Building The Decentralised Marketplace
Monkey Capital was launched as a decentralised hedge fund in July 2017. At the time, there were two components to the decentralised nature of the fund in the form of two digital assets, those being Coeval (COE) and Monkey (MNY). COE was issued by DMH&CO with an issuance value of $2 as a token which would purchase 10,000 MNY at a forthcoming Initial Coin Offering (ICO) to be held on August 8, 2017. The object of MNY was that it would be an entryway into the decentralised fund’s portfolio of assets which would over time grow exponentially in size, without ever being in and of itself a security.
The reason we were opposed to securitisation of decentralised assets from the very start was simple: securitisation runs against the whole ethos of decentralisation, which is rooted in management-controlled value parameters. The decentralisation of returns has led to some almost unbelievable wealth-creating effects. To list the top 3 assets: Bitcoin began trading at a price of 10 cents in 2010 and is now around $9,000, representing a return of 9,000,000%; Ethereum was first offered at 14 cents in 2014 and can now be readily purchased or sold 430,000% higher at around $600 each; Ripple began trading at half a basis point (0.005 cents) in 2013 and currently sells for 90 cents per XRP, representing a 17,900% gain with around 15% of that having materialized in the past 12 months alone.
When compared alongside securitised returns, there is almost no argument in favour of adopting the latter as a comparable investment return asset class, let alone including securities in the same domain of value as decentralised ones. If securities are included among Blockchain assets, you can expect to see similar returns to those that are presently traded elsewhere on securities exchanges. During 2017, the top 3 performing stock exchanges comprised Argentina’s Merval Index, up 77%, The Nigeria All-Share Index, which was 42% higher and Turkey’s Borsa Istanbul, with 42% improvement over the previous year. Even if we average these three top-performing indexes and multiply the cumulative returns over the same time period as for our digital asset comparison pairs (which is optimistic at best) there is nowhere near the same sort of return profile among securities assets as there is for decentralised ones.
We are dumbfounded when we hear that teams are lining up to offer dividend-enhanced securities on the Blockchain, and that customers actually want such products. The only affect that putting securities on the Blockchain will have is to lower the average return by a massive factor, so that digital payment utility value as a market becomes virtually unrecognizable and fails to do what it does so well today, which is make investors incredibly high returns without the requirement for a large upfront capital investment.
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At the same time, there is a distinct consciousness over the lack of intrinsic values that are represented among digital assets. The concern over the lack of real, tangible value is both understandable and wise. If the only area an asset is able to derive its source of value from is in its core utility, then ultimately it becomes nothing other than a commodity that exists with zero dimensions of additional currency value other than its own specific function(s). For now, the gamble is that digital markets will grow exponentially year-on-year, and thus the current premiums on digital assets will be justified by the future demand for the utility of such assets, but this is a gamble that, very much like a ponzi scheme, targets over 100% efficiency. In other words, betting on digital payments as a source of continually-increasing value by themselves is 100% sure to result in a catastrophic loss one day.
With both these arguments in mind, what appealed to us was the idea that we could somehow take the best from the exponentially-growing digital payments market and the best from the world of products which have tangible values, and formulate a new sort of asset class that would somehow work exactly like a payment tool and thereby remain non-securitised and unhindered by the continual interference of senior management teams and Board directors, while benefitting somehow from the soundness of underlying value that was sourced outside of the world of digital payments upon which these hybrid assets would draw their own values rooted in tangible values.
Brazen as we were, we seriously miscalculated the amount of work involved in achieving such an aim, let alone establishing a decentralised pool of such assets which digital payment asset holders could access on a whim.
The ICO of MNY was subsequently cancelled to a degree of angry by overall supportive investors. In order to buy time to find the potential solution while still keeping the market we had prematurely fostered active, we offered for sale a variety of digital assets for sale which we advertised with the proposed benefit of such assets becoming ultimately convertible into a brand-new COE/MNY token combination. Needless to say, we ended up trying the already shattered patience of the last of our remaining supporters beyond an acceptable threshold. It was not the finest moment in management history.
Meanwhile, however, as we wound down the previous market we had clung onto over a period of 6 months, we sought to find the answer to the problem we had set out so brazenly self-assured would take us just a few weeks to discover: how is it possible to represent real, tangible, growth and income-supported value on the Blockchain without tripping up over securities regulators?
To date, no one has managed to solve that particular puzzle; instead, eager to enhance their payment utility tokens with real value, many ICOs offer all sorts of dividend-equivalent features within their digital asset promotions, most of which are quite illegal to offer in the places they are advertised and sold.
We emphasize here that we had no aversion to dealing with securities regulators other than that they were not responsible — and are still not responsible — for overseeing the sorts of assets we were seeking to create and invest in.
The sorts of assets we had in mind still had the return profiles of Bitcoin, Ethereum and Ripple; they just happened to share the value foundations of Apple, Microsoft and Berkshire Hathaway as well. The plan of allowing investors to cumulatively participate in a passively-administered decentralised (digital asset entry-based) fund was looking a lot harder than we at first imagined.
For a short while our dreams of creating a decentralised hedge fund looked like wishful thinking and worst of all, wasted time and money. However, as we began working with some financial advisors on various side projects in London, we began to formulate a way in which such assets could be constructed.
As we proceeded with this new line of enquiry, we realised in so doing that we would need to build a marketplace for these new hybrid payment utility-income value derivative assets in order to maximize their potential.
We realised that what we had to do was build a marketplace for our decentralised fund to invest into — after all, without a market, how does the fund make money?
We called our new value-loaded digital assets Metacurrencies, or three-dimensional currencies, due to their dual status at both digital payment utilities and digital assets that held a form of referenced income value. We wrote a paper. No one bothered reading it except the lawyer, who read it cover to cover. That was usually a bad sign.
Amazingly however, none of the lawyers complained. We knew this was as good a starting point as we were likely to encounter any time soon. We also knew we by now understood the process inside-out to a somewhat unhealthy degree.
“Basically, what we are doing is building the closest thing to a security without it being a security,” explained one of our legal advisors to a fellow lawyer in one conference we sat in. “What is it then?” asked the fellow lawyer in response. “That’s a very good question. It’s a cryptocurrency with actual value,” replied our legal eagle. We were finally getting somewhere.
As we made headway in laying the foundations of the marketplace we would build for our Metacurrencies alongside our slowly-expanding team of advisors, partners and other industry and market professionals, privately the Founders circled back to the original aim of creating a decentralised hedge fund.
After all, a decentralised digital capital asset market was beginning to take shape now; a decentralised hedge fund was surely entirely plausible.
Partly, we confess, this circling back was something we were forced to do as a result of having so many now exasperated, dispirited or plain disinterested investors to make good on from our somewhat ill-advised entry to the cryptocurrency market from the year before.
Metacurrencies are a major step in value innovation of digital assets. They provide the purchaser with the assurance of real base value that can be obtained with the unregulated non-securitised asset of hyper-inflated value that they are hoping to extract unusually high returns from. They are, in a sense, the best of cryptocurrencies with the best of securities values referenced inside their exchangeable values.
Despite the odds against race, the birth of non-securitised asset structuring on a digital distributed and the concurrent establishment of unregulated, non-securitised asset management functions is now taking place in the start of the second quarter of 2018.
We may have been a little late to get to the party, but then again, we cannot help but notice either that we are still the first to have arrived here.
