Kepler – Facebook of the blockchain community

 

The newly formed group TaaS, Token-as-a-Service, will conduct an initial coin offering from March 27, 2017 to April 27 2017. TaaS will create a closed-end fund for investing in blockchain assets and thereby focusing its subscription-based business model. The closed-end fund will be governed by Cryptographic Audit.

In addition, TaaS will introduce Kepler, a Bloomberg-like cryptocurrency portfolio management and analytics platform. The private beta release is planned for Q3 2017.

According to the Whitepaper, Kepler will offer:

1. Market research;
2. Analytics;
3. Investment objectives;
4. Portfolio management; and
5. Paper trade.

Based on the above mentioned functionalities, Kepler has the chance to become the

Facebook of the blockchain community. 

Kepler could become a household name for integrating and connecting blockchain and cryptocurrency markets around the globe. It could be a disruptive software, a publishing house, a media outlet or an exchange – the opportunities are countless.

An analogy could be made to the famous Bloomberg Terminal. At the beginning, the Bloomberg Terminal gave traders, researchers and visitors the opportunity to connect with each other, monitor and place quotes on financial markets and message / chat with each other. In other words, the Bloomberg Terminal has become the Facebook of the finance community due to its large network effects. The annual subscription fee for a Bloomberg Terminal amounts to USD 20 k. This shows how valuable Kepler could be for TaaS.

In order to be successful, Kepler should produce the same network effects as Bloomberg has built over the years. Almost every dedicated financial professional has its own Bloomberg Terminal as significant trading volume is conducted through the terminal. If Kepler is able to produce similar network effects, it would be almost immune against competition as the switching costs would be too high for the end user. TaaS should make sure that the feedback of the users is properly incorporated into the system during development phase but also thereafter.

Thus, potential revenue stream of the Kepler platform, created by TaaS, could be

• Annual subscription fees;
• Advertisements on the terminal;
• Sponsored news;
• Real-time quotes.

A priori, it is very challenging to estimate the amount of revenues TaaS could generate with the Kepler platform. More than 20’000 traders are often online on Poloniex. If 20% paid an annual subscription fee of USD 500, annual income could be USD 2 million. New start-ups could place advertisements on the terminal. Considering that over 100 ICOs have already occurred and each of them could place an advertisement on Kepler costing USD 150 would lead to an additional income of USD 15 thousands. A further income stream could be the offering of aggregated of real-time quotes and charting Technics. Finally, sponsored news could serve as as further revenue stream.

To conclude, Kepler could make a huge impact on TaaS’ business model and become the Facebook of the blockchain community. Kepler could become an industry standard in the blockchain industry, which would enable TaaS to receive a huge premium in the market. It will be interesting to watch the innovation and movement of Kepler and whether it will revolutionize the cryptocurrency investment world.

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The Open Fund Management platform

An interesting innovation of ICONOMI – a new open-source project – is the Open Fund Management (“OFM”) platform. The OFM platform provides the framework and the necessary tools to current or prospective fund managers to set up an independent fund. The OFM platform also offers standardized performance evaluation or performance management tools.

To legally open and fund has been expensive outside of the world of cryptocurrencies. If you want to open a fund, you have to consider start-up costs of at least USDk 75 and annual operating costs of c. USDk 100 (Source). Due to other working capital requirements, initial Assets under Management (“AuM”) need to be at least USDm 50.

However, this will change due to the blockchain technology, ICONOMI and Ethereum. The OFM platform will reduce significantly the start-up costs as well as the annually recurring operating costs of a fund. This will have a disruptive effect and completely change the asset management landscape.

Global AuM increased by 1% in 2015 to USD 71.4 trillion according to a BCG study. If the OFM platform is a success story, more and more traditional funds will consider using it, thereby transferring a share of the global AuM to ICONOMI. This will give ICONOMI a vast set of profit opportunities, which is highly beneficial for shareholders.

More information of the ICONOMI-project can be found here.

 

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Active management vs. passive management of cryptocurrency investments – which one is better?

The objective of an active management strategy is to beat the respective benchmark on a risk-adjusted basis, i.e. to generate alpha. Contrary, a passive management strategy has the aim to track the specified index with upmost precision and to reduce the tracking error.

ICONOMI – a new open-source project – offers both, an actively managed fund (“Coin Managed Fund”) and a passively managed fund (“Coin Traded Fund”). This leads to the question: Which one is better?

A study by Invesco (2016) found that 62% of all active managers have outperformed their respective benchmark (net of fees) on a risk-adjusted basis over the last 20 years.

Thus, an investor could assume that an investment in the Coin Managed Fund would outperform the Coin Traded Fund in the long-run, however, under the assumption that the active fund managers possess the relevant skills. Considering that the cryptocurrency financial markets are at their very beginning and still in development, it might be true that the efficient market hypothesis does not hold. An active manager could then earn excess profits, i.e. arbitrage profits or informations-based profits. In addition, actively-managed investments are often characterized by a lower degree of correlation to the market. A further advantage of the Coin Managed Fund is that investor can profit from the ICO-picking abilities of the active managers.

It will remain to be seen whether the Coin Managed Fund or the Coin Traded Fund generates larger profits for the investors. However, it can be said that ICONOMI offers very innovative financial products, thereby increasing the financial development of the whole cryptocurrency market.

More information of the ICONOMI-project can be found here.

 

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Crytocurrencies and diversification

The classical financial market theory states that an investor is able to reduce risks or volatility by investing in different assets (for laymen this means “Do not put all your legs in one basket) or in a portfolio comprising different assets. If the portfolio assets do not have a perfect correlation, i.e. less than 1, the portfolio has a lower degree of variance than the weighted average of the individual assets in the portfolio.

To achieve diversification has been quite difficult for the average cryptocurrency investor. In addition, the diversification process has been quite complex associated with a lot of fees.  However, a new open-source project emerged, called ICONOMI. The team of ICONOMI will build a Coin Traded FUND (CTF), which will track the value of the most popular and well accepted cryptocurrencies. The rules of including and excluding cryptocurrencies are transparent and clear and can be read here (Whitepaper).

Overall, ICONOMI provides (existing and new) cryptocurrency investors the opportunity to purchase a cryptocurrency index, thereby enabling efficient diversification. The opportunity to invest is especially promising for risk averse investors, who consider risk and return characteristics.

More information of the project can be found here.

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