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August 13, 2020

Episode 016

Efrontier, Vertalo & Pantera Capital


Market Spotlight

Dave Hendricks, CEO of Vertalo, talked about the evolution of the company from a due diligence platform to a transfer agent cap table shareholder registry for digital assets, which they built as a result of the problems they faced issuing their own digital asset in a compliant manner.

Hendricks discussed the state of the blockchain today, saying:

“In May of 2019 we introduced Keyless custodial wallets. Our feeling was that Keyless custodial wallets look most like eTrade or Coinbase and that if you want to refuse the complexity and the barriers and the obstacles to adoption of digital equities, programmable assets, what you have to do is is you first have to get the nerd stuff out of the equation. And the nerdiest thing in crypto or blockchain is definitely the wallet. Managing private keys, passphrases, using MetaMask and these other things. People don’t want to bother with it and they’re scared to self-custody. So we first simplified that…

(19:21) The wallets solved a complexity problem for the investor. We then wanted to solve a complexity and cost problem for the issuer as well. So in the summer of 2019 we introduced three-click tokenization.”

Vertalo also launched Vertalo Real Estate launched during COVID-19. They acquired a team out of Philadelphia, handpicked real estate industry veteran Gary Brandeis to run it for them, and it has been off to the races.

“Now they’re signing a lot of deals. This week we’re going to add a new client, it’s called Mount-X. They are in Mexico and Canada. And Mount-X is bringing on at least 15 properties onto Vertalo and tokenzing those. We have another real estate project…it’s a $100 million…offering, which is, it’s multi-family assets in the Northeast. I’ll announce that one shortly…And every day, we have more real estate companies calling us saying, ‘Hey, how do we use this technology to reduce costs for fund administration but also improve liquidity for our investors?’”

There’s been a slow rise in liquidity in the cryptocurrency space but a very fast rise in DeFi. Hendricks discussed the idea of looking for real-world assets as collateral in these liquidity pools.

“There’s a whole world of assets which are illiquid today such as real estate and other cash debt/instruments where no market exists. There’s not a borrowing and lending, there’s not really a
selling market. And there are these pools of owned assets which are ideal to be pledged as collateral to underpin and support DeFi markets and provide liquidity. Vertalo’s plan is to enable asset owners, real estate funds, real estate investors and people who own debt instruments to bring those assets under the Vertalo platform and then in a couple of clicks turn them into a tokenized asset that can be pledged as collateral on DeFi networks.”

In Conversation With

Joey Krug, co-CIO at Pantera Capital, is an Augur alum who got into the Ethereum space in 2014. He discussed the DeFi landscape and whether there are too many solutions looking for a problem or if they actually have all intrinsic value.

“If you look at transaction costs to do something on Ethereum, as of this morning it’s around 200 gwei, which means to send money from one person to another it’s like USD 10. An Augur trade would be like USD 90-100. And so the main use cases right now are just people speculating on other stuff within crypto. And I think to get out of that and to build stuff that people want to use outside of that, the costs need to come down a lot and it needs to be much faster to use. People aren’t going to be comfortable waiting five to 10 minutes for a transaction to go through. They’ll want to sort of see it instantly…or within a few seconds. And so those are I think the big problems.”

Oracles are services that are designed to feed external information into blockchains for interpretation and have become a hot topic lately, with projects like Chainlink and Band. Krug discussed the hype around oracle projects.

“For the Oracle problem, it’s really a tough problem. And the main criteria that surrounds the problem is, ‘how fast do you need the data?’ If you don’t need the data at a very high frequency, things like Augur really are the best solution for that…but if you need some data that’s updated every five minutes, today you pretty much have to use something like Chainlink, or you could do it yourself, which is sort of what Compound has done. You can get a group of people to provide the results and take the median of them…which is actually what MakerDAO does. But they all sort of converge to a very similar system. I think the problem with all those approaches is that unless you do something beyond that, it’s not very secure.” Krug shared what he is paying the most attention to these days.

(41:11) “I’m excited about the growth in decentralized exchange volumes. I think that’s something that there’s hype right now but it’s going to become a longer term sustainable trend I think that continues to grow. I think peer to peer lending protocols…are interesting as well, stuff like Compound, obviously a lot of the high numbers right now are due to the fact that you can earn COMP but I think a lot of it is actually just legitimate demand as well…And then the last thing I’m excited about, I’m excited to see some of these options and derivatives protocols and stuff go live…I think all of these interesting DeFi applications are things that I’ve been interested in for the whole time and a lot of them are finally starting to go live.”

Onchain Reaction

James Bennett, CEO of ByteTree, provided the latest onchain insights and observations. This week, Bitcoin broke the long term downtrend that it started in 2018.

  • “It’s been a really exciting week for bitcoin again now that we’ve broken that long-term downtrend that we started in 2018. Bitcoin currently sits a little bit below $12K.”
  • ByteTree’s Network Demand score remains at five out of six, which is bullish as bitcoin pushes toward $12K. The score has been bullish for the past couple of weeks.
  • “As bitcoin continues to push upward, the valuation actually is holding steady. And this is a factor of the growth in sentiment volume that we’ve seen on-chain…The sales or the value that’s being generated by the network through the increase in sentiment volume is increasing faster than the market price…which is really positive.”
  • Network fees remain high, as total revenues generated by miners climb back towards pre-halving levels.
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Gerelyn Terzo
Gerelyn caught wind of bitcoin in mid-2017 and after learning about the peer-to-peer nature of Satoshi's creation has never looked back. Previously she covered institutional investing and fintech for several major trade publications. Gerelyn resides in Verona, N.J.

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