DAA Manager Insights: Ethereal Capital
Mark Zuckerberg’s motto is “Move fast with stable infrastructure,” and it seems that this is what is happening in Australia. The Australian crypto community is laying some important blockchain infrastructure, and DAA manager Ethereal Capital is one of the major players.
In August, the Australian government announced that it would regulate crypto exchanges as part of legislation to prevent money laundering and terrorism financing. Many crypto experts welcomed the move, saying it will encourage wider use of digital currencies. In your opinion, how will this affect the Australian crypto scene and its community?
I think the regulation of cryptocurrency exchanges can be viewed as a “necessary evil”. Until the majority of businesses accept crypto currency payments, crypto-to-fiat gateways (exchanges) will be required. It’s important to have these controls to ensure the money is not being used for criminal activities, such as terrorist financing and money laundering.
The regulation of exchanges also requires these exchanges to improve their business processes in order to meet their regulatory obligations, for example implementing proper security controls, separation of duties, formalised processes and customer verification. I think that’s a good thing, but obviously it also needs to be balanced with security and privacy concerns.
The Australian crypto community is growing, for example there is PowerLedger which is a Perth based blockchain renewable energy trading startup. We have Australian digital commerce association that promotes blockchain innovation in Australia. Also, we have major of Perth involved in one ICO which is a sign that also high-level politician is supporting the movement.
Forbes recently posted an article where they compared cryptocurrencies and blockchain with the internet and email in 1994. What are your thoughts on blockchain’s development? Where do you see Bitcoin and Ethereum in five years? And where are we today?
In the internet time scale, I think we’re probably somewhere between 1992 and 1994.
Over the next five years, blockchain will continue to scale and will become more complete in terms of the functionality required to support a wide variety of real world business use cases. As this happens, demand for crypto currencies will increase commensurately, so the value of those crypto assets will continue to grow.
In terms of Ethereum vs. Bitcoin, I’m a big supporter of both. I think Ethereum is poised to become the blockchain platform of choice based on the mind share it has within the developer community. Once Ethereum scales and becomes more feature complete, a large number of useful blockchain based applications can then be built that have real world utility.
Bitcoin has obviously been going through some recent growing pains. It’s been interesting watching the evolution of the various Bitcoin forks. It’s an interesting process: a marketplace of blockchains in effect. As they fork, they gain different features and traits, and the market decides which of those traits it values, and those it doesn’t. The next wave of blockchains end up adopting the best traits of the blockchains that came before, effectively resulting in evolution within the blockchain ecosystem.
Bitcoin will continue to increase in value due to increasing adoption as a ‘digital gold’ like asset that is not seen to be correlated with other financial asset classes, but as for which fork will win: who knows? As long as you back each fork equally, then you win no matter which fork wins out.
As Founder and Chief Investment Officer of Ethereal Capital, which is focused on mining and investments in the blockchain/digital assets space, primarily focusing on Ethereum and related tokens on the Ethereum blockchain, what are your views on Ethereum alternatives such as Neo, Stratis, and Lisk?
You can’t go into anything like this thinking “this is the only one.” You have to keep your eyes open, look out for the best projects, support them and adapt to the environment. Ethereum can act as a store of value and payment currency like Bitcoin, but can do so much more due to it being a ‘turing complete’ blockchain with programmable ‘smart contracts’. Hence developers will be able to build pretty much any application you can think of once the platform is complete, and will probably win out over the long term.
My background as a computer scientist with significant experience building computing infrastructures means that designing and operating our own crypto mining farms was a natural choice. We design and manufacture our own crypto mining systems, which has enabled us to achieve economies of scale and eliminate many problems that traditional ‘GPU rigs have’. This enables us to operate our crypto mines with less personnel, with extremely high uptime and reliability. This means the yield on our capital assets and electricity costs is extremely high, efficiency is the name of this game.
Your annual management fee is 1.3% and is one of the lowest on our platform. Is this related to your DAA strategy (infrastructure as a stable industry), or do you have something else in mind?
Yes, I definitely had something else in mind. We want to provide a low cost option for investors to safely acquire a managed portfolio of cryptocurrency and blockchain assets at the lowest possible ongoing cost, whilst ensuring that those assets are protected against theft via secure cold storage.
Additionally, this is a long term index fund that is in effect a passively managed fund, hence it doesn’t require as much effort to maintain as an actively managed portfolio. We decided to pass these savings on to our DAA holders.
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