Master Minds

Master Minds Part II: Blockchain - The New Gold Rush

4/12/2021 8:00:00 AM
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Welcome to Master Minds Part II. In Master Minds, we take some of the best, game-changing investment opportunities for family offices and talk about them with our readers and club members. 

In Master Minds, we talk about long-term investment trends and possibilities which could change the way you or your family office invests. And today, we talk about Crypto investment, 

If in Master Minds I, we talked about water as the new oil, in this Master Minds second edition we discuss Crypto as the new money. Indeed, crypto has the potential to eventually replace paper money and other forms of monetary transactions. Even the U.S. government is studying the possibility of creating a “digital dollar.” This is already happening at a rapid pace, and governments are getting involved.

However, Crypto needs a substrate called blockchain in which to function. Blockchain is to crypto what undersea cable technology is to the internet or what pipelines are to oil. It is the infrastructure on which such transactions are based.

There is a saying that goes like this: “when there is a gold rush, you should sell shovels”. This means those who invest in technologies profiting from new trends win much more than those chasing after the trend.

Indeed, while Cryptocurrencies themselves may come and go due to changes in fashion, those few players that invest in Blockchain and are ahead of the game will stay. Why? Because everyone who issues crypto needs blockchain.

What is Blockchain technology?

Simply put, Blockchain is a decentralized verification system made of thousands of computer terminals or nodes that verify the veracity of a transaction and thus create a seamless and fast transactional decentralized system. 

The applications of blockchain are limitless. It can run governments, corporations and conduct whole projects without any risk. This is why it is the future. 

Indeed, when you send money from one bank to another, you need a whole system of codes, bank-to-bank servers, and connections, and a third party to verify that you have received your money. With blockchain, you don’t need any of that. The minute you send your crypto, it is verified by thousands of independent computers, so you no longer need a bank to certify the transaction The same would go, for example, with certifying titles to property, assets, etc. The blockchain can potentially replace government or private registries at one point. 

So, while cryptocurrencies individually may go up and down, blockchain technology will always be required. 

Herein lies both the opportunity and the problem. While there are thousands and soon tens of thousands of cryptocurrencies being created, there are not many decentralized, public blockchains because you need a huge amount of computer nodes, time, investment, and public interest to create one.

The most famous blockchain technology on which many coins are hosted is Ethereum. However, Ethereum suffers from some issues; the major one is that Ethereum transaction fees are often unaffordable, particularly for smaller transactions. This fee is called Gas and must be paid in Ethereum’s cryptocurrency, Ether (ETH). Thus, even if you launch another cryptocurrency in Ethereum’s blockchain, the Gas must be paid in ETH. Therefore, you always need enough ETH to pay for the Gas. Moreover, with thousands of coins and blockchain applications running on Ethereum, the Ethereum network is often slow and expensive.

The solution

There is a blockchain solution that scales better than Ethereum, has significantly cheaper transaction fees, and is more competitive than Ethereum because it deals with sidechains.

It builds tools for developers and businesses to develop their own blockchain and blockchain applications for groups of non-related parties that might not “trust” each other (i.e. competitors, business partners, members of a supply chain, etc…).

They are building with one of the most secure public blockchains, which has the largest incentivized node network. What does this mean? Basically that they are decentralized and can promise swiftness, security, and efficiency).

This sidechain ecosystem connects to the public mainchain via an open-sourced SDK (software developer kit) and is kept safe by a cutting-edge encryption technology called “zero-knowledge”. 

The sidechains take advantage of the public chain’s existing own cryptocurrency and its solid node network. This means low developing costs with the benefits of a public blockchain.

It’s like the difference between having roads for your city that can be built at 30% of other roads’ price. Obviously, your city would grow faster.

But blockchain is the center of a new evolutionary governance structure called the decentralized autonomous organization or DAO, changing the way we transact business and conduct projects. 

Let’s take a Gold mine, for example. If you place an entire gold mine on a blockchain sidechain, then all the gold in the ground, the product sales, storage, and delivery can all be tracked on the blockchain, and the gold mine can issue tokens backed by gold which can be verified through the chain. You don’t need intermediaries anymore. Thus, whole projects, government departments, even whole cities can utilize the blockchain to manage themselves. 

Here is where the profit is: Every time a transaction occurs on a sidechain using this company’s technology, you profit because it charges a micro-transaction fee on each transaction.

The sidechain technology has dozens of business applications, let’s just name three:

-Marketplaces: Blockchain-based marketplaces reduce operational issues between parties that don’t trust each other while it increases cost efficiency and ensures that transfers of value can be executed both swiftly and safely.

-Record keeping and registries: Timestamping and revision validation increase operational efficiency and allow immediate and straightforward data sharing among non-related parties and even competitors.

-Supply Chains: Blockchain brings a new level of transparency and traceability to supply chain businesses involved in multiple industries.

So, to wrap it up, what advantages does this technology have?

-Speed & Cost. Proof of stake sidechains are quick, can handle thousands of transactions per second at insignificant transaction costs.

-Security. Proof of work mainchain with modified Nakamoto consensus provides protection against 51% of attacks and full node-to-node TLS encryption.

-Privacy. Zero-Knowledge cryptography allows compliant data storage. Thus, some information is shared while some is kept shielded.

-Scalability. Proof of stake sidechains and massive node network permits extensive commercial use over a public blockchain infrastructure.

-Availability. Massive node network guarantees 100% uptime and reduced network latency.

How to invest?

This family office investment is backed by a huge billion-dollar fund looking for co-investment with other family offices. Thus, this project is not likely to be running out of money soon.

If you had gone into Ethereum three years ago or Bitcoin 9 years ago, you would have made unparalleled returns. Well, this new blockchain technology is now being offered at entry-level prices on the first-round investment. Usually, such investments are speculative, but this one has financials to back up its bold vision and already makes enough money to cover overhead. It’s seeking additional investors so it can rapidly expand its engineering team and capture as much market share as possible. 

Enterprise blockchain stands to revolutionize the world we live in by enabling businesses to build blockchain solutions that are fast, secure, private, and scalable.

This is undoubtedly the future. But no matter how great the potential, this future is not possible until the development of blockchain technology is more accessible to businesses.

Disclaimer: The information contained in this article is for informational purposes only and does not constitute financial advice or recommendations. Investing in financial products or cryptocurrencies involves risks, and you should be aware of the potential risks involved before investing. The content on this website is not intended to be a solicitation or offer to buy or sell any financial products or services. The information provided does not take into account your specific investment objectives, financial situation, or needs, and should not be relied upon as a substitute for professional financial advice. You should seek independent advice from a financial advisor or other professionals before making any investment decisions. Please be aware that the legal status of cryptocurrencies and other financial products may vary in different jurisdictions and may be subject to regulation. It is your responsibility to ensure compliance with any relevant laws and regulations governing the sale and marketing of financial products and services in your jurisdiction.

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