in customer deposits, while CZ seeks leverage by putting himself under law enforcement actions. It is safe to say that if Binance had not developed to its current scale, the regulatory measures he faces would be more akin to the decades-long sentences faced by the developers of Tornado Cash, and the entire industry's view of this "best ever" CZ would be completely different.

Conclusion

Caesar's goals rose steadily with his success, so he needed infinite leverage—statistically speaking, his bankruptcy was just a matter of time. In contrast, Octavian took his entire portfolio to take risks early on (the best time for risk, with minimal venture capital), but as the scale of capital grew and returns dwindled relative to his goals, he gave up on taking risks.

Do Kwon built the entire system on leverage, not as a means to achieve goals, but as the goal itself. Like Caesar, he ultimately faced "forced liquidation." SBF's path did not have to be so tragic. He made decisions that were morally questionable, highly illegal, and with extremely high leverage—though almost all great historical figures have done so. The key difference is that he failed to reduce risk as returns diminished. In contrast, CZ is well-versed in this.

Leverage is an extremely powerful tool. If used properly, it can maximize the chances of positive expected value and lead to life-changing decisions. However, misjudgment or over-leveraging can ruin you. My biggest takeaway is to make leverage a habit—becoming numb to unleveraged returns—which statistically leads to destruction. Constantly increasing targets will ultimately leave you far below your initial goals. Clear objectives can effectively control risk.

"Every battle has an element of luck; ignore luck, and disaster will follow" — Loading screen of "Rome: Total War"