Investing in a new asset class: Cryptocurrency · The origin of Bitcoin - 2009 •“Satoshi Nakamoto” whitepaper •Bitcoin: A Peer-to-Peer Electronic Cash System •Unknown identity

Investing in a new asset class:CryptocurrencySanto Domingo, República Dominicana

July 2018

© 2018 LUGNA www.lugna.pt

What is covered?

• Blockchain basics

• Traditional World & FinTech – Where does blockchain fit in?

• Cryptocurrencies 101 – Coins Vs Tokens

• Acquiring, holding and selling cryptocurrencies

• A new asset class for investment – The Token in the ICO

• Traditional regulations vs new technologies

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Blockchain basics

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The origin of Bitcoin - 2009

• “Satoshi Nakamoto” whitepaper

• Bitcoin: A Peer-to-Peer Electronic Cash System

• Unknown identity

• Bitcoin (BTC) was a by-product of a propose decentralized payment system.

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Wikipedia print screen


Distributed Ledger Technology

• Technology based on:• Constant duplication and validation• Security by decentralization• Publicity for control, transparency

• List of records – “blocks” linked and secured through cryptography.

• Records are managed by a network of inter-validating nodes using the same protocol.

• The ledger is public – all transactions are validated chronologically.

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Distributed Ledger Technology

• Any information in any given block cannot be altered retroactively without the alteration of all subsequent blocks –the chain of blocks.

• Decentralization avoids collusion of the network.

• Consensus is required.

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Issues

• Lack of regulation + Uncertainty

• Establishment is (usually) against it

• Full transparency can be an issue

• Crime and Money Laundering

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In the traditional world

• Secure ledgers for digital transactions

• Rapidly accelerates the pace of transaction

• Crowd funding – The ICO

• Elections and transparency

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• File storage & Data Management

• Contracts and Land/Commercial Registries

• Identity Management


Cryptocurrencies 101

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Concept

• Encrypted digital currency

• Limited entries in a database, which cannot be changed except by fulfilling specific conditions

• In this regard, the concept does not differ much from a bank deposit

• Key aspects - accounts, balances and transactions

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Traits of cryptocurrencies

• Transactional properties

• Irreversible

• Pseudonymous

• Fast and global

• Secure

• Permissionless 11


• Monetary properties

• Controlled supply

• No debt but bearer


Tokens• Secondary assets

• Part of an ecosystem

• Market value + Function

• Representation of a

particular asset or utility

• Usually resides on top of

another blockchain.

Coins• Protocols

• BTC/ETH/NEO

• Exhibit the same properties

as Bitcoin

• Altcoins

Coins & Tokens

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Coins by Market capitalization

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Bitcoin (BTC)• 1st coin

• P2P payments

Ethereum (EHT)• Smart contracts• Tokenization

formula

Ripple (XRP)• Instant payments• Banking uses

Bitcoin Cash (BCC)

• Fork of BitcoinLitecoin (LTC)• Fork of Bitcoin• Faster

Cardano (ADA)• Resource

efficient


BTC chart 2017/2018

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Smart contract

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• Custom-build

• Enforces a relationship with cryptographic code

• No third parties

• No risk of downtime, censorship, fraud or third-party interference

• Creation of markets, store registries, transactions, redemptions, liquidation of tokens, triggering of other smart contracts

• Tokens


Tokens to watch

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UTRUST (UTK)• Payment platform• Buyer & Seller

protection

TRON (TRX)• Decentralized

entertainment applications

EOS (EOS)• Easy deployment

of decentralized applications

GOLEM (GNT)• Decentralized

supercomputer

Tether (USDT)• Not ETH based• Pegged to USD

Ontology (ONT)• Trust ecosystem• NEO based


VeChain chart 7 days

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Types of tokens

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Utility Token

Access products and servicesPlatform based

Payment Token

Currency function

Security Token

Represents asset, stake or equityAppreciation

• Regulatory concerns differ

• Payment – KYC/AML + Banking

• Security – Securities Law


Investing in cryptocurrencies

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Investment alternatives

• Mining – DIY

• Trading – Direct/Exchanges

• Initial Coin Offerings21



Mining

• Investment – no lucky trades

• Dual purpose• Creating coins• Confirming transactions

• Hardware vs Cloud Mining

• Electricity price vs market price

• Proof of work vs Proof of stake

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Exchanges - Crypto/Fiat frontier

• Online Marketplace

• Trading Platforms

• Direct Trading

• Brokers

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Exchange Policies

• Reputation + Regulatory compliance

• Fees & Payment methods

• Verification (KYC/AML) requirements

• Geographic restrictions

• Exchange rates and Market cap

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Acquisition, sale and conversion

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Exchange

Merchants


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Initial Coin Offerings

When moon?

When lambo?



A new fundraising model

• Token sale, token generating event or initial token offering

• Facilitated by smart contracts

• Idea or Product + Marketing + Whitepaper

• Usually project oriented

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The issuer

• Blockchain-based start-ups

• Tech companies

• Venture Capital funds or Crypto Funds

• Traditional Finance & Real Estate

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Benefits

Issuer

• Financing

• Community creation

• Positive network effect

• Non-discrimination

• Global marketing

• Speed

• Settlements over the blockchain

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Participant

• Quick gains

• Liquidity

• Easily transferable

• The network effect of value creation

• Democratizing investment


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Private SaleBigger investorsInsidersSeed capitalDiscounts apply

ICOContributions are collected

KYC / AMLAllocation

Pre-saleReduced % of tokens to sellDiscounts apply

Contributions ofCrypto / FIAT

Allocation of Tokens


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Project is viableBTC ETH NEOUSD EURO

Platform is created /

Investment

Token Listed?

Use of the token

Financing of the project


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ICO

Early Stage

Tokens

Developing regulatory framework

Underlying rights vary

Liquidity may be restricted

Whitepaper & Token sale agreements

IPO

Late stage

Equity

Security Commisions supervison

Ownership – Right to Dividends

Liquidity is higher

Plethora of filings and disclosures

Investment cycle

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Investment cycle

• Price volatility

• Market manipulation – Whales & Pump and dump

• Sales attributed to ICO cash outs36



Risks of contributing

• Lack of due diligence – No formal process of auditing

• Poorly designed smart contracts

• Lack of education and familiarity with tech

• Phishing scams

• Regulation on security offerings

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Evaluating the ICO

• Does the team have a track record in business and crypto?

• Is the project feasible?

• Is the company incorporated? Is it regulated?

• Is a token necessary?

• Is the pricing accurate?

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ICO evolution 2017

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ICO evolution 2018

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In a nutshell…

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Be aware…

• Traditional world strategies for investment need to be adapted

• Take time to educated yourself

• Volatility issues

• Evaluate ICOs carefully – Team, Corporate & Purpose

• Regulation is increasing

• Consider an advisor when investing large sums in crypto

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Questions?And answers…

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Web: www.lugna.pt

© 2018 LUGNA


Documents

Investing in a new asset class: Cryptocurrency · The origin of Bitcoin - 2009 •“Satoshi Nakamoto” whitepaper •Bitcoin: A Peer-to-Peer Electronic Cash System •Unknown identity