Benchmarking $666M of Venture Capital Investments In the Crypto-currency Space

The $665 Million Evolution in a Space Nobody Respected a Year Ago

You probably already know that the Internet circa 1994 was the biggest investment opportunity (for those who had the foresight and resources to capitalize on it) of the 20th century. Imagine a world where there was a near “guarantee” of a similar monumental investment opportunity (x2) and where many (but most certainly not all) of the world’s most powerful and influential investors are quietly backing entrepreneurs from all over the world to monetize and stake claims of control well ahead of the lay investor.

In other words, imagine lightening is about to strike twice

Let me show you something (slides with the “Coindesk” designation are sourced from the State of Bitcoin 2015 [11] slide presentation, annotated as shown):

Yes, the opportunity is real. Growth metrics are popping three years in a row, even as media froth and rampant speculation has died down. (BTW, that’s a good thing!)

Some of us saw through the noise years ago. That is why I started Veritaseum (formerly marketed under the moniker “UltraCoin”). As of late the venture capital community is truly starting to come around. What does this Bitcoin VC investment look like? 

The deals are not necessarily small deals either. Here are the latest:

The “Contrarian Badass” (yours truly)—who has shown a strong proclivity for things finance and technological, and who has created a start-up with a crack-shot team and a first mover advantage on many fronts—is in an ideal position considering this activity.

Investors (should) look for four things when plowing money into startup:

1. Astute, driven management;
2. A strong, unique product;
3. Ample opportunity and timing; and
4. A charismatic, analytical, and communicative leader.

Let’s walk through each of these and examine exactly what it is we’re doing at Veritaseum with Veritas.

Our launch product is a bitcoin wallet, and there is rapid growth in wallets, worldwide.

But our product is not just any bitcoin wallet. It was (and still is, we believe) the firstMULTISIG, smart contract-aware, universal FinTech wallet that we know of. VCs loveMULTISIG, they adore smart contracts [Bitcoin 2.0], and if there’s something they cream over even more than those two it would be a universal wallet.

I warned early on that, although a lot of money was going into bitcoin payment processors (ex. Bitpay, Coinbase), it was a bad idea to invest in the strategy that the transaction business would enrich all. The margins are indefensible in a market rife with better capitalized competitors with larger existing customer bases. Reference my post from a year ago, “Payment Processors, Patents and a Dollop of Healthy Paranoia [12]”:

… the big media interest in Bitcoin combined with the increasing VC interest in Bitcoin companies (reference BitPay Gets $30 Million in Venture Capital Funding [13]) is a very good thing for the industry, but also illustrates shortsigtedness in both the investment community and many practitioners.

The problem with the processors...

When bitcoin is as easy as PayPal to use then it will be on the path to mass adoption, but to assume that’s the most lucrative path to take in bitcoin company private equity investment begs the wrong question.

...That 25x markup on the high end is significant (even for the Bitcoin companies), and ripe for disintermediation itself (that's right, the disintermediating agents are poised for disintermediaion). Particularly once the UX of Bitcoin evolves, as email and web browsing did, and users realize how easy and cheap it is to jump onto the blockchain and do this stuff themselves.

Even assuming users don’t follow the historical model of those that left proprietary walled gardens (think AOL) and jumped directly into the open World Wide Web themselves, there are no material barriers to entry to enter into the processing business other than potentially a money transmitter license. The only material barrier, hence the business opportunity, is that Bitcoin is cumbersome to use. As the UI/UX polish increases and the amount of competitors in the space increase, the lower the prices charged - hence the margins - will be.

With such low barriers to entry and potentially humongous markups to exploit, what do you think happens next? The wild, untamed hordes of competitors swoop down upon the masses, and we have a concerted race to zero, and likely negative margin as competitors attempt to make processing a loss leader to draw users into the folds of richer, higher margin services!!!

The race to marginal zero, then negative, does not make a strong business plan. So, what do these companies such as BitPay, Coinbase, etc. do once that point is reached (rather quickly)? They look to value added (high margin) services on top of their low margin, utility-like payment infrastructures.

Enter smart contracts and the true use of programmability in the crypto-currencies. The easiest and the likely first implementation of such will be multi-sig operations which allow multiple parties to share funds without having to worry about trusting and single party in a transaction. Our ZeroTrust Letters of Credit (patent pending) is just such a product. It allows for multiple parties to tranfer payment for simple and complex transactions contingent upon the mutual agreed upon successful execution of said transactions. This is done without the parties having to:

1. 1. Know each other;
   2. Trust each other; or
   3. Have any form of proximity to each other;

and can be done using micropayments all the way up to multi-million dollar macro payments. The barriers to this business are much higher. For one, it takes more than just programming code. You have to be able to congeal the legal logic of the conventional law in equity contract into code. You have to be able to congeal the business logic into code, and you have to be able to implement it into the blockchain or whatever other underlying transmission mechanism you choose to utilize.

Once the race to negative zero is in full swing, a few of the wiser companies will wake-up and say "Hey, there has to be a better way, and we think we found it!". It is at that point Reggie Middleton's UltraCoin products and assets will shine. It is not hard to foresee that the entrenched companies (Visa, Mastercard, PayPal, Western Union) may enter a bidding war with the new comers armed with material VC warchests (much more than we're seeing with $30 million investments of today - all over the guys who had the foresight to see the next evolutionary step in plain vanilla payments - smart transactions and self-executing digital contracts and transactions.

That was a year ago. Was I right? Well, pricing models changed to drop prices and the business slowed down:

Which led to exactly what I predicted, business model drift:

 And at the same time margins shrunk.

What is Multisig?

A multi-signature address is an address that is associated with more than one private key (in cryptograsphy, security is handled by pairs of unique alphanumeric keys - one private to open a lock, the other public to send to the locked funds/data to others through open passageways [ex. Internet, email]. Once the other side gets the locked package, they will need a private key to open it. The two unique keys must fit with and recognize each other in order to open the lock). The simplest type of multisig is an m-of-n address - it is associated with n private keys, and sending bitcoins from this address requires signatures from at least m keys. A multi-signature transaction is one that sends funds from a multi-signature address.

The primary use case is to greatly increase the difficulty of stealing the coins. With a 2-of-2 address, you can keep the two keys on separate machines, and then theft will require compromising both, which is very difficult - especially if the machines are as different as possible (e.g., one pc and one dedicated device, or two hosted machines with a different host and OS).

It can also be used for redundancy to protect against loss - with a 2-of-3 address, not only does theft require obtaining 2 different keys, but you can still use the coins if you forget any single key. This allows for more flexible options than just backups.

It can also be used for more advanced scenarios such as an address shared by multiple people, where a majority vote is required to use the funds.

Cross-reference the companies below with the green spreadsheet graphic above, and you’ll see that VCs simply love MULTISIG technology.

Veritaseum is also a universal wallet. VCs adore universal wallets. Cross reference the names in this graphic with the names in the funding sheet above.

Veritaseum was not only one of the early universal wallets, but to finance and investment guys, it’s likely the most powerful universal wallet ever made. You see, not only can it send, receive, and store bitcoins. It allows you to act as your own broker by buying exposure to nearly any publicly traded financial asset (over 45k tickers), in any asset class, through any major exchange around the world, and do this with up to 10,000x leverage. This is all done without counterparty, credit, or default risk.

Here’s some obligatory screenshots:

With nothing more than a 15 second download of our trading client [14] (no signups, registrations, no accounts) you can:

1. Create your own bespoke, custom trading vehicles to...
2. Directly trade peer-to-peer and OTC, exposure to over 45,000 ticker symbols...
3. In any asset class...
4. From exchanges from around the world...
5. Without an exchange or broker...
6. With up to 10,000x digital leverage...
7. Without fear of margin calls or negative equity...
8. While eliminating practically all counterparty/default/credit risks...
9. For the least expensive transaction and leverage costs in the industry - as little as 5 bp.

Eliminate your broker, exchange and clearing house - all while actually increasing the safety of your trading.

Veritaseum's offerings and technology are right on time:

Let me show you something more:

So, with Veritaseum you have a universal financial services and self-contained P2P exchange wallet—quintessentially what’s in demand by the “smart money” right now.

When I say we do financial services, I mean we do heavy lifting financial services—going after the big money.

This is quite timely from a VC investment perspective:

Keep in mind that Veritaseum doesn’t just trade bitcoins. It trades everything that’s available on public exchanges (including stocks, bonds, forex, and commodities) and more!

Veritaseum has a very, very diverse management team with expertise in IP law, software engineering and architecture, investment stategy, forensic/fundamental/global macro strategy and analysis—and we're just getting started. The CEO has a strong media presence as well:

The Business Media Sees This as DISRUPTION!

These are the reasons to learn more about Veritas and Veritaseum.

In closing, I urge all to read Using Veritaseum's Free Crypto 2.0 Valuation Tool To Value Tokens, Crypto Assets & Smart Properties [20]. Feel free to download the model, tweak the assumptions to your liking or value any other Crytpo 2.0 venture you desire. The results are sure to be illuminating.

Team Veritaseum is uniquely trained, and highly motivated. Specialists with few equals, immune to the concept of “can’t”!

—Reggie Middleton, CEO and Founder of Veritaseum, Inc

Veritaseum is in the business of disintermediation. Our profit model is based on the displacement of rentseeking entities. As a result, our profit is your profit, since we split the difference of monies extracted by those who have gained as financial gatekeeper. We have demonstrated how Veritaseum poses to disintermediate “legacy” banking system (reference “DACe, Disintermediation and the Death of Wall Street [21]”), but our search for capital has opened our eyes to an ever inreasing pool of industries that will likely be disrupted as our technology and methodologies become more widespread. I will present a barrage of facts and data and let you come to your own conclusions as to whether this is the dawn of a new age.