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Framework for Crypto Analysis

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Framework for Crypto Analysis

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Framework for Crypto Analysis

  1. 1. Framework for Crypto Asset Analysis With Z-Cash + 0x Protocol Case Studies
  2. 2. Context A crypto asset is any asset where questions of ownership are settled via a blockchain based ledger A blockchain based ledger is a secure distributed database There are two main types of crypto assets today: •Type 1 is a blockchain’s native currency. •“Protocol Coins” • Examples include BTC, ETH, ZEC, and XRP. •Type 2 are application specific tokens that exist on top of different blockchains • “AppCoins” •Examples include StorJ, Steem, and Argur
  3. 3. Evaluating a Crypto Project • Market • What are they building? • What problem is being solved? Is it useful?   • Implementation • Is the underlying technology feasible? • What is the quality of the project’s members and its governance? • What is their level of commitment and true motivation? • Value Creation • What security or instrument are you purchasing? • What is the expected upside potential? • How do you harvest your investment outcome in the future? • Competitive Advantage? • What advantages does it have against potential competitors targeting the same market or a future fork? Similar to Evaluating a Software Startup
  4. 4. Token Specific Questions • What type of token Is It? • What function or utility does it perform? • Is it absolutely necessary? • Can you describe a viable economic model behind it? • How does value flow from the outside of the ecosystem to the inside? (Liquidity) Economics Regulatory • In what jurisdiction is the company incorporated? • What legal structures are being disclosed? • What is the token distribution structure? • How Is the token a utility to the operations of the business? • When does the token become available? (Should be after the product is launched) Source: https://coincenter.org/entry/could-your-decentralized-token-project-run-afoul-of-securities-laws
  5. 5. Potential Token Features Type Examples Right Ownership, Product Access, Voting Value Exchange Work Rewards, Buying, Selling Toll Running Smart Contracts, Usage Fees Function Joining a Network, Connecting with Users Currency Payment Unit, Transaction Unit Earnings Profit Sharing, Inflation Benefits Source: http://startupmanagement.org/2017/06/10/tokenomics-a-business-guide-to-token-usage-utility-and-value/
  6. 6. Market Overview Zcash is a cryptocurrency that offers privacy and selective transparency of transactions. Zcash payments are published on a public blockchain, but the sender, recipient, and amount of a transaction may remain private. Zcash builds on the existing work from the Bitcoin core team to enable privacy preserving transaction data using zero-knowledge proofs (called zk-SNARKs.) Zcash is optimal for any transactions where financial privacy is desired (most.) Competing privacy centric crypto assets include Monero + Dash. Zcash
  7. 7. Implementation Zcash Zero-knowledge proofs help make Zcash “untraceable” by creating private transactions on the public Zcash blockchain. Transactions on Zcash cryptographically obscure the addresses of the sender and recipient, as well as the value one address sends to another. The cryptography behind Zcash is both new and highly experimental. The Zcash protocol also needs a special trusted setup phase for technical reasons. More detail on set-up ceremony + potential technical challenges: https://petertodd.org/2016/cypherpunk-desert-bus-zcash-trusted- setup-ceremony#zk-snarks
  8. 8. Team Zcash The Zcash team includes the scientists who invented the Zerocash protocol as well as engineers with a specialized track record in open privacy technology. Zooko Wilcox is Founder of Zcash. He is recognized for his work on DigiCash, Mojo Nation, and Tahoe-LAFS. In addition to the core team, Zcash counts many leaders in the Bitcoin, Ethereum, and academic communities as investors and advisors. More detail on the team: https://z.cash/team.html
  9. 9. Financing History Zcash Zcash raised $1 million in their seed round. In exchange for $1 million, investors in the seed round received 10.15% of equity in the Zcash Electric Coin Company + 214,000 ZEC over the first year (~$4.66 per ZEC.) Later, Zcash raised an additional $2 million in their second financing round. In exchange for $2 million, investors in this round received 6.25% of equity in the Zcash Electric Coin Company + 132,000 ZEC over the first year (~$15.15 per ZEC.) Investors in the company include Naval, Pantera Capital, Digital Currency Group, Fenbushi Capital, Evolve VC, and others. At the current price of ZEC ($388.18) - the holding value of the ZEC in the seed round is ~$83m and the current holding value of the ZEC in the second financing round is ~$51m.
  10. 10. Value Accretion Zcash Zcash's supply model has a fixed and known issuance model that is cut in half approximately every four years (with a maximum of 21,000,000 units.) As the number of transactions on the network increase, ZEC will continue to increase in value.
  11. 11. Asset Performance Zcash
  12. 12. Market Overview 0x is an open protocol that facilitates low friction peer-to-peer exchange of tokens on the Ethereum blockchain. The protocol is intended to serve as an open standard and common building block, driving interoperability among decentralized applications that incorporate exchange functionality. 0x is not a decentralized exchange, it is a protocol for exchange. Interoperability via 0x should dramatically better enable liquid markets for application tokens increasing the total value of the Ethereum ecosystem. Competition from decentralized exchanges include Ether Delta, Oasis Dex, and Shapeshift. More traditional centralized exchanges include Gemini, Kraken and GDAX (Coinbase.) Pronounced: “Zero-Ex” 0x Protocol
  13. 13. Implementation 0x Protocol 0x enables interoperability by pulling exchange functionality from the application layer into the protocol layer. Trades are executed by a system of Ethereum smart contracts that are publicly accessible, free to use and that any decentralized application (dApp) can hook into. DApps built on top of the protocol can access public liquidity pools or create their own liquidity pool and charge transaction fees on the resulting volume. The protocol does not impose costs on its users or arbitrarily extract value from one group of users to benefit another. Decentralized governance is used to continuously and securely integrate updates into the base protocol without disrupting dApps or end users.
  14. 14. Team 0x Protocol 0x Protocol was started by Will Warren and Amir Bandeali. Will previously worked as a graduate research assistant at Los Alamos National Laboratory conducting applied physics research. Amir previously worked in fixed income trading at DRW. The team is complimented by a group of advisors from other crypto projects + companies.
  15. 15. Financing History 0x Protocol Polychain Capital, Blockchain Capital, Pantera Capital, Jen Advisors and FBG Capital participated in the initial investment round for the protocol project. In exchange for their initial investment in the project, each groups receives a 30% discount on its future tokens. Native Protocol Token is ZRC.
  16. 16. Value Accretion 0x Protocol The total supply of ZRX will be fixed at 100,000,000. Their value will be proportional to their utility within the system and grow as the amount of trading activity increases over time. There is currently no for-profit entity for the 0x Protocol. Founders will hold 10% of the total tokens + generate a return from participating in the growth of value in the underlying token protocol. The 0x Protocol Foundation (a nonprofit organization based in the Swiss Canton of Zug) will hold 18% of the total tokens to fund future development.
  17. 17. 0x Protocol 0x is a relatively new project. At launch, Augur, Aragon, Maker, and Melonport announced they would be integrating the protocol into their application tokens. The project is currently planning to launch the tokens via ICO in late Q3 or early Q4 of 2017. Performance
  18. 18. Example Analysis of Other Tokens • Kibo - Global Lottery Platform • https://medium.com/@danielzakrisson/ethereum-evaluation-kibo-ico-fd5f9a3fcd73 • SingularDTV - Blockchain Entertainment Studio • https://medium.com/@danielzakrisson/the-crowdsale-analyst-singulardtv-three-projects-in- one-713e819aec16 • Golem - Decentralized Super Computer • https://medium.com/@danielzakrisson/the-crowdsale-analyst-preliminary-thoughts-9c764a13a9d2 • Smith & Crown - Crypto Asset Investment Research • https://www.smithandcrown.com/research-search/

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