Blockchain Industry Overview

Blockchain technology enables the secure transfer of information and value between unknown actors via the
Internet. For the first time in history, Bitcoin was the first major implementation of this technology. Today,
Blockchain technologies are being used by countless individuals, banks, governments, startups, and other
participants globally.
At its most simple essence Blockchain technology enables the transfer of things securely inside of “tokens.” For
example, a Bitcoin is a token. Most implementations of a Blockchain can have tokens which, in most cases,
investors can purchase. Protos exists to invest in the creation of new Blockchains and to invest in the associated
tokens. Obviously inherent to Blockchain technology is its online existence. Some of the Internet’s most successful
entrepreneurs and investors, such as Marc Andreessen and Fred Wilson, view this iteration of the Internet,

sometimes referred to as the Internet 2.0, as the third major technological innovation after the PC and the Internet
itself. We agree.
This iteration of the Internet also coincides with revolutions in other technologies which are undergoing
exponential change such as AI, big data, machine learning, cloud computing, and IoT. It has also coincided with the
advent and adoption of innovations in finance such as crowd funding. Taken together, we think Blockchain
technology will touch nearly every industry, and we believe it will result in the creation of several hugely valuable
Blockchains and Blockchain innovating companies. As investors, it is our focus to select the Blockchains which we
believe: (a) will provide immense value to human kind and thereby dominate their market spaces of the future; and
(b) accrue value created from the Blockchain in the token we have invested in. As an example, Ethereum was one of
our founders’ earliest investments in the cryptocurrency sphere during its so-called Initial Coin Offering or “ICO”
(sometimes referred to as Initial Token Offerings or Token Generating Events).
The power of the Ethereum Blockchain platform has arguably led to rapid proliferation of new currencies, coins
or tokens through ICOs. Today there are hundreds of tokens or coins with different uses and that have varying
market values which are traded with varying degrees of liquidity. The Ether token itself has increased greatly in
value as the tokens are used to buy new token offerings via the Ethereum Blockchain Network. The average price of
Ether tokens when they were first released on July 22, 2014 was approximately $0.30 (see
against a recent market price of $289.15, which represents a market capitalization of approximately $27.5 billion. It
is worth noting that it is a feature of a Blockchain network that this type of layer of the technology, sometimes
referred to as the protocol, on which other applications are built, we believe increases in value as the rate of usage of
the application is built on top of the protocol layer. This is in contrast to the Internet itself where relatively little
value has accrued to the essential protocol layers which support it, but almost all value has accrued to data
applications (such as search engines and social media platforms), which are built on top of the protocol layer (such
as TCP/IP, SMTP HTTP, etc.).
We are seeing the increase in value of tokens as a result of this feature. For example, at the start of 2017, the
combined market cap of all cryptocurrencies at the time stood at a little over $17 billion. Currently, the value of all
tokens in the industry is valued to be over $135 billion. With a rise of almost 700% in a year, the asset class has
demonstrated itself to be one of the fastest growing in the world.
In terms of where we believe the market will evolve, we note that with almost $1 billion in transaction volume
and a current market cap of $65.8 billion, Bitcoin is still the largest cryptocurrency. However, Bitcoin dominance
has dropped below 50% as new currencies and tokens are issued on a frequent basis, with ICOs having raised more
than $2.3 billion year to date. The number of ICOs held per month has been on the rise and the average ticket size
raised has seen a marked increase.
Furthermore, in terms of future development of the market, we believe that an important aspect of ICOs is that
token issuance has the potential to disrupt many industries. Finance in particular we think is likely to be profoundly
affected as the Blockchain has the power to dramatically lower costs and increase the ease of transactions (we
understand that approximately 15% of banks are actively working on Blockchain technology globally). We believe
that the decentralized nature of Blockchain transactions and the ability to incorporate sophisticated smart contracts
will likely lead to rapid innovation in many fields in ways that are yet to be known, and we believe these will be
disruptive in areas where a trusted intermediary is currently required (e.g. custodians, trustees, escrow arrangements,
identity verification).
We believe that digital tokens issued via ICOs can represent tremendous investment opportunities but their
sheer number and complexity pose challenges for investors to filter out poorly constructed ICOs and to get access to
and evaluate the better investment opportunities. As described below under “Investment Thesis,” we believe that the
combination of the Fund’s strategy, and the experience of the Fund’s management team, position the Fund well to
deal with these challenges and seek the most suitable investment opportunities.



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