As those following me will know from my previous article with the playful title “Monkey capital: Ponzi or value innovation”, meant to entice as much as to inform, we are now seeing the first crack at bringing hedge funds and venture capital into the realm of blockchain technology.
While hedge funds may traditionally have invested in digital assets, we have still to see one who digitizes its entire operation, value-promise, funding approach and investor-relations – that is until now.
The aim of this article is to use Monkey Capital, the world’s first and only decentralized hedge fund, as a case-example, applying Peter Diamandis 6 D’s of technological disruption to their business strategy and value promise, hoping to shed light on the disruptive potential of this company in specific, as well as the industry as a whole.
Let’s get into it.
DIGITIZATION
The first thing which needs to happen, is for something previously not digitized to be turned into 1’s and 0’s, thus becoming an information-based technology, by that entering the possibilities of exponential growth.
In the case of Monkey Capital, what has been digitized is the issuance of ownership shares in the fund as well as the rules governing investor relations such as, when it is possible to enter/leave as an investor as well as the profit distribution schedule and handling. Traditionally, a hedge fund would only allow new investors to join or existing investors to sell some shares and take profit, once a month, quarter or year. In this new constellation however, it is possible to buy into and leave the fund at any time, the profits are distributed in an overarching token (COE) which eliminates the need to sell shares to take profit and finally you can choose to only buy into specific investments/portfolios, all in a digital manner within a fully sustainable ecosystem of digital tokens all traded on the open markets 24/7. We could say that all the tokens created by Monkey Capital are the “Monkey family tokens”.
The more in-depth token relationships are outside the scope of this article, however, to put it simply:
COE is the overarching “Embryo”-token of the family and can be considered the currency of the entire value network. It gets its value from the fact that all profits will be paid out in the token, which Monkey Capital will therefore buy back from the open market continuously as there will only ever exist a fixed amount of these tokens.
MNY (Monkey Token) is the first investment token to be created and is to be considered the first “Parent” token. It has its ICO the 8th of august and the funds collected will be used to invest in the initial investments outlined by the team in the whitepaper (SpaceX contracts, digital assets such as crypto-currencies, hostile takeovers of undervalued legacy companies etc.). By owning MNY you therefore partake in the profits generated by the investments from this initial investment round.
MNY is the only Parent token, but beneath this token an endless list of “Child”-tokens can and will be created. This is to be understood as subsequent investment opportunities with a new investment round/ICO.
To summarize, Monkey capital have tokenized, and by that digitalized, the whole process of funding and investor relations, by that allowing themselves to be set on a potentially exponential growth curve, in contrast to traditional hedgefunds which needs to raise money and handle investor payouts manually.
Speaking of exponential growth, we move on to the next disruptive factor “Deception”.
DECEPTION
Exponential growth can be deceptive at first, as it tends to increase slowly in the beginning. 0.1 becomes 0.2. 0.2 becomes 0.4. In the beginning exponential growth can be tricky to spot as the numbers are low and the massive growth which is going on will therefore not be apparent. However, if we repeat this doubling of growth only 25 times in this simple example, we would get to a staggering 1.677.722. So from 0.2 to 1.677.722 in 25 cycles of exponential growth.
In regard to Monkey Capital we don’t have much data yet to confirm the overall growth-trend, but if you consider just how many new ICO’s they can potentially complete in a matter of very short time and you couple that with an overarching vision from the Monkey Team of creating a complete self-sustaining value-ecosystem with their own exchange, market cap, differentiated companies which fulfills specific purposes within the ecosystem itself as well, then perhaps you get an idea as to their potential.
I will leave you with one thought on this matter before moving on. Right now the COE token trades at around 500 dollars. All profits from the entire ecosystem will need to be paid out in this token. If Monkey Capital are indeed on a somewhat exponential growth curve now, what do you think this token, as well as the actual ICO-token MNY will be worth in 1-2 years?
DISRUPTION
The existing market for a product or service is disrupted by the new market which the exponential technology creates as digital technologies outperform in effectiveness and costs.
The traditional cost-model of a hedge fund varies, but a not uncommon model would be around a 1% yearly management fee before profits as well as 20% of all profits generated going directly to the managing partner.
Monkey Capital on the other hand do not incur any of these costs on their investors, and 100% of the profits are used to sustain the ecosystem – 50% to buy back COE from the open market and 50% being paid out in profits. The managers themselves are incentivized by and hold the same tokens as the investors. This means that there is NO value-loss, effectively creating a perpetual circle of value creation for all stakeholders as long as the overall portfolio of investments is sound.
This way of going about their business is a stroke of genius in the sense that they have exchanged short-term greed with long-term value creation for all participants. At this point it is not clear what other players will emerge on the scene, but one thing is clear. If one player charges 20% of all profits for his services and limits his stakeholder’s possibilities, and another player charges no fees at all and allows his stakeholders to trade their ownership 24/7 – it is almost self-evident that the latter business model will eat up the old model over time.
DEMONETIZATION
Once everything is digitized you are on the road to extreme cost-efficiencies, sometimes in the case with software, to the point of being completely free. Granted, Monkey Capital still needs offices around the world, leadership and employees as do their traditional peers. They do however save a lot of money on the automated nature of their fundraising approach as well as payout plans.
In the beginning Monkey Capital will likely incur new costs as they need to set the system up in a meaningful way, find the best way to host and manage their ICO’s and hire experts within accounting, law and technological development to make sure they are aligned on all aspects of their business plan. Over time however this cost will shrink as blockchain technology used for securities find its place with regulation and consumer mindset. These costs could also be argued to be relatively small compared to the cost of missing out which traditional hedge funds now per definition suffer, making Monkey Capital relatively better off.
DEMATERIALIZATION
Separate physical products are removed from the equation as technologies such as our smartphone absorb other bulky products like the GPS, Camera, video, maps, radio etc. Effectively removing in some cases entire markets. This point seems not to relate in the same way to a hedge fund, I will however point out two things.
First of all, all brokers or middlemen previously used by hedge funds to get in contact with high net worth individuals or used in other ways in relation with stakeholder management or fundraising have now become of less use. You don’t need to go through your bank, you don’t need to belong to a certain club, all you need to do is download a digital wallet, instantly granting you access to a fiat gateway, portfolio management and a decentralized exchange to buy into the fund.
The second point relates to asset-classes. What monkey capital essentially does is to allow the linking between illiquid and liquid assets, which in turn means that I may be incentivized as an investor to put more of my investment capital into Monkey Capital to reap the benefits of the system, thus in turn taking out money from other brokers, funds etc.
DEMOCRATIZATION
Once everything is digitized, more people can access it. This means that services and information which were previously reserved for governments, large organizations or the wealthy are now in the hands of the masses, creating a more level playing ground.
In the case of Monkey Capital this is probably one of the more inclusive aspects of the innovation, as smaller private investors are now allowed access to the deals and opportunities previously reserved to the rich.
When it comes to the business model and the value-ecosystem itself, it seems a more “democratic” system as well as it makes sure that all profit are retained and distributed fairly amongst the stakeholders, while still recognizing the need for earlier investors to receive larger upsides to compensate for the higher risk.
One thing is for sure, if bitcoin and blockchain technology was about freeing and democratizing currency and cooperation, then I strongly believe in Monkey Capital being the right step in freeing value-flows from the few to the many, as wealth is never destroyed, it is merely redistributed.
To learn more about Monkey Capital and their upcoming ICO go to monkey.capital
I you want more essays and insights on Monkey Capital I recommend checking out fellow steemit user @Scatmandingo
Cryptoprophet