Looking for exposure to a diversified portfolio across a spectrum of blockchain initiatives? Think Coinsilium
“…Coinsilium certainly offers access to the further gains bitcoin may make this year, but with its investment in a range of emerging Web3 technologies, Coinsilium seems to have positioned itself to be around for some time to come…”
With its investments in a cluster of blockchain-driven Web 3.0 start-ups Coinsilium (AQSE: COIN; OTCQB:CINGF) inevitably moves within the orbit of the cryptocurrency market.
But Coinsilium’s commitment to a raft of technologies at the forefront of the internet’s evolution distinguishes the company as something more than an opportunistic vehicle for gaining exposure to crypto rallies.
Explaining Web 3.0
An immediate challenge for Coinsilium is to go beyond the noise and explain what Web 3.0 technologies are, how they work, and why they are significant. Last month the company published the first in a new series of Web3 Industry reports designed to explain the Web3 space and the blockchain technology underpinning it to investors in accessible terms, which are available for download from the Coinsilium website.
In brief, ‘Web3’ is a term used to refer to a cluster of related digital innovations driving the next major step in the evolution of the internet. Following Web 1.0, the first generation of read-only ‘static’ websites, and Web 2.0, the dynamic, interactive world of social media and e-commerce that has transformed the world economy and everyday life, Web3 is focused on the potential the blockchain offers for direct peer-to-peer transactions and data sharing that bypass traditional intermediating institutions.
Web3 promises to address the issues of privacy, data ownership, and centralisation that blight today’s Web 2.0, opening the prospect of decentralised networks in which users have control over their data. As Coinsilium puts it, Web3 anticipates ‘a more equitable, transparent, and user-centric online world’.
Web3 Applications include Decentralised Finance (DeFi), which refers to the digital assets and financial smart contracts, protocols, and decentralised applications (DApps) built on blockchain technology that aim to create a financial system open to everyone, minimising the need to trust and rely on central authorities. The blockchain can also be used to generate and operate Decentralised Autonomous Organisations (DAOs), collectives sustained through the direct exchange of immutable contracts, rather than traditional hierarchical structures of executives, boards, and investors. Blockchains also permit the exchange of Non-Fungible Tokens (NFTs), unique digital assets best known so far for the distribution of unique artworks, but which have the potential to verify any kind of intellectual property.
The Byzant Collaboration: social media, transformed
One of Coinsilium’s major initiatives, the ‘Byzant Collaboration’, a syndicate of major digital advertising and blockchain industry partners, is focused on Web3’s transformative potential for social media. Rather than – as today – relying on a narrow set of platforms that harvest user data without meaningful consent or compensation, peer-to-peer blockchain exchange opens the prospect of a decentralised ecosystem in which users retain control over their personal information and have a say in the governance of platforms, including decisions about content moderation policies, feature development and revenue distribution. NFTs and social tokens allow content creators to earn directly from their followers without intermediaries taking a big cut.
The Byzant Collaboration, which in addition to Coinsilium includes Web 3 development business Indorse and A-ADS, one of the longest established crypto advertising networks, is developing a Web3 ecosystem whose innovations include Byzant, a decentralised social network for creative professionals; Bastion, a smart wallet Software Development Kit (SDK) to smooth the process by which new users can engage with Web3; Adbazaar, a smart-contract powered advertising network; and Alcazar, an NFT marketplace.
Coinsilium’s interest in the venture, which it describes as ‘a major development milestone’ expected to be highly value accretive for shareholders over the years to come’, is represented through a material stake in new project tokens at the founding member level. Reports by Future Market Insights, quoted by Coinsilium, indicate that the value of the global decentralised social network market is expected to grow from $12bn in 2023 to $101bn by 2033.
A March update welcoming A-ADS to the syndicate reported that ‘the first phase of the Byzant social media application development has been achieved’. A private alpha version is now running in test mode within Byzant’s ecosystem for partners and advisors, allowing for transactions to be settled through ‘test tokens’ without financial risk. Coinsilium said that ‘while we see Web3 as the foundation to move social networks beyond the exclusive reliance on advertising driven revenue models, we also believe that ad revenues can become a significant engine for growth in the Web3 space.’ Advertising has fuelled the web since its early days, Facebook earning $131.948bn through ads alone last year.
Coinsilium’s portfolio: a Web3 showcase
Coinsilium’s portfolio showcases the range of possibilities Web3 technologies offer to the worlds of banking, social networks, gaming, and fashion. In addition to a 10pc interest in Byzant partner Indorse, Coinsilium has an option to take a stake of up to 6.7pc, worth $0.5m, in Silta, which is using AI to expedite the time-consuming process through which climate projects apply for finance. Silta wants to ‘revolutionise the feasibility study and financing process for green projects’, using AI to analyse vast amounts of data automatically, swiftly evaluating a project’s potential, feasibility and risks, thereby slashing a preparation process that currently can take up to three years to complete. Silta recently notified Coinsilium that it has received an investment from ‘a top 10 global infrastructure development bank’ as part of a strategic partnership agreement to build a climate financing marketplace. The partnership ‘aims to help support governments, infrastructure developers, and financial institutions to reach their goals of deploying $800bn towards Climate Financing by 2030’.
Coinsilium also has interests in two digital finance initiatives. It has a stake valued at £652,549 in Greengage, which offers clients including SMEs, high net worth individuals and digital asset firms access to a B2B lending platform for digital sources of money. Greengage has signed an agreement with a new partner to bring forward the launch of currencies including the US dollar along with FX and SWIFT payments for its clients. Noting ‘there still remain very few “crypto friendly” payment providers offering USD accounts’, Greengage is also exploring collaborations to progress a new line of SME digital debt offering with potential partners.
Yellow Network is building a peer-to-peer trading infrastructure allowing crypto exchanges, brokers and trading firms to securely exchange liquidity and facilitate trading, clearing, settlement, and compliance, designed to ‘solve the problem of liquidity fragmentation’ in the crypto market. Its unique ClearSync smart clearing protocol facilitates a system for traders that reduces counterparty risk and helps settle trades quickly and efficiently using blockchain smart contracts. Traders deposit collateral into an adjudicator smart contract to guarantee trade settlement, ensuring a secure and transparent way to trade without recourse to traditional clearing houses. Coinsilium announced in February that Yellow Network has updated its roadmap for Yellow Token’s public launch and token listing, a ‘critical milestone’ scheduled for Q2 2024. Coinsilium is entitled to $0.2m worth of future Yellow Network digital tokens.
Coinsilium has a stake in gaming company GGs, a Web3 start-up which has developed a particularly strong presence in Latin America’s 140 million-strong gamer community, which is seeking to facilitate the process by which blockbuster Web 2.0 games transition to Web3 platforms. In February Coinsilium announced that GGs had a partnered with Off The Grid, ‘one of the most highly anticipated games in Web3 gaming’, with the goal of helping the game scale across the LatAm economy. Coinsilium is entitled to $0.1m worth of future GGs digital tokens. The company also has a Master Collaboration Agreement for Web3 initiatives with global fashion brand Blvck Paris, known for its ‘All Black’ clothing and monochrome aesthetics.
Coinsilium and the cryptocurrency market
With its growing set of investments in blockchain start-ups developments, the wider cryptocurrency sector inevitably exerts a strong pull on Coinsilium’s share price. The extraordinary pace of technological change in the sector – often only partially understood by investors – can generate waves of expectation and excitement as investors anticipate higher future earnings from advisory fees, future digital tokens and potential equity stakes.
Rapid shifts in market sentiment are facilitated by non-stop trading – unlike traditional financial markets, the crypto markets operate 24/7 – generating more pronounced price swings. The market is relatively young and less regulated than its mainstream counterparts, leaving it exposed to significant impacts from relatively small events or news. Price changes can become wild swings as investors pile into bull markets, or pull their money at the first sign of a downturn. And efforts to stabilise the market can themselves generate further uncertainty as traders respond to rumours of regulatory crackdowns.
Coinsilium’s portfolio, diversified across a spectrum of blockchain initiatives, offers exposure to a maturing sector, with which the company’s value has historically moved in sympathy, if not in lockstep.
In the past few months that has meant a sharp rise in value, as the price of Bitcoin has surged. Coinsilium spiked from 1.35p to 3.45p in the space of a few weeks in January this year as cryptocurrency prices broke out again after falling away in the second half of 2022. Bitcoin is up 70pc this year – trading at just over $61,300 at the time of writing – buoyed by the arrival of US spot Bitcoin ETFs in January. Some $67bn flowed into the dozen or so ETFs launched in Q1, BlackRock’s product alone taking in $18.7bn.
Last month’s Bitcoin ‘halving’, described as ‘this year’s most important bitcoin event’, is expected to push prices even higher over the medium term. Bitcoin’s protocol specifies that only 21 million coins can be mined, with the rate at which new coins are created decreasing by half every 210,000 blocks, a milestone reached every four years or so – the last halving took place in May 2020.
This year’s adjustment had the immediate effect of reducing the rewards miners earn in exchange for securing and validating transactions on the Bitcoin network, which fell from 6.25 bitcoins to 3.125 bitcoins, or from $408,000 to about $204,000 per block. Some of the largest miners have stockpiled near-record amounts of Bitcoins in a bet that future increases in the token’s price will blunt the halving’s impact on their revenue. Halvings exert upward price appreciation in Bitcoin: even if demand stays constant the price has to increase to offset the supply reduction.
Past evidence indicates that during years in which a halving occurs, Bitcoin usually returns around 125pc on average, putting the currency on track to hit $100,000 this year. Indeed, in the years following a halving, the value of Bitcoin has risen by some 400pc. If this halving follows the same pattern the coin could be worth some $500,000 by 2025.
Outlook
As noted above, prospective investors should try to maintain some distance from the excitable commentary that swirls around the cryptocurrency space. Recent developments augur well for future gains, but this is a market continuing to mature. But, in the near term, Coinsilium is set fair to gain should cryptocurrency prices continue to rise. The company continues to accumulate new tokens in payment for its advisory services, earlier this year signing an agreement with DeFi exchange platform LC Lite according to which it will advise its new partner on a token launch planned for Q4 in return for a success based fee denominated in cryptocurrencies or in project digital tokens.
Coinsilium’s most recent set of results, for H1 2023, stated cryptocurrency assets – including rights to future tokens – of £1,071,553 (the company had cash of £608,355), and a March placing brought in £472,500. CEO Eddy Travia – who participated in the subscription along with Chairman Malcolm Palle – said: ‘The rapidly rising cryptocurrency price obviously bodes well for our crypto-treasury position, and the strengthening market also appears to have generated further investor interest in Coinsilium, which is understandable given that we have seen before, in the previous cycles of 2018 and 2021, quite a close correlation between cryptocurrency price movements and marked market capitalisation growth for the Company.’ Mr Travia added that Coinsilium had ‘never before … been so well positioned, with our portfolio now reaching across multiple high-growth Web3 markets including, but not limited to infrastructure, AI, social media, finance and game technology sectors.’
That commitment to a broad range of emerging Web3 technologies marks Coinsilium out as something other than a means of riding the mercurial crypto market. As noted, the company’s price surged as bitcoin took off late last year, but at 2.15p at the time of writing (taking its market cap to £4.675m) it is still well up the value of 1.4p it held coming into 2023. Coinsilium certainly offers access to the further gains bitcoin may make this year, but with its investment in a range of emerging Web3 technologies, the company might also be considered a longer term hold. The very first blockchain company to IPO, back in 2015, Coinsilium seems positioned to be around for some time to come.
Here, in this recent interview, Chief executive and co-founder Eddy Travia talks about advising businesses which have gone on to become multi-billion dollar companies including Fantom the South Korea-based blockchain enterprise which raised $39.8 million in its ICO.
