“Right now, pricing of these assets is effectively a beauty contest based primarily on branding. But predicting the whims of the crowd is notoriously difficult. Consequently, it makes more sense to buy things with strong fundamentals such that, as the scalability and on-ramp barriers are lifted, they become so good that the market can no longer ignore them.”

Read entire section entitled Summary

You can read “A Crypto Thesis” in its entirety here.

MIT, Stanford, U.C. Berkeley Academics Form “Distributed Technology Research” (DTR)

Academics from MIT, Stanford, and U.C. Berkeley have joined to form DTR (Distributed Technology Research) — a Pantera-backed non-profit focused on developing decentralized exchanges that can process thousands of transactions per second. On January 17, DTR announced its first initiative, virtual currency Unit-e. Joey Krug had this to say about Pantera’s investment in DTR:

“We are on the cusp of something where if this doesn’t scale relatively soon, it may be relegated to ideas that were nice but didn’t work in practice: more like 3D printing than the internet.’’

More on this recent Pantera ICO Fund investment on Bloomberg.

VFII PORTFOLIO ANNOUNCEMENT :: COINS.PH ACQUIRED FOR $95 MILLION

On January 18, Pantera Venture Fund II portfolio company Coins.ph announced that it was acquired by Go-Jek, Southeast Asia’s leading ride-hailing and payments company for $95 million in one of the largest tech acquisitions in Philippine history.

Pantera was one of the largest investors in the seed round in 2014 and also participated in their Series A round. Founded in 2014, Coins.ph is the market-leading mobile wallet in the Philippines. The product provides a low-cost blockchain-based remittance solution, peer-to-peer money transfer into the Philippines ($26 billion market, 3rd largest in the world), and a variety of other financial services to five million users. When people say there’s no killer use case, I like to point out that Coins.ph already has one out of every ten adults in the country. Coins.ph was the first company in Southeast Asia to be regulated as a Virtual Currency Exchange and e-wallet and was also the first virtual currency provider in the Philippines to be licensed by the Bangko Sentral ng Pilipinas (BSP) with a Virtual Currency Exchange license.

CEO Ron Hose was a founding partner at Innovation Endeavors, an early stage venture fund backed by Eric Schmidt. He was also the co-founder of TokBox, a video conferencing company backed by Sequoia Capital, Bain Capital, and Stanford University and later acquired by Telefonica.

For further details on the acquisition of Coins.ph, please read the coverage in TechCrunch.

VFIII INVESTMENT :: $4.5 MILLION PANTERA-LED SEED ROUND IN STAKED

Energy-intensive mining isn’t sustainable if blockchains do become the payment rail of the world. According to Professor Ed Felten of Princeton, Bitcoin consumes 0.2% of world electricity production. Bitcoin energy consumption is a function of price. If the price of bitcoin goes up 10x, miners will rationally consume 10x as much electricity. 2% of world production is conceivable. However, another 10x from there is riots in the streets type stuff.

We believe that blockchains will move away from energy-intensive mining and that many will use proof-of-stake. Proof of stake is like the securities markets — one share, one vote. Staking your tokens is cumbersome so there will emerge companies that provide staking as a service — in the same way proxy companies vote your shares. Staked is the current leader in this nascent space.

I’ve known the CTO for fifteen years since his first company — PlanetTran — a car service using Prius and at the time cutting edge booking/routing technology — like a primordial Uber.

Pantera led the recently announced $4.5 million seed round in Staked — a platform for staking and earning returns on tokens that are based on Proof of Stake consensus algorithms. Staked provides institutional holders of digital currencies with secure infrastructure enabling them to compound their crypto holdings through staking and lending. Staked supports staking and lending across six proof-of-stake currencies, which have gained in popularity because they use dramatically less electricity than Bitcoin’s Proof of work security model. According to Staked’s Founder and CEO Tim Ogilvie:

“We help institutional investors in digital currencies earn their staking rewards.”

Investors in proof-of-stake currencies are paid block rewards by “staking” their assets and running the server software that secures the blockchain. This participation yields 5–100% annually in additional currency but requires secure and highly available servers. Staked provides secure infrastructure for staking and currently supports six cryptocurrencies including Tezos, Dash, Decred, Livepeer, Factom, and EOS. Customers include top-tier crypto funds, venture capital funds, family offices, and hedge funds. Staked also offers a white-labeled staking platform that enables exchanges, custodians, and wallets to offer staking rewards to their customers without an expensive and complex technology build out. Staked will add support for other passive opportunities such as lending in Q1 2019 and expects to support staking across 20 crypto assets by the end of this year.

“Investors have a growing number options to compound their crypto assets, and Staked makes it easy to understand and execute on all of the available opportunities.”

Pantera initiated discussions with Staked as a potential customer before deciding to invest in the company. Pantera’s Paul Veradittakit, who will be joining Staked’s board of directors, had this to say about the investment:

“Pantera invests in many leading proof-of-stake projects, so we knew we needed a staking solution. We liked Staked because of the experienced team, focus on institutions, and broader vision around generating passive yield for investors.”

Staked was founded in April 2018 by three founders with long histories building and running successful internet businesses. CEO Tim Ogilvie previously founded the Y-Combinator-backed startup, Think Gaming, a SaaS data platform focused on mobile games, and prior to that Tim was the CEO and founder of AdBuyer.com, an early demand side platform (sold to Mediaocean). CTO Seth Riney, architected and implemented large-scale big data pipelines and developed systems on AWS at Paytronix. After graduating from Yale University with a B.S. in Astronomy and Physics, Seth spent considerable time consulting on cloud security and compliance in the Financial Services/Securities industry. COO Jonathan Marcus was the founder and CEO of Goodsie and Flavors.me (sold to Moo). Before founding Goodsie, Jonathan grew a small team of two to sixteen in his role as the VP/General Manager at Vimeo. Jonathan also co-founded Pronto (sold to IAC/InterActiveCorp), and held a variety of incubation roles at IAC/InterActivecorp.

Read more about the Pantera-led Seed Round in Staked at The Block.

PANTERA PORTFOLIO UPDATES

VFII :: Abra Brings Global Access To US Stocks (By Paul Veradittakit)

On February 6, VFII portfolio company, Abra, announced a new way for users to gain investment exposure to US stocks and ETFs using its bitcoin- and smart-contract-powered platform. Here’s a quick run-down of how it works and why it may soon outcompete other popular online trading platforms.

Essentially, Abra has taken its existing platform and extended it to support assets available on the NASDAQ, starting with the top 100 stocks and ETF’s.

Once users invest capital into the platform, they can choose to “invest” in one of Abra’s 100 stock/ETF offerings, which represents stock investment exposure in corporations like Facebook, Apple, Amazon, and Alphabet/Google. As soon as a user adds money to the Abra app, the capital is immediately transformed to bitcoin. Then, using Abra’s crypto-collateralized contract, Abra keeps the notional value of that bitcoin investment tied to the current value of the stock. This is done with what’s called a multisig bitcoin address, where Abra and the user sign a contract to peg the amount of cryptocurrency to the value of the asset. Abra users then hold an asset that tracks the exact price and volatility of the given stock.

While users don’t actually hold any shares in the company they still receive dividend payments because of the means by which Abra hedges itself on the contracts — super cool. The platform can also support short selling which Abra hopes to offer in the future.

Anyone interested can read the coverage of this announcement in Forbes.

RECENT SPEAKING EXCERPTS

Money20/20 :: Wall Street 2.0 — Will Blockchain Revolutionize Finance?

Dan participated in Money20/20 in Las Vegas on whether blockchain technology will revolutionize finance in the years to come. These are some highlights from the panel:

Q. Can you spend a couple minutes on domestic and cross-border payments?

Blockchain is very good at some things and probably not good at others. There are some things that aren’t broken like DTCC which transacts 115 million trades a day — 6,300 per second. The thing that is broken is cross-border money movement. It’s very expensive. In most countries, even very primitive countries, you can do a domestic transaction pretty much free and pretty much real-time. As soon as you cross the border, it slows way down and gets really expensive. With blockchain, you can send the money essentially instantaneously, and with most blockchains essentially free to anyone, anywhere on earth. That’s really going to be powerful both for huge financial use cases, but I think it’s going to have its biggest impact in the developing world where you have so many migrants working in foreign countries.

Q. What is one widely held belief or opinion in the blockchain crypto space that you disagree with or you think is wrong?

For me, the biggest misconception is that equity and tokens are similar financing vehicles, and a company could do one or the other. In my opinion, they’re really antithetical. A project should be either cooperatively owned with a very useful token or it should be a venture-backed company that’s trying to extract money out of its customer base somehow. Those are really, really opposite.

The entire Money20/20 panel can be viewed here.

VENTURE FUNDS :: REALIZED VALUE

Pantera Venture Fund I has returned 4.5x back to investors in five years, with 3.6x of unrealized value remaining — creating 8.1x of total value on committed capital.

As we now have a new investment option for LPs wishing to recycling their proceeds, Venture Fund II is begging to return capital to LPs. The current value of Venture Fund II is $65mm.

VENTURE FUND III :: FINAL CLOSING

We are pleased to announce that Pantera Venture Fund III will have its final close on March 28th.

The Fund has invested $30 million into nine portfolio companies. Pantera was joined by BCG and Microsoft as a founding investor in Bakkt, the newly formed subsidiary of the parent of the New York Stock Exchange (Intercontinental Exchange — NYSE: ICE). Pantera led the funding rounds in five deals, including Blockfolio and, most recently, Staked. Our investments in StarkWare and Synthetic Minds have also been announced.

Co-Investment Class

As with our previous venture funds, we are offering a Co-Investment Class. Investors who commit $5mm or more will have co-investment rights to at least 10% of every deal.

Capital Calls

After closing, 35% of each limited partners’ capital commitment will be called. We anticipate calling the remaining committed capital in installments over the next two to three years.

New Investors

All new investors in VFIII will get pro rata exposure to the deals the fund has already invested in — at cost plus an 8% interest rate on the capital previously called.

Pro Rata Rights from VFI & VFII

It is likely that Venture Funds I and II will eventually have fully invested their follow-on reserves. At that point, the pro rata rights of the two previous funds will be granted to Venture Fund III. (VFII Co-Investment Class will continue to receive 10% of every deal.)

VFIII Conference Call

The investment team will hold the next (and last) Venture Fund III Conference Call on Tuesday, March 12, 2019 at 9:00am PDT / 17:00 CET. Please register here if you’d like to participate.

To review fundraising materials, including access to the data room where you will find financial, legal, portfolio company details, and due diligence materials on this fund and our two previous venture funds, please contact ir@panteracapital.com.

UPCOMING TRAVEL

Pantera partners will be traveling over the next months to discuss Venture Fund III and the blockchain disruption. We have organized group lunches in many cities, should you want to meet other investors who share your interest in blockchain. If you are interested in attending one of our group lunches, please fill out the form on this page and we will be in touch regarding availability.

Boston, February 21–22

Dallas, February 22 | including a Group Lunch at 12:30pm

Palo Alto, March 4, Group Lunch | 12pm

Seattle, March 4

Minneapolis/Milwaukee, March 5–6

Los Angeles, March 6

London, March 11

San Francisco, March 11, Group Lunch | 12pm

Boston, March 13

New York City, March 13–14, March 14 Group Lunch | 12pm

Denver, March 18

Salt Lake City, March 19–21

Boston, March 25–27

Chicago, April 8 | including a Group Lunch at 12pm

New York City, April 9–11

Miami, April 10–11, April 10 Group Lunch | 12pm

Washington D.C., April 12

Phoenix, April 29

Denver, April 30

Chicago, May 1–2

Toronto, May 7–8

If you are interested in a meeting, please contact Pantera’s Investor Relations team at +1–650–854–7000 or ir@panteracapital.com.

The future has arrived,

@Dan_Pantera

dan@panteracapital.com

@JoeyKrug

joey@panteracapital.com

“Put the alternative back in Alternatives”

PORTFOLIO ANNOUNCEMENTS

VFII :: Chronicled “Raises $16mm To Bring Blockchain To The Pharmaceutical Industry”

On January 15, Pantera Venture Fund II portfolio company, Chronicled, announced a $16 million Series A. Funds from this round will be used to support the pharmaceutical industry network and operational growth. Chronicled Co-Founder and Chairman Ryan Orr had this to say about the Series A:

“We are aware that the pharmaceutical industry has certain problems with regulations that are ripe for this technology platform. With the Series A funding, we are focusing on the pharmaceutical go-to-market. After a year or two, there could the possibility of applying this technology to other industries, but for the next 12–18 months we are focusing the company specifically on the pharmaceutical industry.”

Pantera initially invested in Chronicled in 2015 as part of the company’s Seed round. Founded in 2014, Chronicled is using blockchain technology to build enterprise tools for supply chain management.

For further details, please read coverage of the announcement in Forbes.

VFII :: Coinsuper Closes Pre-Series B

On January 8, Pantera Venture Fund II portfolio company, Coinsuper, closed its pre-Series B. Pantera invested in the Hong Kong-based crypto exchange in June 2018 as part of its Series A. Founded in October 2017, Coinsuper is one of the top crypto exchanges in the region; providing trading services for institutional investors, commercial institutions, and professional individual investors in many well-known cryptocurrencies.

In December, Coinsuper announced plans to add the Hong Kong Dollar (HKD) deposits on its exchange. Accepting transactions using fiat currencies, like HKD, means more people will have the opportunity to trade cryptocurrencies. For further details on Coinsuper’s plans to add HKD deposits, read Reuters.

VFIII Investment Update :: Bakkt’s First Acquisition

Venture Fund III portfolio company, Bakkt, recently announced their acquisition of certain assets of the Rosenthal Collins Group (RCG). RCG is an independent futures commission merchant with nearly 100 years of developing clients’ trust. The acquisition is aimed at enhancing Bakkt’s risk management and treasury operations with systems and expertise. In addition, the transaction will contribute to their regulatory, AML/KYC, and customer service operations.

Bakkt continues to build its operational infrastructure while the team awaits approval by the CFTC for the launch of their Bitcoin futures market. Despite the delays, due in part to the government shutdown, Bakkt is utilizing this time to ensure robust and efficient systems are in place as they look to launch the most trusted ecosystem for digital assets.

For further details, please read Bakkt’s announcement in Medium.

VFII :: ErisX Hires Execs From YouTube, Pico, and Barclays

Pantera VFII portfolio company, ErisX, recently hired former Barclays Executive, Robert Thrash, as Chief Operating Officer. Thrash is a derivatives executive with extensive experience across prime brokerage, execution services, and trading. Before joining ErisX, Thrash was at Barclays Investment Bank for 12 years, most recently as Managing Director and Global Head of Futures Execution Services and Clearing Platform Management. Thrash had this to say about his new role:

“Top performers from financial services and technology domains, alike, are attracted to the opportunity to build an exchange and clearing house from the ground up for a whole new asset class. Bringing on Robert means we have rounded out the executive team. This is someone who ran a global derivatives business and we couldn’t ask for someone better.”

Led by former Citigroup executive Thomas Chippas, ErisX is looking to attract traditional investors and traders to its market, which it says will be regulated by the CFTC. ErisX believes hiring a team of talented leadership will ensure the firm continues to attract top talent as they prepare to launch the platform.

“ErisX has assembled an impressive team of experts to build the most robust, secure and regulated digital asset platform. Leveraging intermediary relationships and their diverse group of investors, ErisX will help both institutional and individual participants access these markets.”

John Denza, former Head of U.S. sales at Pico Quantitative Trading, will be joining ErisX as its business development executive. And Arnold Connell, formerly at Google and a leading executive behind the launch of YouTubeTV, will be Head of Infrastructure.

ErisX is currently working with the CFTC for approval of its application to operate a futures exchange. While the recent government shutdown in the U.S. impacted the roll-out of a number of financial-products, Chippas said the Q2 deadline for the launch of its spot market is still on track, saying, “I am very pleased at the speed we are moving at”.

Anyone interested can read more about this announcement in Business Wire.

PORTFOLIO COMPANIES AND PROTOCOL TOKENS

FUND DOCUMENTS

If you would like to receive additional information on Pantera’s funds, including the Private Placement Memorandum, Limited Partnership Agreement, or Subscription Documents, please fill out the form on this page to begin the subscription process.

BLOCKCHAIN FUNDS

CONFERENCE CALLS :: ICO, DIGITAL ASSET, AND VENTURE FUNDS

ICO and Digital Asset Funds Conference Call

Tuesday, February 26, 2019 9:00am PST / 18:00 CET / 1:00am CST (Feb. 27th)

Please register (in advance) via this link:

https://zoom.us/webinar/register/WN_Fno1oUmtShSawQiKDKlQLQ

Meeting ID: 832–269–763

Venture Fund III Conference Call

Tuesday, March 12, 2019 9:00am PDT / 17:00 CET / 12:00am CST (Mar. 13th)

Please register (in advance) via this link:

https://zoom.us/webinar/register/WN_KWX6BSOTRvC7_6QRbsiYTQ

Meeting ID: 858–032–933

ICO and Digital Asset Funds Conference Call

Tuesday, April 2, 2019 9:00am PDT / 18:00 CEST / 12:00am CST (Apr. 3rd)

Please register (in advance) via this link:

https://zoom.us/webinar/register/WN_qYCri90iRWCvLQvLoEgS3A

Meeting ID: 557–030–322

PAST ICO, DIGITAL ASSET, AND VENTURE FUND CONFERENCE CALL RECORDINGS

Recordings of recent ICO, Digital Asset, and Venture Fund III conference calls are available on this page.

RECENT PRESS

OPEN POSITIONS

Pantera is actively hiring for the following roles:

Controller

Venture Associates

Executive Assistant

Data Scientists

Engineers

If you have a passion for blockchain and want to work in Menlo Park, San Francisco, or New York, please follow this link to apply.

FURTHER READING

Some good material to start with on the development of blockchain technology and cryptocurrencies as speculative instruments:

Additional information on blockchain regulation:

PANTERA PUBLICATIONS

You can subscribe our publications, including the below, by visiting Pantera’s website or by e-mailing ir@panteracapital.com

Blockchain Letter

A monthly letter with our thoughts on significant market and ecosystem-related developments. Also, includes our thoughts on blockchain venture capital and news on our portfolio companies for accredited investors.

White Papers

Periodic, original blockchain research and academic papers.

“A Crypto Thesis” by Pantera Co-CIO Joey Krug [2019.01.08]. Joey’s insights on crypto and blockchain innovations what is still needed for user and institutional adoption. Informative and detailed primer for anyone considering investing in the space.

Follow us on Twitter and Medium for the latest blockchain news and insights. @PanteraCapital, @Dan_Pantera, @JoeyKrug, and @Veradittakit.