I pledge to be transparent and upfront with readers. Before we get started, I acknowledge that I own the investments I write about here. This was written in mid-February 2023, and it’s very likely my views will change over time, and I don’t plan to update this article once published. Lastly, these views are my own opinions and do not constitute financial or investment advice, nor should my investments in them be viewed as recommendations to buy.
Intro
Artificial Intelligence (AI) is here, now, whether we ready for it or not. With the possibility to change how we work, learn, and interact, and even giving us the opportunity to make interacting with AI itself an everyday occurrence, life in its current form could be rapidly transformed for those who embrace it. Those who invest time to train and learn will gain a competitive economic or quality of life advantage, and even create new areas for economic growth. While AI has the power to change how society lives and works, the full consequences cannot be known, and not everything may be positive. Some of the most prominent industry leaders view AI as an existential threat, with the potential worst-case scenario of AI wrecking havoc on humanity. AI, along with crypto, has the potential to enhance our quality of life, expand our productivity and income, and offer us new ways to live and earn.
It’s important to preface comments and examinations within the current economic environment with the current technology backdrop, most notably in 2023 the rapid rise of market-ready AI products and the continued volatility in cryptocurrencies. The Ethereum merge is almost 6 months old, and results have been promising. This has implications for the wider Decentralized Finance (DeFi) space, as well as cryptocurrencies in general. Vehicles to invest in AI seem present some of the most attractive opportunities now from a risk-reward perspective, while AI adoption is still in its infancy. Of course even with all of the above, without conviction none it will matter.
Crypto Bellwethers?
Ethereum (ETH)
Rank: 2
Market cap: ~$200B
Market cap / FDV: 1
TVL: ~$400B
Twitter followers
Name (Handle): Ethereum Foundation (@ethereum)
Total Followers = ~3,000,000
In September we wrote about the Ethereum Merge through our subsidiary, StakeSchool.com, and how excited we were for the new potentialities this could offer. We haven’t been disappointed and remain encouraged by Ethereum for a variety of reasons. The Ethereum Foundation has demonstrated the ability to significantly alter and coordinate the $200B network that is Ethereum. “The Merge” as it was famously, and infamously, known was a monumental feat of computer engineering and it went off without a hitch and switched the entire network from an energy-intensive “Proof-of-Work” model to an energy-efficient “Proof-of-Stake” model. This speaks to the strength of the technical and administrative teams behind Ethereum and their ability to coordinate a decentralized network with thousands of participants.
As a result of The Merge, Ethereum supply has started dropping for the first time. Ever since the implementation of EIP-1559 (Ethereum Improvement Proposal #1559), a portion of fees used to transact over the network are burned – meaning a small % of ETH is destroyed as a result of transactions, but the network remained net inflationary as new Ethereum were rewarded to hardware miners. Now, however, in conjunction with the transition to Proof-of-Stake as a result of the Merge, the Ethereum supply has been net negative and ETH therefore deflationary – meaning ETH will become scarcer over time. In conjunction with increased network utilization, this has the power to significantly but gradually lower the overall supply of ETH on a sustained, long-term basis.
Looking ahead, the Ethereum Foundation has several additional major milestones outlined on its roadmap. With each successful implementation, the network should become more robust and offer better user experiences and functionality. The Merge was implemented in September 2022. Ethereum is now focused on implementing the next phase, The Surge, to increase transaction throughput, the Verge, to reduce the amount of data stored onchain, the Purge to remove and prune unnecessary data and processes, and the Splurge to enhance operability and usability of the network.
Remember the rate of burning ETH varies based on network utilization, consistent with EIP-1559, so at any given time the burn rate across the network varies and changes over time. According to the Ethereum Merge dashboard, the total supply of Ethereum that’s been burned since the merge is approximately 33,600 ETH, or the equivalent of roughly ~$55 million in USD. Compared to a total supply of roughly $200B, this doesn’t seem like much, and only comes to 0.025% of total supply, but compared to the inflationary nature of 99.9% of all other cryptocurrencies, this is a huge shift.
Although not without network upgrade and other risks, as well as shortfalls notably around scaling, it’s not hard to see why we are bullish on Ethereum, and why it stands out among all other cryptocurrencies. However, like all investment vehicles, they are subject to underlying market conditions and tend to trend together. Difficulties in the wider markets mean any crypto would have to swim against the current. And continued rise of price off of the lows around $900 would similarly help all of DeFi ride Ethereum’s coattails, often in epic proportion.
Polygon (MATIC)
Rank: 8
Market cap: ~$12.5B
Market cap / FDV: $12.5B/$13.8B = 90%
TVL: ~$9-10B
Twitter followers
Name (Handle): Polygon (@0xPolygon)
Total Followers = ~1,800,000
Polygon, or Matic, as I like to call it after it’s former name (Matic Network), and token symbol, has emerged as a prominent player in the drive to help Ethereum scale as a Layer 2 network. A Layer 2 network is basically a network built with the addition to another network in mind, kind of like expanding a building with additional rooms, or a second floor. By using the second layer, users can transact faster and for much cheaper that using the primary layer, but they can still interact with the first layer (Ethereum) if they choose to and bridge assets back and forth. Polygon is one of these networks that helps Ethereum scale makes transactions faster and cheaper for users.
With the support of both corporate America and cryptocurrency projects, Polygon’s partnerships range from Meta (Facebook), Adobe, Starbucks, The NFL, and Disney, to name some of the most prominent from traditional organizations, and it is considered one of the front-runners as the de facto Layer 2 to Ethereum. These partnerships center primarily around Polygon’s ability to scale Ethereum’s NFT Layer-2. This is important because some analysts believe that crypto adoption will ultimately be decided by a “winner-take-all” model. With such deep penetration into the overall foundational infrastructure – Ethereum and the broader crypto space – and building some of the foundation for Fortune 500 company on and off ramps, Polygon has the potential to grow, especially if crypto adoption continues to grow.
The Tokenomics of Polygon are also becoming more favorable thanks to the network’s maturity and chronological age. Launched in 2017, Polygon is over five years old (an “adolescent” by crypto standards), and most of its MATIC tokens have been released into the wild. One of the signs of maturity of a crypto project is how many tokens are scheduled to be released, or in simple terms, how much inflation is expected. As a project matures, typically its inflation goes down (see Ethereum, above) as token holders become organically more decentralized (or spread out) – at least that is the goal.
Polygon has established itself as a crucial player in the development of Layer 2 scaling solutions for Ethereum, and addressed one of the biggest challenges facing Ethereum. Bolstered by its partnerships with major corporations, deep integration within the overall crypto space, and maturity of its Tokenomics model with five years of network uptime, it has the potential to emerge as the leader in the Layer 2 space.
Fantom (FTM)
Rank: 42
Market cap: ~$1.4B
Market cap / FDV: $1.4B/$1.6B = 87.5%
TVL: ~$500M
Twitter followers
Name (Handle): Fantom Foundation (@FantomFDN)
Total Followers = ~480,000
Despite our excitement around Ethereum, another token that earns a lot of our attention, and formerly a favorite of the last bull cycle, is the Fantom Network, or Fantom (FTM). Fantom exists as an independent Layer 1, and bills itself as “the oldest non-fork L1 with any real [value locked in it]”. While not a direct Layer-2 that offboards transactions from Ethereum and then rolls them up to the main chain, Fantom supports the common configuration of the Ethereum Virtual Machine (EVM), allowing direct portability of Ethereum apps over to Fantom and therefore can “scale” existing Ethereum applications if they choose to migrate to Fantom. Fantom sports a superb balance sheet, a mature Tokenomics model, an engaged foundation, and a visionary developer in Andre Cronje: “the most notorious and prolific developer in the DeFi industry.” So let’s dive in to Fantom.
Fantom uses a unique blockchain consensus mechanism called Directed Acyclic Graph, or DAG, architecture that allows for network transactions to be confirmed out of chronological order, which allows for faster throughput and less storage overhead. Without getting too technical, the technical term for Fantom’s consensus model is Lachesis, which is a version of the classic BFT consensus algorithm used by networks such as Cosmos. Lachesis and the DAG architecture of Fantom, allows efficiencies of scale and speed not possible with Ethereum. The bottom is line is that the design of Fantom enables the network to achieve multiple times the transactions per second (TPS) of Ethereum at a drastically reduced cost, and do so faster, with only a few second transaction finality. Of course a network, no matter how fast or cheap it is, still depends on adoption.
Fantom has a decent stable of partnerships within the cryptospace, but lacks notable corporate adoption. As such, Fantom has a lot riding on its ability to acquire major partnerships both within and especially outside of the cryptospace. As such it may have more room to grow than others, especially with a lower relative market cap of ~$1.4B at time of publication.
Fantom appears to have positioned itself by creating many solutions for corporations to leverage, should they choose. A visit to the Fantom Foundation’s Solutions page shows a number of available options ready for adoption: digital financial assets, institutional clearing and settlement, CBDC’s, tokenized real estate, and supply chain management, to name most. By prepping these solutions in advance of partnership, the rails are available for institutional adoption, but it remains to be seen if corporations will take to Fantom.
However, Fantom has a significant advantage over competitors, in that it has a substantial runway of funds to continue development, as well as supply of FTM in its treasury to incentivize new partnerships. In fact, the Fantom Foundation has so much value sitting in stable coins, it currently expects to be able to fund development of the network for the next 30+ years without having to dip into the treasury to sell any FTM. Paying a reasonable incentive to major corporate partners could create alignment and value for the network and token in the future.
The Fantom Virtual Machine (FVM) is a new upgrade to the Fantom blockchain that aims to create a massively scalable Layer-1 blockchain without fragmenting the main chain with Layer-2s or subnets. With the upgrade around the corner, this enhancement will improve upon the Ethereum Virtual Machine, optimizing for efficiency and scale. The innovative FVM solution rests on adopting an entirely new data structure that compacts storage addresses and relies on files rather than key-value databases and introduces super-instructions to speed up smart contract execution. This would potentially enable parallel processing, perhaps the holy grail for blockchain finality speeds. Initial testing indicates a 2X or 3X performance increase over the current blockchain protocol. The improved scale that will be achievable with this upgrade means that the network shouldn’t require any Layer-2’s to support it during times of high demand, while increasing security and improving the user experience at the same time.
The Tokenomics of Fantom, like Polygon above, are in maturity and inflation has lowered, with most coins already been distributed over the network. More than 86% of the overall supply of Fantom has already been released, with about 20,000 FTM being released per month until December of 2025, when the majority of Fantom will be issued, and the remaining either circulating, locked, or lost. Staking rewards and inflation are already extremely low, between 2-6%, with very few receiving the 6% max as this requires a 365-day lockup.
Fantom presents itself as a potential layer-1 blockchain solution and competitor that offers significant technical advantages over Ethereum. With the upcoming upgrade of the Fantom Virtual Machine, the network will be ready for prime time, with the theoretical ability to onboard any of the largest US corporations, something sorely needed for a Layer-1 solution that lacks significant corporate adoption. Fantom has a long runway of funds to work with and its innovative solution and Tokenomics have merits, but adoption will be key for Fantom if it hopes to move up the ranks of the top Crypto’s.
Yield Hunting with DeFi
“There’s always a bull market somewhere.” Somewhere in DeFi, any given week, something is blowing up in price. As part of Angel City’s affiliate StakeSchool.com, we’ve written extensively about providing liquidity on Osmosis DEX. In addition to continuing to provide liquidity on Osmosis, we also returned to providing liquidity on SpookySwap. Osmosis continues to surprise us in its ability to onboard new tokens with high APR . This model of yield hunting, however, requires a user to keep a watchful eye on their investment and usually navigate the various pools by hopping from one to another without missteps.
This field will benefit significantly from an overall rise in adoption of Decentralized Finance and any crypto price rises of non-DeFi crypto tokens in general. The cyclical nature of DeFi means that cycles can feed into themselves creating more of the same. In bull markets, these forces can generate significant yield income for liquidity miners, which can be cashed out as needed by the provider.
While mining on Osmosis can be an active endeavor, yield farming on SpookySwap DEX doesn’t have to be. Please keep in mind that the vast majority of coins on both these exchanges are not established, not accountable and therefore extremely risky. Anyone attempting to provide liquidity on either platform should have at least an intermediate understanding of crypto and impermanent loss before proceeding. If this piques your interest, please take a look at the prior published material. You can also see our getting started on Osmosis guide here:
A Basket of Artificial Intelligence
Artificial Intelligence/AI, is no longer just a buzzword, it’s a rapidly growing industry that is poised to reach a staggering $1.8 **trillion** dollars as an industry by 2030, starting from a current base projection of $196.6 billion for 2023. That’s a potential 9X growth in less than 7 years. With this kind of growth potential, we’re eager to identify top companies that are poised to take advantage of the upcoming Cambrian Explosion of AI.
But which companies have already been investing in AI for years and have laid the foundations necessary to become the next Microsoft, Apple, or Amazon? By embracing the use cases and enhancements that AI has to offer, we acknowledge that AI is likely here to stay. Embrace the potential of this projected growth by gaining access to exclusive insights and analysis, which could ultimately help you make more informed decisions.
That’s a Wrap
Before concluding , it is important to mention the importance of continuous training and education for trading and investing in markets. Markets will likely continue to exhibit volatility, both up and down, and potential investors should consider multiple possible economic scenarios playing out when thinking about their strategy. Approaching investing with an expectation of volatility will help one follow through on their investing plan as intended, and possibly even take advantage of the volatility for personal gain. By maintaining flexibility and approaching the task of capital allocation within a consistent framework, one can create conditions for continuous evaluation and improvement to flourish.
The World Awaits
The world could soon be, or already is, experiencing a revolution driven by AI and cryptocurrency. In this environment, there is a plethora of potential opportunities for investors to capitalize on various emerging trends, including cryptocurrencies as we see it such as Ethereum (ETH), Polygon (MATIC), Fantom (FTM), and more, as well as non-fungible tokens (NFTs), a carefully chosen basket of AI cryptos/stocks, and DeFi investments such as providing liquidity in return for yields. However, it is also important to be prepared for various scenarios in the future, including being mindful of the potential for volatility, and maintaining overall flexibility.
In order to navigate the markets, the importance of consistency, evaluation, self-improvement, and conviction cannot be understated. With a wide range of potential scenarios and uncertainties, there still remains a bullish scenario for continued or accelerating growth, which means that investments such as NFTs, cryptos, and AI investments remain a viable option for those looking capitalize on market tailwinds. Ultimately, updating oneself regularly, being prepared, and staying nimble will help investors prepare for whatever the future may bring and will be the key to success in this rapidly evolving world. Remember, none of this is financial advice, and it’s always important to do your own research.
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