• Wed. Jun 22nd, 2022

Q&A: Long-term viability of cryptocurrencies and blockchain technology

ByHazel R. Lang

Jun 1, 2022

Image by QuoteInspector.com (CC BY-ND 4.0)

With increased volatility in the crypto market, many critics are questioning the true value of these currencies and blockchain technology. However, Rob Frasca, co-founder and managing partner of Cosimo Ventures takes a longer view of the viability of the entire crypto universe.

Frasca advocates that with the advent of blockchain technology, ordinary investors now have the opportunity to invest in companies and projects that only professional institutional investors have had access to in recent decades. More specifically, the tokenization process allows individuals to participate in investments in which only the pros have funds to invest.

Digital diary sat down with Frasca to consider the future of crypto and blockchain investing.

Digital Journal: What parallels do you see between your time as an entrepreneur in the tech boom of the early 2000s and today’s crypto market?

Rob Frasca: Throughout history, looking at the many technological advancements that have made our lives better, faster, cheaper, people are embracing this technology. As people embrace this technology, they become enamored with the hype of new technologies and their promises. Human beings are opportunists. When you are excited, you invest and bring in money because you believe in the promise.

To compound this, today’s technology is based on networks and networks, which have exponential growth potential compared to more traditional or old-fashioned innovation like automobiles or trains. This adds to the “excitement”. This excitement can be felt in the crypto market just as it was in the Dot-Com era of the 2000s.

There comes a time when expectations go beyond reality. This happened during the Dot-Com era and we are seeing flashes of it again with the current state of the crypto market. Eventually people say “Well wait a minute, this isn’t producing the promised value” (or at least not yet) and the market experiences a correction or downturn.

Before the Dot-Com bubble, billions of dollars were invested in installing fiber optics for the future of the Internet. Network companies were on a pedestal and investors invested their net worth in individual companies based on the pledge. 70% of the fiber we put in the ground went unused when the dotcom bubble burst and stocks plummeted, wiping out trillions of dollars of wealth. Now, all that fiber is back in use, and many “internet-only” businesses have grown exponentially, but not in the timeframe we were promised during the tech boom.

The similarities between blockchain and the tech boom are that both have exponential growth potential revolving around networking. Blockchain is the future iteration of a decentralized internet. I think this is the greatest value creation event of our existence. This will create more value than we have ever seen. You should avoid paying attention to the short-term volatility of this one if you believe in it. Human beings struggle to grasp the reality of exponential growth. We think about things in a more linear way. The success of the Dot-Com era was only realized years after we originally thought the same might be true for blockchain technology.

DJ: What are the key considerations for crypto investors to keep in mind when dealing with immense volatility?

Prank: You should avoid paying attention to the short-term volatility of cryptocurrency if you believe in what you are investing in. Human beings struggle to grasp the reality of exponential growth. We think about things in a more linear way. We believe that what is before us is likely to remain so. You can’t be so locked into early market winners or today’s market leaders. There will definitely be losers in the blockchain space, much like what we saw in the 2000s and what we saw with even older technologies like railroads and auto companies.

The main questions are What is the real long-term promise of the blockchain industry? Is this a game-changer, is it completely disruptive? If it is disruptive, does it increase the overall value? If you were asking these questions on the internet in the 90s you would have agreed that it was transformational with the perspective you have now you would of course have been more willing to overcome short term losses to deliver on long term promises and the creation of wealth. , internet.

The other question to ask is: do you invest or play? If you’re investing, you need to understand what you’re investing in on a deeper level and you need to diversify your exposure.

DJ: In times of volatility, we often see opportunities emerge. How do you identify promising opportunities, especially in a difficult market?

Prank: There are a few dynamics to consider. If you look at blockchain from an adoption perspective and believe that only 10% of the world is using this technology and you think more people will adopt the technology, you need to think about how you approach the market. In the blockchain space, you have to think exponentially. Not only will we likely see the remaining 90% of the population (or to some degree) adopt blockchain, but it’s highly likely that blockchain companies that don’t even exist yet will come into the fold and overtake names and the opportunities that we are. think about today.

Times when the markets are struggling make it a great time to review projects because you’ve eliminated the scum and hype. As an investor, you can really focus on creating value and you don’t have to “pay too much”. The most important thing to watch is the team and the problem they solve as entrepreneurs. We’re still so early in the market that what’s really important is entrepreneurial conviction and problem-solving capabilities that we believe will ultimately translate into large-scale value creation. As venture capitalists and former entrepreneurs, this is the main intangible we focus on in turbulent times.

DJ: Are there any emerging areas of crypto or blockchain that investors should pay attention to, if they aren’t already?

Prank: The areas I’m interested in are decentralized identity and decentralized ownership. Imagine if a social media platform was decentralized and community owned. At the same time, NFTs will extend beyond art and serve as the technological backbone for digital rights management. This is an area that seems really deep to me.

NFTs will certainly grow in popularity, but their use cases will expand beyond Bored Apes and other digital arts. We’ve seen it in games and we’ll see it in the music industry and other content creation industries. Content creators will rapidly adopt NFT technologies for decentralized digital rights and royalty management, ultimately changing media business models to better activate fanbases and enable more lucrative royalty payment systems.

DJ: Why is tokenization a game-changer in the world of venture capital investing?

Tokenization — the process of creating digitized stocks that assigned value to a tracked asset via blockchain — has helped investors access a variety of new investment opportunities, from tokenizing real estate to early access to some of the most innovative blockchains. companies there before the public has access to them.

As a tokenized venture capital fund, we have always and continue to believe that all assets (including mortgages, stocks, IRAs, art, bank account balances, future income, etc.) are all negotiable, loanable and secured on the blockchain. This newfound liquidity around tokenized assets is democratizing finance globally, giving access and exposure to people around the world who typically didn’t have access to it. NFTs are just one example of how tokenization can reinvent media rights and ownership.

DJ: How can the average investor get involved in a blockchain project at an early stage?

Prank: The first step is to do your due diligence if you are planning to invest a substantial amount of money. Blockchain has been amazing in that it has opened up new avenues for investors that they have traditionally been excluded from, especially in the area of ​​venture capital. The advent of blockchain has truly democratized early access, but that doesn’t guarantee you’ll get the same returns wherever you go. It is important to understand a fund’s approach to the market, its diversification efforts, past successes and investment track record. Look for benefits that only tokenized funds can provide, such as:

  • Enhanced Liquidity: Investors in tokenized funds can trade these tokens on exchanges. This means you can actively buy or sell tokens (economic interest in the fund) at any time, unlike traditional venture capital funds that require hundreds of thousands of dollars to invest with lock-up periods that can last up to a decade.
  • Evergreen Framework: Tokenized funds are generally evergreen, which means they are open to new capital from new investors and additional capital from existing investors. There are no capital calls and no unforeseen commitment requirements. All tokens are purchased at the discretion of the investor, whether those tokens are purchased directly from the fund or on the open market.

Source link