Wednesday, September 27th 2023

Coinsilium Group Ltd

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New to NFT’s? Then this article explains all and more and why Coinsilium down from 38p to 11p looks an intriguing opportunity 


“…Looking to get exposure to ‘non-fungible tokens’ – better known as NFTs? Coinsilium offers one way of gaining exposure – in every sense – to this fast moving market…”


With the listing of US cryptocurrency giant Coinbase and the emergence into public consciousness of ‘non-fungible tokens’ – better known as NFTs – the decentralised finance sector continues to evolve more rapidly than most of us can keep up with. We look at the confusing but fascinating world of NFTs, and a well established European blockchain company providing a possible entry point for the adventurous investor.

Coinsilium, located in Gibraltar, and trading on the London-based AQSE (AQSE:COIN) and New York-based OTCQB (OTCQB:CINGF) markets, became the first ever blockchain company to go public in 2015. The company is currently working with Singapore-based IOV Labs to promote and commercialise the RSK network, an emerging smart contract platform, and building an NFT development studio with Vietnam-based RedFOX Labs.

Although something of an industry veteran the company has achieved a higher profile over the past few months as the decentralised finance sector has continued its erratic growth. Although, in yet another sign of bitcoin’s notorious volatility, the currency plunged around 25% over the the last week although has recovered 10% over the weekend to trade around $52,000 at time of writing.

Coinbase goes public


In another landmark development for the industry Coinbase, the largest US cryptocurrency exchange, holding funds for some 56 million retail customers, listed on NASDAQ last week, becoming the first major crypto company to go public in the US. Described as today’s equivalent of the Netscape IPO that pushed the emerging world wide web to the forefront of the mainstream financial world’s consciousness back in the mid-90s, Coinbase has ridden the crypto-bull run, its earnings rising to $1.1bn on revenues of $1.8bn over the past year, a nine-fold increase. The company now serves more than a tenth of the total cryptocurrency market, overseeing $90bn in assets at the end of last year. More decentralised finance listings are in the pipeline, including Coinbase’s rival exchange Kraken, and Bakkt, an Intercontinental Exchange-backed provider of crypto wallets.

Coinbase listed amidst a remarkable surge of interest in NTFs, digital assets exchanged and held on the blockchain, certified and digitally stamped as unique. Last month a jpeg file comprised of digital sketches created by the contemporary artist Mike Winkelmann, also known as Beeple, made global headlines when it sold for $69.3m. The sale is the most extreme example yet of the rapidly appreciating market for digital artwork sold through the NFT framework.

Understanding NFTs


Understanding Coinsilium means understanding NFTs and their prospective markets, so here’s a brief primer. An NFT is a digital asset that can exchanged on a public blockchain, like bitcoin. But whereas ‘fungible’ tokens like bitcoin are built so that each individual token, or a fraction of it, is equivalent to the next, each NFT is created with a unique set of characteristics or identifying information that differentiates it from others, making it ‘non-fungible’. Digital tokens function as certificates of ownership for their respective assets, just like those of traditional equities or government bonds. Content creators can specify the quantities of each NFT produced, thereby creating a digital asset with inherent built-in scarcity.

Though the Beeple sale is by far the best known NFT transaction, the framework has been most commonly used so far for the exchange of sports memorabilia. NBA Top Shot, the licensed NFT platform for the US professional basketball league, launched in beta in October and has since logged more than $347m in transactions, an encrypted 12-second clip of the basketball star LeBron James recently selling for $208,000.

Other celebrities have been using the Watafan exchange to sell digital trading cards called ‘watacards’ that record significant moments in their lives. Each watacard is cryptographically signed by the celebrities from their personal wallet on the blockchain to prove ownership. Twitter founder Jack Dorsey, for example, sold the NFT of his first tweet (‘just setting up my twttr’) for $2.9m.

NFTs have quickly become as controversial as bitcoin. For many commentators, the concept of ownership the tokens present is illusory, in the words of one the recent flurry of exchanges little more than a lockdown fad, ‘another minor speculative mania driven by free money meeting free time’. Advocates maintain that owning an NFT digital artwork of which copies can be made is the same as owning a Picasso of which prints can be made. But sceptics argue the painting is clearly an original, a physical object created with specific materials in a particular time and place, whereas digital files are identical. Others note that an NFT does not identify an original item, or even a specific copy: it just tells you that the copy you purchased has the same data as the file from which the copy was originally generated. At the end of the day you don’t own something unique: you just own an NFT that simply asserts its exclusivity.

A useful investor FAQ published earlier this month presents Coinsilium’s view on the nature and long-term prospects for NFTs, arguing that we are so used to thinking of digital assets as copies that conceiving of them as unique objects requires a shift of consciousness. But while conceding that just now the ‘market is experiencing the double effect of the digital art hype and the NFT hype’, and that ‘we can likely expect large price fluctuations for these pieces in the coming months and years’, the company argues that as the possibilities opened by the evolving NFT framework seep into the market’s consciousness, ‘a multitude of NFT applications in various industries, besides art and entertainment’ will open in ‘finance, real estate, education, government services, and manufacturing’.

The FAQ, for example, suggests that tickets minted as NFTs may replace traditional paper-based tickets: an NFT-secured ticket would be impossible to duplicate because its ownership would forever be stored in the underlying smart contract. Music distribution is another possibility: the band Kings of Leon recently released an album as an NFT, attracted by the fact that the code certifying an NFT can be written to ensure a payment is made to the artist every time the token is traded.

Coinsilium’s NFT initiatives


Coinsilium announced its primary vehicle for moving into the NFT space last month, an NFT technology development studio to be launched with Indorse, a Singapore company in which Coinsilium holds a 10pc stake. Nifty Labs (named in playful reference to the NFT acronym) will build NFT in-house applications and contracted solutions for third parties. Coinsilium says the project is currently in ‘stealth’ mode as it discusses the precise focus of the studio with its partners, but it has seeded it with initial working capital of £250,000. The company’s latest update on the studio’s development says that the venture is already generating ‘an unprecedented level of enquiries and demand for NFT development services across a range of sectors including digital art, collectibles, music, sports and social media’.

The announcement was followed earlier this month with news of the company’s first commercial NFT venture, a limited edition 2021 commemorative ‘Cryptocurrency’ postage stamp with the government of Gibraltar, to ‘celebrate the impact Blockchain is set to have on the world’. Published with ’22 individual, exclusively commissioned, iconic images of Gibraltar’, the physical Crypto Postage Stamp will be tied to the release of an NFT counterpart produced by Coinsilium in partnership with RedFOX Labs. Sales of the 50,000 stamps will officially open on 17 May 2021 in time to coincide with the annual celebration of ‘Bitcoin Pizza Day’, an occasion marking the anniversary of the first ever bitcoin exchange in 2010, when 10,000 coins purchased two Papa John’s pizzas. The NFTs will be minted with five levels of scarcity: ‘Common, Uncommon, Rare, Ultra Rare and Mythic Rare’.

Another recent update, on Coinsilium’s ‘crypto treasury position’, highlighted the extent to which the company has profited from bitcoin’s rise over the past year by virtue of holding the currency. As at 6 April Coinsilium’s cryptocurrency and token treasury was worth $3,128,626, an increase of approximately 58pc from 8 February, and up from $575,000 last August.

An intriguing opportunity?


As a company seeking to position itself at forefront of a new application in the avant-garde blockchain sphere Coinsilium offers an intriguing opportunity for investors able to check curiosity with due awareness of the volatility of the decentralised finance sector. We discussed the industry’s principal challenges in our bitcoin piece earlier this year.

In brief, the paradox of bitcoin – like other cryptocurrencies – is that its illiquidity, the quality that makes it such an incendiary speculative investment, also makes it bad as money, something that should be a stable store of value and an easy-to-use medium of exchange. As one observer puts it neatly: ‘The more attractive bitcoin is as an investment, the less useful it is as money. And, conversely, if it is to become useful as money it will lose its use as an asset offering high expected returns. Bitcoin’s advocates can tell two stories – but they cannot both be right.’ 

And seemingly abstract crypto technologies like Ethereum are powered by a very real – and polluting – material infrastructure. A new report by the Cambridge University Centre for Alternative Finance finds that bitcoin mining consumes 66 times more electricity than five years ago, and that this month global power demand by the bitcoin network reached around annualised 143 terawatt-hours, about 4pc higher than Argentina’s total electricity generation in 2019. The strong possibility of tougher regulation in the US and China both to protect private investors and reduce the technology’s material impact may clip the fintech sector’s wings.

The compromises leading crypto companies like Coinbase have had to make to win the limited acceptance they have so far achieved cut against the original decentralised finance ideal: a ‘trustless’ banking system in which secure transactions take place without the mediation of financial middlemen. In its concern to embrace regulation and woo Wall Street Coinbase has abandoned the role of challenging the traditional state-controlled fiat currency system and the ideal of wholly private crypto transactions. The company charges high fees for basic functions such as holding and trading digital assets. Most of the platform’s users do not hold coins but rather Coinbase IOUs, and most transactions on the platform are not settled through any public blockchain.

Like bitcoin, NFTs face a tough road to mainstream acceptance. Just now the space is rife with cynical commercialism, opening opportunities for wealthy celebrities to extract even more from their audiences. But amidst the avalanche of statistics surrounding NFTs one fascinating figure stands out. According to a breakdown of the bidders for the Beeple provided by Christies which oversaw the sale, 91pc cent were new to the auction house, and 64pc were aged under 40, indicating that for younger generations digital assets are just as real, if not more so, than physical objects. It seems that NFTs, bitcoin and other blockchain technologies are here to stay, though we don’t yet know in what form.

Coinsilium offers one way of gaining exposure – in every sense – to this fast moving market. Unsurprisingly the company’s shares have been on a wild ride this year, touching 38p as recently as mid March, before falling back to just under 11p today. If crypto surges again, as this year’s oscillations would seem to indicate it well may, they could be heading back up. Timing though, here, really is everything.