Blockchain Coinvestors Newsletter - Vol. 3, No. 22, October 2021

Blockchain Coinvestors Newsletter

Vol. 3, No. 22, October 2021

Hester Peirce, SEC Commissioner, Nails It.

We don't usually dig into the writings and speeches of US lawmakers. Unless you have a good legal mind, it's easy to get lost. Nowhere more so when US financial lawmakers are opining on innovation and the future of financial services. Not that the two present an oxymoron. Rather, we just wish the regulators would accelerate, not slow down our inevitable journey to the future of digital monies and digital assets to the benefit of all.

However, on October 8th, 2021, we heard a top regulator give a speech that absolutely captured our perspective and viewpoint in the most accurate of ways, and so in this newsletter, we not only want to share parts of it with you, but we want to encourage each of you to read the full transcript by clicking here.

Hester Peirce - Commissioner US Securities and Exchange Commission (SEC)

To paraphrase Wikipedia, Hester Maria Peirce is an American lawyer specializing in financial market regulation. Peirce is serving as a Commissioner on the Securities and Exchange Commission (SEC). Peirce was sworn in on January 11, 2018, for a term ending in 2020, and her second term expires in 2025. Peirce is a former staff member of the United States Senate Committee on Banking, Housing, and Urban Affairs and of the SEC. In 2016, she was nominated by President Barack Obama for Commissioner on the SEC, but the United States Senate did not act on her nomination. 

So as you can see, President's from both sides of the aisle have thought her worthy of leading the country into the digital future of financial services.

Texas Blockchain Summit

This month saw a number of important announcements coming from the Texas Blockchain Summit, and it was as the closing remarks for the conference that Hester Peirce gave her remarkable speech. Before she got up to speak, the Commissioner of the Texas Department of Banking had just issued a letter authorizing all Texas state-chartered banks to custody cryptocurrency. Throughout the summit attendees had been discussing Texas's opportunity to become the world's leading Bitcoin mining center because of China’s decision to cancel bitcoin mining and had been exploring the possibility of eliminating Texas flared gas (one of the largest sources of carbon in the environment) by using it to drive Bitcoin mining rigs. Texas Governor Greg Abbott emphasized his state's position by declaring “Texas will be the crypto leader. Cryptocurrency is now coming to Texas grocery stores” referring to the decision by grocery giant H-E-B to put cryptocurrency kiosks into their stores.

Now it was time to bring the conference to a close.

Lawless in Austin

The speech is entitled Lawless in Austin and it goes a long way to summarizing the state of play in blockchain and crypto regulation, provides a reframing of the moment we are living in with regard to a transition towards a brighter future of digital monies and assets, and makes some suggestions about the road forward.  

A few quotes from Commissioner Peirce's 3,900 words will illustrate why we are so set on encouraging each of you to read the transcript: 

• "Chair Gensler’s habit of calling the cryptoverse the “Wild West” has captured my attention. He is not alone in referring to the crypto landscape as the Wild West, a place we imagine to have been lawless—a society in which the gunslinger with the best reflexes and worst morals wins at everyone else’s expense."

• "Today, however, I will offer a different take on the Wild West and, with that picture in mind, suggest a way forward in crypto regulation."

• "The West of the past called to people who were chafing against the staid and stale societies of the East and looking to throw themselves into building a new future in a more promising place. The Western frontier was a place for the adventurous, the rough around the edges, the idealists, the free-thinkers, and the restless."

• "John Soule wrote in the Indiana Express in 1851, “Go west, young man.” Horace Greeley picked up this phrase fifteen years later, when he wrote: “Washington is not a place to live in. The rents are high, the food is bad, the dust is disgusting and the morals are deplorable. Go West, young man, go West and grow up with the country.”

• "The crypto frontier, like the Wild West, appears pretty wild at first glance: home to lots of codeslingers and speculators and some hucksters too, this new West also has its inter- and intra-protocol fights, friendships forged through shared difficulties and successes, colorful personalities, passions, dreams, hardships, spectacular failures, and remarkable victories. But as in the West of the past, there is order and discipline in all of that rough and tumble."

• "Because crypto is built on code, the code itself serves as a governor of conduct."

• "Decentralized communities collectively figure out how to deal with unanticipated problems. These cooperative and competitive disciplining mechanisms have helped to clean up the crypto frontier though there is more work to be done. The persistence of both self-regulation and calls by the crypto community for clarity from government regulators suggest that lawlessness is not the prevailing culture of the crypto frontier."

• "Ironically, our gunslinging ways in the old, supposedly staid, government regulatory world back East are causing people to question our commitment to the rule of law."

• "It is not too late for government regulators to set clear rules that respect the unique attributes and challenges of life on the crypto frontier."

• "A fundamental area of conflict between the SEC and the public is how much legal clarity there is around digital assets. The safe harbor I proposed for token distribution events acknowledges there is uncertainty about when crypto asset offerings implicate the securities laws, but the prevailing attitude at the SEC is that there is clarity, so why bother with a safe harbor?"

• "The idea that there is clarity as to when crypto assets are securities must come as a surprise to the lawyers advising crypto projects that have struggled with this issue for years."

• "Embedded within the negative Wild West analogy for the crypto-frontier is a concern that unwitting and unwilling investors are being harmed by participating in the crypto markets."

• "As C.S. Lewis noted, “Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive . . .This very kindness stings with intolerable insult.”

• "The good actors want to know which digital assets are securities so they can figure out how to comply with the securities laws, but we have done little during my nearly four years on the Commission to explain what that would look like. We simply have not allowed staff the latitude to consider the hard questions around how crypto can operate within the securities framework."

• "The way forward is not to drag entities into the Commission through enforcement actions and brute force them into a regulatory regime that is not actually well-suited for them. Rather, we should take a methodical approach, one that provides answers to the key questions to which market participants need answers."

• "The stakes are high because the government is riding into crypto town with the promise that it can do a better job than the existing informal disciplinary mechanisms."

• "I might approach this whole endeavor with a less strict hand than some of my fellow regulators, but the real question is not what I or any other regulator wants, but what you the people—the intended beneficiaries of this regulation—want. I am eager to see what you accomplish on the crypto frontier once we set some sensible, clear regulatory parameters."

These are our favorite excerpts from Hester Peirce's speech.

Which are yours?

Again, we want to encourage each of you to read the full transcript by clicking here.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Launched in 2014, our goal is to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and crypto projects. The strategy is now in its 8th year and has to date invested in more than 30 pure play blockchain venture funds in the Americas, Asia and Europe; and in a combined portfolio of 300+ blockchain and crypto projects including 30+ blockchain unicorns. Our funds rank in the top decile amongst all funds in their respective categories on both Pitchbook and Preqin. Headquartered in San Francisco with a presence in Grand Cayman, London, New York, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle. 

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. As of Q2 2021 our funds rank in the top decile amongst all funds in their respective categories on both Pitchbook and Preqin with Net IRR exceeding 60% for Funds I and II. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,200,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Blockchain Coinvestors has launched an Early Stage Token Fund that is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. This Fund expects to have access to early stage tokenized projects that few others can access through its relationships with other leading blockchain investors. The Fund will target 20 to 30 SAFTs as well as positions in traded tokens when excess capital is on hand. This is a continuation of the direct token investing strategy of the Fund Manager that has included private stage investments in Acala, Filecoin, NEAR, Polkadot, Structure, and others.

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

Click here to receive the insightful weekly crypto newsletter and webinar invitations from our Blockchain Coinvestors partner Lou Kerner.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Investing in Early Stage Tokens

- November 1st, 7:00am PST

- November 1st, 12:00pm PST

2022 Blockchain Predictions

- November 15th, 7:00am PST

- November 15th, 12:00pm PST

Meet the Blockchain Unicorns-Year End 2021

- December 6th, 7:00am PST

- December 6th, 12:00pm PST

Blockchain Coinvestors 2021 Wrap-Up

- December 20th, 7:00am PST

- December 20th, 12:00pm PST

Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• Nasdaq Trade Talks: Discussion on the blockchain unicorn universe research and how to gain exposure

• CoinDesk: Our predictions on blockchain unicorns in 2021

• Ashurst: On the ESG Podcast, a discussion of the internet, fintech, blockchain, and individual revolution

• Business Insider: Discussing how right now in blockchain is similar to the internet boom of the '90s in terms of growth and innovation

• NBC San Francisco: An interview on what are NFTs

• US News & World Report: What to know about Bitcoin ETFs

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

"The best way to invest in Blockchain businesses"

Blockchain Coinvestors Newsletter - Vol. 3, No. 21, October 2021

Blockchain Coinvestors Newsletter

Vol. 3, No. 21, October 2021

This week, we have decided to rerun our earlier newsletter on the reasons why some people are holding back from investing in Bitcoin.

WHAT CONCERNS INVESTORS ABOUT BITCOIN?

In newsletter Vol 3, No. 2 we asked you to share your concerns about Bitcoin in a single question survey which is still open for your responses. For those of you who are not a current holder of Bitcoin, we asked what scares you most about it? For those who are already holders of Bitcoin, we asked you what stops you from buying more? Thank you to all of you who responded. In this newsletter we go through the initial results and also provide some answers to your concerns - in effect we hope to demystify Bitcoin for you.

Top Line Findings

This newsletter goes twice a month to over 10,000 people who are accredited investors. It also goes to a large number of institutional investors and even more family offices. For this survey we received back a statistically significant number of responses. We have not found significant differences in how various of investors responded, and we saw little geographic variation.

What stands out for us is that a lot of concerns that we included in the survey received votes including a couple that were trojan horses to see if people understand what Bitcoin really is. We added them because we wanted to see if the fear, uncertainty and doubt (FUD) that others are spreading about Bitcoin might be hitting home. Some of it clearly is.

The other top line finding is simply the breadth of concerns getting votes. This can be read in several ways. Firstly, there may be a lot of legitimate concerns. Secondly, different investors may be concerned about different things. Thirdly, Bitcoin may simply be a confusing asset class with lots of chatter and lots of FUD - much of it being spread by people on the short side of the trade. We have demonstrated in years gone by, that uncertainty chills investment. Other research, such as the very good Bitwise study on US CFA's and Registered Investment Advisors show that more than 90% of those important players in the US investment scene have yet to place a first Bitcoin trade for themselves or their clients. When Bitcoin is performing as the world's highest performing asset, that looks like FUD to us. Said the other way, it does not look like an economically rational outcome.

So let's go through the top 7 concerns one by one (We will hold a future webinar to go through all of the concerns in greater detail than we can do in this newsletter).

Concern 1: Bitcoin keys are not safe to own - my Bitcoin will get hacked (33.4%)

This is appropriately at the top of the list, and in years gone by it is true that the only way to own bitcoin was to enter the ecosystem and take on self-custody including holding your Bitcoin keys yourself. Of course, the world has been worrying about this issue of safety for a few years now. Today, you don't need to self-custody your Bitcoin, and you don't need to take on any custodial risk directly. Institutional custody solutions are now in place including from institutional grade providers like SFOX (the leading independent crypto prime broker) where Matthew is Vice Chairman. If you fear for their security, you can also get Bitcoin exposure by investing in paper based instruments. Foremost among these are the offerings from Greyscale (i.e. GBTC) and Bitwise (i.e. BITW) - Blockchain Coinvestors is an investor in both. These can be invested in at no premium through their respective primary issuances, or you can invest in them in the secondary market including through your favorite brokerage account. There is no risk that you will be hacked. And you don't need to own any keys. You should do your own due diligence on their custody platforms - just as you would if you left your gold bars in your private bank lockbox. Not all providers are equally capable in the custody dimension - and incredibly to our way of thinking, some of the largest New York on ramps for Bitcoin access are outsourcing their custody and security to third parties.

Overall, we don't think this concern is valid unless you want to directly own Bitcoin and hold your own keys in which case you do need to ensure leading edge cybersecurity for your assets.

Concern 2: Bitcoin is too expensive now (31.3%)

This is a perennial fear for investors. No one wants to buy the last tulip bulb, at the highest ever price paid for a Liliaceae. It is why most people did not buy Amazon in any of the years during which its share price was going through a power curve. Each period, an investor would look at the last year's appreciation and argue themselves out of investing. "Amazon just went up xx%, it surely won't do that again. I can't justify this price based upon the intrinsic value." It is a common refrain, and there is some truth to the notion that nothing compounds geometrically for ever. Perhaps Bitcoin is already at its peak value? 

It is a truism that beauty is in the eye of the beholder. For us, when we look at this chart of Bitcoin's annual appreciation, we can't help but see a beautiful pattern. When the world's fiat currencies are being printed in the trillions, they must be going down in value. In that context, scarce assets can only be relatively more valuable. So while we fear that Bitcoin will stop appreciating at these historical rates, we still greatly value its scarcity in a world where most monies are not. It seems to us that a small allocation (2 to 5%) might make sense since while you can lose 100% of 2 to 5% you might also see that 2 to 5% appreciate at rates like those in this chart. The asymmetry of returns is spectacular. What is your view?

Concern 3: Bitcoin is too volatile (25.0%)

Yes, Bitcoin is volatile. You can see the history by clicking here. It is declining over time as Bitcoin becomes more widely owned and traded, but it is still significant.

While traders care a great deal about volatility (and many of them need it for their trading strategies), we lean towards the view that short term volatility is not very relevant to long term investors who have the resources to avoid needing to dump assets in downturns. Which means most family offices for example. If you are going to buy some Bitcoin and HODL it for the long term, why does short term volatility matter at all? Multigenerational wealth is not impacted by daily or weekly volatility in speculative markets. However, this one is clearly a real and legitimate concern for those of you who worry more about the risk than the return (Bitcoin clearly far outperforms most other asset classes on a risk adjusted basis).

Concern 4: Bitcoin is not issued by a government, so it is not trustworthy (21.9%)

Implicit in the question is some faulty logic. Assets issued by governments are not always trustworthy either and many governments are not trustworthy when it comes to monetary policy. Ask the 4 billion or more people around the world who live in countries where their fiat currencies are hyperinflating, subject to expropriation, and are generally so untrustworthy that their citizens live in fear of waking up on a Monday to find out that their Friday night wealth has vanished over the weekend. While most of our readers are not citizens of countries like Argentina, Sudan, Venezuela and Zimbabwe we still think this observation is important in the context of Bitcoin. The value of Bitcoin is going to be driven by it's utility including to those 4 billion people. They need a sovereignless, distributed, portable money that can secure their family wealth in a world of untrustworthy governance. The VAST majority of those people have not yet discovered Bitcoin but they are going to.

For those of us in the EU, Japan, Switzerland, UK, US, and so on, we trust our governments much more and may feel that a money that is not backed by a central bank is untrustworthy. However, we have never before experienced the printing of fiat money on the scale of the last few months. Given the trillions of units of currency being printed, and the close to zero interest rates on cash (or negative at some banks i.e. in Switzerland) the jury is out on whether our trust is well placed. Perhaps a straddle on both sides of this debate might be a sound strategy. 

Concern 5: Bitcoin is owned by a few people and this is a way for them to get rich (18.8%)

This is an interesting one. In the case of Bitcoin, there is a lot of false information that circulates on this issue of the concentration of ownership. Foremost among them is a bad analysis in which people take a look at the addresses owning Bitcoin and do simple concentration analyses on them such as in the chart that follows. Ten years ago, that was a fair way to assess Bitcoin ownership concentration. Today it is not. Binance, Coinbase, Greyscale, Huobi, Microstrategy, PayPal, Tesla and so on consolidate large Bitcoin holdings, and sometimes millions of investors or shareholders into one or a small number of addresses on the Bitcoin blockchain so the concentration analyses no longer hold water. Click here to see a list of Bitcoin treasuries and you will appreciate that addresses are no longer a good way to analyze Bitcoin ownership.

Meanwhile, we should also ask whether concentrated ownership makes an asset less attractive to an investor? Blackrock (BGI) where Alison was CFO is the world's largest asset manager and represents double digit ownership of most public equities. Furthermore, the world's most attractive public equities of the last few decades have been technology stocks and their ownership has been quite concentrated too. It is the reason why Elon Musk, Jeff Bezos, Bill Gates, Larry Ellison, Larry Page, Jack Ma, Sergey Brin, Mark Zuckerberg, and so on are today the world's wealthiest people. Do we run away from those assets because of this ownership concentration? Let's not even begin to consider gold, rare earths or diamonds where a few players control the world's mines, refineries and inventory. We think concentration does not mean unattractive per se. 

It is true that a few cypherpunks, including Satoshi Nakamoto, own a great deal of Bitcoin. Why is that of concern to us? They invented it, just like our technology titans invented the world's most valuable companies. We think if you checked this box, you should look again. Is it the green monster (envy) that makes you unhappy that a few whales own lots of Bitcoin? It doesn't seem to be an issue that holds back most investors in most other asset classes.

Concern 6: Bitcoin is being taken over by Wall Street greed (18.8%)

We are interested why people checked this issue?  Is it that you don't like Wall Street? Or perhaps you believe Bitcoin represents a worthwhile investment because of its decentralized and sovereignless design and you fear that those benefits are going to be lost? Or maybe you think that you don't have a trading edge and that once Wall Street gets into the game, you will be the roadkill? Perhaps there are other reasons why you might have checked this concern as fully one in five of you did. For us, we respect the world's financial centers and believe that they bring great expertise, capital, liquidity and trading acumen to asset classes and that this makes those asset classes MORE not LESS investable. As we watch institution after institution, from Blackrock to BNY Mellon and from Deutsche Bank to Mass Mutual declare that they are now investing into Bitcoin, we see that as good news and reason to be a holder - not a reason to dump Bitcoin. Are we missing something here?

Concern 7: Bitcoin is not scarce - you can subdivide it endlessly (15.6%)

Bitcoin is designed to be a scarce asset with a maximum of 21 million Bitcoins that can ever be minted. The monetary policy is hardwired and there is no chance of additional units being minted. It is true that bitcoin is in turn subdivided into small fractions called Satoshi's - there are 100 million Satoshi in 1 Bitcoin. But to keep it simple, you can subdivide a pizza as many times as you want, but there is still only one pizza.

To be fair, there is one concern that might have been a reason for checking this box. That is not the issue of subdivision, but rather the issue of forking. Bitcoin is open source software, and anyone can take the code, fork it, and potentially improve upon it. This is essentially what Bitcoin Cash or Bitcoin SV were all about. Should that concern you?  Yes potentially. Just like when we were investors in Inktomi - the world's best search platform driving Ask Jeeves, Alta Vista, Yahoo Search etc. - only to wake up one day to find out that Google had made our technology obsolescent. So, conceivably, a new Bitcoin fork could appear that might make the current Bitcoin much less attractive. Assuming the hundreds of millions of Bitcoin holders all decided to throw in the towel and embrace the new protocol, this could lead to the demise of today's Bitcoin. However, that's like asking all the gold bugs to agree that platinum is the better precious metal (which of course it is - it is stronger, denser, rarer and has more utility of use cases) and dump the former to buy the latter.

We could keep going. However, we hope this has gone some way to demystify Bitcoin for you.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Launched in 2014, our goal is to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and crypto projects. The strategy is now in its 8th year and has to date invested in more than 25 pure play blockchain venture funds in the Americas, Asia and Europe; and in a combined portfolio of 300+ blockchain and crypto projects including 30+ blockchain unicorns. Our funds rank in the top decile amongst all funds in their respective categories on both Pitchbook and Preqin. Headquartered in San Francisco with a presence in Grand Cayman, London, New York, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle. 

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,200,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

Click here to receive the insightful weekly crypto newsletter and webinar invitations from our Blockchain Coinvestors partner Lou Kerner.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Options for Investing in Blockchain & Crypto

- October 18th, 7:00am PST
- October 18th, 12:00pm PST

Introduction to SPACs and Update on the Market

- October 20th, 7:00am PST
- October 20th, 12:00pm PST

Investing in Early Stage Tokens

- November 1st, 7:00am PST
- November 1st, 12:00pm PST

2022 Blockchain Predictions

- November 15th, 7:00am PST
- November 15th, 12:00pm PST

Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• Nasdaq Trade Talks: Discussion on the blockchain unicorn universe research and how to gain exposure

• CoinDesk: Our predictions on blockchain unicorns in 2021

• Ashurst: On the ESG Podcast, a discussion of the internet, fintech, blockchain, and individual revolution

• Business Insider: Discussing how right now in blockchain is similar to the internet boom of the '90s in terms of growth and innovation

• NBC San Francisco: An interview on what are NFTs

• US News & World Report: What to know about Bitcoin ETFs

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

"The best way to invest in Blockchain businesses"

Blockchain Coinvestors Newsletter - Vol. 3, No. 20, September 2021

Blockchain Coinvestors Newsletter

Vol. 3, No. 20, September 2021

BUILD YOUR FORTUNE IN THE FIFTH ERA

It was some six years ago that we sat down to put pencil to paper in order to sketch out the contents of our first book, "Build Your Fortune in the Fifth Era." At the time we were already convinced that the world was transitioning out of the Industrial Era into a new time of unprecedented innovation and change - that we named The Fifth Era - and that this would in turn represent a period of value and wealth creation unlike anything the world had ever seen before. This weekend, a reader suggested we go back to that first book and summarize it in our newsletter - they felt that the essential points made back then were as relevant today as ever. So in this newsletter we cut and paste three readings from the book:

1. The book overview

2. The list of characteristics of the Fifth Era

3. Our closing chapter where we implore our readers to 'happen to things'

Here you go.

1. BOOK OVERVIEW

The Internet didn’t even exist 30 years ago, and now billions of people are connected to the web every day, and remarkable new technologies have been invented that will dramatically change the way humans exist on our planet. This emerging playing field is not well understood and not everyone who was successful in the past will be able to benefit from this momentous shift. “Build Your Fortune in the Fifth Era,” outlines the nature of the change the world is in the middle of, describes many of the disruptive innovations and the impact they are having, shows why this is the greatest phase of wealth creation the world has ever seen, and provides options and a decision-making process that will allow every reader to choose how to play—or will at least make them more informed if they make the decision not to. 

2. CHARACTERISTICS OF THE FIFTH ERA

We would like to share our list of the top fifteen characteristics of the Fifth Era that we see as particularly important to watch and track. They are:

1. The development of an entirely digital world in which information, communication, and collaboration are comprehensive and instantaneous.

2. The invention of new and unimaginable innovations at the intersection of the Digital Revolution and the Biotechnology Revolution and a constant flow of a host of other disruptive innovations feeding off the global availability of knowledge and new collaborative innovation approaches.

3. Addressable target markets rapidly becoming global, allowing disruptive innovations to quickly be adopted by billions of people.

4. Consumers gaining enormously as the choices they have will be multiplied by a host of competing solutions and providers, and prices will fall given the economies of scale provided by serving global markets.

5. There will be a reevaluation of what humans value and what makes us happy, with significant implications for markets for consumer goods and services. The next generations may value simplicity/less over-clutter/excess, and experiences over material goods.

6. A dramatic increase in productivity. But, this time it will not just be increases in labor productivity. Instead, physical asset productivity will also be greatly enhanced, and formerly unproductive assets will be made available for others to use on demand.

7. The Industrial Era large corporate model of organization will be challenged, with the largest companies increasingly extending their enterprises beyond their four walls and looking more like virtual entities.

8. Public markets will need to evolve to address their shortcomings, for example short-termism.

9. Private capital will drive the initial stages of development for most emerging innovations capturing much of the value of new disruptive innovations.

10. Sustainability will become an essential part of doing business with a clear focus on the broader societal impacts of company strategies including the quality of jobs, the full impact of products and services on society and other external considerations.

11. People will have much more freedom to spend their time according to their desires. Multi-tasking, parallel working, and short-lived organizations and workgroups will be the norm, and the very notion of work will change.

12. Distributed innovation will be everywhere, with no monopoly on innovation by any one company, country, or region. Most innovation will come from small, emerging players, with large corporations being the “go-to-market” partners for innovators.

13. There will be a global war for talent as every digital innovation hub and every region and country try to keep their own technology innovators home and attract those of neighboring regions in order to further strengthen their innovation economies.

14. The power of diversity will be increasingly understood and leveraged.

15. Traditional philanthropy and the for-profit model will come closer together as non-profits look at becoming more sustainable in social entrepreneurship models, and as for-profit corporations aim for double and triple bottom line outcomes.

Because of these changes, every industry, every profit pool, in every country, will be fundamentally challenged as we move into the Fifth Era. We believe that it is possible to already see significant new areas of economic opportunity and wealth creation by divining carefully through these glimpses of the future and making a few bets.

3. HAPPEN TO THINGS

"It had long since come to my attention that people of accomplishment rarely sat back and let things happen to them. They went out and happened to things." —Leonardo Da Vinci 

For 30 years we have been in Silicon Valley and have been exposed to the world’s leading innovation cluster. Over that time, almost by osmosis, we have observed and absorbed from others so much about this most dynamic of times. This book summarizes what we have learned. To reiterate:

• The world is entering a new era: the Fifth Era.

• This is being driven by a host of disruptive innovations, with the Digital Revolution and the Biotechnology Revolution central among them.

• Everything we as humans do is being questioned at the most fundamental of levels.

• The underlying assumptions, formulated in the Industrial Era and in the eras before it, around which we’ve structured our lives, cannot be taken for granted.

• Each time new disruptive technologies enable an underlying assumption to be made obsolete, they open up the way for new business opportunities—and for the entrepreneurs and businesses that exploit them.

• This represents the greatest wealth-creation opportunity the world has ever seen.

• Wealth is being captured earlier than in the past by the entrepreneurs themselves and by those that back them.

• Most people are on the sidelines. Only 0.2% of the US working population are becoming fundable technology entrepreneurs each year, and only 2.5% of the accredited investor households are investing as venture capitalists or angel investors.

• Meanwhile, the principal investment strategy of the Industrial Era of investing in the public markets does not seem to work as well anymore.

• Instead, in this time of transition you need to invest early in disruptive technology companies in order to secure your position or find another option for playing and building your fortune in the Fifth Era.

Now is the time for action. The time of transition is not only one through which the world is passing, but also it is a time of transition for many people. The coming Fifth Era is a chance for each person to make a choice to change from being a spectator on the sidelines to an active player in the greatest of games.

And, for those of our readers who decide to go another way and take a purposeful decision not to participate, we would like to end by sharing with them a final thought:

One day you might wake up and realize that you slept through the greatest moment of change the world has ever seen. We implore you to not let that happen to you.

Good luck.

"It’s the job that’s never started as takes longest to finish." —J. R. R. Tolkien 

CONCLUDING COMMENTS

When we wrote this book we were just ramping up our own investing focused on Blockchain and Fintech. We felt it was worthwhile synthesizing our rationale at that time. Now, living in another decade, a lot of those words look obvious to us, and perhaps to you. However, another point we made back then was that the time of transition between eras is not fast - that it may be many decades before the world completes this transition to The Fifth Era. This in turn implies that new opportunities will continue to surface. The world and all of its innovators won't stop innovating. 

Which in turn implies that for investors it is not too late to get started.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Launched in 2014, our goal is to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and crypto projects. The strategy is now in its 8th year and has to date invested in more than 25 pure play blockchain venture funds in the Americas, Asia and Europe; and in a combined portfolio of 300+ blockchain and crypto projects including 30+ blockchain unicorns. Our funds rank in the top decile amongst all funds in their respective categories on both Pitchbook and Preqin. Headquartered in San Francisco with a presence in Grand Cayman, London, New York, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle. 

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,200,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

Click here to receive the insightful weekly crypto newsletter and webinar invitations from our Blockchain Coinvestors partner Lou Kerner.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Meet the Blockchain VCs

- October 4th, 7:00am PST
- October 4th, 12:00pm PST

What is DeFi and Why Does it Matter? 

- October 6th, 7:00am PST
- October 6th, 12:00pm PST

Options for Investing in Blockchain & Crypto

- October 18th, 7:00am PST
- October 18th, 12:00pm PST

Introduction to SPACs and Update on the Market

- October 20th, 7:00am PST
- October 20th, 12:00pm PST

Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• Nasdaq Trade Talks: Discussion on the blockchain unicorn universe research and how to gain exposure

• CoinDesk: Our predictions on blockchain unicorns in 2021

• Ashurst: On the ESG Podcast, a discussion of the internet, fintech, blockchain, and individual revolution

• Business Insider: Discussing how right now in blockchain is similar to the internet boom of the '90s in terms of growth and innovation

• NBC San Francisco: An interview on what are NFTs

• US News & World Report: What to know about Bitcoin ETFs

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

"The best way to invest in Blockchain businesses"

Blockchain Coinvestors Newsletter - Vol. 3, No. 19, September 2021

Blockchain Coinvestors Newsletter

Vol. 3, No. 19, September 2021

INSTITUTIONS MAKING THE CASE FOR BLOCKCHAIN

This weekend we have spent hours reading through the rationales that the world's leading institutional investors are using to explain their decisions to invest in blockchain and crypto. It is an exercise we have done before, several times over, but what has changed is the forcefulness of their arguments and the breadth of different types of investors arguing the case. 

Next week, we will summarize our findings in our webinar "Institutional Investors - Making the Case for Blockchain". Please join us, or listen to the recording once posted at www.fifthera.com/webinars.

Some highlights:

1. Paul Tudor Jones - It's all about the great monetary inflation and the reality that governments can't stop instructing their central banks to print money, reducing its value and increasing the value of all other scarce assets

2. Bill Miller - From a purely trader perspective, there is an apparent arbitrage between Bitcoin (Digital Gold) and gold itself

3. Cathy Miller - Exponential technologies are driving value creation and digital monies are part of the fintech revolution being powered by them

4. Fidelity Investments - In a world in which most 'alternative investments' are correlated with the public equities and fixed income products that they trade, Bitcoin appears to be a real alternative investment.

5. CFA and Bitwise - Financial advisors and their clients increasingly want access and adding it to a conventional portfolio appears to create substantial potential upside

6. Michael Saylor - For many corporate treasuries, this is the smartest investment they can put on their balance sheets

7. Governments and Central Bankers - Watch what we do, not what we say

8. Various thought leaders - Digital asset infrastructure is rapidly building out on a global scale

9. Decentralized Finance (DeFi) - Trading volumes are ramping up, although there are issues

10. Non fungible tokens (NFTs) - From nowhere to everywhere - users and trading ramping up

After nine years investing into blockchain, and many more investing in Internet and Fintech we are excited to see so many of the world's investment thought leaders now arguing the case too.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Launched in 2014, our goal is to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and crypto projects. The strategy is now in its 8th year and has to date invested in more than 25 pure play blockchain venture funds in the Americas, Asia and Europe; and in a combined portfolio of 300+ blockchain and crypto projects including 30+ blockchain unicorns. Our funds rank in the top decile amongst all funds in their respective categories on both Pitchbook and Preqin. Headquartered in San Francisco with a presence in Grand Cayman, London, New York, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle. 

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,200,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

Click here to receive the insightful weekly crypto newsletter and webinar invitations from our Blockchain Coinvestors partner Lou Kerner.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Options for Investing in Blockchain & Crypto

- September 20th, 7:00am PST
- September 20th, 12:00pm PST

Institutional Investors - Making the Case for Blockchain

- September 27th, 7:00am PST

Meet the Blockchain VCs

- October 4th, 7:00am PST
- October 4th, 12:00pm PST

Options for Investing in Blockchain & Crypto

- October 18th, 7:00am PST
- October 18th, 12:00pm PST

Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

UPCOMING EVENTS

Linqto's Global Investor Conference - September 21st
Join Matthew Le Merle and James Zhang at Linqto's Global Investor Conference for their panel "NFTs & The Gaming Economy - How Real Is This?" to learn more about how NFTs can expand the monetization of gaming.

RECENT PRESS

• Nasdaq Trade Talks: Discussion on the blockchain unicorn universe research and how to gain exposure

• CoinDesk: Our predictions on blockchain unicorns in 2021

• Ashurst: On the ESG Podcast, a discussion of the internet, fintech, blockchain, and individual revolution

• Business Insider: Discussing how right now in blockchain is similar to the internet boom of the '90s in terms of growth and innovation

• NBC San Francisco: An interview on what are NFTs

• US News & World Report: What to know about Bitcoin ETFs

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

"The best way to invest in Blockchain businesses"

Blockchain Coinvestors Newsletter - Vol. 3, No. 18, September 2021

Blockchain Coinvestors Newsletter

Vol. 3, No. 18, September 2021

PROOF OF CONTINUOUS INNOVATION IN BLOCKCHAINS

In the last newsletter Vol. 3, no. 17, we talked about Diffusion of Innovations Theory and we posited that blockchain has still not moved beyond the Early Adopter phase based upon the global penetration rates of cryptoassets and applications that have been built on top of the blockchain protocols. We argued that blockchain is about where the Internet was in 1999. We asked you to think back to 1999 and remind yourself what was going on back then, and what happened in the following two decades. Especially with regard to the global adoption of the technology and the massive value and wealth creation that followed.

We had some interesting reactions to that newsletter. Most who wrote to us asked us to give our viewpoints on what this implied for the price of Bitcoin and other leading cryptoassets and what it implied for our early stage investing strategies. We responded that we think continuing to place new early stage capital investments makes sense if you believe that new innovators may still surface - as we do.

But the question that one of you asked that we want to address today was "can you give me one piece of evidence that blockchain is still innovating and that continuous innovation will occur in this space or should I just place a bet on Bitcoin since all the innovation is already embedded in it?"

Evidence that Blockchain is still Innovating

Take a look at the chart above from Rareliquid. Ben Chon is a former JP Morgan analyst and he publishes interesting Youtube videos regularly. His chart above was intended to explain the rapid increase in the price of Solana that has been the narrative of the last couple of weeks. The chart was made before the most recent run up in the price of Solana.

Here are some takeaways we have from his table.

1. A comparison of blockchain protocols like this demonstrates that there are enormous variations across them in regards to:

• Capacity

• Speed

• Cost of transaction processing

• Ability to handle massive usage volume

• Number of developers building applications on each

2. The oldest blockchains (e.g. Bitcoin, Ethereum) are much slower, more expensive and have less capacity than the newest blockchains (e.g. The Ethereum v2.0 upgrade and Solana). Now to some extent this results from design choices that were intended to increase decentralization, censure resistance and security, but nonetheless the key performance indicators are dramatically different today.

3. The valuation of blockchains does not directly correlate with their performance and potential. There is a 10x and more valuation gap between, for example, Ethereum and its fast growing competitors who are benefitting from:

• Learning how to iterate beyond Ethereum's capability level

• Are able to do this by building new code with the learnings from those that have gone before

• Have the advantage that they are not burdened by legacy code that needs to be maintained and upgraded (remember the burden of legacy becomes larger the older your software is, and eventually bogs down even the most capable software developers and companies)

4. Those new applications that require faster, higher capacity and lower cost transaction processing, have the option of choosing more capable blockchain operating systems to build on top of. Their developers are likely to migrate towards the blockchain protocols that solve these fundamental constraints if they plan to serve tens of millions of users.

5. This is especially true as we move out of the Early Adopter phase into the Early Majority phase. As the number of users starts ramping up quickly, cost, capacity and throughput matter more than ever. Early blockchain applications had handfuls of users. Today blockchain applications may need to cope with daily average users in the millions - e.g. NFT platforms and applications.

Implications for Investors

For investors, this discussion is fundamental. 

Just like Facebook displaced Myspace, and Google displaced Inktomi so we should assume that new blockchain players will surface who may improve upon the capabilities of those that have gone before.

We often give the example of the first generation ISP's which were painfully slow and very unreliable. We can all remember trying to download images only to have the ISP fail halfway through after we had waited 10 and 15 minutes for the image to appear line by line. Today we have global, real time, high definition, multiparticipant, video streaming. 

Innovation did not, and has not stopped.

The new, and often more capable players can be invested into at much lower valuations - especially if you are an early stage blockchain investor. Of course all the best practices of early stage investing need to be applied including the need for diversification.

Solana may be a case study in the making.

And more are coming everyday.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Launched in 2014, our goal is to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and crypto projects. The strategy is now in its 8th year and has to date invested in more than 25 pure play blockchain venture funds in the Americas, Asia and Europe; and in a combined portfolio of 300+ blockchain and crypto projects including 30+ blockchain unicorns. Our funds rank in the top decile amongst all funds in their respective categories on both Pitchbook and Preqin. Headquartered in San Francisco with a presence in Grand Cayman, London, New York, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle. 

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,200,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

Click here to receive the insightful weekly crypto newsletter and webinar invitations from our Blockchain Coinvestors partner Lou Kerner.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Investing in Early Stage Tokens

- September 13th, 7:00am PST

- September 13th, 12:00pm PST

Options for Investing in Blockchain & Crypto

- September 20th, 7:00am PST

- September 20th, 12:00pm PST

Institutional Investors - Making the Case for Blockchain

- September 27th, 7:00am PST

- September 27th, 12:00pm PST

Meet the Blockchain VCs

- October 4th, 7:00am PST

- October 4th, 12:00pm PST

Options for Investing in Blockchain & Crypto

- October 18th, 7:00am PST

- October 18th, 12:00pm PST

Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• Nasdaq Trade Talks: Discussion on the blockchain unicorn universe research and how to gain exposure

• CoinDesk: Our predictions on blockchain unicorns in 2021

• Ashurst: On the ESG Podcast, a discussion of the internet, fintech, blockchain, and individual revolution

• Business Insider: Discussing how right now in blockchain is similar to the internet boom of the '90s in terms of growth and innovation

• NBC San Francisco: An interview on what are NFTs

• US News & World Report: What to know about Bitcoin ETFs

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

"The best way to invest in Blockchain businesses"

Blockchain Coinvestors Newsletter - Vol. 3, No. 17, August 2021

Blockchain Coinvestors Newsletter

Vol. 3, No. 17, August 2021

DIFFUSION OF INNOVATIONS

September is shaping up to be a busy month for us at Blockchain Coinvestors with the next closing of our open fund of funds, the launch of our new early stage token vehicle, and other projects underway. As always, let us know if you want to participate or learn more by just emailing us directly or at ir@blockchaincoinvestors.com.

Meanwhile, August has given us time to reflect on where we are with blockchain global adoption. Partially in preparation for our investor annual meetings which took place last week. Partially, because the summer months often seem to be a good time to stand back and see the big picture.

So this week in our newsletter we summarize the BIG SO WHAT of the diffusion of the blockchain innovation.

THE BIG SO WHAT

From a diffusion of innovations theory perspective, blockchain now has critical mass and is moving towards the steepest part of its adoption curve. As investors, it's not too late to catch the big ramp up.

DIFFUSION OF INNOVATIONS THEORY

Alison and Matthew first met the 'Diffusion of Innovations' theory while studying as undergraduates at Cambridge and Oxford respectively.  Everett Rogers had written his classic book on the topic the year they were both in nappies, but it had aged well. The concept was a simple one.

Innovations diffuse through a population in stages based upon the influence of four main drivers:

• The innovation itself;

• The modes of communication;

• Time and;

• The social system within which it is getting traction.

The process is itself driven by human capital and diffusion dynamics. For an innovation to become self-sustainable, it needs to be widely adopted, and there is a point of critical mass after which the innovation will enter its steepest period of growth as it reaches the largest possible audiences of users.

Rogers made a very useful categorization of users by the stage within which they trial, use, and then firmly adopt the innovation. He named them:

• Innovators

• Early adopters

• Early majority

• Late majority

• Laggards

The steepest part of the innovation adoption curve (S Curve) occurs as the early majority starts coming on board in large volumes

The following exhibit summarizes Everett Rogers' view on the adoption through the population.

As strategy and innovation management consultants at places like Booz, Kearney, McKinsey, and Monitor we found the model simple, usable, but most importantly - accurate.

Let's demonstrate by turning to the diffusion curve for the largest global innovation that we have collectively lived through - the Internet.

PAST IS PROLOGUE: THE INTERNET

It was around 1986 that Alison and Matthew first learned about the Internet. As students at Stanford Graduate School of Business, we were made to log into the mainframe at the business school to bid for classes. The screens were black and green. The interface text only. It was painfully slow. But it worked. Most probably because the future founders of Cisco were working at that time in the IT department at Stanford experimenting with the TCP/IP protocol to enable this type of digital communication.

A handful of years later, around 1990, Matthew worked on the 'What to do about Prodigy?' project for Sears while at McKinsey. Few had heard of Prodigy, and even fewer knew what an Internet ISP was. But the concept of dialing up and accessing the world's information was so compelling that our household became early AOL users and advocates, and we invested in AOL as soon as we were able. Soon after, while working with Bank of America rolling out bankamerica.com we met Omid Kordestani who was pitching netscape to enable search and more lightbulbs went on. We invested in Inktomi but missed Google.

By then Internet adoption was still in the world of Early Adopters. It was beginning to work, but most of the world did not see its power. Many were actively trying to resist it or at least were in denial. We worked on many client projects in the nineties with Kearney in which the sole objective of the project was to convince the executive team and the board that electronic commerce was a reality and that it could be applied to the client's own business.

By 1999, the dotcom boom was in full force, and there was clearly massive value capture occurring as new dotcoms raised ever larger sums at higher and higher valuations. Here is the cover of Fortune that summer.

In the case of Fortune, they chose to feature Yahoo which at that time was on top of the world. Of course, success was not assured. As with all enabling technologies, not all start-ups will succeed. Indeed, even if the innovation is widely successful, the old venture capital maths typically still apply with more failures than successes, but with a small percentage of outcomes being 10x and better driving very high average returns. Diversification is a requirement to play as an investor in early stage technology.

Forbes took a slightly different approach. Arguing that the Internet was now with us for the long term and that the winners were beginning to be apparent. They called them 'Masters of the New Universe' on their cover. In retrospect they captured quite a few of the best ones in their photoshoot including Jeff Bezos.

It is easy to look back in hindsight and see that Everett Roger's model was playing out perfectly. By 1999:

1. Innovation. The Internet innovation had proven itself to be competitively advantaged over traditional ways of doing communications. Real time, low cost communication was a global reality and paper could not compete - nor could version 1 digital communications like radio or faxes.

2. Modes of Communication. Importantly, while traditional communication channels like Fortune and Forbes were all talking about the Internet and its power, the innovation had itself turned the entire world (or at least the 400 million or so people at that time online) into a global echo chamber.

3. Time. It was at least 10 years since the first powerful commercial applications had been built on top of TCP/IP and that had allowed the momentum to build.

4. Social System. People were using the Internet as a cool conversation starter, and the proverbial New York taxi cab drivers were all talking to their passengers about it.

However, in 1999 we had only just begun to climb the Internet power curve of adoption. In Rogers' model, you can see that with only 400m people online, we were not yet into the Early Mover phase. Those of us who were buying online were still the Innovators and Early Adopters.

Of course, success was not that clear. In 1999 it was confusing, chaotic, and there was resistance everywhere. Let's not forget examples like:

• Powerful government voices arguing that the Internet should be banned because of the widespread use of the Internet for porn and dark activities

• Leading corporations arguing that electronic commerce should be banned because of the high credit card fraud rates

• Content based industries trying to slow down adoption by suing disruptive companies that were moving content online

• Everyone arguing for new regulations and/or the application of old regulations that had not been built for a digital age that was coming fast

• CEO's arguing that at best this was a bolt on website (clicks and mortar) rather than something that would transform their core businesses

• Etc.

But we all know what happened next. Today we have about 5 billion people online, every industry and every business has been transformed by digital communications, and all of the world's most valuable companies are Internet based innovators like Alphabet, Amazon, Apple, Facebook, and Microsoft to name but the top 5 most valuable companies by market capitalization.

GLOBAL BLOCKCHAIN ADOPTION CURVE

What does all of this have to do with blockchain?

Past is prologue. The blockchain protocol is rolling out just like the TCP/IP protocol did back then.

Consider.

1. Innovation. The innovation has proven itself to be competitively advantaged over traditional ways of doing commerce. Just as one example, you can now transfer money in almost real time at almost no cost to anyone in the world. In comparison, a bank wire still takes 3 to 5 days to clear and if you send $100 abroad, the bank will take at least $25 of it in fees.

2. Modes of Communication. With 5 billion people now online the news of blockchain has gone around the world at lightning speed and at least 10x the number of people are talking about blockchain as were talking about TCP/IP in 1999.

3. Time. It is at least 10 years since the first powerful commercial application (Bitcoin) was built on top of the blockchain protocol and that has allowed the momentum to build.

4. Social System. This time around, half the world are now digital natives and they are fully onboard. They don't want traditional approaches to money, payments and investments that are paper based, slow, costly, and complicated. They want mobile-first, simple, quick, and cheap solutions based upon digital monies and digital assets. And they don't trust the traditional providers at all.

So there is ample evidence to suggest that the blockchain adoption curve will be steeper than the Internet adoption curve.

The following exhibit from Coinanalysis shows the penetration rate of bitcoin (as a proxy for blockchain) on a common indexed scale.

The takeaway is that this is a global phenomena. But conversely, when you consider that there are perhaps only 100 million users with a digital wallet or storage device that contains their own bitcoin, you can see that like the Internet in 1999, we are still in the Early Adopter phase of the innovation. The power curve is still ahead.

Just like in 1999, it is confusing, chaotic, and there is resistance everywhere. Let's not forget examples like:

• Powerful government voices arguing that blockchain should be banned because of the widespread use for dark activities

• Leading corporations arguing that blockchain should be banned because of the high fraud rates

• Financial industries trying to slow down adoption by suing disruptive companies that are moving financial transactions to crypto and DeFi

• Everyone arguing for new regulations and/or the application of old regulations that have not been built for a digital age that is coming fast

• CEO's arguing that at best this is a bolt on (Let's give Bitcoin access) rather than something that will transform their core businesses

• Etc.

We could keep going.

IMPLICATIONS FOR INVESTORS

From a diffusion of innovations theory perspective, blockchain now has critical mass and is moving towards the steepest part of its adoption curve. As investors, it's not too late to catch the big ramp up.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Launched in 2014, our goal is to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and crypto projects. The strategy is now in its 8th year and has to date invested in more than 25 pure play blockchain venture funds in the Americas, Asia and Europe; and in a combined portfolio of 300+ blockchain and crypto projects including 30+ blockchain unicorns. Our funds rank in the top decile amongst all funds in their respective categories on both Pitchbook and Prequin. Headquartered in San Francisco with a presence in Grand Cayman, London, New York, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle. 

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,200,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

LINQTO LEARN
Join Matthew and other guests for the Linqto Learn program on Tuesday, August 24th from 9:00am-10:00am Pacific Time. The discussion focuses on private investments in pre-IPO fintech companies. Register for free to learn more about how to become an early investor.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

Click here to receive the insightful weekly crypto newsletter and webinar invitations from our Blockchain Coinvestors partner Lou Kerner.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Blockchain Coinvestors Investment Thesis

- August 30th, 7:00am PST
- August 30th, 12:00pm PST

Investing in Early Stage Tokens

- September 13th, 7:00am PST
- September 13th, 12:00pm PST

Options for Investing in Blockchain & Crypto

- September 20th, 7:00am PST
- September 20th, 12:00pm PST

Institutional Investors - Making the Case for Blockchain

- September 27th, 7:00am PST
- September 27th, 12:00pm PST

Meet the Blockchain VCs

- October 4th, 7:00am PST
- October 4th, 12:00pm PST

Options for Investing in Blockchain & Crypto

- October 18th, 7:00am PST
- October 18th, 12:00pm PST

Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• Nasdaq Trade Talks: Discussion on the blockchain unicorn universe research and how to gain exposure

• CoinDesk: Our predictions on blockchain unicorns in 2021

• Ashurst: On the ESG Podcast, a discussion of the internet, fintech, blockchain, and individual revolution

• Business Insider: Discussing how right now in blockchain is similar to the internet boom of the '90s in terms of growth and innovation

• NBC San Francisco: An interview on what are NFTs

• US News & World Report: What to know about Bitcoin ETFs

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

"The best way to invest in Blockchain businesses"

Blockchain Coinvestors Newsletter - Vol. 3, No. 16, July 2021

Blockchain Coinvestors Newsletter

Vol. 3, No. 16, July 2021

Early Stage Tokens Made Simple

Last week we published our updated list of blockchain unicorns for midyear 2021. Many of you were surprised to learn that there are more than 100 blockchain enterprises and crypto projects that are valued at more than $1 billion, and we received a lot of comments about the high coverage that Blockchain Coinvestors has of these unicorns in its funds (See opening Exhibit). However, the fact that surprised most was that there are now 76 crypto projects that trade at market capitalizations over $1bn.

In newsletter Vol. 3, No. 13 we focused on 'Protocol Tokens Made Simple'. Today we provide a broader token taxonomy to assist those of you who would like to join us investing in early stage token offerings (email ir@blockchaincoinvestors.com if you are an accredited investor and want to know more.)

Please join us on Monday August 2nd at 7am pst or 12pm pst to watch our webinar 'Investing in Early Stage Tokens' or watch the recording by clicking here to learn more.

Crypto Tokens Simplified

To begin with we need a simple taxonomy to break apart the diversity of cryptoassets that are included in those 76 crypto unicorns and the many thousands of projects that are ranked below them. Just as in private equity investing, we need to differentiate between different industries, sectors, business models and technologies, so too in token investing.

The following exhibit provides a simplified 8 part categorization that we find helpful. There are much more complex and probably more nuanced taxonomies that have been created for other purposes, but right now for investing purposes, we find this is a good start - although it is hard to be MECE in this arena.

The first four categories are focused on monies and asset backed tokens. We find it helpful to simplify these back into four categories, none of which are where we focus our own investing activities. They are:

1. Central Bank Digital Currencies. These are in the news all the time these days as the world's governments begin the challenge of upgrading central bank fiat currencies to new digital versions. CBDCs are just that. Digital versions of national currencies. The most advanced is the digital Chinese Yuan.

2. Stablecoins. Until we have a world of digital monies, we need to move back and forth between 'old world' fiat currencies, and 'Fifth Era' digital monies. You can't buy, hold, trade, or use fiat currencies in digital wallets so they are unfit for our future digital economy. Right now, in order to make those conversions back and forth we need something that is digital but backed by fiat so that it trades in a closely correlated way to fiat. These are 'stablecoins' such as USDC and USDT (Tether). Much is being written about stablecoins, and increasingly governments are appreciating that by their own inaction they have created global demand that these crypto stablecoins are now filling - with serious potential repercussions for fiat currencies.

3. Cryptoassets. Our third category are cryptoassets. Here we see digital tokens that have been created to be means of payment, units of account, or stores of value to function in a digital economy and without the help of a traditional centralized authority like a central bank. This is where the crypto movement began with the search for a solution to native e-cash which led to Satoshi Nakamoto's original white paper and Bitcoin.

4. Asset-Backed Tokens. Beyond stablecoins backed by fiat currencies we can in fact back or secure a token with any asset. So this fourth category is diverse, from crypto commodity tokens like Universal Gold (UPXAU) and Universal Carbon (UPC02) to tokens that confer ownership of real estate, funds, private investments, and so on. We also call these security tokens (STOs). For us, NFTs are a subset of this category, although NFT platform tokens are included below and we could make a case for including the actual NFT's in that eighth category instead of in this one.

A few examples of each of these four categories are included in the next exhibit.

Our Investment Focus

The second four categories are focused on tokens that support software development projects of one sort or another. We wrote newsletter Vol. 3, No. 13 to provide some historical context and simplified understanding of how these tokens have become the drivers of the leading edge of software development around the world. We see them coming in four principal flavors at this time. They are:

1. Protocol Tokens. These are the tokens being used to incentivize and reward communities building decentralized, distributed software platforms. We focus on the protocol layer but conceptually this could be middleware or applications too. Examples are Ethereum, Polkadot, and Solana to mention just three.

2. Utility Tokens. Beyond protocol tokens, there are a few other tokens that clearly have great utility in the context of the projects that they support, but which don't neatly fit into protocol, DeFi, or NFT platform categories. These are used to support projects like Filecoin's distributed storage, DFinity's Internet Computer, and so on. We include them here as well as the 'centralized exchange tokens' from major exchanges such as Binance, Huobi, and FTX.

3. DeFi Platform Tokens. All really decentralized financial projects use tokens in their communities for various reasons, and we have seen a proliferation of these tokens as DeFi begins to scale up and become a viable alternative to financial services provided by our traditional centralized financial providers. Examples here include Aave, Compound, Sushi, and Uniswap to name but four.

4. NFT Platform Tokens. Finally, we are now seeing the tokenization of the digital entertainment world, as well as the large but disorganized world of assets that we buy and sell but that we don't think of as being traditional financial assets. Fine art, collectibles, and so on. These are being tokenized to provide digital ownership records which in turn will enable global digital marketplaces for them and we include the asset backed tokens themselves in our Asset-Backed category. However, there are also entire platforms for these tokens and those NFT platforms are also using tokens in their software development communities. Examples include Dapper Labs' Flow, or Gala Network's Gala token.

A few examples of each of these four categories are included in the next exhibit.

Investing in Early Stage Tokens

We believe that these second four categories of tokens are important for us as early stage investors.

The movement from centralized software development, to decentralized, distributed software development is not a new idea, and Linux proved more than 30 years ago that it could create a mission critical software platform of great value. What's different now, is that the software creators are using tokens to support their projects throughout their life cycles. Increasingly they take little or no equity capital. This means that if you want to be an investor in the next generation of global software solutions, you simply have to consider investing in early stage tokens of the leading projects.

We are doing just that at Blockchain Coinvestors, and we will have our new Blockchain Coinvestors fund in position later this summer to take advantage of these early stage tokens.

Please reach out to us directly, or email ir@blockchaincoinvestors.com if you want to get onto the waiting list to learn more once we are ready to share the details.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Launched in 2014, our goal is to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and capture superior returns through investments in the leading blockchain venture partnerships. The strategy is now entering its 8th year and has to date invested in 25 pure play blockchain venture funds in the Americas, Asia and Europe; and in a combined portfolio of more than 300+ blockchain and crypto projects including 30+ blockchain unicorns. Headquartered in San Francisco with a presence in London, Menlo Park, New York, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle.

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,200,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

Click here to receive the insightful weekly crypto newsletter and webinar invitations from our Blockchain Coinvestors partner Lou Kerner.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Investing in Early Stage Tokens

- August 2nd, 7:00am PST
- August 2nd, 12:00pm PST

What are SPACs and Why are They Relevant to Blockchain & Crypto?

- August 16th, 7:00am PST
- August 16th, 12:00pm PST 

Blockchain Coinvestors Investment Thesis

- August 30th, 7:00am PST
- August 30th, 12:00pm PST

Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• CoinDesk: Our predictions on blockchain unicorns in 2021

• Ashurst: On the ESG Podcast, a discussion of the internet, fintech, blockchain, and individual revolution

• Business Insider: Discussing how right now in blockchain is similar to the internet boom of the '90s in terms of growth and innovation

• NBC San Francisco: An interview on what are NFTs

• US News & World Report: What to know about Bitcoin ETFs

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

"The best way to invest in Blockchain businesses"

Blockchain Coinvestors Newsletter - Vol. 3, No. 15, July 2021

Blockchain Coinvestors Newsletter

Vol. 3, No. 15, July 2021

Meet the Blockchain Unicorns - Mid-year 2021

Last week we published the most up to date listing of blockchain unicorns - both private enterprises and crypto projects currently trading at a market value in excess of $1bn. This week we summarize our observations about the significant changes of just the last six months, and the implications they have for investors. You can listen to the complete report by following this link to the recorded webinar Meet the Blockchain Unicorns - Mid-year 2021.

We have seen an acceleration of value creation in the blockchain sector as well as an increasing number of going public events - both IPOs and SPACs. We are excited that through the Blockchain Coinvestors investment strategy, we now have capital invested in 65% of the blockchain enterprise, and 45% of the crypto project unicorns. See the entire Blockchain Coinvestors portfolio at www.blockchaincoinvestors/portfolio.

Blockchain Enterprise Unicorns

There are now 26 blockchain enterprise unicorns. This period we saw the additions of Dapper Labs, BlockFi, Paxos, Mercado/2TM, Bithumb, Ledger, Upbit, BitPanda, Amber, Animoca, Bitso, and Forte to our list following their recent funding rounds. This after the loss from our list of several unicorns that have now gone public. Blockchain Coinvestors has capital invested in the unicorns shaded in blue.

Importantly, we continue to see an expansion of value in all layers of the blockchain technology stack, and worldwide. The following chart aligns the 26 blockchain enterprise unicorns by their positioning in the technology stack (foundational, transactional or application layer) and by geography. Please note that most of the foundational layer unicorns have chosen to take the crypto project funding route and are discussed below. Since blockchain is to a significant extent about the creation of a functional 'Internet of Value', it is not surprising that most of the enterprise unicorns focus on the transactional layer.

Crypto Project Unicorns

As we have previously explained, blockchain teams have the option of either raising equity through traditional funding rounds, or launching crypto tokens to their communities and supporters to raise their capital. At the end of the first quarter, there were 76 crypto projects with tokens trading at more than $1 billion of market value across a range of cryptocurrencies, crypto commodities, protocol, and DeFi tokens.

Here at Blockchain Coinvestors we have capital invested in 45% of these crypto project unicorns, focusing on the protocol and DeFi tokens.

Going Public Events

In the first half of 2021 we saw a number of blockchain enterprises go public through IPOs and de-SPAC mergers. While Coinbase was the one that got most media attention, we were just as focused on the milestone that the world now has a critical mass of pure play public blockchain companies to support indices, ETF's, and other public market focused financial products.

IPOs vs SPACs

We have mentioned before that we expect SPACs to be a preferred going-public option for blockchain and crypto enterprises that believe they need to be public companies. The recent announcements from Circle and Bullish are just the beginning of what we expect to be quite a wave that will follow. There are clear reasons why SPACs can be more attractive than traditional going public approaches as indicated in the following exhibit from our webinar What are SPACS and Why Are They Relevant to Blockchain and Crypto.

We continue to believe that this acceleration of value creation in blockchain is driven by fundamental tailwinds which are not going to stop any time soon. The world is moving towards a global digital economy that we call the Fifth Era, and yet we can't get there without complementing today's Internet with more powerful approaches to Security, Identity, Decentralization, Digital Monies, and Digital Assets as outlined in our book, Blockchain Competitive Advantage that can be downloaded for free.

This is where we at Blockchain Coinvestors focus our investment thesis.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Launched in 2014, our goal is to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and capture superior returns through investments in the leading blockchain venture partnerships. The strategy is now entering its 8th year and has to date invested in 25 pure play blockchain venture funds in the Americas, Asia and Europe; and in a combined portfolio of more than 300+ blockchain and crypto projects including 30+ blockchain unicorns. Headquartered in San Francisco with a presence in London, Menlo Park, New York, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle.

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,100,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

Click here to receive the insightful weekly crypto newsletter and webinar invitations from our Blockchain Coinvestors partner Lou Kerner.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Investing in Early Stage Tokens

- July 19th, 7:00am PST

- July 19th, 12:00pm PST

Options for Investing in Blockchain & Crypto

- July 26th, 7:00am PST

- July 26th, 12:00pm PST

Investing in Early Stage Tokens

- August 2nd, 7:00am PST

- August 2nd, 12:00pm PST
 
Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• Ashurst: On the ESG Podcast, a discussion of the internet, fintech, blockchain, and individual revolution

• Business Insider: Discussing how right now in blockchain is similar to the internet boom of the '90s in terms of growth and innovation

• NBC San Francisco: An interview on what are NFTs

• US News & World Report: What to know about Bitcoin ETFs

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

"The best way to invest in Blockchain businesses"

Blockchain Coinvestors Newsletter - Vol. 3, No. 14, July 2021

Blockchain Coinvestors Newsletter

Vol. 3, No. 14, July 2021

Meet the Blockchain Unicorns

It is time once again for us to reveal the most up to date listing of blockchain unicorns - both private enterprises whose market value has exceeded $1bn and crypto projects where their respective cryptoasset is currently trading at an implied value in excess of $1bn.

Rather than steal our own thunder, we invite you to join us for our webinars "Meet the Blockchain Unicorns - Midyear 2021" on Monday July 12th, or else listen to them afterwards.  As always they can be found at www.fifthera.com/webinars and on Youtube.

Here is the press release that went out today on the same topic:

Blockchain Coinvestors Unveils Most Comprehensive List of Global Blockchain Unicorns

• The blockchain sector has seen an acceleration of value creation in the first half 2021

• There are now 24 blockchain enterprises and 76 crypto projects worth more than $1bn each

• These figures exclude recent public listings. There are now 12 pureplay public blockchain companies

• Blockchain Coinvestors is an investor in 58% of blockchain enterprise unicorns and 38% of crypto project unicorns

SAN FRANCISCO, July 9, 2021 /PRNewswire/ -- Blockchain Coinvestors, a leading blockchain venture fund-of-funds and co-investment program with a combined portfolio of more than 300 blockchain enterprises and crypto projects, including 30+ blockchain unicorns, today announced its midyear 2021 list of blockchain unicorns – private blockchain enterprises and crypto projects with valuations exceeding $1 billion.

"The first half of 2021 has seen an acceleration of value creation in the blockchain space, including the maturation of blockchain companies some of which are now ready to be public companies either through traditional IPOs or SPAC demergers," said Alison Davis co-founder and Managing Partner of Blockchain Coinvestors.

Blockchain Coinvestors uses its proprietary combined portfolio of blockchain companies resulting from its first three blockchain venture funds of funds to track the emerging unicorns of the space. For the crypto project valuations, Blockchain Coinvestors relies upon CoinStats for its data.

"It is exciting to see so many hardworking blockchain teams seeing their work being rewarded in this data," said Matthew C. Le Merle, co-founder and Managing Partner. "We are very proud to have supported so many of them with capital, and we are working hard to find ways to support the blockchain companies and projects in their future growth and development – expect more news from us this summer."

Blockchain Coinvestors will present the results of its work in upcoming "Meet the Blockchain Unicorns" webinars on Monday July 12th at 7am and 12pm PST, respectively. Register via this link.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Launched in 2014, our goal is to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and capture superior returns through investments in the leading blockchain venture partnerships. The strategy is now entering its 8th year and has to date invested in 25 pure play blockchain venture funds in the Americas, Asia and Europe; and in a combined portfolio of more than 300+ blockchain and crypto projects including 30+ blockchain unicorns. Headquartered in San Francisco with a presence in London, Menlo Park, New York, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle.

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,100,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

Click here to receive the insightful weekly crypto newsletter and webinar invitations from our Blockchain Coinvestors partner Lou Kerner.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Meet the Blockchain Unicorns - Mid-Year Update

- July 12th, 7:00am PST

- July 12th, 12:00pm PST

Investing in Early Stage Tokens

- July 19th, 7:00am PST

- July 19th, 12:00pm PST

Options for Investing in Blockchain & Crypto

- July 26th, 7:00am PST

- July 26th, 12:00pm PST
 
Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• Ashurst: On the ESG Podcast, a discussion of the internet, fintech, blockchain, and individual revolution

• Business Insider: Discussing how right now in blockchain is similar to the internet boom of the '90s in terms of growth and innovation

• NBC San Francisco: An interview on what are NFTs

• US News & World Report: What to know about Bitcoin ETFs

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

"The best way to invest in Blockchain businesses"

Blockchain Coinvestors Newsletter - Vol. 3, No. 13, July 2021

Blockchain Coinvestors Newsletter

Vol. 3, No. 13, July 2021

Protocol Tokens Made Simple

These days we are often asked, what are protocol tokens? These are the tokens like Eth from Ethereum, Dot from Polkadot, and Solana from Solana among others which are being used to fund the base layer blockchain operating systems.

In today's newsletter, we unbundle this discussion:

1. What are Protocols?

2. What is Decentralized, Open-Source Software?

3. From Shareholder Backed to Community Backed

4. From Emails to Smart Contracts in Token Form

5. Do these Tokens have Value?

As always, we aim to keep this simple, which of course means we take some liberties of oversimplification to do so.

1. What are Protocols?
In our Blockchain Coinvestors investment thesis webinar and many of our writings we have introduced the notion that the blockchain ecosystem can be thought of as a technology stack with the foundational layer made up of the most fundamental layer of technology including the 'blockchain operating systems'. Just as the Internet sits on top of TCP/IP and other protocols, and as our mobile apps and solutions sit on top of their respective operating systems (Apple iOS, Android, Microsoft OS, etc), so any blockchain stack needs to sit on top of a base layer of computer software. In the world of blockchain, we call these protocols.

2. What is Decentralized, Open-Source Software?
To understand today's decentralized, open-source blockchain protocols, we think it helps to go backward a few decades to breakthroughs that are now so ubiquitous that we may have even forgotten about them:

• In the beginning computer code was written by software engineers. It still is.

• At first, software engineers worked for large companies. They received a salary, and they wrote their code. The company owned the software - including operating systems they developed - and captured the economic value from that work product. In the 1980's the companies had names like Apple, HP, IBM, and importantly, AT&T.

• In those far away years, AT&T was the object of an antitrust case that banned it from playing in the computer space. As a result, it had to share its UNIX operating system with everyone, and eventually Bell Labs allowed anyone to propose modifications to UNIX.

• The regulators had essentially launched the notion of open-source software development.

• In parallel, a Finnish software developer called Linus Torwalds decided that he wanted to create a fully functional and free operating system. After some iterations of its license, they ended up with a body of code that he and other decentralized software developers called Linux.

• This free operating system, built by a decentralized, open-source software development process, began as far inferior to the dominant operating system of that time which was owned by Microsoft.

• However, as a centralized corporation, Microsoft extracted a great amount of value from other computer companies who had to use its operating system, and some of them, like Dell, HP, and IBM were not happy about this rent taking. So they decided to use Linux as the foundation layer for an open-source operating system(s) of their own.

• Today Linux and decentralized, open-source software code is embedded in many of the applications that we and our companies and governments use. We may not know it, and we may take it for granted, but it is not a new idea. It has been going on for more than 40 years now.

However, the fact that we have known for a long time how to create decentralized, open-source software did not solve the software engineers personal challenge:

• While they had used technology to change how they worked, they had not been able to use it to change how they were paid.

• They mostly either earned their salaries as employees, or they volunteered their work for free in open-source initiatives during their moonlit hours.

• A few of them figured out how to also be entrepreneurs and own the companies that they wrapped around their software. Those few became the richest people in the world creating companies like Alibaba, Alphabet/Google, Amazon, Apple, Facebook, Microsoft, and Tencent to name a few.

• However, most software engineers were not people who were able, or interested in building large companies.

• They preferred to write code.

So the world moved forward into the Fifth Era with software engineers writing software which was eating the world, but the engineers themselves only eating what they took home from their corporate paychecks.

3. From Shareholder Backed to Community Backed
The next big breakthrough was for the software developers to come up with a way to change the economic, value capture model of decentralized, open-source software. We don't know exactly how it happened, but at some point software engineers realized that their communities of users were the way to change the paradigm. 

We experienced this shift in the video game industry as follows (yes video games are just software too):

• In the 00's we were backing video game companies and virtual worlds like Telltale, Unknownworld Entertainment, Mindfuse, and others in corporate structures with equity financing.

• Then some of the teams we were working with came up with the notion of pre-selling their games. These were the ones who were already well known for creating great games, and their fan bases were willing to give them money upfront for games that they planned to launch.

• Initially, the deal (contract) was that the fan sent in some money, in return receiving a future discounted version of the game, and maybe some other giveaway like a t-shirt or cap. Sometimes we gave them limited edition in-game names, badges, or even digital assets for their early support.

• Then we realized that we could also ask the fans about how they would like the game to be built. We began asking the fans to help design the future game. Sometimes we asked them to contribute assets, levels, maps, and so on. We called this user generated content.

• Over time this model became very powerful. The community began to fund the game, and we no longer needed as much, or in some cases, any equity capital. They also began to do substantial amounts of the development of some games.

• With the emergence of product crowdfunding platforms like Kickstarter and Indiegogo, the video game software engineers even found a way to reach audiences who did not already know about them. And some very large rounds were closed.

The software developers had broken out of the Industrial Era model of corporate equity funding. Instead, they had unleashed a powerful new model of community based, pre-development funding. With added design based dialog between developer and future user at the outset of the project, we had the beginnings of community based governance too. And the rise of user generated content.

4. From Emails to Smart Contracts in Token Form
In those early fundraising experiences at Telltale and Unknownworlds we talked to the community through traditional communication approaches. In some cases we emailed the fans for their support and some way of transferring the money had to be devised. The fans trusted the teams so there was very little in the way of contracts and agreements. 

However, over at Kickstarter and Indiegogo and other crowdfunding platforms, trust needed to be codified into contracts, and there were simply too many situations in which the fund raiser took the cash and never delivered the promised software such that a more disciplined, trustworthy, and reliable solution was needed.

At about the same time, someone (Satoshi Nakamoto) had solved the issues of security, identity, and trust around digital money in the Bitcoin whitepaper by creating something called a blockchain. It seemed to be a way to resolve the issues of value transfer across large distributed and decentralized communities - on a global scale.

When the software developer team building the Mastercoin (now Omni) protocol on top of the Bitcoin blockchain wanted to raise capital to fund their project they decided to focus on community based funding and they wrote some software to encode the agreements between the fans and their software development project. The resulting software contract was given the name the 'Mastercoin Token' and in July 2013 the first token sale occured. It was sufficiently successful that others followed quickly. In 2014 the Ethereum project team raised 3,700 bitcoin - then worth $2.3 million, now worth $130 million - in just the first 12 hours of their offering.

Before we knew it, a vast number of whitepapers were issued in the 2015 to 2018 period for what had become known as Initial Coin Offerings or ICO's. These were software tokens encoded with agreements for how a community might buy the tokens and get rights in the creation of future software. Many of these ICO's were never real, and/or their project teams never planned to build the promised software - they planned to take the money and run. However, don't throw out the baby with the bathwater. Among those ICO's were also the world's best software developers planning powerful new decentralized, open-source software protocols including Ethereum, Polkadot, and Solana among others which are being used to form the base layer blockchain operating systems that are now changing the world of computing globally.

5. Do these Tokens have Value?
So that is how we explain the notion of protocol tokens in as simple a way as we can manage:

• They derive from a long history of open-source software development.

• They enable decentralized and distributed teams of software developers to capture the value of their coding.

• They allow a community of fans to provide capital to those same software development projects.

• They are enabled by smart contracts in token format which include the agreements being made between development teams and fan buyers.

• Because they are software, the agreements can include all sorts of utilities that the software team will give to the buyers over time. They can also be made dynamic and can unlock or evolve as needed, too.

• The tokens can be sold, but they can also be earned - for community activities like developing code, mining, being an advisor, marketing the story to other people, and so on.

• There is no limit to what the tokens can be encoded with - they are truly flexible smart contracts.

Once the project goes public, these tokens become publicly traded too. At which time potential buyers are not just the community that believes in the software development project. Suddenly buyers may be speculators too.

Which comes to our final question. Do these tokens have value?

As long term investors - which is what we are at Blockchain Coinvestors - we believe that among these tokens are the ones created by the world's leading software engineers building the foundational protocols that will drive computing globally. So yes, we believe their tokens have value.

However, and conversely, we know that many tokens do not have value since they are being issued by people who are not leading software developers, and/or who do not have the interest or capability in seeing their whitepaper visions to completion.

Also, we don't understand the world of speculation, and so we can't talk about price once tokens go public. Which is when the speculators move in. So we confine our own investing activities to private early stage token funding rounds when high quality teams are getting their projects funded by the inner circle of their community and by selected long term investors.

For the rest, 'Caveat Emptor'.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Launched in 2014, our goal is to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and capture superior returns through investments in the leading blockchain venture partnerships. The strategy is now entering its 8th year and has to date invested in 25 pure play blockchain venture funds in the Americas, Asia and Europe; and in a combined portfolio of more than 300+ blockchain and crypto projects including 30+ blockchain unicorns. Headquartered in San Francisco with a presence in London, Menlo Park, New York, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle.

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,100,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

Click here to receive the insightful weekly crypto newsletter and webinar invitations from our Blockchain Coinvestors partner Lou Kerner.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Meet the Blockchain Unicorns - Mid-Year Update

- July 12th, 7:00am PST

- July 12th, 12:00pm PST

Investing in Early Stage Tokens

- July 19th, 7:00am PST

- July 19th, 12:00pm PST

Options for Investing in Blockchain & Crypto

- July 26th, 7:00am PST

- July 26th, 12:00pm PST
 
Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• Global Investor Conference: A panel on NFTs and why they matter

• Business Insider: Discussing how right now in blockchain is similar to the internet boom of the '90s in terms of growth and innovation

• Irish Tech News: A review of our book Blockchain Competitive Advantage that provides clear advice on strategies for investing in blockchain technology

• Irish Tech News: A review of our book The Intelligent Investor: Silicon Valley which has practical wisdom from leading Silicon Valley angels and VCs

• NBC San Francisco: An interview on what are NFTs

• US News & World Report: What to know about Bitcoin ETFs

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• San Francisco Business Times, Venture Capital Journal (paywall), and CrowdFund Insider: Coverage on the recent close of Blockchain Coinvestors Fund II

• VICE and CNNBusiness: Press coverage of the recent COINBASE public offering

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

• Irish Tech News Podcast: An overview of the Fifth Era, digital monies and assets, and how bitcoin fits in

• Nasdaq's Trade Talks: A discussion on the concerns accredited investors have for allocating to Bitcoin

"The best way to invest in Blockchain businesses"

Fifth Era/Blockchain Coinvestors Newsletter - Vol. 3, No. 12, June 2021

Fifth Era/Blockchain Coinvestors Newsletter

Vol. 3, No. 12, June 2021

Coinvesting with Blockchain Coinvestors

We are often asked why we are called Blockchain Coinvestors? With the successful first closing of the third blockchain venture fund of funds, we have almost 50 new investors joining us, so in this newsletter we summarize how the coinvestment program that gives rise to our name works.

What is the Purpose of the Coinvestment Program?

The coinvestment program identifies the emerging unicorns of the blockchain space and adds additional capital into their follow on rounds. The fund of funds' invest very early and cast a broad net - the coinvestment program deploys more capital as momentum builds.

What Coinvestments Have you Made to Date?

So far we have completed equity coinvestments into Bitwise, Braintrust, Brex, Coinbase, DappRadar, Ripple, Securitiize, Valui and Wyre and early stage token coinvestments into DFinity, Filecoin, NEAR, Polkadot and Structure. The equity coinvestments have been accessible to all of our investor circle, and the token opportunities only to those who have specifically approached us with an interest in early stage token investments.

How do you Select the Coinvestments?

On an ongoing basis, we monitor the combined portfolio - the more than 300 companies that the fund of funds' are now invested in - and we watch for the category leaders as they emerge. If we hear of a follow on round taking place we see if it meets our filters:

Backed already by leading blockchain VC'sBeginning to emerge as a leader in its category or strategyRound being led by leading VCWe can be direct investors into the companyThe company supports us having an allocationWe can see at least some of the Due Diligence (although we are a coinvestor and do not do primary due diligence on the company ourselves)

If the opportunity meets all or most filters, then we contact the company directly and ask for an allocation.

Fund, SPV or Syndicate investment?

We have three ways to take advantage of the allocations we secure:

Each of our fund of funds has a 20% allocation for coinvestments. Depending upon the degree to which the fund is already exposed to the opportunity, we may invest further capital directly from the fund.Secondly, the SPV coinvestment program gives our investors the chance to select specific coinvestments into which they wish to allocate additional capital. These are made through our dedicated special purpose vehicle.Finally, we make certain coinvestments available through our Blockchain Coinvestors AngelList syndicate (see below).

What is the Investor Circle?

While we use the term 'investor circle' loosely, we think of our investors as being in the following categories: 

Coinvestment Class Investors have committed more than $1 million to one or more of our investment vehicles. They receive the largest share of the allocations we receive (e.g. 75%).Non-Coinvestment Class Fund investors have invested in at least one of our funds and can also invest in coinvestments since we reserve a portion of each allocation for them (e.g. 25%). Finally, we maintain a list of other investors who have expressed interest in Blockchain Coinvestors, but who have not invested in one of our funds. If allocations permit, we may offer opportunities to this broader list.

In practice, as our funds have more investors in them, we expect to have fewer opportunities reaching the third category.

What is your Coinvestment Process?

Once we receive an allocation the process is as follows:

We send out a summary email to investors letting them know about the opportunity;If you are interested you email us back and indicate your potential interest level;We then open up a data room;If there is sufficient interest we create a class of our SPV and close the round.

The AngelList syndicate works a little differently as indicated below.

What are the Terms and Conditions?

All the SPV's are 1% annual management fee and 10% carry with a one time 1% org fee. So very low cost compared to the VC LP's who are paying 2% and 20% to get into the same rounds. We take four years of the management fee upfront to avoid micro capital calls. However, investors are returned any unused portion on an exit.All SPV's have a minimum commitment of $50,000.What is the Role of Blockchain Coinvestors AngelList Syndicate?

We also have the Blockchain Coinvestors AngelList syndicate for investing in coinvestments from $1,000 and up. We typically put very small allocations that do not justify a purpose created SPV, or opportunities that don't meet all of the filters above into that syndicate.

We believe that Blockchain Coinvestors operates a compelling and efficient way for our investor circle to allocate additional capital into the emerging unicorns of the blockchain space.

We are happy to answer any other questions.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Since 2014 our goals have been to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships. The strategy is now entering its 8th year, and so far we are investors in 25 pure-play blockchain venture funds in the Americas, Asia and Europe and in a combined portfolio of more than 300+ blockchain and crypto projects including 30+ blockchain unicorns. Simply put, our funds, SPVs and syndicates represent the best way to invest in blockchain businesses.

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,100,000 prior to investment in the fund (excluding the value of his or her primary residence).While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

Click here to receive the insightful weekly crypto newsletter and webinar invitations from our Blockchain Coinvestors partner Lou Kerner.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Options for Investing in Blockchain & Crypto

- June 28th, 7:00am PST

- June 28th, 12:00pm PST

Meet the Blockchain Unicorns - Mid-Year Update

- July 12th, 7:00am PST

- July 12th, 12:00pm PST

Investing in Early Stage Tokens

- July 19th, 7:00am PST

- July 19th, 12:00pm PST
 
Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

Irish Tech News: A review of our book Blockchain Competitive Advantage that provides clear advice on strategies for investing in blockchain technologyIrish Tech News: A review of our book The Intelligent Investor: Silicon Valley which has practical wisdom from leading Silicon Valley angels and VCsNBC San Francisco: An interview on what are NFTsUS News & World Report: What to know about Bitcoin ETFsCrypto Unstacked: Podcast on the Fifth Era and the evolution of digital assetsBusiness Insider: Which digital asset to hold right now - Bitcoin or EthereumSan Francisco Business Times, Venture Capital Journal (paywall), and CrowdFund Insider: Coverage on the recent close of Blockchain Coinvestors Fund IIVICE and CNNBusiness: Press coverage of the recent COINBASE public offeringInc Magazine: An explanation of NFTsPensions & Investments: How institutional investors are getting closer to blockchain and crypto investmentsOn the Brink with Castle Island: An overview of technology trends and the cryptoasset marketsIrish Tech News Podcast: An overview of the Fifth Era, digital monies and assets, and how bitcoin fits inNasdaq's Trade Talks: A discussion on the concerns accredited investors have for allocating to Bitcoin

"The best way to invest in Blockchain businesses"

Fifth Era/Blockchain Coinvestors Newsletter - Vol. 3, No. 11, June 2021

Fifth Era/Blockchain Coinvestors Newsletter

Vol. 3, No. 11, June 2021

Why are Corporate Treasurers Exploring Stablecoins & Bitcoin?

Ever since working with Bank of America on their global payment solutions (GPS) business unit in the mid 1990's as consulting partners we have understood that the role of corporate treasurer in a multinational corporation is not an easy one. Furthermore, traditional approaches to managing the balance sheet and cash management of a company operating across countries, business units, and product divisions raises complexities that make global payments and treasury management important and challenging.

How Does It Work Today?

A few observations illustrate this complexity:

Sophisticated corporate treasurers understand that balance sheet management requires multiple and parallel strategies. This includes long term, mid term and short term investment horizons as well as working capital management which has to be attuned to the needs of each business unit and product group in each country of operation. Since global market conditions can be volatile, and global supply chains are open to sudden and unexpected disruptions, cash management is also a critical and complex business decision.

When corporate treasuries have large excess cash flows to manage, the movement of money around the corporation can become very complex and costly as well. Operating in multiple geographies implies exposure to numerous fiat currencies, as well as the need to bring money back and forth to operating units that may go from surplus to deficit very rapidly. Leaving emergency stocks of cash in every geography and operating unit is not an efficient approach - leaving pockets of capital stranded and in the current low or even negative interest rate environment is potentially costly too.

As a result, very sophisticated corporate treasurers have to manage working capital in a segmented way: by geography, by business unit, and even by emergency risk band (eg. what short term cash might be required under different levels of negative business scenario).

What is Changing Now?

To summarize, in the context of a multinational balance sheet, cash management is costly, slow, and very complex. A lot of money, time, and effort is absorbed by the reality that international financial systems have not kept up with the businesses of multinational companies in a digital world. Up until recently, there has been little true innovation against this challenge. Much of the infrastructure, and most of the conceptual approaches to the multinational corporate treasury challenge were established in the 1980's and 1990's. The largest banks continue to rely upon legacy infrastructure including, for example, the Swift payments network and dollarization in most cases.

This is beginning to change as stablecoins and of course bitcoin have opened up alternative possibilities. Some examples:

1. Real time, low cost international remittances are now under consideration both from new private sources such as Ripple/XRP, from pivoting traditional networks like MasterCard, Visa, and UnionPay who have announced their intent to build digital stablecoins and enable the movement of bitcoin and other crypto assets across their networks, and sovereign governments who have also begun to explore the rollout of central bank digital currencies.

2. On the latter front, much has been written about how the Chinese digital yuan will be used within China for domestic cash displacement, and the Western press has been full of stories of how it may also be used to monitor and even censor the populace if their spending patterns do not conform to government preferences. Less has been written about the use of the digital yuan across the Chinese sphere of influence including the belt and road initiative. However, when China is conducting international trade around the world, why not de-dollarize transactions with a zero cost, real time digital yuan and on-us netting of transactions?

3. Meanwhile, rather than wait, some large corporate treasuries have already begun to use bitcoin on the balance sheet, and are exploring how stablecoins can work to simplify their international payment activities. In the US, Microstrategy and Tesla have stolen the limelight by announcing large bitcoin purchases, but they are far from alone. We know of a large number of the largest companies in the world who have exploratory teams looking into this topic.

Change is coming fast now.

It Can't, Won't, Shouldn't Work

At the same time, the popular press have begun to tell the narrative in another, and overly simplistic way. Not understanding the complexity of the issue, they have simplified it down to 'Bitcoin on the Balance Sheet' and have begun to publish articles about how volatility, regulatory uncertainty, and energy usage should rule out a corporate treasurer from considering this option.

On the first objection, we will simplify it down to the following. Yes, volatility matters, but only when you have to sell. Very large companies, with very large balance sheets, almost by definition have portions of their assets that never get sold. We would argue that for some multinational corporations Bitcoin is the best possible base layer in a sophisticated multi-tier cash management strategy since you almost never sell the base layer in practice and the returns have been excellent almost every year since inception.

On regulatory uncertainty, we see this as a boon, not a barrier to exploration of digital payment solutions. Just as the confusion around the matter of taxation of Internet electronic commerce transactions allowed the most innovative multinationals to move ahead with their activities, so the current regulatory grey zone around new digital monies and assets enables the most sophisticated to move forward. It is the less sophisticated corporate treasurer who in practice gets chilled by regulatory uncertainty.

We will address energy usage in a future newsletter since we are concerned greatly about that topic.

In short, we are seeing large multinationals moving ahead with initiatives to both leverage stablecoins in their businesses as well as make their first additions of bitcoin to their balance sheets.

We expect many more announcements this year and next along these lines.

Conclusions

We believe stablecoins are coming fast now, and will be ubiquitous once the traditional payment networks roll them out as early as 2022. Each of MasterCard, Visa, and UnionPay have initiatives underway as do the largest banks providing global payment solutions.

Sophisticated corporate treasurers managing the balance sheets of the world's largest multinationals already know that bitcoin has a place in their overall strategy - however, it is a question of matching the return and volatility profile of bitcoin, to the different investment and working capital decisions that they need to make in their respective businesses.

A great corporate treasurer understands that when you have one of the world's highest returning assets which is also showing high volatility, you need to analyse how to fit it in. Throwing out the baby with the bathwater never makes sense.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Since 2014 our goals have been to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships. The strategy is now entering its 8th year, and so far we are investors in 25 pure-play blockchain venture funds in the Americas, Asia and Europe and in a combined portfolio of more than 300+ blockchain and crypto projects including 30+ blockchain unicorns. Simply put, our funds, SPVs and syndicates represent the best way to invest in blockchain businesses.

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,100,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Blockchain Coinvestors Fund III First Closing

- June 7th, 7:00am PST

- June 7th, 12:00pm PST

Options for Investing in Blockchain & Crypto

- June 28th, 7:00am PST

- June 28th, 12:00pm PST

Meet the Blockchain Unicorns - Mid-Year Update

- July 12th, 7:00am PST

- July 12th, 12:00pm PST

Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• NBC San Francisco: An interview on what are NFTs

• US News & World Report: What to know about Bitcoin ETFs

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• San Francisco Business Times, Venture Capital Journal (paywall), and CrowdFund Insider: Coverage on the recent close of Blockchain Coinvestors Fund II

• VICE and CNNBusiness: Press coverage of the recent COINBASE public offering

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

• Irish Tech News Podcast: An overview of the Fifth Era, digital monies and assets, and how bitcoin fits in

• Nasdaq's Trade Talks: A discussion on the concerns accredited investors have for allocating to Bitcoin

"The best way to invest in Blockchain businesses"

Fifth Era/Blockchain Coinvestors Newsletter Vol. 3, No. 10, May 2021

Fifth Era/Blockchain Coinvestors Newsletter

Vol. 3, No. 10, May 2021

The Public Blockchain Products are Coming !

Regardless of whether Paul Revere really said "The British are coming," it seems a fitting way to begin this edition of our newsletter wherein we outline how the East Coast (financial) community is getting awoken to the arrival of a host of public blockchain companies and the products that follow.

Context

Newsletter Vol 3., No. 8. outlined the arrival of public pureplay blockchain companies as we discussed SPACs and why they are relevant to blockchain and crypto. With the enormous value creation in the blockchain sector, a subset of the unicorn blockchain companies and projects are now in the throes of deciding whether or not to become public companies. We predicted that by the end of 2021 there will be 20 to 30 pureplay public blockchain companies, with many more on the horizon.

Critical Mass Now Reached

Today, we think critical mass has been reached. There are now enough pureplay blockchain and 'substantially focused on crypto' public companies that it makes sense to create products built on top of them: Indexes, mutual funds, ETFs, and so on.

The principal pureplay blockchain public companies are Coinbase, Galaxy Digital, Riot Blockchain, Voyager Digital, Canaan, Bitfarms, Hive Blockchain, and Ebang with eToro and Bakkt in the de-spac process. In addition, there are a number of public companies that are substantially focused on crypto. Microstrategy has turned itself into a Bitcoin tracker stock, technology companies including Northern Data, Marathon Digital, and Nvidia and Fintechs like PayPal and Square have leaned into the space and more and more of their EBITDA is driven by blockchain and crypto activities. There are others as well.

We have reached the point where an index of 30 public crypto companies is a possibility.

Public Blockchain Products are Coming

So it is no surprise to us that Bitwise, the leading crypto index and fund company (we are early investors and Alison is senior advisor to the board) has just announced the launch of its Bitwise Crypto Innovators 30 Index and its new Bitwise Crypto Industry Innovators ETF (NYSE Arca: BITQ).

ETFs are superior products over most other fund formats as we discovered in the process of strategising and launching iShares in the 1990's - today the world's most valuable branded product bar none. For many investors, including most large institutional investors, ETFs are their most efficient way to invest in public markets. The advantages are ease of access, low cost, tradeability and liquidity and in the case of blockchain ETFs, the promise of high performance in a market that is starved for returns.

Opening up blockchain to these enormous institutional sources of capital, which are hungry for returns and increasingly interested in accessing exponential technologies like blockchain is likely to be extremely important to the sector.

Conclusion

BITQ is the first ETF that the SEC has authorized to use 'crypto' in its name. It will not be the last. Just as the distributed movement wants to democratize access and reduce costs and friction, so Bitwise is helping to do so with this first crypto focused ETF. We expect a great deal of interest among institutional investors now that they can invest into pureplay blockchain companies within their existing investment processes.

We believe they deserve a round of applause.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Since 2014 our goals have been to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships. The strategy is now entering its 8th year, and so far we are investors in 25 pure-play blockchain venture funds in the Americas, Asia and Europe and in a combined portfolio of more than 300+ blockchain and crypto projects including 30+ blockchain unicorns. Simply put, our funds, SPVs and syndicates represent the best way to invest in blockchain businesses.

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@fifthera.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,100,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@fifthera.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Options for Investing in Blockchain & Crypto

- May 24th, 7:00am PST

- May 24th, 12:00pm PST

Blockchain Coinvestors Fund III First Closing

- June 7th, 7:00am PST

- June 7th, 12:00pm PST

Options for Investing in Blockchain & Crypto

- June 28th, 7:00am PST

- June 28th, 12:00pm PST

Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• US News & World Report: What to know about Bitcoin ETFs

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• San Francisco Business Times, Venture Capital Journal (paywall), and CrowdFund Insider: Coverage on the recent close of Blockchain Coinvestors Fund II

• VICE and CNNBusiness: Press coverage of the recent COINBASE public offering

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

• Irish Tech News Podcast: An overview of the Fifth Era, digital monies and assets, and how bitcoin fits in

• Nasdaq's Trade Talks: A discussion on the concerns accredited investors have for allocating to Bitcoin

"The best way to invest in Blockchain businesses"

Fifth Era/Blockchain Coinvestors Newsletter - Vol. 3, No. 9, May 2021

Fifth Era/Blockchain Coinvestors Newsletter

Vol. 3, No. 9, May 2021

Bitcoin vs Ethereum?

During the last couple of weeks a new debate has begun to surface. As the most valuable cryptoasset - Bitcoin - has seen its dominance begin to fall (the % of all cryptoasset market capitalization that it represents), so observers are asking should smart investors put more into the second most valuable cryptoasset by value - Ethereum? 

Today we examine the question of Bitcoin vs Ethereum, and we conclude that it is a misplaced debate. You should consider investing in both.

Traders vs Investors

To begin, let's acknowledge that the world can be broadly split into traders and investors. Traders focus on short term price movements and arbitrage opportunities and rightly are excited by Bitcoin versus Ethereum relative movements right now. Investors focus on what the future will be like, the tailwinds driving projects forward and how value will be captured by some and lost by others. We don't pretend to be traders (or speculators). We are affirmed long term investors who have focused on Internet, Fintech and Blockchain investing for the last two decades and more. 

While we acknowledge that searching for Bitcoin vs Ethereum arbs is a worthwhile short term trade, for the rest of this newsletter we look through the long term investor lenses that we wear.

Apples vs Oranges

At Blockchain Coinvestors our investment thesis since 2014 rests on the central premise that all the world's monies and all the world's assets will be made digital. Enormous value will flow to those that enable this outcome. Both Bitcoin and Ethereum are playing key roles in this transition. But they have very different aspirations, and certainly in this timeframe are doing very different things.

For the world's media to hype up a Bitcoin vs Ethereum investment debate is like the same commentators asking whether you should invest in Gold or Google? It's not that it is a bad question per se. However, before picking specific investments you first have to know what asset class each investment opportunity fits into. So in this case, a better first question is should you invest in precious metals or into advertising focused business models? Based upon recent investment performance the answer would have been both. So let's discuss what asset classes each of Bitcoin and Ethereum are in.

Global Leading Cryptoasset

Bitcoin is first and foremost a cryptoasset. While it was originally conceived as a distributed, sovereignless form of secure electronic cash, the reality is that when Satoshi Nakamoto turned up the design 'control knobs' of immutability, security, transparency, and distributed to position '10' the result was that Bitcoin became a not very good solution to global payments. As we now understand, although it took most of us five years or so to appreciate it, the benefits of extreme immutability, security, transparency, and distributed design added in a high degree of computing complexity. This in turn made the Bitcoin blockchain not fit for purpose for high volume, low value global electronic cash transactions - let alone the microtransactions that are beginning to come fast now as we turn on the Internet of things, web 3.0 search, store, share and socialize, and non fungible tokens to name just three innovations that require blockchains that can operate with massive capacity, throughput, speed, at low cost, and with low energy usage. The Bitcoin developer community is working hard to mitigate this reality, but it will be hard for them to create the fastest, cheapest, highest capacity, and lowest energy usage blockchain given where they are starting from. Perhaps they will succeed?

Today, Bitcoin is the world's best cryptoasset. Tens of millions of holders agree that it has value, benefit from its security, transparency and immutability and enjoy being able to buy and sell it in very rapid and relatively low cost ways. At least compared with the buying and selling of other scarce assets which have much more severe legacy issues to solve (e.g. real estate or precious metals).

In addition - and at last - every sovereign central bank, and essentially every major financial institution has now agreed that digital monies and assets make sense. They are now furiously working to design and launch stablecoins, embrace digital asset focused wallets, custody solutions, exchanges and so on, and most are getting ready to offer Bitcoin access to their clients. If that was not enough, there is a real debate emerging about whether the world will have a new digital reserve currency, and whether it will be a digital dollar, digital yuan, or perhaps Bitcoin.

In this context, Bitcoin has a chance of remaining the world's leading cryptoasset.

Global Distributed Software Development Platform

Ethereum, conversely, is the leading global distributed software development platform. It allows computer engineers and developers to build their software solutions on top of its protocol, software, and reusable modules of code. 

The way to think about Ethereum in layman terms is the following (apologies in advance for the over simplifications):

• Once we had mainframe computers that required proprietary custom software to be written for them. This was a complex, inefficient and costly task.

• Only a few could afford to hire software engineers to develop operating systems so most went without.

• Then a few companies (think Data General, DEC, and IBM) began to offer packaged operating systems.

• By the 1980's IBM/Microsoft DOS was displacing the early, and fragmented, operating systems.

• Soon we saw Windows and a revised Apple OS pull ahead of the pack.

• By the 1990's networked computers were a reality.

• Then we saw the emergence of the world wide web and web based solutions.

• Microsoft and Apple shifted their operating systems to the cloud and the first large scale open source operating system - Linux - was launched.

• A few years later came the development of Android which Google bought and then gave to the world.

Today we take for granted the notions of cloud based operating systems, simple API's upon which computer engineers can develop, and open source and/or decentralized software development. We use the outputs of this work all the time - even if we don't realize it.

Ethereum, along with other blockchain based software protocols/networks like Cardano, NEAR, Polkadot, and Solano to name just four of many, are moving that evolution forward. In Ethereum's case there are two very fundamental ways - Ethereum is enabling distributed open source cloud based software development, and is using certain powerful aspects of blockchain to create 'smart contracts' that are about to replace most contracts that we use today. Contracts that are often still paperbased (as in real estate or fund investing) or at best are 'dumb' first generation computer code. By combining the two, Ethereum has a chance of remaining the leading global distributed software development platform.

Right now, large numbers of computer developers are betting that it will and are choosing to develop their solutions on top of it. Meanwhile, the Ethereum developer community is furiously working to upgrade Ethereum in important ways including the Berlin and London hard forks. Unfortunately, they are beginning to see that prior generations of operating system software engineers often lost the operating system wars not because they were bad developers, but because the burden of legacy code makes continuous improvement difficult when you seek to upgrade an operating system that is already in use.

Invest in Both

So to summarize, Bitcoin and Ethereum are pursuing fundamentally different long term aspirations and are in quite different asset classes. Bitcoin has a chance of remaining the world's leading cryptoasset. Ethereum has a chance of remaining the leading global distributed software development platform. Both positions of leadership would capture trillions of dollars of value. So if you are a long term investor you should consider investing in both.

Looking back just a handful of years, if you had bought BOTH at inception we know where you would be today. If you buy BOTH today, we think you will be happy in ten years time. But keep vigilant - other promising cryptoassets and distributed software networks/platforms are launching everyday.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Since 2014 our goals have been to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships. The strategy is now entering its 8th year, and so far we are investors in 20 pure-play blockchain venture funds in the Americas, Asia and Europe and in a combined portfolio of more than 300+ blockchain and crypto projects including 20+ blockchain unicorns. Simply put, our funds, SPVs and syndicates represent the best way to invest in blockchain businesses.

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@fifthera.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,100,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@fifthera.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

 Securing Global Early Stage Access in Blockchain

- May 17th, 7:00am PST

- May 17th, 12:00pm PST

Options for Investing in Blockchain & Crypto

- May 24th, 7:00am PST

- May 24th, 12:00pm PST

Blockchain Coinvestors Fund III First Closing

- June 7th, 7:00am PST

- June 7th, 12:00pm PST

Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• Crypto Unstacked: Podcast on the Fifth Era and the evolution of digital assets

• Business Insider: Which digital asset to hold right now - Bitcoin or Ethereum

• San Francisco Business Times, Venture Capital Journal (paywall), and CrowdFund Insider: Coverage on the recent close of Blockchain Coinvestors Fund II

• VICE and CNNBusiness: Press coverage of the recent COINBASE public offering

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

• Irish Tech News Podcast: An overview of the Fifth Era, digital monies and assets, and how bitcoin fits in

• Nasdaq's Trade Talks: A discussion on the concerns accredited investors have for allocating to Bitcoin

"The best way to invest in Blockchain businesses"

Fifth Era/Blockchain Coinvestors Newsletter - Vol. 3, No. 8, April 2021

Fifth Era/Blockchain Coinvestors Newsletter

Vol. 3, No. 8, April 2021

What Are SPACs and Why are They Relevant to Blockchain and Crypto?

Before launching into the content of this newsletter, we would like to invite you to a new webinar we have just scheduled. Click a link to register: 

What are SPACs and Why are They Relevant to Blockchain and Crypto, May 5th 7am PST
What are SPACs and Why are They Relevant to Blockchain and Crypto, May 5th 12pm PST

By the end of the newsletter you will see why we think this subject is important..
______________________

Public Blockchain Companies?

Is it surprising that a movement that began focused on creating financial products to disintermediate established financial institutions would now be sending some of its most promising offspring to be listed on established stock exchanges as traditional public equities? Like Baakt, Canaan, Coinbase, Ebang, eToro, Galaxy Digital, Riot Blockchain and others? 

We don't think it is surprising. 

In this newsletter we cover the number of blockchain and crypto unicorns, why for some of them public company status is a sensible next step, and the options they have to become publicly listed companies. We expect at least 20 to 30 blockchain companies to take that path before the end of 2021.

And many more in 2022.

How Many Blockchain Unicorns Are There?

Twice a year for a few years now we have analyzed the blockchain ecosystem and published information on those blockchain companies and projects that have reached unicorn status - i.e. that are valued at more than $1 billion. The full list can be found at www.blockchaincoinvestors/portfolio if you click on all three filters under Unicorns & >$1bn Projects. The filters are Blockchain Coinvestors (those our funds are invested in), Fifth Era (those we have invested in outside the Blockchain Coinvestors funds), and Other (unicorns we are not investors in including many the cryptocurrencies). If you do this, you will be confronted by a wall of logos. There are more than 100 blockchain unicorn companies and projects as of the writing of this newsletter and that number is increasing rapidly.

If you prefer, you can listen to our webinar Meet The Blockchain Unicorns to learn a little about some of them.

Why are there so many? 

Because as we have written before, all of the world's monies and all of the world's assets are transitioning to be digital and those projects that have already created global cryptocurrencies and utility tokens and those companies that are building the infrastructure to support this new world of digitized payments, commerce, investment, and so on are capturing enormous value. Profit pools in the trillions are in motion. Just as when the Internet companies first appeared and turned our world into a connected, digital, communication platform.

Only this time it is the world of value - monies and assets and payments - that is being digitized. Not just communications. 

Why Go Public and Why Do So Through Traditional Means?

What is so fascinating this time around is that many blockchain and crypto projects have invented ways to capture value without needing to resort to traditional capital formation approaches - essentially by building a vast network of  contributors, users, fans, and so on, then creating tokens that are central to the operations of those networks, and then using those tokens to attract, motivate, incentivize, retain, and excite the community. 

As the network grows, and as the value of the activities of the network increase, so those tokens become more and more valuable - especially those that have a well designed monetary policy in place at the outset.

Of course speculation is a powerful force as well.

So why would a blockchain entity choose to become a publicly listed company on the traditional exchanges? 

One reason for some of them is that relationships with established enterprises are essential to their business and public status brings credibility, and also increased awareness. Others have business models less suited to the protocol and utility token route and they see traditional investment funding - venture capital and then public capital - as the right choice for them as their business scales. Or if, like Coinbase, the public market investors will value you in the tens of billions, why not tap into low cost capital from the world's largest and most liquid markets. Especially when capital is so abundant right now with the massive central government money printing of the last few years.  

Meanwhile, investors everywhere are seeking return in a very low interest rate environment and are just beginning to understand the exponential growth opportunities facing companies using new technologies to create the world of the 'Fifth Era'.  And the massive and unprecedented value shifts that will occur during that transition to the innovation leaders and away from legacy incumbents.

What  Are The Options For Going Public?

The options are relatively well understood with one exception. They are:

• A traditional Initial Public Offering (IPO) - eg Galaxy Digital on the TSE

• A direct public listing - such as the one Coinbase has just completed

• An acquisition by an established public company - eg Curv selling to PayPal

• A merger into a SPAC - eg eToro

There are pros and cons of each, but in our opinion the SPAC route can be a good option for many blockchain companies if the sponsors are strong, experienced and 'value added'.  Here's a quick summary of some of the reasons - and we will go through this in greater detail in the webinars on May 5.

1. SPAC mergers can be quicker, cheaper and more focused than traditional IPO and direct listing processes.

2. The blockchain company looking to go public doesn't have to spend time educating an array of traditional investors who may not understand the blockchain space and opportunities. The SPAC sponsors can line up interested and knowledgeable investors who understand the opportunity.

3. SPAC sponsors are motivated and incentivized to seek out the blockchain companies that can succeed in public markets and to help them be prepared, flourish, and avoid the pitfalls that can trip them up. For example the SPAC sponsors can ensure the control, disclosure, governance, and oversight processes and governance and oversight standards required by the SEC, exchanges, and other entities are in place, and can help support and mentor teams on strategy, successful scaling, team expansion and so on.

4. The SPAC sponsors have the relationships with the PIPE and DeSPAC backers to do much of the heavy lifting of the capital formation process.

There can be a perception that blockchain companies are anti-establishment and that the establishment does not support them. SPAC's short circuit this dialog by matching those that believe with those that are innovating. The naysayers need not apply.

So we don't find it surprising at all that there will likely be many public blockchain companies in the next couple of years. We think many of them will choose the SPAC process.

Please join us on May 5th to learn more.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Since 2014 our goals have been to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships. The strategy is now entering its 8th year, and so far we are investors in 20 pure-play blockchain venture funds in the Americas, Asia and Europe and in a combined portfolio of more than 300+ blockchain and crypto projects including 20+ blockchain unicorns. Simply put, our funds, SPVs and syndicates represent the best way to invest in blockchain businesses.

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@fifthera.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,100,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@fifthera.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Blockchain Coinvestors Investment Thesis

- May 3rd, 7:00am PST

- May 3rd, 12:00pm PST

What are SPACs and Why are They Relevant to Blockchain and Crypto

- May 5th, 7:00am PST

- May 5th, 12:00pm PST

Securing Global Early Stage Access in Blockchain

- May 17th, 7:00am PST

- May 17th, 12:00pm PST

Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• San Francisco Business Times, Venture Capital Journal (paywall), and CrowdFund Insider: Coverage on the recent close of Blockchain Coinvestors Fund II

• VICE and CNNBusiness: Press coverage of the recent COINBASE public offering

• Inc Magazine: An explanation of NFTs

• Pensions & Investments: How institutional investors are getting closer to blockchain and crypto investments

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

• Irish Tech News Podcast: An overview of the Fifth Era, digital monies and assets, and how bitcoin fits in

• Nasdaq's Trade Talks: A discussion on the concerns accredited investors have for allocating to Bitcoin

"The best way to invest in Blockchain businesses"

Fifth Era/Blockchain Coinvestors Newsletter Vol. 3, No. 7, April 2021

Fifth Era/Blockchain Coinvestors Newsletter

Vol. 3, No. 7, April 2021

WHY FUND OF FUNDS?

As we wrap up our oversubscribed second fund and prepare to launch our third Blockchain Coinvestors Fund of Funds, we thought it might be worthwhile outlining the advantages of fund of funds and why we are convinced that this is the right model for investing in the global leaders of the blockchain world. 

To begin, we should recap briefly some unique characteristics of early stage technology investing that make it perhaps the best asset class for a fund of funds strategy:

HIGH EARLY STAGE RETURNS
First and most importantly, early stage technology investing has the high returns to make the fees on fees of a fund of funds strategy justifiable. The Cambridge Associates US Venture database shows that early stage venture has the highest returns of almost any asset class - and so far our experience in early stage blockchain investing has far exceeded the broader benchmark with most of our 25 funds performing as top quartile or better. An institutional fund of funds will have low costs of 1% management fee and 10% performance fee and an exceptionally high return asset class will absorb these low fees easily.

PERSISTENCY OF TOP QUARTILE
Next, a fund of funds strategy works best where there is persistency of the top quartile funds. Persistency is a measure of whether a fund that was top quartile in the prior period is likely to be top quartile in the next. Early stage venture has one of the highest persistency rates of any asset class at 48% according to Harvard University and State Street data. This is important, because if you can secure access to the top quartile funds you have a high likelihood of superior returns in the next period.

HARD TO ACCESS THE BEST
Unfortunately, investors find it hard to access the highest performing funds on an ongoing basis. Not only does it take a great deal of work and relationship building to know which are the top quartile funds, but in addition, as soon as you know who they are, it seems as if all the capital in the world finds out too and beats a path to the fund manager's door. So securing access is hard to do, and consistent investment vehicles that support these funds over time are more likely to be able to allocate capital to them.

ONE STOP SHOP
A fund of funds like ours is a one-stop shop for leading blockchain venture managers and strategy diversification. Our goal is to be in all of the best funds globally in this sector, and to allow our investors to write a single check and get global coverage - often beneath the minimum commitment requirement of any one fund. In terms of diversification, if a fund of funds invests in 15 funds each of which invests in 30 or so blockchain businesses, that implies a combined portfolio of more than 300 after overlap. This level of diversification is unparalleled at this time.

MORE EFFECTIVE, LESS EXPENSIVE
While most family offices don't want to build an internal team to handle every category of investing, some larger institutions do. However, by the time that they get to a unique and complex area of investing like blockchain, this requires a great deal of expertise that generalist alternative investment professionals do not have. It is more effective and less expensive to use a fund of funds, rather than building a direct and diversified portfolio in-house which requires dedication of time and staff.

DEDICATED STAFF
The corollary of the prior point, is that a fund of funds has skilled and experienced staff dedicated to sourcing managers and performing comprehensive investment and operations due diligence, analysis, and monitoring. It is all we do.

ACCESS TO INNER CIRCLE
Last, but perhaps most importantly, the almost 8 years that we have been backing the leaders of the blockchain venture space, and the more than 300 blockchain companies and projects that are in our combined portfolio today, bring additional access benefits. As noted above, early stage technology returns are concentrated among the persistent performers, and enhanced returns are possible due to access to ‘inner circle’ partnerships and the most attractive coinvestment opportunities. 

This is what we offer.

We hope you will wish to know more about our third blockchain venture fund of funds. Please don't hesitate to subscribe at www.blockchaincoinvestors.com or contact our investor relations team at ir@fifthera.com if you would like to learn more.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Since 2014 our goals have been to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships. The strategy is now entering its 8th year, and so far we are investors in 20 pure-play blockchain venture funds in the Americas, Asia and Europe and in a combined portfolio of more than 300+ blockchain and crypto projects including 20+ blockchain unicorns. Simply put, our funds, SPVs and syndicates represent the best way to invest in blockchain businesses.

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

• Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

  • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

• Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@fifthera.com if the minimum is of concern.

  • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,100,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@fifthera.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Blockchain Coinvestors Fund III Kickoff

- April 12th, 7:00am PST

- April 12th, 12:00pm PST

Blockchain Coinvestors Investment Thesis

- May 3rd, 7:00am PST

- May 3rd, 12:00pm PST

Securing Global Early Stage Access in Blockchain

- May 17th, 7:00am PST

- May 17th, 12:00pm PST

Recordings of past webinars and calls can be found at www.fifthera.com/webinars.

RECENT PRESS

• On the Brink with Castle Island: An overview of technology trends and the cryptoasset markets

• Irish Tech News Podcast: An overview of the Fifth Era, digital monies and assets, and how bitcoin fits in

• Nasdaq's Trade Talks: A discussion on the concerns accredited investors have for allocating to Bitcoin

"The best way to invest in Blockchain businesses"

Fifth Era/Blockchain Coinvestors Newsletter - Vol. 3, No. 6, March 2021

Fifth Era/Blockchain Coinvestors Newsletter

Vol. 3, No. 6, March 2021

First we would like to thank you for the interest in Blockchain Coinvestors which has surged in the first quarter of this year. Fund II was oversubscribed and this week the entire team is working hard to complete all of the closing documentation. Fund III will open shortly. Thank you.

No doubt, this surge of interest is aligned with the worldwide narrative surrounding digital monies, digital assets, bitcoin and crypto and the changes that will inevitably occur as the global economic, monetary, payment, investment and associated systems adjust. A wholesale transformation and upgrading of all the world's financial instructure is now underway and the value creation (and disruption) will be enormous. As we have written before, we are living through an age of unprecedented innovation as the world transitions into the Fifth Era and blockchain will play a key role. To learn the essentials about bitcoin and blockchain please visit our free Fifth Era resource page and watch our investment thesis webinar.

For those of you with only 45 minutes to invest into getting up to speed we have a new resource for you. The team at On The Brink interviewed Matthew this week and in a broad ranging conversation Matt Walsh of Castle Island was able to knit together all of the threads into a podcast that we think summarizes our thinking very well.

Click here to listen to the podcast or find it on your favorite podcast channel (Apple & Google podcasts, Spotify and so on).

Thank you for reading (and listening).

Alison Davis

Matthew C. Le Merle

Blockchain Coinvestors AngelList Newsletter - March 8, 2021

Syndicate Newsletter

March 8, 2021

Dear Blockchain Coinvestors Syndicate Members,

February was another great month for crypto, with total market cap ending the month up 37%, to $1.41 trillion. Bitcoin finished February with a gain of 37.6%, eclipsing, $1 trillion in market cap for the first time as institutions such as Tesla and Mastercard embraced bitcoin. The macro environment remained positive for crypto with the $1.9 trillion Covid bill passing both the House and the Senate.

This newsletter will highlight:

1. Syndicate Investment Updates

2. Syndicate Community

Progress Syndicate Investment Updates

February was the first month to see two deals “close”, as both Wyre and Valiu saw strong demand. Our fifth syndicate investment, BrainTrust launched at the end of the February, and is tracking to be our largest investment to date at $200,000. Our great webinar for LPs with BrainTrust CEO Adam Jackson held on March 4th is now available for replay on the BrainTrust Deal Page.

Syndicate Community Progress

The Syndicate saw LP growth accelerate to 27% month-over-month, adding 56 LPs, to reach 265 total. More importantly, the number of LPs investing more than doubled, to reach 65 total as the quality of the deals continued to impress.

Thanks again for your support.

Alison, Lou and Matthew

Blockchain Coinvestors AngelList

Join our syndicate on AngelList providing access to rounds that we are investing in. Blockchain, Crypto and Fintech. Click here to go to our Syndicate page on AngelList.

Fifth Era/Blockchain Coinvestors Newsletter - Vol. 3, No. 5, March 2021

Fifth Era/Blockchain Coinvestors Newsletter

Vol. 3, No. 5, March 2021

What On Earth are NFTs?

This week we thought we would leave the worlds of fintech, digital monies, and blockchain and go instead in a quite different direction.

Not!

While this edition of our newsletter talks about something that will seem like a world away from Wall Street and the City of London, by the end we hope you will agree that the picture above is very much part of the future of fintech, digital monies and blockchain.

Defining Non Fungible Tokens (NFTs)

'A non-fungible token is a special type of cryptographic token which represents something unique; non-fungible tokens are thus not mutually interchangeable. This is in contrast to cryptocurrencies like bitcoin, and many network or utility tokens that are fungible in nature' according to Wikipedia.

A Little History

Once upon a time Matthew had the high score on the Centipede coin operated video game console in the JCR at Christ Church, Oxford. He also held the high score on Robotron for much longer. He was proud and his classmates were envious. It cost a lot of 10 pence pieces to master the machines. But it was worth it for all of the adulation that he enjoyed. Good times.

Later, he played Metal Gear Solid, Spyro the Dragon, Crash Bandicoot, Gran Turismo, and Final Fantasy on his Playstation 1 with his kids but they simply became much too good for him when their fingers mastered the multifunctional controls and he was unable to. Their fingers whirring across the buttons in ways that his brain could not fathom. He still watched them play, but it was nowhere near as much fun. They had the highest scores, prestige and status. He just paid for the CD's and DVD's at Gamestop to keep them happy.

By the time they had moved on to Runescape, he was really intrigued. Not only were they investing '10,000' hours grinding in the games, but they were also mastering the acquisition, trading and monetization of in game virtual goods powered by proprietary in game virtual monies. Since he was investing into video games including virtual worlds and MMORPG's by then, it was something he needed to understand. They were paying huge amounts for items like the 3rd Age Druidic Robe Top depicted in the image above which was the most expensive item ever in Runescape. It sold for 1,970,648,002 coins. That is a HUGE value when you reverse engineer how many hours of gameplay would have been needed to earn that many coins.

Later the value of scarcity really came home when we were with our kids at the Goodman's auction at Pebble Beach and watched as people first bid up a Bugatti Veyron with celebrity provenance into the 7 figures and then paid over the odds for a Tesla Roadster number 0008 which had been George Clooney's. The provenance was nailed down since he had complained frequently in the press about the regularly failing batteries of the car which had left him stranded by the LA freeways more than once. A scarce car, celebrity provenance and a clear paper trail. In retrospect the $95,000 it sold for seems very cheap today.

What is so Valuable About Infinitely Copyable Code?

In contrast to the Bugatti and the Tesla, why on earth would a digital image of a fantasy piece of clothing, in low resolution pixels carry so high a value? It didn't even have much utility within the game as can be seen from its 'Attack', 'Defense' and 'Other' bonuses. These are the power ups that the player received if playing while wearing the Druidic Robe. Not much to write home about compared to other, much more powerful in game items within Runescape. No, this item became enormously valuable because of its scarcity and because the ownership of it carried with it status and prestige beyond imagination - at least within the Runescape community.

As the Christ Church, Oxford experience illustrates, most of us care about our status within our immediate, and closest community. For digitally native, Generation C men and women (learn about them in Newsletter Vol 3., No. 3), that community can be vast because the digitally connected worlds in which they move are accessible to vast numbers of similarly aged and like minded peers. Having the highest score on Robotron might have been visible to a few score members of the House. Owning the 3rd Age Druidic Robe Top was visible to 1.1 million users at Runescape's peak. Now how many of us can hope to impress 1.1 million of our peers in our lifetimes?

Breaking The Value Down

What tools do we have for breaking this value down? When seen through the lens of discounted cash flow there is not much to analyze here. You spend a lot for it, and you might be able to sell it for more. But that is the greater fool theory in action. However, viewed through the lense of behavioral and emotional economics it becomes quite interesting. The item itself has little functional utility. It doesn't earn anything, and doesn't spin off any cash. But it does create enormous perceived value through the prestige and status it brings to its owner. We don't have many tools for measuring that status. Other than saying that beauty is in the eye of the beholder.

So if you were a software engineer what platform would you build to replicate these types of values not within a proprietary in game environment, but so that the whole world can participate in them should they wish to. Well it needs to be a digital platform of course so the access is global. It needs to be able to ensure that the claims being made are true especially about scarcity and provenance - is there really only one and did George Clooney really own it? That index and registry has to be publically viewable, immutable and secure. Then it helps if the digital item itself can be wrapped in some sort of carrier that will include the item's description but perhaps also other benefits and utilities that the engineers might want to bolt on. Instead of the bonus power ups being recorded in the game code, why not attach them to the item code, or even add in something else of value. So that these values travel with the good rather than the good having to be compared to some external registry. Like having to look up Debretts Peerage after you meet someone at the Bodleian library and you are not sure if they really are the Viscount or not. Ha Ha.

Of course, that means the engineers are going to use distributed ledger, or blockchain technology for the task. To create their unique digital goods - which we are now calling Non Fungible Tokens or NFTs.

Beyond this, what are the other drivers of value? Kinjal Shah at Blockchain Capital puts it this way. " Valuing NFTs is subjective. Just like valuing art, for example, an NFT’s value will likely depend on a confluence of factors, including cultural relevance, scarcity, utility, social status, and credibility. Price discovery is in the earliest stages in the NFT market. There are a number of experiments like peer prediction for NFTS (Upshot), bonding curves for price discovery (Foundation), and unique markets for individual NFTs (Zora). Although the market is currently flooded with NFTs, over time a set of standards will likely emerge to better enable efficient pricing and discovery."

Does Anyone Care?

This is the part that is hard for non digital natives to understand. Even though we may not care, hundreds of millions of digital natives do care. And as we have talked about in prior newsletters, they are now entering the years in which they earn a lot, accumulate the beginnings of their wealth, and begin to collect what they care about. Just as we may seek out that unscratched original vinyl, or the first edition copy of our favorite author's novel, they are hoping to own the made scarce moment in which their favorite athlete dunked the ball to win the key game, or the napkin sketch that Lindsey Lohan just put into an NFT - she is the same age after all and they may have loved her ever since Mean Girls.

We need to take this seriously, since the global collectibles market is huge and these digital natives are the future and will decide what represents good value in years to come.

How Do We Invest in this?

The infrastructure to power the global NFT market places is being built right now by companies like Crypto Art House, Gala, Opensea, SuperRare, Tari and so on. This chart also taken from Kinjal of Blockchain Capital provides a framework and some of the key names.

We are investors in many of them through Blockchain Coinvestors.

Conversely, you don't have to invest in the platforms. You can just open an account and start buying specific NFTs. Don't ask us how you will know which ones will become valuable over time. We don't know how to set prices on modern art either.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

Fifth Era/Blockchain Coinvestors Newsletter - Vol. 3, No. 4, February 2021

What Concerns Investors About Bitcoin?

In newsletter Vol 3, No. 2 we asked you to share your concerns about Bitcoin in a single question survey which is still open for your responses. For those of you who are not a current holder of Bitcoin, we asked what scares you most about it? For those who are already holders of Bitcoin, we asked you what stops you from buying more? Thank you to all of you who responded. In this newsletter we go through the initial results and also provide some answers to your concerns - in effect we hope to demystify Bitcoin for you.

Top Line Findings

This newsletter goes twice a month to over 10,000 people who are accredited investors. It also goes to a large number of institutional investors and even more family offices. For this survey we received back a statistically significant number of responses. We have not found significant differences in how various types of investors responded, and we saw little geographic variation.

What stands out for us is that a lot of concerns that we included in the survey received votes including a couple that were trojan horses to see if people understand what Bitcoin really is. We added them because we wanted to see if the fear, uncertainty and doubt (FUD) that others are spreading about Bitcoin might be hitting home. Some of it clearly is.

The other top line finding is simply the breadth of concerns getting votes. This can be read in several ways. Firstly, there may be a lot of legitimate concerns. Secondly, different investors may be concerned about different things. Thirdly, Bitcoin may simply be a confusing asset class with lots of chatter and lots of FUD - much of it being spread by people on the short side of the trade. We have demonstrated in years gone by, that uncertainty chills investment. Other research, such as the very good Bitwise study on US CFA's and Registered Investment Advisors show that more than 90% of those important players in the US investment scene have yet to place a first Bitcoin trade for themselves or their clients. When Bitcoin is performing as the world's highest performing asset, that looks like FUD to us. Said the other way, it does not look like an economically rational outcome.

So let's go through the top 7 concerns one by one (We will hold a future webinar to go through all of the concerns in greater detail than we can do in this newsletter).

Concern 1: Bitcoin keys are not safe to own - my Bitcoin will get hacked (33.4%)
This is appropriately at the top of the list, and in years gone by it is true that the only way to own bitcoin was to enter the ecosystem and take on self-custody including holding your Bitcoin keys yourself. Of course, the world has been worrying about this issue of safety for a few years now. Today, you don't need to self-custody your Bitcoin, and you don't need to take on any custodial risk directly. Institutional custody solutions are now in place including from institutional grade providers like SFOX (the leading independent crypto prime broker) where Matthew is Vice Chairman. If you fear for their security, you can also get Bitcoin exposure by investing in paper based instruments. Foremost among these are the offerings from Greyscale (i.e. GBTC) and Bitwise (i.e. BITW) - Blockchain Coinvestors is an investor in both. These can be invested in at no premium through their respective primary issuances, or you can invest in them in the secondary market including through your favorite brokerage account. There is no risk that you will be hacked. And you don't need to own any keys. You should do your own due diligence on their custody platforms - just as you would if you left your gold bars in your private bank lockbox. Not all providers are equally capable in the custody dimension - and incredibly to our way of thinking, some of the largest New York on ramps for Bitcoin access are outsourcing their custody and security to third parties.

Overall, we don't think this concern is valid unless you want to directly own Bitcoin and hold your own keys in which case you do need to ensure leading edge cybersecurity for your assets.

Concern 2: Bitcoin is too expensive now (31.3%)
This is a perennial fear for investors. No one wants to buy the last tulip bulb, at the highest ever price paid for a Liliaceae. It is why most people did not buy Amazon in any of the years during which its share price was going through a power curve. Each period, an investor would look at the last year's appreciation and argue themselves out of investing. "Amazon just went up xx%, it surely won't do that again. I can't justify this price based upon the intrinsic value." It is a common refrain, and there is some truth to the notion that nothing compounds geometrically for ever. Perhaps Bitcoin is already at its peak value? 

It is a truism that beauty is in the eye of the beholder. For us, when we look at this chart of Bitcoin's annual appreciation, we can't help but see a beautiful pattern. When the world's fiat currencies are being printed in the trillions, they must be going down in value. In that context, scarce assets can only be relatively more valuable. So while we fear that Bitcoin will stop appreciating at these historical rates, we still greatly value its scarcity in a world where most monies are not. It seems to us that a small allocation (2 to 5%) might make sense since while you can lose 100% of 2 to 5% you might also see that 2 to 5% appreciate at rates like those in this chart. The asymmetry of returns is spectacular. What is your view?

Concern 3: Bitcoin is too volatile (25.0%)
Yes, Bitcoin is volatile. You can see the history by clicking here. It is declining over time as Bitcoin becomes more widely owned and traded, but it is still significant.

While traders care a great deal about volatility (and many of them need it for their trading strategies), we lean towards the view that short term volatility is not very relevant to long term investors who have the resources to avoid needing to dump assets in downturns. Which means most family offices for example. If you are going to buy some Bitcoin and HODL it for the long term, why does short term volatility matter at all? Multigenerational wealth is not impacted by daily or weekly volatility in speculative markets. However, this one is clearly a real and legitimate concern for those of you who worry more about the risk than the return (Bitcoin clearly far outperforms most other asset classes on a risk adjusted basis).

Concern 4: Bitcoin is not issued by a government, so it is not trustworthy (21.9%)
Implicit in the question is some faulty logic. Assets issued by governments are not always trustworthy either and many governments are not trustworthy when it comes to monetary policy. Ask the 4 billion or more people around the world who live in countries where their fiat currencies are hyperinflating, subject to expropriation, and are generally so untrustworthy that their citizens live in fear of waking up on a Monday to find out that their Friday night wealth has vanished over the weekend. While most of our readers are not citizens of countries like Argentina, Sudan, Venezuela and Zimbabwe we still think this observation is important in the context of Bitcoin. The value of Bitcoin is going to be driven by it's utility including to those 4 billion people. They need a sovereignless, distributed, portable money that can secure their family wealth in a world of untrustworthy governance. The VAST majority of those people have not yet discovered Bitcoin but they are going to.

For those of us in the EU, Japan, Switzerland, UK, US, and so on, we trust our governments much more and may feel that a money that is not backed by a central bank is untrustworthy. However, we have never before experienced the printing of fiat money on the scale of the last few months. Given the trillions of units of currency being printed, and the close to zero interest rates on cash (or negative at some banks i.e. in Switzerland) the jury is out on whether our trust is well placed. Perhaps a straddle on both sides of this debate might be a sound strategy.

Concern 5: Bitcoin is owned by a few people and this is a way for them to get rich (18.8%)
This is an interesting one. In the case of Bitcoin, there is a lot of false information that circulates on this issue of the concentration of ownership. Foremost among them is a bad analysis in which people take a look at the addresses owning Bitcoin and do simple concentration analyses on them such as in the chart that follows. Ten years ago, that was a fair way to assess Bitcoin ownership concentration. Today it is not. Binance, Coinbase, Greyscale, Huobi, Microstrategy, PayPal, Tesla and so on consolidate large Bitcoin holdings, and sometimes millions of investors or shareholders into one or a small number of addresses on the Bitcoin blockchain so the concentration analyses no longer hold water. Click here to see a list of Bitcoin treasuries and you will appreciate that addresses are no longer a good way to analyze Bitcoin ownership.

Meanwhile, we should also ask whether concentrated ownership makes an asset less attractive to an investor? Blackrock (BGI) where Alison was CFO is the world's largest asset manager and represents double digit ownership of most public equities. Furthermore, the world's most attractive public equities of the last few decades have been technology stocks and their ownership has been quite concentrated too. It is the reason why Elon Musk, Jeff Bezos, Bill Gates, Larry Ellison, Larry Page, Jack Ma, Sergey Brin, Mark Zuckerberg, and so on are today the world's wealthiest people. Do we run away from those assets because of this ownership concentration? Let's not even begin to consider gold, rare earths or diamonds where a few players control the world's mines, refineries and inventory. We think concentration does not mean unattractive per se.

It is true that a few cypherpunks, including Satoshi Nakamoto, own a great deal of Bitcoin. Why is that of concern to us? They invented it, just like our technology titans invented the world's most valuable companies. We think if you checked this box, you should look again. Is it the green monster (envy) that makes you unhappy that a few whales own lots of Bitcoin? It doesn't seem to be an issue that holds back most investors in most other asset classes.

Concern 6: Bitcoin is being taken over by Wall Street greed (18.8%)
We are interested why people checked this issue? Is it that you don't like Wall Street? Or perhaps you believe Bitcoin represents a worthwhile investment because of its decentralized and sovereignless design and you fear that those benefits are going to be lost? Or maybe you think that you don't have a trading edge and that once Wall Street gets into the game, you will be the roadkill? Perhaps there are other reasons why you might have checked this concern as fully one in five of you did. For us, we respect the world's financial centers and believe that they bring great expertise, capital, liquidity and trading acumen to asset classes and that this makes those asset classes MORE not LESS investable. As we watch institution after institution, from Blackrock to BNY Mellon and from Deutsche Bank to Mass Mutual declare that they are now investing into Bitcoin, we see that as good news and reason to be a holder - not a reason to dump Bitcoin. Are we missing something here?

Concern 7: Bitcoin is not scarce - you can subdivide it endlessly (15.6%)
Bitcoin is designed to be a scarce asset with a maximum of 21 million Bitcoins that can ever be minted. The monetary policy is hardwired and there is no chance of additional units being minted. It is true that bitcoin is in turn subdivided into small fractions called Satoshi's - there are 100 million Satoshi in 1 Bitcoin. But to keep it simple, you can subdivide a pizza as many times as you want, but there is still only one pizza.

To be fair, there is one concern that might have been a reason for checking this box. That is not the issue of subdivision, but rather the issue of forking. Bitcoin is open source software, and anyone can take the code, fork it, and potentially improve upon it. This is essentially what Bitcoin Cash or Bitcoin SV were all about. Should that concern you? Yes potentially. Just like when we were investors in Inktomi - the world's best search platform driving Ask Jeeves, Alta Vista, Yahoo Search etc. - only to wake up one day to find out that Google had made our technology obsolescent. So, conceivably, a new Bitcoin fork could appear that might make the current Bitcoin much less attractive. Assuming the hundreds of millions of Bitcoin holders all decided to throw in the towel and embrace the new protocol, this could lead to the demise of today's Bitcoin. However, that's like asking all the gold bugs to agree that platinum is the better precious metal (which of course it is - it is stronger, denser, rarer and has more utility of use cases) and dump the former to buy the latter.

We could keep going. However, we hope this has gone some way to demystify Bitcoin for you.

There are more concerns that you voted onto the list. We will schedule a webinar to go into more detail, so watch for that.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

Fund Performance & Access

We are holding the final closing of Blockchain Coinvestors at the end of March. We are limited to 99 investors and currently have over 70 with another 15 in process. We may have to turn people away so please email us at your earliest convenience at ir@fifthera.com if you are interested. Existing investors may increase their commitment if they would like to by sending an email to the same address - we will provide an increase in commitment letter in return.

Blockchain Coinvestors Funds are continuing to generate strong returns. To date, over 80% of the funds we are invested in are performing as top quartile funds against the Cambridge Associates benchmark. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

Blockchain Coinvestors funds are open to Accredited Investors and can take investments via IRAs. We support several providers, including Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Our coinvestment program provides opportunities to invest into the follow-on rounds of the most promising of our combined portfolio of 250 and more blockchain companies.

Blockchain Coinvestors AngelList - Our syndicate on AngelList providing access to rounds that we are investing in. Blockchain, Crypto and Fintech. Click here to go to our Syndicate page on AngelList.

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@fifthera.com.

Register Now For Our Upcoming Webinars

Blockchain Coinvestors has a simple goal - provide the broadest coverage of the fastest growing blockchain companies and emerging unicorns. This webinar presents our investment strategy.

Blockchain Coinvestors Investment Thesis - March 1st, 7:00am PST

Blockchain Coinvestors Investment Thesis - March 1st, 12:00pm PST

Do you know the primary Blockchain VCs? Let us educate you about the VCs that are most closely connected to the blockchain ecosystem. 

Meet the Blockchain VCs - March 15th, 7:00am PST

Meet the Blockchain VCs - March 15th, 12:00pm PST

Our webinar library can now be found at www.fifthera.com/webinars .

Appearances in 2020

We had the honor of presenting at multiple online conferences this year. A selection follows. Click links to listen to any you may have missed:

1. Inspired Insider: Early-stage investing hack and emerging opportunities

2. Digital Future: Why Digital Monies Change Everything for Business on VoiceAmerica podcast.

3. On The Brink: How to make sense of Digital Monies and Assets

We thank you once again for your support, and we hope that in this challenging time you and your family and loved ones are staying safe and healthy. 

Best wishes,

Alison Davis
Matthew C. Le Merle