Block Reward Halving and Venture Fund III Closing :: Pantera Blockchain Letter, March 2019

Dear Community,


We have raised $160mm of the $175mm target for Venture Fund III. We’re wrapping up the final close this month. If you are interested in subscribing please contact our Investor Relations team at


The investment team has hosted conference calls to discuss opportunity we see in the developing blockchain ecosystem and recent fund investments. We’ve compiled all topics in a single “best of” version: Transcript in Prose.

Expanded Co-Investment and Secondaries Program

As with our previous venture funds, we are offering a Co-Investment Class. Investors who commit $5mm or more will have co-investment rights to at least 10% of every deal.

In some deals, we are able to gain larger allocations and can offer co-investment to many more LPs. Please let our Investor Relations team know if you would like to be notified when we have the ability to allocate beyond the Co-Investment Class.

From time to time, we are able to secure secondary shares in our portfolio companies and offer these to interested LPs. Again, please let our Investor Relations team know if you would like to be notified when we are in touch with a block of secondary shares.

We are providing an extension to individuals investing $2.5mm or more — and for pensions, endowments, and other institutions, allowing them time to schedule due diligence and board-level consideration.

To review fundraising materials, including access to the data room where you will find financial, legal, portfolio company details, and due diligence materials on this fund and our two previous venture funds, please contact


The Fund has already invested $38 million into 11 portfolio companies. We project making a total of 35 investments, with an average deal size of $3.5 million, and an 11% target average equity stake. Pantera has led five of the investments so far. Two of the deals have been follow-on rounds in existing portfolio companies.

Investment Categories (By Joey Krug and Paul Veradittakit)

We’ve broken down the Fund’s invested capital to date into five categories: Finance, Payments, Exchanges, Enterprises, and Infrastructure. As you can see from the chart below, we’ve invested the most in deals from the infrastructure (35.1%) and exchange (29.4%) categories.

Some of the most successful investments in our previous two venture funds have been cryptocurrency exchanges and we still think there’s opportunity to invest in them. To date, 29% of Venture Fund III’s capital has been invested in this category. With VFI and VFII, we invested in two types of exchanges. First, we were investing in exchanges for buying and selling Bitcoin. Then, as some of the exchanges were bound in overseas jurisdictions, we invested in more exchanges set up geographically. With VFIII, we are investing in two types of exchanges. The first is institutional-grade exchanges, like the Fund’s first investment, Bakkt. The idea with Bakkt is that, if you’re a hedge fund on Wall Street, a high-frequency trader, or anybody who is used to trading on traditional exchanges, this is the exchange you would go to trade cryptocurrencies.

However, there is an additional opportunity for players who know a certain market really well, because the institutional-grade exchanges can’t go after every market all at once. So, the second type of exchange we are investing in are ones in developing jurisdictions, where crypto is just starting to get traction. While some of these exchanges may not have a ton of volume today, they’re far and away the market leader in whatever jurisdiction they’re leading in. Think of it like a market control bet on crypto: if crypto starts to take off in that jurisdiction, we’re almost guaranteed a slice of the pie because we’ve invested in the best exchange in that geography. We’re focused 100% on that, to gain a foothold and do quite well. Our (undisclosed) Investment in a leading cryptocurrency exchange in Latin America is one of these.

We’ve invested 15.2% of the Fund’s capital in payments. Investments in this category will be anything that will make it easier to buy cryptocurrency. Right now, if you want to buy cryptocurrency, it’s a three day process that requires you to input a ton of information on one site, and then go to a separate website. It’s six or seven steps just to get started. If you consider that process in the context of the current web purchasing experience of Amazon, or even setting up a PayPal account, then you can imagine that this is a pretty good way to lose about 99.99% of your user funnel.

We invested in a service that makes it really easy to get fiat into crypto and, in particular, makes it easier to get fiat into decentralized apps and into smart contracts. Just as easy as it is to buy something with Stripe on a regular website — providing a super smooth user experience, which is exciting. You’ll also be able to buy with your bank account and with your debit card, enabling access to cryptocurrency pretty much instantly on the smaller amounts. On the larger amounts, you will still have to wait a few days but the fees are much lower than, say, at Coinbase.

Infrastructure projects make up over 35.1% of our invested capital. If you look at the cryptocurrency space, it’s similar to how the web was early on, where there wasn’t really much infrastructure for developers, or for anybody really. If you wanted to build something back then, it took a really long time. In the early days of the web, the start up cost to just get a minimal viable product out was $2 million due to all of the servers you’d have to buy. You actually had to buy physical servers. You had to do everything by hand. When AWS (Amazon Web Services) came out, it dropped the cost dramatically. Today, you could launch a web app with just $50,000 in the bank.

One of the things we are looking at in this category are services that will charge a small fee to help Proof-of-Stake (PoS) chains with their staking. Pantera led the $4.5 million round in Staked, a staking as a service for investors to compound crypto assets through staking and lending. The infrastructure Staked is building is useful for anyone who owns crypto currencies, whether they’re a retail person or an institutional grade investor. (You can read more about staking in the VFIII Transcript in Prose.) Another infrastructure we’ve invested in is StarkWare, a project focused on scalability. Instead of everyone having to process every transaction when you do a transaction in a smart contract, StarkWare is creating software and tooling to make it possible to just provide a proof that a certain number of transactions are processed honestly.

We have made three investments in the finance category, totalling approximately 19% of the Fund’s invested capital. These are projects that will get retail and institutional investors interacting with cryptocurrencies. It includes portfolio management, and brokerage and trading services. We’ve even invested in a crypto quant fund to get a broad basket of tokens and trading for the venture fund. Our first investment in this category was in Blockfolio, the largest portfolio-tracking application in the space. They have over 4.5 million users and 624,000 daily active users. The app has integrations with 300+ exchanges and supports over 6,000 cryptocurrencies — so they pretty much support every exchange and every cryptocurrency. If you own cryptocurrencies, you can use Blockfolio to keep track of how much your crypto is worth, how much you’ve lost or gained over any given time frame, how much you own of each asset, and you can even do simulation of trades within multiple portfolios. While most of the other portfolio tracking tools don’t have a useful functionality, Blockfolio has been really focused on design and usability, and they’ve come up with a pretty sleek UI. It’s almost like, but for crypto. If you are wondering, “What are the revenue streams for Blockfolio?” Right now, they are trying to get a bunch of new users and so it’s mostly pre-revenue. But potential revenue streams are things like monetizing users through referrals. For example, if you look at companies like, Credit Karma, or Personal Capital, they all either funnel users to products that they work with or, in the case of Personal Capital, they actually funnel users to a product that they run. The companies then take a portion of the conversion fees. Blockfolio has a number of different routes they could monetize — such as funneling users to fiat on-ramps or exchanges, or to applications.

About 1.5% of the fund is invested in enterprise projects. These are projects focused on the core technology; solving problems relating to scalability, smart contracts, and security. Synthetic Minds is making it easier for developers to build smart contracts and deploy them in a secure manner. Smart contract vulnerability leads to theft of funds. An estimated 4 million ETH has been lost due to smart contract bugs. Today’s solution is to pay bounties to people who report bugs. This works decently well, but it is slow, expensive, and humans tend to miss things.

Synthetic Minds is creating software to essentially automate that and to have a computer come up with all the possibilities. Programs are generated that try to break the code, testing all of the potential ways one can interact with the contract. An example would be: you want to develop a smart contract that can have no more than $100 in it. You can run Synthetic Minds on it to see if there is any possible way to have more than $100 and it will report the conditions and when it can occur. So, it’s a really core piece of infrastructure.


The money supply function of the Bitcoin protocol is to issue 12.5 bitcoin in a block every ten minutes. Every 210,000 blocks (approximately 4 years) the block reward decreases by half. Bitcoin’s supply and coin distribution ruleset is based purely on mathematics — predictable and transparent by design.

“Total circulation will be 21,000,000 coins. It’ll be distributed to network nodes when they make blocks, with the amount cut in half every 4 years. first 4 years: 10,500,000 coins next 4 years: 5,250,000 coins next 4 years: 2,625,000 coins next 4 years: 1,312,500 coins etc…”
- Satoshi Nakamoto

There’s intense interest in the “halvings” as those every-four-year cuts in bitcoin supply are called. Although there’s only a few data points, it seems that Bitcoin’s price has shown patterns with block reward halvings. We have seen a couple of these cycles where the tide begins to shift roughly a year in advance of these dates. Inflection points occurred 376 and 320 days prior to the 2012 and 2016 “halvings”, respectively. Taking their average of 348 days could indicate a bottom on June 10, 2019. The vertical lines below indicate block reward halving dates and the circles represent past and possible future inflection points.

The next reward halving is expected to occur on May 24th of 2020, dropping the block reward from 12.5 BTC per block to 6.25 BTC.


Pantera was an investor in Tagomi’s $12 million round, announced on March 4. Below is an excerpt from Paul’s blog post about the recent investment, entitled “Why Tagomi Will Bring Confidence & Investment into Crypto”

Last week, Pantera announced an investment into Tagomi, and I believe that the company is solving a problem for institutions, family offices, and retail to get exposure to crypto at best prices with convenience. I wanted to shed a bit more detail below on Tagomi product and why it’s compelling.

  • Tagomi is an electronic trading platform that delivers, hands down, the best spreads for anyone trading in size. There is no minimum, but trades 25k + get the most benefit.
  • Tagomi’s fiduciary-like model is a big deal to sophisticated investors. Why? Because Tagomi is obligated to provide best priced trades and confidentiality, unlike an OTC or principal trading desk that is actually allowed use a client’s information to trade against them, and often is a key part of their business model.
  • Tagomi aggregates global liquidity and combines smart routing, trade management, and custody in one integrated account so clients can avoid the hassles of setting up and transferring between multiple accounts and also having to separately manage all their counterparty relationships.
  • Most crypto investors don’t understand how much their trades really cost them, and their unfamiliarity is often exploited. Yes, most platforms clearly state their transaction fee, but what is conveniently left out are the markups and other hidden costs. Since most brokers are not required to disclose these markups, there is little to prevent abuses if you are not informed. Tagomi is set up in such a way that it is required to give clients transparency and show them exactly how their trades were executed, and how they got to the price they got.
  • Tagomi comes at a time when the macro crypto market structure is shifting from a dealer-oriented market to one dominated by highly advanced market makers tech-enabled electronic trading firms like Tagomi, which are driving down spreads and creating more efficient and stable markets worldwide.
  • Tagomi is run by an incredible team that brings the best of both trading and crypto experience from Two Sigma, Virtu, and Citadel, Union Square Ventures, and including the former Global head of electronic trading at Goldman Sachs.

If you’re looking to invest more than a few thousand dollars into cryptocurrencies, Tagomi will dramatically lower your trading costs by routing your trade across global liquidity pools while employing algorithmically-powered strategies trained off of market data reduce market impact and continually find you the best price. While that may sound intimidating, these cutting edge tools are wrapped in an incredibly well-designed platform that any user would find intuitive and easy to use, so you can be a beginner and still reap the benefits. For more advanced traders, and active trader platform that gives the user much more control is available as well.

Tagomi was co-founded by Jennifer Campbell, Greg Tusar, and Marc Bhargava, all of whom have incredible experience in the cryptocurrency, asset management, and electronic trading space. Previously, Campbell worked on the investment team at Union Square Ventures. Tusar previously was the Global Head of Electronic Trading at Goldman Sachs, which he found his way to through an acquisition. Bhargava previously worked investing in the blockchain space while at Brainchild and at roles in private equity and consulting. Even beyond the founders, the team is pretty incredible with folks from Two Sigma, Citadel, KCG, Virtu, Google, etc.

Now more than ever, a solution like Tagomi is needed to restore investor confidence in the cryptocurrency market. Despite the long-term drop in prices, cryptocurrency offers a very promising space for investors — but it needs more maturity. Tagomi brings the market structure we’ve seen evolve in other asset classes by creating a one-stop, end-to-end platform for investors to manage their cryptoassets, make large-scale trades, and make smart, algorithmically-verified trading decisions. With tools like Tagomi deploying on the market, we can hopefully expect a lot more confidence and investment — and more returns — than ever before.

For more on Tagomi and what it might mean for Institutional Investors, read Fortune’s article “Crypto Finance Grows Up: Tagomi’s New Tools Could Draw Institutional Investors.”


Pantera partners will be traveling over the next months to discuss the blockchain disruption. We have organized group lunches in many cities, should you want to meet other investors who share your interest in blockchain. If you are interested in attending one of our group lunches, please fill out the form on this page and we will be in touch regarding availability.

  • Boston, March 26–27
  • Chicago, April 8 | including a Group Lunch at 12pm
  • New York City, April 9
  • Grand Cayman, April 10–12
  • San Diego, April 11–12
  • Washington D.C., April 12
  • Los Angeles, April 25–26
  • Phoenix, April 29
  • Denver, April 30
  • Chicago, May 1–2
  • Toronto, May 7–8
  • New York City, May 9–17

If you are interested in a meeting, please contact Pantera’s Investor Relations team at +1–650–854–7000 or

The future has arrived,


“Put the alternative back in Alternatives”



If you would like to receive additional information on Pantera’s funds, including the Private Placement Memorandum, Limited Partnership Agreement, and Subscription Documents, please fill out the form on this page to begin the subscription process.




Recordings of recent ICO, Digital Asset, and Venture Fund III conference calls are available on this page.



Pantera is actively hiring for the following roles:

  • Venture Associates
  • Data Scientists
  • Engineers

If you have a passion for blockchain and want to work in Menlo Park, San Francisco, or New York, please follow this link to apply.


Some good material to start with on the development of blockchain technology and cryptocurrencies as speculative instruments:

Additional information on blockchain regulation:


You can subscribe our publications, including the ones listed below, by visiting Pantera’s website or by e-mailing

Blockchain Letter

A monthly letter with our thoughts on significant market and ecosystem-related developments. Also, includes our thoughts on blockchain venture capital and news on our portfolio companies for accredited investors.

Blockchain Investor Letter

Public Letter plus exclusive information for accredited investors.

White Papers

Periodic, original blockchain research and academic papers.

  • “A Crypto Thesis” by Pantera Co-CIO Joey Krug [2019.01.08]. Joey’s insights on crypto and blockchain innovations what is still needed for user and institutional adoption. Informative and detailed primer for anyone considering investing in the space.

Follow us on Twitter and Medium for the latest blockchain news and insights. @PanteraCapital, @Dan_Pantera, @JoeyKrug, and @Veradittakit.