How Bitcoin Created the New Crypto Asset ClassBorn out of the global financial crisis of that time. Bitcoin was made up of more than just clever programming. The white paper combined important facets of computer science, cryptography. economics and network theory to create something that no single one of these disciplines alone could have formed. Over the last nine years. Bitcoin has amassed a globally dispersed and dedicated group of developers, miners, businesses and users who continuously work to improve its protocol. During this time, exponential growth in the number of users on the network has been rivaled by a similar trend in price, as the cost of a single bitcoin went from $0,003 in March 2010. when it first appeared on an exchange, to nearly $20,000 at its peak with a market capitalization of over $300 billion in December 2017.

Described as a “peer-to-peer electronic cash system.” Bitcoin allows anyone, anywhere in the world, to transact with nothing more than an internet connection. But Bitcoin is much more. It is the first

Cryptocurrency network to attain a critical mass of global users, and its resilience in the face of adversity over the past several years is one reason some consider it to be more important than the internet itself.

This critical proof of concept demonstrated the power of decentralized systems with no single point of failure, which has led to an explosion in the development of second-generation blockchain protocols. Many of these protocols have been designed to expand upon the limited “value transfer” capabilities of Bitcoin by modifying its social, economic and/or technological constructs to satisfy entirely different needs. These differences have necessitated a new way to describe the currencies that operate these protocols: there are no longer just cryptocurrencies, but also crypto commodities and crypto tokens, which fall into the broader category of crypto assets (see previous page).

Relatively new crypto asset networks, like Ethereum and Ethereum Classic, are Turing complete, geared toward decentralized applications (DApps) that can execute condition – based payments through the use of smart contracts. Others, like Zcash and Monero. offer privacyenhancing features to protect the identities of individuals and entities storing and transacting wealth on their blockchains. Moreover. Filecoin and Storj. each billed as “Airbnb for file storage.” seek to demonstrate the value that distributed networks can provide as a more efficient data storage architecture, with built-in incentives for users who contribute unused file storage capacity. And these are just a few examples.

So what is fundamentally driving the tremendous growth of this technology? In the investment world, we often talk about the power of compound returns — the idea that as an investment generates returns, the base of wealth grows, so any future returns of the same magnitude on the larger asset base will also be larger in dollar terms.

The concept of compound returns extends to knowledge as well, the power of which is incredibly profound and visible in the open – source. permissionless networks of many crypto assets. The adoption of new ideas is driven through selfselection based on the “survival of the fittest” And with the global networks that these assets possess, ideas are not localized to a particular group of people, companies or geographic regions. Brilliant ideas can come from anyone who opts into that network from anywhere in the world. New innovations offering greater security, scalability, programmability, privacy, storage capacity, hashing efficiency and more can be proposed and. if accepted, built on top of already tested and proven concepts. In fact this technology will likely evolve in many ways that we cannot possibly imagine yet

There are trade-offs that developers must consider in order to optimize each crypto asset to fulfill a unique use case, and this will often result in one of the above innovations being sacrificed for the benefit of another. This means it will be difficult for a single crypto asset to be optimized for all use cases simultaneously, and it is unlikely that there will be one winner across all dimensions.

For this reason, we believe in a future of multiple crypto assets, each with unique comparative advantages that will enable them to play distinct roles in driving economic growth and in diversifying modern investment portfolios.

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