Crypto Assets

Our way in the crypto space has been quite similar to the one followed by most of the early adopters (as we consider we are at the very beginning of crypto space yet). We saw Bitcoin first, and the entire crypto universe after, as a very speculative bubble (similar to tulips, South Seas Company…), and it has been neither easy nor quick to start understanding what is really going on in this space.

We see blockchain technology as a revolution, similar to the internet back in the ’90s, and there is an entire world of possibilities using this relatively new technology, which has a huge disruption potential. (A blockchain is a decentralized, distributed public ledger where all transactions are verified and recorded)

Obviously, it does not mean that we consider that the +8000 cryptos that exist have value. But we can see a lot of it in the two cryptos where we are investing, Bitcoin and Ethereum. We believe that Crypto can be considered a new class of asset, its current capitalisation is around 2 trillion dollars.

The website CoinMarketCap divides the cryptos in several categories:

  • Store of value (Bitcoin, Terraluna, Maker…)
  • Smart Contracts (Ethereum, Cardano, Chainlink, Stellar, Vechain,…)
  • Centralized exchange (Binancecoin, Ftxtoken, Cryptocomcoin,…)
  • Memes (Dogecoin, Shibainu,…)
  • NFTs (Theta, Axieinfinity, Chilliz, Descentraland, Sandbox…)
  • Defi (Uniswap, Wrappedbitcoin,Pancakeswap,…)
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As of 16-08-2021

Bitcoin

It is the world most popular digital currency and the one with the biggest capitalisation. Its main characteristics are that it is decentralized (no government, institution or authority can control it) and its supply is limited (It has the characteristic that there are only 21 MM Bitcoin.).

This is one of the main arguments in favour of Bitcoin as opposite from Fiat money, which central banks are constantly printing (and consequently, forcing the devaluation of the currency), Bitcoin cannot be printed as the number of them is limited by an algorithm. It is usually compared to gold as a value reserve.

It works under a Proof of Work algorithm. The so called miners validate the transactions made on the network and they obtain a reward for doing this. Every four years there is a halving, which means that the reward diminish 50%. At the moment, 18.6MM of bitcoins have been emitted. The rest of them (2.4MM) will be emitted from now until 2140.

Currently, around 3-4% of the world population have or have had Bitcoin. More than 10% of Americans and 32% of people from Nigeria, which is the country with the highest adoption in the world.

Ethereum

It could be considered as a decentralized computing network built on blockchain technology. It is a platform with a lot of use cases such as:

  • Decentralised Finances (Defi)
  • Non-Fungible Tokens
  • Decentralised Autonomous Organisations

It does not have the supply fixed, it was inflationary at the beginning (the amount of supply increased over time). However, it has recently (Aug-2021) upgraded (London) and from now on, each transaction burns Ethers. At this point in time, the supply continues to increase but at a considerably slower pace. 

Ether can also be used as a digital currency and store of value, but the Ethereum network makes it also possible to create and run decentralized applications and smart contracts. Ethereum blocks are validated approximately every 12 seconds on Ethereum as opposed to approximately every 10 minutes on Bitcoin.

Ethereum is currently migrating from Proof of Work to Proof of Stake, which require much less energy to validate transactions

Matic – Polygon 

Polygon is a layer-2 network (scaling solution) that aims to provide multiple tools to improve the speed and reduce the cost and complexities of transactions on blockchain networks. As a layer-2, Polygon does not seek to change the original blockchain layer.

Polygon is a multi-level platform with the aim to scale Ethereum thanks to a abundance of sidechains, all of which aims to unbolted with the main platform in an effective and cost-efficient manner.  Polygon can be also used to scale other platforms. It promises a simpler framework for building interconnected networks.

At this moment, Polygon is focused on Ethereum. Ethereum platform has seen how its activity is growing exponentially due to its decentralized applications (virtual worlds, games, NFTs, financial services…) All this activity on the blockchain has increased dramatically the traffic on the platform and also the cost of transmission (gas).

Polygon’s main chain is a Proof of Stake (PoS) sidechain in which network participants can stake MATIC tokens to validate transactions.

Theoretically, its main threat is Ethereum 2.0 (when completed), but this will probably take several years to arrive, and Polygon is versatile enough to evolve and become a key component of the blockchain revolution

We are going to continue developing this section by including a deeper analysis of Bitcoin and Ethereum. These analyses are in their final revision stage. Moreover, we will expand this section further from these two cryptos as we are reading and understanding this new asset class better. 

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