Why are digital assets a good investment right now?
- Adding digital assets to a traditional portfolio improves returns without increasing risk
- Blockchain investments provide asymmetric returns (we expect the market to grow 160x in the next 10 years)
- Blockchain value proposition creates new business models and disrupts existing industries (i.e. remittances, payments, cloud computing, data monetization and others)
Can cryptocurrencies go to zero?
Taking Bitcoin as an example, it is mathematically impossible for Bitcoin to have zero value if there are people still using it.
How many people are using cryptocurrencies?
Who is using blockchain right now?
The currently most widely adopted use case is peer to peer money transfer. You can send money on a Sunday evening and the receiver gets it in the course of seconds, whether they are next to you, or on the opposite side of the globe. Blockchain-based payments are popular mainly among the young generation.
What are the use cases for blockchain?
Blockchain disrupts existing business models and enables the core value proposition by lowering the cost of trust to zero. This can be exploited in the following areas:
- Payments – fast and cheap peer to peer value transfer without intermediaries (i.e. DAI, Bitcoin)
- Remittances – instant cross-border transaction at very little cost (i.e. DAI, Bitcoin)
- Resource Monetization
- Data – monetization of sensitive data without compromising privacy or GDPR (i.e. Ocean Protocol)
- Hardware – monetization of unused computing power, storage, and networks (i.e. iExec)
- Open Finance
- Credit – lending without the need for financial institutions (i.e. Maker)
- Fixed Income – earning interest on crypto-assets (i.e. Dharma or Compound)
- Derivatives – managed and settled by smart contracts (i.e. Vega Protocol)
What is the difference between traditional VC investing and crypto VC investing?
In general, we believe they are very similar. Our experience in both areas shows that:
- From the risk perspective, traditional VC and crypto VC is almost the same
- From the potential upside perspective, crypto provides significantly higher returns than traditional VC
- From the complexity perspective, crypto is more complex and requires much broader team skillset than traditional VC
How should I use cryptocurrencies when the value is so volatile?
If volatility is an issue, one can use cryptocurrencies backed by real-world assets called stablecoins (such as USDC or DAI).
Will Facebook Libra dominate all cryptocurrencies?
No, Libra definitely does have disruptive potential, but its features are limiting its use cases. Libra is primarily targeting peer to peer value transfer for unbanked people in Africa and Asia. It lacks important features such as privacy, transparent governance, decentralization and others.
Why are digital assets not correlated with traditional assets?
Value of non-collateralized digital assets (such as Bitcoin) is driven by a) their usage and b) speculation. The connection to the traditional world is very weak. Therefore, the correlation with the traditional world is low. Such digital assets are not managed by a central authority and are thus purely driven by market movement.
Should I wait for the space to become more mature before investing?
No. Investing in digital assets provides benefits to your portfolio right now. There is no need to wait. A general rule of thumb is to start small (up to 2.5% of your Net Worth).
Where is the opportunity? What needs to be developed?
The implementation of the blockchain technology into real-world use cases is in its infancy. To use the example of the financial industry – opportunities include user-facing applications for payments, credit and debit, derivative financial products. On the technological level, improvement needs to be achieved in transaction throughput, security, and development tools. And these are just a few areas.
Are Slovak and Czech developers good at blockchain?
Yes, we have hundreds of developers, business, and crypto-friendly people participating in community events. Most of them are held in Paralelni Polis, a mix between a café and a co-working space in Prague and Bratislava. Globally recognized companies founded by Czechs include the first Bitcoin mining pool Slush Pool, the hardware wallet Trezor, and crypto-ATMs General Bytes.
Can a European/Slovak/Czech project compete with the US and Asian ones?
Yes. Unlike traditional businesses, crypto endeavours are not tied to constraining local markets. Given the nature of blockchain, most of the projects compete immediately on a global level. One may consider such characteristic as a disadvantage; however, the chances of becoming a global market player are much higher than in traditional businesses, where the continental leap is usually very difficult to make.
Can regulation stop cryptocurrencies?
It is very unlikely for cryptocurrencies to be stopped by regulation. Due to their decentralized nature, one cannot turn off blockchain by a single switch. As experience shows, there are countries like India or China actively hindering adoption by blocking related services such as trading platforms, wallets, or mining services. However, people always find a suitable workaround, practically eliminating the constraints (i.e. when exchanges were banned in China, people started to trade cryptocurrencies in Telegram groups). Blockchain is more resistant to malicious attacks than the Internet.
Which countries are blockchain-hostile, blockchain-neutral, and blockchain-friendly?
- Hostile (actively hindering adoption): China, India
- Neutral (waiting): United States, European Union
- Friendly (actively supporting adoption): South Korea, Singapore, Japan, Malta, Gibraltar, Switzerland, Lichtenstein