On Tuesday, 8 March 2016, Bitcoin was trading at $412.07 and Ethereum was hot on its heels at $10.86. The KR1 team had just inked a deal to take a dormant publicly listed former Romanian property investment company and turn it into a publicly listed crypto fund. Every single person involved in the process, whether legal, administration or fundraising (except for the KR1 founding team obviously) had never even heard the word ‘cryptocurrency’ or ‘Ethereum’ before in their lives and loosely associated ‘Bitcoin’ with some shady things on the dark web.
Investors look for trends in the market to build up a picture of what may come down the line. Bull markets, short squeezes, ‘FUD’, accumulation, precipitous sell offs, and lost wallets are all part of the crypto market curriculum, but to get a strong sense of the macro trend, it’s useful to understand how far the digital asset space has come.
KR1 is uniquely placed to provide a window into crypto’s early days because when we inked the incorporation documents for the company, much of the great rise of crypto to global attention was yet to get underway. Our aim in starting the company back in 2016 was to allow investors exposure to the crypto economy via a publicly listed share. In essence, to create a basket of early-stage digital assets, oftentimes via opportunities unavailable for most people, that would track the movements of the emerging innovating crypto ecosystem. We didn’t at the time fully realise we’d just hitched our wagon to the most insane roller coaster ride ever devised.
There had been just two ‘Initial Coin Offerings’ (ICO) when we started to build our digital asset portfolio and we were busy setting up banking, internal ‘storage’ processes and other such things a crypto fund needed.
The infrastructure was being built around us and with us. We were an emerging investment company in an emerging space, relying on the experience the team had gained having lived through the early era of Bitcoin and trading many of its clones like Litecoin and other cryptocurrencies.
Our first investment into an ICO could best be described as ‘tentatively dipping a toe’ for we went big and put in the princely sum of £5,000 into the ‘SingularityDTV’ token sale ‘smart contract’. Bearing in mind KR1 got started with only around £200,000 of funds raised in the early days, investing this felt like a fairly good sum to start with. Shortly after, the ‘Golem’ ICO came along and we went a little bigger to acquire Golem tokens at one cent via the ‘smart contract’ and then bought another chunk at the same price a few weeks later when the Golem tokens started trading on a then-new Chinese exchange ‘Yunbi’ (which by now have already shut their doors again due to government regulations in China).
Golem’s token price began to rise and KR1 loosened up and started looking to place a bigger investment, already bolstered by how the rest of the portfolio (Ethereum, Augur and SingularDTV) was performing. We skipped a few projects coming to market (back then it was only a few a month) and finally settled on the Melon Protocol, spearheaded by Melonport, to really start investing in size. The founder Mona El Isa painted a compelling vision of a trust-less one-click hedge fund on the blockchain, which perfectly utilizes the innovation behind Ethereum and Bitcoin’s breakthroughs, and we wrote our first six-digit cheque. After anxiously awaiting the Melon Protocol public sale for three weeks, the Melon token listed on exchanges at a high double digit multiple of the price we negotiated and we were well and truly beginning to fly.
There were so many highlights from 2017: A bleary-eyed 4.00am Cosmos ICO session placing a six-digit cheque into it that later returned millions and validated the company’s strategy for some time to come; a fairly nail biting last second entry into the Qtum ICO to the tune of some Bitcoins, which later returned KR1 many multiples, and seed funding FunFair over a Thai lunch, after weeks of digging into their break-through tech in the Ethereum space, writing one of our biggest cheques at that time.
A testament to our due diligence and investment processes are not just the past investment successes but also many of the ‘bullets’ we dodged on the way. These include never having lost any funds in any of the multiple crypto exchange hacks or wallets and also not participating in ICOs like the Telegram token sale, the EOS sale or projects that struggled massively with regulatory concerns like Kik.
Over the years, KR1 has funded a hugely influential number of projects and become one of the most active investors in ‘Decentralised Finance’ (DeFi) in terms of projects we have supported including Argent, Connext, Nexus Mutual, the Melon Protocol, Acala or Union to name a few.
A big strategic decision that informed KR1’s early investments in Cosmos, Polkadot and eventually Dfinity was the notion of ‘Proof-of-Stake’ networks and the associated ‘staking’ activities. ‘Proof-of-Stake’ networks replace the enormous electrical energy and computer hardware required in ‘Proof-of-Work’ networks, such as Bitcoin, with a more sophisticated digital algorithm that instead of wasting energy only requires a value-bearing ‘deposit’ to use as collateral to ensure network participants behave truthfully. Participants putting up this ‘deposit’ are being rewarded for ‘validating’ the network and earn an income on the collateral they provide.
KR1’s portfolio composition today and largest investments made thus far represent exactly that reasoning, with Cosmos being KR1’s largest holding and placing $1,000,000 in Polkadot’s earliest funding round, our largest investment to date. Branching out from being a highly successful early stage investment company into additionally becoming a revenue-generating company is the path we’re on as of right now. By generating yields from our portfolio assets, KR1 could potentially offset some company costs or add to our available pool of investment capital to support more and more promising projects.
Today the crypto landscape has changed immeasurably from when we started and we keep pushing the boundaries of this technology as well. Some of the largest traditional finance macro traders and family offices have woken up to allow their portfolios to hold Bitcoin in a ‘digital gold’ narrative, though they are still completely missing the big picture of the innovation being built out in real time in the crypto space. The crypto market has bounced back strongly from the global liquidity sell-off caused by Covid-19, benefiting heavily from the ‘brrrrr’ free fiat money printing headlines all over the globe. Ethereum has found a strong product market fit with the explosion of ‘DeFi’ related products and is fast becoming an entirely new financial ecosystem. The ICO world has evolved and we’re witnessing new models of token distributions, a strong contender currently being ‘Lockdrops’. In effect, a ‘Lockdrop’ allows prospective token holders to lock up some collateral for a fixed period of time (i.e. facing opportunity costs and illiquidity for that time) in return for ‘free’ lockdrop tokens from the new network.
In the meantime, we’re keeping our eyes on the emerging Polkadot and Cosmos ecosystems, which are projects that look to take the space forward on a new trajectory, one of blockchain interoperability, shared security and scaling. If these two protocols and ecosystems mount a credible challenge to Ethereum’s dominant position, we could be on the verge of a new era of innovation and growth, which would unlock opportunities that could remind everyone of the crazy days just a couple years ago.
George McDonaugh, Managing Director and Co-Founder of KR1 plc
George has been involved in the industry since 2011 and is also a founding member of the Multichain Asset Managers Association that represents ecosystem players interested in working towards a new vision for asset management using blockchain technology. George is a regular speaker and advocate for the use of blockchain technology to traditional investors and institutions.
Keld van Schreven, Managing Director and Co-Founder of KR1 plc
Keld has been involved in the tech industry since 1995 and Bitcoin since 2013. Previously, he has started several tech start-ups including SmartTrade App, a leading UK mobile payment app. Keld is true advocate for the use of blockchain technology and a regular speaker at industry events, including Techcrunch and MoneyX.
About KR1 plc
KR1 is a leading digital asset investment company supporting early-stage decentralised and open-source blockchain projects. Founded in 2016 and publicly traded in London (NEX:KR1), KR1 has built a notable reputation for generating significant returns by investing in many key projects that are designed to power the decentralised platforms and protocols that are emerging to form new internet infrastructures.
This communication is for informational purposes only and should not be viewed as any form of recommendation as to a particular course of action or as investment advice. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, in particular KR1 shares, or as an official confirmation of any transaction. Opinions, estimates and assumptions expressed herein are made as of the date of this communication and are subject to change without notice. This communication has been prepared based upon information, including market prices, data and other information, believed to be reliable; however, KR1 does not warrant its completeness or accuracy. All market prices and market data contained in or attached to this communication are indicative and subject to change without notice.