Markets which serve the dual purpose of allowing monetization and the extraction of hidden knowledge are known as prediction markets. Although betting on headline events is nothing new, where prediction markets really come to the fore is when combined with the properties of blockchain technology. Namely the decentralized, anonymous, and fully permissionless world enabled by blockchain transactions is ideal for the full power of prediction markets to be unfurled.

Digital assets infrastructure developers have always been working on the blockchain trilemma of simultaneously improving decentralization, security, and scalability. Much progress has been made on scalability using Layer 2 (L2) rollup solutions, specifically relying on optimistic verifications or zero-knowledge proofs (ZKPs). (Refer to our earlier post on Layers and Bridges for a broader review.) While the nomenclature is seemingly an oxymoron, ZKPs are a technically interesting solution that can address not only scalability but also security and privacy, and thereby, have a wide range of applications.

The idea of tokenizing real-world assets (RWAs) captured the imagination of many, soon after smart contracts were introduced by the Ethereum white paper back in 2014. The concept was cited as a use case in the whitepaper under the subsection “Token Systems”. Since then, much of the focus had been on blockchain protocol and application development by cryptoasset-native entities. ICOs boomed and busted after 2017, and DeFi and NFTs proliferated over 2020 and 2021 but have lost their luster with the digital assets market pullback of 2022. With the multiple applications for spot bitcoin ETFs this past June and futures-based ether ETFs, TradFi institutions are strongly signaling continued interest in the space. Their work alongside cryptoasset-native companies to tokenize RWAs is worth paying attention to.

Should factoring in ESG stop investors who have a sustainability goal from considering the digital assets space altogether? A recent 2022 survey indicated that although ESG concerns may not be a showstopper for a digital assets allocation within a portfolio, it remains a significant consideration.

Perhaps framing the question differently may yield different insights into the issue.

Confessions of a crypto hedge fund manager. Often, uncomfortably narrow is the line between a portfolio manager and a fortune teller. Both are in the business of forecasting the future, both expect remuneration for this task. Where they differ is that at least some portfolio managers are not charlatans, which is perhaps the best that we can say.

But what if you could actually see the future? Just how good of a portfolio manager could you be?

In the traditional capital markets, return on investments comes from two sources – price appreciation and/or yield. Price appreciation (or loss) comes from the realization (or disappointment) of growth prospects compared to discounted growth expectations. Yield comes from the income generating capacity of the entity into which the capital was invested – be it an equity stake in an enterprise, a piece of real estate, or a debenture. Presumably, that entity was doing something productive with the capital it was given to have the capacity to generate income. We should expect no less from the digital asset protocols and projects that we invest in. Let’s dive into what productive ends capital is used for and where these yields come from.

Famously, “bitcoin can only perform 10 number of transactions per second”. After the common arguments of “it's got no intrinsic value”, “it's only used by criminals”, and “governments will crush it”, it's often the last remaining arrow in the quiver of no and nevercoiners. And in fairness to the critics, the transaction throughput has been a legitimate argument against crypto adoption and certainly an impediment to growth. However, one should never bet against human ingenuity, where there is a will there is a way, and in crypto there is always a will.

As we wrap up 2022 and head into 2023, it’s time to toss the dross to allow us to lay down a strong foundation for the coming years. What better way to do this than to tackle some of the myths that surround digital assets? We address our choices for the top five and hope that this provides the proper framework for our readers to think about digital assets constructively.

"It ain't what you don’t know that gets you into trouble. It's what you know for sure that just ain't so." - Mark Twain

In September, the Ethereum network successfully completed a highly technical major upgrade, known as the Merge, which changed how transactions are added to Ethereum's blockchain ledger. There are many reasons why investors ought to be excited about this transition. We provided an overview at the beginning of August, but these reasons are worth diving more deeply into.

There has been proliferation of activity to build out the infrastructure for blockchains. The explosive growth seeks to pursue better functionality along the critical lines of scalability, security, and decentralization. With this discussion, we go back to the fundamentals to cover the motivation behind and the breadth of the infrastructure development.

Metcalfe’s Law and has been previously used to value internet companies like Facebook and Tencent. It has been proposed that bitcoin and other cryptocurrencies should exhibit scaling properties proportional to the square of the number of users, and here we present a small selection of results of our research into Metcalfe’s law and briefly discuss some other models en-vogue amongst industry commentators.

Out of all the reasons to be bullish on Bitcoin, claims that it is an inflation hedge is the most puzzling one.

A cautionary tale of hubris and greed in the Crypto Wild West.

The “bitcoin is digital gold” narrative has been around for some time. From all the frameworks used to value Bitcoin, it is one of the few we consider having a number of economic merits supporting it. After all, Bitcoin’s seminal whitepaper itself does reference a similarity to how Bitcoin is mined.

What started as a fiendishly clever curiosity shared on an esoteric anti-authoritarian cryptography mailing list, has now developed into a legitimate emerging asset class in its own right, discussed in boardrooms of banks and pension funds throughout the world.

Digital assets are a new and exciting asset class. From the unmatched returns of Bitcoin, the OG of the space, to the vast promised land of DeFi made possible by the smart contract capability of a blockchain, it’s hard to miss the signs that there’s something new afoot.

Institutional investors make asset allocations decisions in a portfolio context. Retail investors allocate mostly based on what they think is going to pump with little regard to a portfolio context. Both have found hodling difficult for distinct reasons. So far, it’s been the best strategy.