A Personal Invitation To Institutional Investors To The Cryptocurrency Industry

Dear institutional investors from the USA and all over the world. As the cryptocurrency industry progresses, the need of some decentralized and trustless systems have gained traction, and now is the time to invest is as we are still on early stages and development. There might be some factors pushing you away to invest some part of your portfolio, but keep in mind that people who invest in the future, are always the biggest winners.

Investing in cryptocurrencies means investing in the technology behind it, impact, experienced teams, roadmap, vision, and community just like an early stage startup. The difference is that instead of getting equity stake in a startup that has 90% of failing and never seeing your initial investment again, you get easily liquidated tokens that can go up and down depending on a lot of factors surrounding the project. ?? ??

Blockchain technology is able to improve or disrupt outdated systems like the banking, real estate, healthcare, supply change management industries with trustless technology without the need of a third party. Again, not every company has the need to use blockchain, but the ones that do, can benefit tremendously.

Right now we have witnessed some scams within the industries, but they will go away as people are able to differentiate the good parties vs the bad ones. In crypto, everyone can invest in, but big whales can have a bigger impact in the industry as more capital rushes in, and the race to digitize $80 Trillion+ assets is on.

History of cryptocurrencies and bitcoin

If you may have not known, bitcoin was not the first use case of cryptographic transactions and digital currencies. David Schaum invented ecash as the first digital currency, followed by Hashcash which introduced Proof of Work and other attempts of creating a secure, trustless, and decentralized cryptocurrency. Satoshi Nakamoto learnt from the failed attempts, and in 2008 introduced bitcoin in his whitepaper that will revolutionize digital assets and currencies. Using cryptography as a secure way to transact in an anonymous and trustless manner, blockchain technology to record decentralized transactions, private and public keys to identify accounts, and a proof of work consensus to make sure no one is cheating the system.

It took some time to gain traction, early stage developers worked on the open source protocol to improve it and find new ways to use and leverage bitcoin for the common good of the world. Laszlo Hanyecz, was the first to purchase a good with bitcoin, trading 10,000 BTC for two pies of pizza and Vitalik Buterin leverage blockchain to introduce programmable contract called “smart contracts” that takes away the need of a third party verifying untrusted parties.

We have come a long way from cryptocurrencies beginnings and now are ready for maturity stage of the technology. Before we delve in, we have to understand there is a difference in investing in security and utility tokens. Utility tokens allows a token holder to use their platform for a specific task (it is not an investment tool). Binance Coin is used to trade against other cryptocurrencies within their platform, and Filecoin will be used as a currency to store files within a decentralized network. Security tokens are meant to create a profit for an investor. Platform such as tzero, Polymath, and Harbor are working to launch a security token focused offerings.

Swiss FINMA has the best description of different ICO categories (utility, security, and payment).

Why now is the time to invest in cryptocurrencies

• Security ??
• Regulations ??
• Technology Development ??
• Usability ??
• Global Adoption ??
• Education ??
• Liquidity ??
• Interoperability ???? ??
• ROI ??
• Major blockchain companies involved to help bring in institutional investors ??

Security

Cryptocurrencies have three layers of security: Coin/tokens, Exchanges, Wallets (According to Forbes).

The first layer of security depends on the protocol of the token/coin invested in. Bitcoin, Ethereum, NEO and major cryptocurrencies have communities of developers working on the security aspect and finding bugs constantly to make a better network. Their open source code, allows anyone looking to help make a better cryptocurrency can find open source code in a respective projects github account.

The second layer of security relies on the exchange trading a respective token/coin. Hacks and theft have put cryptocurrencies on red alert for potential investors with millions being stolen from users mainly because of irresponsible executives storing token in a single hot wallet. Exchanges such as Bithumb and Huobi have taken action towards a safer environment and gave their clients an assurance that they will refund any token stolen related to any hacks. Decentralized exchanges is another answer to hacks due that tokens are not stored in a single account but is truly peer to peer network.

Wallets is the third and last layer of security. Major cryptocurrencies have built in wallets that provide private keys straight to the user. Remember that if you don't own your “private keys” for example holding in a exchange, then you don't really own your tokens.

I suggest holding your cryptocurrency portfolio in personal wallets, Exodus is an offline wallet provider with multiple cryptocurrencies to hold on in a cold storage manner.

Regulations

A regulatory system varies on countries, but many are waiting for the most advanced countries such as the USA, Japan, and South Korea to implement a fair system for them to follow. Malta has been a pioneer country to develop and implement friendly laws regarding blockchain advancement that has attracted major companies in the industry such as Binance.

Japan is building a clear framework how cryptocurrencies and ICO should operate in their country. According to Bitcoin Magazine:

Prompted by a desire to protect consumers and the FATF’s recommendations, Japan revised its Payment Services Act. The new law, which went into effect in April 2017, does two things. First, it legally defines virtual currency as a form of payment. (Japan still does not define bitcoin as legal tender, but acknowledges that you can use it to purchase things with.) Second, the law requires any virtual currency exchange that wants to do business in Japan or solicit its citizens to register with the country’s Financial Services Agency (FSA).

Now exchanges operating in Japan are accountable to their customers, to bookkeep, store assets in different wallets than exchanges, report audits, comply AML/KYC regulations and provide business reports.

In the USA, SEC chairman Jay Clayton recently categorized bitcoin and ethereum as commodities and securities. He still considers most ICOs as securities. This is the beginning of a clear regulatory understanding of the industry that can take some time to take into effect but it seems to be on cryptocurrencies side.

Check out Coin.Dance for current regulations in your country.

Technology Advancement

We investors want to know how a certain technology product is holding on to its potential. Most ICOs consist of promising ideas written in a prolific and selling manner whitepaper. As the ICO boom of 2017 hits one year, most successful ICOs have already delivered products to the public or beta released depending of funds raised and complexity of problem they are solving. EOS recently launched their main network leaving Ethereum's network to allow developers to interact with their own Delegated Proof of Stake consensus that can reach a scalability of thousands of TPS.

Bitcoins developers are still working on Lightning Network that will allow global micro payments and a clear competition of venmo and Visa (Visa holds 50,000 TPS, Lighting Network promises 100,000+ TPS due to their 99% off chain nature). BAT is testing their token distribution to content creators and viewers with a partnership with Twitch in place and Ripple is providing technology to Santander for their cross border transactions.

You can check github to analyze open source protocol development.

Usability

Cryptocurrency adoption has come en masse even as the price drops. The first company to accept bitcoin as payment was the Electronic Frontier Foundation, a non-profit group, back in 2011. Expedia, Overstock, and other major companies followed to accept the popular cryptocurrency as payment. Hundred of Thousands of merchants already accept bitcoin and other major cryptocurrencies as payment ranging in different industries. From buying clothes in Balboa boutique in Panama, to food delivery services in Germany.

There is a Brazilian entrepreneur testing bitcoin micropayments for clients to purchase a cup of coffee by scanning the QR code in the coffee machine. He plans to use Lightning Network to allow even more and faster transactions for their customer to purchase coffee. Civic, an identity verification platform (IDV) launched a beer vending machine that handed out free beers for anyone providing their IDs and proof of over 21 of age in the 2018 Consensus conference. to Other popular cryptocurrency accepted are Litecoin, Bitcoin Cash, NEM, Verge, and Ether. Cryptocurrency adoption is correlated to a countries regulations due that the more friendly it is, entrepreneurs will test crypto acceptance (hence Germany).

There are currently 25,349,936 (+0.48% this week) Bitcoin wallet accounts worldwide. Facilitating wallet generators for average users will bring mass adoption. (I have a few ideas on how to fill this gap as well, hint it involves South America).

Global Adoption

Aside from citizens adopting cryptocurrencies, government are also testing the market. From the launch of the Petro (scam or not), government has shown interest and potentials in blockchain technology and use it for a more stable and secure store of value, supplement to local currency, and cross border payment settlement. Seoul, South Korea holds some of the biggest demand in the cryptocurrency market amongst, even its mayor Park Won-soon announced the plan has shown interest in creating a capitals digital currency (S- Coin) during an interview with Coindesk.

Liberland is a constitutional republic within disputed land with an area of 7KM2 bordering Serbia and Croatia. Its president and entrepreneur Vít Jedli?ka proclaimed the land as his own due to that no border country claim it as their own. Now he is fighting legally for independence and in the meanwhile has proposed bitcoin as its national currency, and invited interested people to obtain Liberland citizenship with bitcoin once independence is imminent to happen.

Education

Knowledge of the industry is an important gap to be filled to attract institutional investors and regular investors alike. During the 2017 astronomical rise, investors were pouring in money to an asset they had little understanding of. Hyperledger, RSK, and Blockhain@Berkeley offer intensive open source blockchain educational content for anyone looking to understand this technology and make better investments. Universities such the University of Nicosia and the London School of Economics are certifying students in blockchain technology as well for a fee.

We at LATAM Blockchain Solutions together with LumitBlockchain Technologies are making sure every Latino institutional investors and regular citizens alike are informed about the technology, so they will be prepared for the next soar in valuation. Before mass implementation we believe we should focus on education. We provide content in Spanish online, offer universities prolific semestrial blockchain courses as well as organized personalized seminars for investors, banks, VCs, and Real estate agencies. Please reach out for a free consultation, and subscribe to our email newsletter (spoiler we provide daily blockchain podcasts all in Spanish).

Liquidity

Digital asset liquidation has been a major plus to the cryptocurrency world. Companies such as Circle, Coinbase, crypto ATMs, and online brokers allow any verified investor liquidate their digital assets in a matter of seconds. Depending on how you use cryptocurrencies, certain liquidation factors measure better than competitors. If investors use bitcoin as a store of value (gold and silver), bitcoin is far more faster and easier to exchange. If used as a supplement currency to local (Venezuelan Bolivar, Argentine Peso, Zimbabwean dollar), exchange to other currencies is much easier intimes of crisis and volatility is not a concern in this case (Venezuelan Bolivar hyperinflating 25,000% this year!). Also in the future when blockchain technology tokenizes assets such as real estate, fine arts, paintings, diamond etc, you will be able to liquidate/trade your 10% token stake in the Monalisa (if tokenized) in a matter of seconds with all commands and agreements set in place within a smart contract.

Imagine being able to liquidate a startups shares before their exit? 90% of startups fail, so for a VC looking for a short term strategy, this opens the gates for a lot of new opportunities. Had early stage investors noticed the promising Theranos startup imminent failure, they could of have exited their holdings while being pessimistic about the future of the startup had Theranos launched an ICO or token offering/crowdsale. (Equity tokenization is still under development due to technology, and regulatory systems not in place).

Interoperability

As the race of building the best blockchain started once developers realized the need of building the technology infrastructure, it has become a recent trend to connect them all. Bitcoin, Ethereum, NEO, EOS, Tron, Qtum, Orbs, and Waves are some of the most known public blockchains out there. Sidechains and vertical solutions to interoperabilate computational power has facilitate increase in TPS (transactions per second), information and data storage in bigger blockchains, communication and trust between networks.

If for example Wal Mart uses Ethereum's blockchain for its supply chain management, Fedex uses EOS, and a coffee farm in Colombia uses Orbs to store information there has to be a system to connect them all in a decentralized manner. Projects such as ARK, Rootstock (RSK), and Plasma are example of side chain blockchains.

ROI

Some investors see high risk, high reward in crypto. So far bitcoin and other cryptocurrencies have been the biggest creation of wealth to early adopters, so astronomical Return Of Investment is a known fact for institutional investors. Bitcoins rise from pennies to an ATH valuation of $20,000, Ethers reaching $1,400 ATH from $11 in a year and NEO (previously Antshares) reached an ATH of $150 from $4 early January.

ICOs have shown tremendous returns as well early stage. NXT saw a ROI of ~695,250% ($0.0000168-$2 ATH), IOTAs return was ~282,300% ( $0.001-$4 ATH) and Stratis ~42,000% ( $0.007-$22 ATH). Numbers like these attracted investors worldwide, if you had invested $100 in NXT ICO back in 2013 and sold at ATH in 2017 you would have ~$695,250! Consider that 90% startups fail and early stage VCs take such risk into measure but still present good ROIs.

Let's talk about Snapchats ROI after their 2017 IPO, were investors were first able to exit their holdings. Benchmark was the leading investor in the young companies series A funding, obtaining 140.58M shares $0.10 each investing $14.58 Million in 2013. In 2017 the ROI was 16,207% with a valuation of $2.4 Billion. Monster returns no?

Now what if Benchmark had invested those $14.58 Million in Bitcoin back in 2013? This would equal to 602,479 BTC ($24.79 per BTC) for a total worth of $3,747,644,405.0 (+25,704.0%) at a $6,300 current offering. See, there is over $1 Billion in differences, and that wasn't even bitcoins cheapest token offering. Lets compare those $14.58 Million invested by Benchmark to Snap if it were invested in NANO (previously Raiblocks). Now NANO was created in 2017, so their profits would be $3,976,474,409.2 (+27,273.5%), in just one year!

Tips on how to invest in good cryptocurrency projects: 1. read the whitepaper, understand it, analyze feasible roadmap, vision, promises and adoption. Remember that many projects are tackling complex problems. 2. Check github for advancement of project and community commitments. 3. Team, check their background, experience and products shipped. 4.Research, due diligence and invest 5%-25% of your portfolio!

Here are some major VCs invested in cryptocurrency already: A16Z, Union Square Ventures, Pantera Capital, Digital Currency Group and Blockchain Capital.

Major blockchain companies involved to help bring in institutional investors

While cryptocurrency startups such as Vechain and Civic are focusing on disrupting/improving industries blockchain companies without a cryptocurrency (for a lack of a better name) are focusing on facilitating the entry of investors. Coinbase aside from offering an entry into the cryptocurrency world with FIAT (buy bitcoin, Ethereum, Litecoin, Bitcoin Cash and soon Ethereum Classic), has been working on obtaining licenses from the SEC, offering ETFs,, and custody to protect investors holdings and provide solutions.

In an interview with CNBC, Adam White, vice president and general manager of Coinbase said while introducing Coinbase Markets:

“We think we can unlock $10 billion of institutional investor money sitting on the sideline,” . “We’re seeing a rapid increase in attention awareness and adoption in the cryptocurrency market.”

Gemini, the Winklevoss twins blockchain startup have been winning key patents for their exchange. They have also entered into an exclusive global license agreement to provide bitcoin market data to CBOE (press release).

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End remarks: Investing in cryptocurrencies in a near future will be the same as investing in a regular stock or bond as regulations and facilitation mature and prices stabilize. There is a lot of opportunity to trade with quantum algorithm trading bots, shorting, margin trading, arbitrage etc.

If you have any questions about the blockchain opportunity in South America, please reach out! We at LATAM are creating the opening gateway of blockchain powered solutions in the region starting with education. ?? ?? ?? Please clap and share!

Disclaimer: please do your own research and due diligence before investing cryptocurrencies as they tend to have a volatility nature.

By Menajem Benchimol.