Digital Asset Weekend Round-Up 11.22.2021

Getting #financialadvisors caught up on #digitalassets happenings from Friday evening heading into Monday morning.

After a week off to celebrate Arbor Capital’s 25th anniversary, the weekend round-up is back! The teams were able to spend a few days together reflecting on where we have been, where we are currently, and where we are going. It was invigorating strategizing about the traditional and digital businesses as well as elevating each other. My wife and I were then able to parlay that with time together in remote Alaska. It was both refreshing and a little scary to spend time where there was little connection to the world let alone the digital one. Now we are back and geared up to end 2021 with a bang and head into 2022!

This past week and weekend the prevailing themes have been centered around:

 

      1. ConstitutionDAO and the aftermath of its bid to buy an original copy of the constitution 
      2. Square’s release of their whitepaper on a decentralized Bitcoin exchange 
      3. El Salvadore’s continued commitment to “hyperbitcoinization” 
      4. Other headlines: US Navy testing blockchain, Gaming and Music NFT’s, no hiding in crypto, and Paraswap airdrop. 
      5. Learning Opportunities: Arca goes beyond Crypto, Bitwise DeFi primer, and Galaxy Digital crypto resources 

Weekend ETH Prices

Weekend BTC Prices

ETH Friday at 5pm: $4,266

ETH Weekend Low: $4,216

ETH Weekend High: $4,437

ETH Price as of posting: $4,221

Performance YTD: +479.86%

BTC Friday at 5pm: $58,301

BTC Weekend Low: $57,579

BTC Weekend High: $59,866

BTC Price as of posting: $57,570

Performance YTD: +97.12%

ConstitutionDAO

Below you will find articles reviewing what recently happened when a DAO was created for the purpose of purchasing an original copy of the constitution that was set to go on auction. Be sure to read them and listen to episode 309 of The Breakdown from NLW as they will get you caught up. The aftermath has people asking themselves:

What the heck is a DAO?

DAO stands for decentralized autonomous organization. A definition from Ethereum.org, “Think of them like an internet-native business that’s collectively owned and managed by its members. They have built-in treasuries that no one has the authority to access without the approval of the group. Decisions are governed by proposals and voting to ensure everyone in the organization has a voice. There’s no CEO who can authorize spending based on their own whims and no chance of a dodgy CFO manipulating the books. Everything is out in the open and the rules around spending are baked into the DAO via its code.”

What we saw play out recently with ConstitutionDAO’s attempt to buy a copy of the constitution, and recently with other DAO’s buying collectible pieces, will undoubtedly become case studies on next-generation crowdfunding and organizational structures. DAO’s are important because they will fuel the transition from the intermediary economy to the verification/authentication economy where trust in human intermediaries is replaced with trust in programming and code. One of the main benefits of a DAO is the potential solving of the principal-agent dilemma. DAO’s however are at their very early stages of development and adoption. If Bitcoin and crypto assets are in 1997 internet days right now, then DAO’s are in the 1970’s and 1980’s internet days. DAO’s need to address security concerns around smart contracts, legal concerns around formation and structure, and need more time to test governance structure among other things. When is ArborDigitalDAO coming? No idea but we are paying close attention and already gaming out internally what that would look like.

 

PlannerDAO

What can I do now? As advisors who want to get a pulse and learn by getting into it then the first place you need to go is to an organization called PlannerDAO. Taken from their website, “PlannerDAO is a decentralized movement owned by financial planners. Our mission is to democratize access to wealth building strategies around the globe. We bring a diverse set of talents, skills, and experiences, which we use to promote economic sovereignty for all individuals.”

You can check them out at www.plannerdao.io

and follow them on LinkedIn here:

 

Square’s Decentralized Bitcoin Exchange

Square’s TBD division, first announced in July, released a white paper presenting tbDEX this past Friday. Taken from a report from Jeff Benson on Decrypto, “Square, the financial services company helmed by Twitter’s Jack Dorsey, wants to do more with Bitcoin than just allow people to buy it on its Cash App. It’s working on a way to let people trade BTC and fiat on the type of decentralized exchange (DEX) that’s common to Ethereum.”

Couple of things to note here: 1. Jack Dorsey is a Bitcoin maximalist and purely focused on championing Bitcoin, 2. Square has a lot of experience in peer-to-peer payment systems with their Cash App so this makes sense for them. This plays into the broader macro theme that we at Arbor Digital is yelling from the rooftops to anyone who will listen: The traditional and the digital are merging. Look for other FinTech companies and platforms whose mission it is to disrupt the current system continue to lead the charge.

So, what does this mean for advisors? Two words: Next generation. Leadership groups within firms who want to be positioned to manage the millennial and beyond generational wealth (not to mention net generation of talent) need to be adding this question to their business planning meetings: What does XYZ firm of the future look like? A financial advisor who is passionate about this exact topic and spends a lot of time thinking on this is Justin Castelli of RLS Wealth and Onramp Invest. Be sure to check his website and podcast.

El Salvador to issue Bitcoin Bonds and develop Bitcoin City

El Salvador president Nayib Bukele announced on Saturday his plans to build the world’s first “Bitcoin City” powered by the Conchagua volcano and funded initially by bitcoin-backed bonds. To execute on this El Salvador has partnered with Blockstream and iFinex. Dubbed “bitcoin volcano bonds” half of them would be invested in Bitcoin and the other half on infrastructure. While there were a lot of liberties taken in the forecasting this is very bullish for Bitcoin, “The country plans to fund construction of the city and the infrastructure for bitcoin mining via a $1 billion tokenized bond. The only tax in the City will be a 10% value-added tax to help fund construction and pay for overhead down the road. This bond is issued by Blockstream’s Liquid Network side chain and processed by iFinex. $500 million of the bond, which carries a coupon rate of 6.5%, would be earmarked for construction of the city and necessary mining infrastructure, while the other half of the bond would go towards buying more bitcoin.” As reported by Sam Reynolds via Blockworks.

It will be interesting to see the bond’s prospectus when it becomes available. NFT technology is mainly seen as the conduit for digital art and collectibles but one thing we are extremely bullish on is the tokenization of any asset. This will be another test case, and everyone will be paying attention on how well, or poorly, this goes.

Anthony Pompliano, Pomp, had a couple takeaways he shared in his free newsletter, “There are two main takeaways that I have from the early information that we have received. First, El Salvador is plugging their entire country into the bitcoin network in the same way that MicroStrategy plugged their company in the network last year. This will likely prove to be an incredibly intelligent decision, but it will also create a number of fast followers that will attempt to emulate pieces of the El Salvador plan.

Second, I would imagine there will be immense interest in the El Salvador bitcoin-backed bonds. They are reportedly going to carry a 6.5% yield, which would make them competitive in the market by itself, but the bitcoin-backing means that they will become even more attractive. If El Salvador is able to easily capture demand for the bonds, you can anticipate them to issue many more of them, along with having a multitude of countries, states, and cities racing to do the same.”

Other Weekend News


Learning Opportunities


Going Beyond Crypto: Exploring the Digital Asset Ecosystem

By Jeff Dorman, CIO, Arca Digital Assets

“Now that the digital asset industry has hit the $3 trillion market cap and exceeds 7,000 crypto assets, we believe the ecosystem can benefit from an asset classification method. Our digital asset taxonomy outlines and defines the token landscape for increased knowledge and comprehension. As the industry continues to progress, it’s helpful for all community members, both early adopters, and incumbents, to understand its vastness and extensive capabilities for further growth”

Join Rayne Steinberg, CEO, and Jeff Dorman, CIO, for a Twitter Live on November 23, 2021 at 4:00 PM ET as they discuss our classification system and answer community questions. Please submit your questions below.

You can follow them here:

 

Decentralized Finance (DeFi): A Primer for Professional Investors

By Bitwise Asset Management

“DeFi replaces traditional financial intermediaries with software: Self-executing “smart contracts,” secured by blockchain technology, allow innovators to reimagine everything from lending to trading, asset management, and more.”

 

Foundations, Investment Thesis, and Valuation Methodologies: Bitcoin, Ethereum, DeFi, and more

By Galaxy Digital

If you and your firm are looking for resources in all of these areas of crypto then look no further than Galaxy Digital’s resources page.

 

 

Thank you for reading this all the way through. Be sure to take time away from normal routines this week to practice gratitude. On behalf of everyone at Arbor Capital and Arbor Digital we send our energy out to everyone for a wonderful Thanksgiving! Stay safe, healthy, and happy 😊

Stay safe, healthy, and happy!

– Marc

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