Cryptocurrencies & Blockchain · 18. George Soros 19. Phil Knight 20. Michael Dell 21. Laurene...
Transcript of Cryptocurrencies & Blockchain · 18. George Soros 19. Phil Knight 20. Michael Dell 21. Laurene...
Cryptocurrencies& Blockchain
The greatest wealth creation opportunities of our lifetimes?
2018
WHOAREWE?
• WHY? WHY INVEST IN EARLY-STAGE TECH?
• WHAT? WHAT ARE BLOCKCHAIN & CRYPTO?
• HOW? HOW TO INVEST STRATEGICALLY?
TODAY’SROADMAP
DIGITAL&BIOTECHNOLOGYREVOLUTIONS
COMPOUNDINGINNOVATIONS
THE FIFTH ERA
GREATESTWEALTHCREATIONEVER
- POPULATION
- GDPPERCAPITA
- GLOBALIZATION
X
GLOBALPROFITPOOLSINFLUX
WORLD’SMOSTVALUABLECOMPANIES
1. Bill Gates2. Warren Buffett3. Jeff Bezos4. Mark Zuckerberg5. Larry Ellison6. Michael Bloomberg7. Charles Koch8. David H. Koch9. Larry Page10. Sergey Brin11. S. Robson Walton12. Jim Walton13. Alice Walton
14. Steve Balmer15. Sheldon Adelson16. Jacquelin Mars17. John Mars18. George Soros19. Phil Knight20. Michael Dell21. Laurene Powell Jobs22. Len Blavatnik23. Paul Allen24. Charles Ergen25. Carl Icahn
US’SRICHESTPEOPLE
68% FIRST GEN, 72% TECH, 88% GLOBAL
HIGHESTRETURNINGASSETS
32%
24%
12%
11%
10%
3%
EarlyStageVCIndex
USVCIndex
LateStageVCIndex
NasdaqComposite
S&P500
BarclaysGovtBondIndex
ANNUALRETURNSOVER25YEARS(%)
MORETHAN97.5%ONSIDELINES
USACCREDITEDHOUSEHOLDPARTICIPATION
WEIGHTOFINERTIA:
1. INDUSTRY2. INTERESTS3. NOACCESS
&MISINFORMATION
• WHY? WHY INVEST IN EARLY-STAGE TECH?
• WHAT? WHAT ARE BLOCKCHAIN & CRYPTO?
• HOW? HOW TO INVEST STRATEGICALLY?
TODAY’SROADMAP
PwC’s Digital Services 15
WHATISBLOCKCHAIN?
PwC’s Experience Centre – China and Hong Kong
Whatisbitcoin?
Anunregulated digital virtual currencybasedonblockchain technology.ItisusedtoprocessP2Ptransactionsandofferslowertransactionfeesthan
traditionalonlinepaymentmechanisms
Adecentralised publicledgerofalltransactions,essentiallyblocksof
validatedandcryptographictransactionschainedtogetherby
mathematicalalgorithms
Whatisblockchain?
Source: PWC
How blockchain works
Distributed ledgerEvery participant in the network has simultaneous access to a view of the information
CryptographyIntegrity and security of the information on the blockchain are ensured with cryptographic functions
ConsensusVerification is achieved by participants confirming changes with one another, replacing the need for a third party to authorise transactions
Smart contractsThe ability to run additional business logic means that agreement on the expected behaviour of financial instruments can be embedded in the blockchain
Source: PWC
Blockchain benefits
Reduction of costs &
complexity
Shared trusted transactions
Reduction of fraud
Audit trail & transparency
ResilienceSecurity & Immutability
BLOCKCHAINANDITSBENEFITS
BLOCKCHAINACROSSINDUSTRYSECTORS
Additionalcompaniesexploring blockchainsolutions
Stake-holders arecommitted
Wine Tracking� Associate each bottle of
fine wine as unique physical assets to create a traceable, pseudo-anonymous, decentralized, permanent historical archive all transactions to make digital provenance a reality
Gold Trading� Quick, transparent, and
easy access to bullion markets to ensure investing in physical gold is simple and efficient
Diamond Certification� Blockchain technology
based around Hyperledger Project to enhance security and traceability of Kimberly Process Certificates to prevent fraud against global diamond trading
Real Estate Contracts� Start-up company
building a land title registry for the citizens of Honduras to prove and defend land titles for the first time
Commodity Trading� Digitization throughout the
energy industry has ripple effects in oil production, refining, and shipping as cargo traders are passing title from buyer to shipper to seller through standardized blockchain contracts
Produce Tracking� International connected
supply chain systems built using the blockchain verify pork suppliers, shippers, and buyers involved in moving products across countries
Source: PWC
REDESIGNINGTHEINTERNET
Global Connectivity
Interactivity
Accessibility
Scaleability
The InternetDesigned for Communication,
used for Commerce
Flexibility
Concentrated Insecure
Opaque Unverified
Distributed Secure
Public VerifiedPermanent Timestamp
Weaknesses
Blockchain
Strengthss
Temporal Indeterminancy
CRYPTO-ASSETS
21
$1 $31 $9 $235
$3,700
2009 2010 2011 2012 2013 2014 2015 2016 2017
CRYPTOCURRENCIESANDCRYPTO-ASSETS
A crypto asset is a medium of exchange, created and stored electronically in the blockchain, using encryption techniques to control the creation of monetary units and to verify the transfer of funds. It is not issued by any central authority.
What is a crypto-asset?
Then… … NowThere are over 1,500 coins and tokens globally(as of 2/23/18)
The total market cap of all coins and tokens $455B(as of 2/23/18)
Global token sales $millions
All crypto assets are not created equally…
Source: PWC
WHYDOCRYPTO-ASSETSREQUIREATTENTION?
Market catalysts that necessitate an assessment of Web 3.0 and decentralized models:
Emergence of decentralized digital workforce models
Entrepreneurs are moving faster than regulation
Developer roles in increasingly digital lives
Public discourse around security
Global conversation around data ownership
• Public unease around the concentration of data ownership in the vaults of Big Tech (GAFAM)
• Protocol layer behind web 2.0 covers data transfer, messaging, and security, but not ID and data ownership
• High profile data breaches of the most sensitive financial data
• Adoption of tokenization and the use of multi—factor authentication to protecting static data
• C-suites challenged to become digitally competent
• Incentive structures shifting towards developer channels
• Law suits in IP and non-compete clauses as developers move between corporates
• Test and/or launch in services that leverage cryptocurrencies (i.e. accepting cryptocurrencies for payment, raising capital through an ICO, committing teams of developers to investigate use-cases, and identifying partnership opportunities.
• Potential industry inflection in workforce across sectors: legal services, financial contracts, digital ID.
• Industries with high levels of commoditization are most likely to adopt decentralized networks
Source: PWC
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INITIALCOINOFFERINGS(ICO’s)
ICOSEXPLODEDIN2017(>$5BN)
Source: https://www.icodata.io (Accessed on 8 Jan 2018)
ICOVS.IPO– SOMEFUNDAMENTALDIFFERENCES
ICOs represent the sale of digital assets providing access to
an early-stage project or concept
They align much closer to venture
funding than investments in public
companies
Unlike equity, the digital tokens do not
offer ownership in the venture
Source: PWC
ADVANTAGESOFDOINGATOKENSALE
An effective way to raise capital for a blockchain-based
project
Allows to put together talented team fairly quickly
Removes many of the hurdles present in the equity capital
raising process
Allows the setup and build of an
ecosystem
Provides optimal visibility in market
Receive funding without diluting equity
or control
Source: PWC
CRYPTOINVESTMENTS– THEREALITY
TaxAs ICOs are a nascent phenomena, most tax authorities do not have specific regulations in place yet. Whilst many ICOs tried to position themselves as a ‘foundation’ or ‘non-profit’ in the early days, way fewer are exploring such models today opting instead for a for profit model. The recent rise in Bitcoin and other cryptocurrencies has caught the attention of tax authorities around the world as well
Cyber-securityMany ICOs still lack proper cybersecurity which can represent a major threat for investors. As most ICOs raise money in the form of cryptocurrencies (e.g., Ether and Bitcoins), high-volume transactions provide an attractive target for criminals. Beside ICOs, several cryptocurrency wallets (where tokens/coins get stored) have been hacked.
RegulationWorldwide, regulators started to look into ICOs, and took different approaches. While some jurisdictions are mainly positive towards the new funding method (e.g. Switzerland, Hong Kong, Singapore), others are rather concerned or intervene actively (e.g. USA, China).
Source: PWC
• WHY? WHY INVEST IN EARLY-STAGE TECH?
• WHAT? WHAT ARE BLOCKCHAIN & CRYPTO?
• HOW? HOW TO INVEST STRATEGICALLY?
TODAY’SROADMAP
LESSONSOFTHEINTERNETBOOM/BUST
Environment• Many companies were formed• Most failed (e.g. Fintech)• Everyone had a hot dotcom deal• Valuations took off, then crashed• A few big winners emerged
Investment• Value was captured early• Diversification was smart strategy• Inside deals and circles won big• Best VC’s captured highest returns• Access diminished over time• Fund of Funds provided access
Environment• Avoid the herd• Avoid high valuations• Avoid publically shopped deals• Avoid unknown players• Avoid market timing strategies
Investment• Invest in early stages• Diversify• Gain access to insiders• Be an LP in insider VC’s/Funds• Get in early to emerging stars• Consider quality fund of funds
Internet/Dotcom Observations Blockchain Investment Strategies
• ICOFunds (e.g.PanteraICO)
• Direct ICO
• Cryptoasset Funds(e.g.Polychain)
• DirectAltcoin purchases• Singlecoinvehicles(eg.
GBTC)• CoinsinExchanges
(Coinbase)
• FundofFunds(e.g.KCBFOF)
• VCFirms (e.g.BCP)
• DirectInvestments
• FundofFunds(e.g.Bitbull Capital)
• Baskets(e.g.Bitwise)
• ETFs(OnceApproved)
INVESTINGINBLOCKCHAIN&CRYPTO
Blockchain Cryptoassets
TraditionalFunding Approaches
EmergingFundingApproaches
Smartinvestorsseekactive,diversifiedinvestmentapproachesinrapidlyemergingassetclasses
PLACEHOLDERCAPITAL
PLACEHOLDERCAPITAL
MOSTACTIVEBLOCKCHAINVC’S
PLACEHOLDERCAPITAL
BCP:SELECTEDINVESTMENTS
PANTERA:SELECTEDINVESTMENTS
CRYPTOHEDGEFUNDS
• LaunchedthefirstdigitalassetfundintheUnitedStates
• ManagedbytheformerHeadofMacroTradingatTigerManagement,advisedbytwofoundersoftop10cryptocurrencies
• Quantitativeandqualitativestrategies
• Closedfund
• Backedbytop-tierventurecapitalcompanieslikeAndreessen&Sequoia
• Long-only,fundamentalvaluestrategyfocusedonprojectswithtechnologicaldifferentiation
• Introduction-onlyfundwith$1Mminimuminvestment
• Backedbytop-tierventurecapitalcompanies
• Mixed-strategyfocusedonvalueappreciationandevent-driventrading
• ICOFunds (e.g.PanteraICO)
• Direct ICO
• Cryptoasset Funds(e.g.Polychain)
• DirectAltcoin purchases• Singlecoinvehicles(eg.
GBTC)• CoinsinExchanges
(Coinbase)
• FundofFunds(e.g.KCBFOF)
• VCFirms (e.g.BCP)
• DirectInvestments
• FundofFunds(e.g.Bitbull Capital)
• Baskets(e.g.Bitwise)
• ETFs(OnceApproved)
OURINVESTMENTSTRATEGY
Blockchain Cryptoassets
TraditionalFunding Approaches
EmergingFundingApproaches
Smartinvestorsseekactive,diversifiedinvestmentapproachesinrapidlyemergingassetclasses
KCBFOF
BitBull
Bitwise
Fifth Era Blockchain
CONCLUSION
MINDSET• TRANSITIONINGINTOANEWFIFTHERA• GREATESTWEALTHCREATIONEVER• VALUEISBEINGCAPTUREDEARLY
BEHAVIORS• MORETHAN97.5%AREONSIDELINES• WEIGHTOFINERTIA/MISINFORMATION• MANYWAYSTOPARTICIPATE/PROSPER
ACTIONS• 2018ALIGNSTRATEGIES/ASSETS• CONSIDERBLOCKCHAIN/CRYPTOALLOCATION• TALKTOUSTOUNDERSTANDOPTIONS