The Evolution of FinTech
In the era of the digitalisation megatrend, we are still utilising physical tokens as money, a cumbersome and outdated technology that is preventing the potential of disruptive innovation in how we store and transfer value. Through centuries of the boom and bust of cyclical recessions, the current financial technology of physical money – and its implementation through Modern Monetary Theory (MMT) – has shown fundamental weaknesses in how we manage global wealth and its circular economy. The inefficiencies of MMT notably led to the 2008 banking crisis and the preceding years of austerity from creating all-time high corporate debt levels through Quantitative Easing.
Since the first invention of the financial technology known as money some 3,000 years ago in the Kingdom of Lydia, where the first coin was minted and disrupted the current barter system, there has arguably been very little innovation in ‘money’ as we are still utilising physical token systems in the era of digital transformation. Credit and debit cards attempted to digitalise money but are merely a digital layer on-top of physically stored money (i.e. national currencies). Still subject to the rampant inflation that has seen both the USD and GBP lose over 90% of its historic purchasing power due to the continuous printing of new physical money tokens by centralised economic governance.
The invention of the Bitcoin FinTech in 2008 was the first real innovation in money in over 1,000 years, since Marco Polo introduced paper money to Europe after his return from Asia, where paper money had been in use for 200 years already. Although this was only a step-change innovation from carrying more cumbersome heavy metal coins.
However, the ease of transport came at a cost of money devaluation (i.e. inflation). ‘Paper’ money lacked the fundamental value of precious metals and thus required third parties and central authorities to guarantee and underwrite the value of our paper money tokens, creating a centralised economy prone to systemic failures and human error; such as printing more tokens to finance economies beyond their GDP creating trillion dollar national deficits. In addition, gold coins did not require a guaranteed redemption by a third party or the government. Therefore, paper money technology was in fact a step-back from the decentralised and individual store of value of deflationary gold, which is why we still utilise the ancient method of storing gold to this day.
After Bitcoin entered the public markets in 2010, its underlying blockchain technology soon spurred the creation of of a whole new digital economic ecosystem, with over 2,000 alternative cryptocurrencies emerging in the past 10 years alone, creating more FinTech innovation in a decade than in the preceding century through returning to the monetary roots of decentralisation.
Bitcoin’s blockchain was a disruptive innovation as it finally solved the digital double-spend problem that meant that electronic money could not be counter-feinted, as the blockchain prevents double-spending of digital currencies by timestamping groups of transactions and then broadcasting them to all nodes in the global bitcoin network simultaneously. As transactions are time-stamped on the blockchain and mathematically related to the previous ones, they are irreversible and impossible to tamper with, creating ‘digital gold’ that eliminated the weaknesses of cumbersome storage and transfer of the heavy metal as a financial technology.
The World Wide Web created an internet of information, the blockchain technology is now firmly emerging in creating an internet of value, and in doing so, it may become a catalyst for a disruptive digital transformation of our entire global financial monetary system.
Empowering Economic Evolution
Digital Future Capital is Scotland’s first Cryptocurrency Hedge Fund, and a market leading cryptographic assets-and-currencies technology investment firm by global 2018 performance, applying our proprietary investment algorithm – Nikolin™ – to the emerging digital revolution of the global economic financial system.
We provide secure investment access to high growth blockchain and digital currency technologies for accredited investors, and we will be reinvesting our profits to empower economic evolution in the Scottish economy through fostering local cryptocurrency FinTech innovation. Our vision is to empower the global Peer-to-peer (P2P) money technology adoption and become the UK’s leading cryptocurrency technology company by 2023.
Digital Future Capital originated in the classroom of the Robert Gordon University MBA course, where the co-founders met in September 2016. Unimpressed with the current monetary technology and its economic governance following the 2008 banking crisis, the co-founders commenced an extensive research of the potential solutions offered by blockchain technology, and in the process generated a 2,700% investment return by the end of the MBA through fundamental research and technical analysis of cryptocurrencies.
The Business Opportunity
The establishment of the venture in 2018 met initial public resistance due to the misinformation surrounding the emerging cryptocurrency technology. Notably, mainstream media had heavily reported that the “crypto bubble” had burst following the economic contraction in the Bitcoin and cryptocurrency markets in our founding year.
However, the 12-months of academic research conducted prior to the ‘bubble’ bursting by the co-founders conclusively established the economic contraction to be in-line with normal cyclical economic patterns for the new digital economy. The cryptocurrency markets were merely conforming to historic price patterns and provided the co-founders with the opportunity to establish first-mover advantage in Scotland, while the market conditions detracted new entrants, ensuring its commercial launch for the next cyclical cryptocurrency market expansion in 2019-2020 was in absence of local competition.
The historical performance of the investment opportunity is measured by the 10-year financial performance of Bitcoin, being the ‘gold standard’ of the new crypto-economy. The first recorded sale of Bitcoin occurred in 2010, when two coders in the US swapped 10,000 BTC for two pizzas, valued today at $84m, and by 2011 1 BTC took parity with the US dollar.
The valuation of 1 BTC has since its first trade in 2010 delivered a total investment gain of 122,940%, with the average market expansion delivering 30,800% and the average market contraction depreciating BTC by 88.3%. The historic ratio of market expansion to market contraction was 2:1, whereas it cyclically appreciates for an average of 680 days followed by a minor relative % contraction for an average period of 315 days. The business opportunity was in developing an algorithm that could profit from the statistical predictability of cryptocurrency volatility.
After graduating in December 2017, 6-months of market research and development of a proprietary algorithm followed. Digital Future Capital was finally founded in August 2018, first launching a pilot fund to test various investment strategies and obtain proof-of-concept of its algorithm – NikolinTM – through a 12-month cryptocurrency investment fund, raising £100k in fund investments from early-stage accredited investors.
By year-end of 2018, after one of the worst cryptocurrency markets in recent history, Digital Future capital finished the year-end with a return of 10%, while the top 15 global cryptocurrency hedge funds had an average performance of -47%, in a year where Bitcoin depreciated by 85%. By May 2019, the pilot fund had delivered 77% returns, achieving global market leading returns above both cryptocurrency and traditional market investment funds.
The venture joined the first cohort of the new RGU Innovation Accelerator, launched in March 2019, and received an initial £10k grant. Digital Future Capital was awarded the top prize during the Accelerator finals, hosted by Opportunity North East, and won the “Global Impact Award” for the venture with the highest global potential, securing an additional £20k in grant awards. Following this success, the venture was recently nominated for the global Association of MBA’s annual technology start-up awards, held in London in February 2020.
Digital Future Capital is now launching its first commercial fund in November 2019, and is currently seeking prospective accredited investors, and professional collaborations, to help promote the adoption of the new financial technology in Scotland, an industry forecast to grow by a CAGR of 69% per year, from $1.5bn in 2019 to $59bn by 2025.
Kris Lindahl | Co-founder | Hedge Fund Manager and Chief Investment Strategist
Hal Salvesen | Co-founder |Head of Operations and Investor Relations
Sebastian Overell | Market Analyst | Market research, business and technical analysis