KR1 June Update 🎪
Dfinity Starting to Unveil
Dfinity released a major milestone in June with its ‘Tungsten’ release. Tungsten is the first proper public release of the work that has been going on at Dfinity behind the scenes and was presented publicly in a super slick Silicon Valley event, you can watch the recording below.
The release marked Dfinity’s halfway point to a main net release, currently set for Q4/2020 or early Q1/2021, probably coming in a similar fashion as we watched Polkadot or Cosmos roll-out, launch network first, guarantee stability, then enable governance and eventually enable transferability of the Dfinity (“DFN”) tokens.
With KR1 we’ve been fans of what Dominic and the team at Dfinity were planning since 2017 and we backed them in their 2018 fundraising round, still KR1’s second-largest investment to date (just shy of Polkadot). Dfinity’s Internet Computer is taking a very brave and, pleasantly, very different technical approach than many other blockchains that are attempting to compete for mainstream developer interest. It utilizes different types of cryptography and network security than many other blockchains and the current internet stack provides. Even though it will be trying to woo developers to build consumer applications on it, Dfinity feels it may get more adoption in the huge enterprise market.
Dfinity appeared in 2018, amid the flurry of investments in the blockchain space. It raised $102 million in funding at a $2 billion valuation in a round jointly led by Andreessen Horowitz and Polychain Capital, along with other investors, including KR1. I must admit that at the time it appeared for all intents and purposes as if it would be yet another attempt to replace Ethereum. Or at least something similar. But then something odd happened. It started behaving like an actual software company. — Mike Butcher, Techcrunch June 30th 2020
Polkadot’s Proof-of-Stake Transition
Polkadot got one step closer to being fully launched with its transition to proper ‘Proof-of-Stake’ from Web3 Foundation’s previous ‘Proof-of-Authority’, removing the ‘sudo key’ (i.e. main admin key held by the Web3 Foundation) and introducing governance is next, after that transferability and more features (like Polkadot Parachains) to come.
Staking Strategy & ETH 2.0 at KR1
“We’re very excited for ETH 2.0 to initiate its launch process and are definitely planning to participate in the staking with the ETH we hold in the portfolio.
KR1 also has exposure to ETH 2.0 through investments like Rocket Pool, who are building staking infrastructure to take advantage of Ethereum’s move to Proof-of-Stake, see here. Currently, it is difficult to provide useful estimates as to what the potential revenue from Ethereum staking yields would look like as some of the research and implementation is still ongoing and many network parameters are not set in stone yet. Additionally, staking rewards are generally highly dependent on the overall ‘active’ staking participation, which is variable and can only be observed when networks are live, i.e. ETH 2.0 is launched.
That said, KR1 has already been generating healthy revenue from staking activities on Cosmos for over a year, please find our latest update on our Cosmos Staking Yields here.
We’re also expecting to start generating revenue from other networks and investments such as Polkadot, Dfinity, Edgeware, etc. once they are properly launched. Polkadot recently initiated the very first phase of its launch process and is currently operating as a ‘Proof-of-Authority’ release candidate, which should switch into proper Proof-of-Stake soon.”
Following that, there was a followup question on how we’re managing the proceeds, i.e. if we’re compounding the rewards or continue re-investing them, here is our reply:
“Thus far our Cosmos strategy has been to liquidate accruing revenue from staking activities to reinvest in new projects and support operations, though we halt the selling of staking yields if market conditions are not favourable and asset prices are below a certain threshold.
Further, our strategy to hold onto our Cosmos ATOM yields below a certain price threshold has greatly improved our average exit price.
We are regularly reviewing this strategy taking into account market conditions, the particular network conditions and the overall KR1 portfolio as well as the pipeline of upcoming project launches (i.e. Polkadot staking, Ethereum 2.0 staking).”
We were excited to announce that KR1 participated in the first Plasm Network ‘lockdrop’, please find all details in our public announcement.
A ‘lockdrop’ is a new method of token distribution where in return for locking up collateral (i.e. ETH) in a smart contract for some time, participants are being rewarded in an upcoming/soon-to-be-launched network’s native token (i.e. Plasm Network’s PLM). This method of token distribution involves no direct investment of capital, instead, it is an indirect investment with the opportunity costs being the inaccessibility of the time-locked ETH funds. KR1 will regain access to the currently time-locked ETH in three intervals, with the large majority being released within 300 days and the residual being released after 1,000 days from the time of the lockdrop.
KR1 has previously successfully participated in Edgeware’s lockdrop, which was was the first-ever lockdrop, and in similar activities such as ‘asset mining’ with ChainX.
“KR1 is innovating in value creation by actively participating in lockdrops, using our existing assets and helping nascent crypto networks get off the ground. These novel token distributions signal the importance and potential future value of crypto networks.”
We consider lockdrops (and similar structures like ‘stake drops’ or ‘liquidity mining’) a novel and innovative way to optimize the utilization of assets in our portfolio. We have written about lockdrops in a previous KR1 blog post.
Virtually Out and About
Keld was on a panel for the Europas 2020 discussing the impact of Covid-19 on the emerging tech sector including AI and Blockchain. The panel had Amadeus Capital, legends of VC investing, being one of the UK’s oldest and most respected Venture Capital firms, as well IQ Capital on it. The host was Chris O’ Brien from the respected Tech blog Venturebeat.
KR1 is Europe’s leading digital asset investment company supporting early-stage decentralised and open-source blockchain projects. Founded in 2016, KR1 has been a notable first investor in many key projects that will power the decentralised crypto assets, platforms and protocols that form the emerging Web3 infrastructure.
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