What’s Beyond the Bitcoin ETF?

Having been present at the birth of the first public internet, which ultimately led to the .com era (Web 1.0). to the evolution of Web 2.0, and now Web 3.0, it is truly amazing to have lived through those times to and witness how technology can transform, disrupt, connect, and change the world and lives of so many people. I remember the day that I first experienced the internet. I was a student at MIT and remember hearing about something called the World Wide Web; that’s what it was called at the time. I logged into our computer system called Athena, opened a browser, and saw my first internet page. It was just a list of links which would lead, when clicking one link, to another web page that displayed another list of links. I recall thinking how stupid this was and that it would be impossible to traverse all the links. Little did I know what was about to happen. Having lived through the ups and downs of Web 1.0 and Web 2.0 both as a user as well as an investor and trader, I have made sure to not repeat the same mistake which was to so quickly dismiss technology in such an abrupt and superficial way rather than do deep and fundamental research which is the way that I approach investing today.

From each technological cycle, most companies fail but a few become monsters. Web 1.0 gave us Amazon, Web 2.0 gave us Facebook and Google. And as they say, history doesn’t repeat but it rhymes. Web 3.0 is no different and it will undoubtedly produce category killers who are either winner-take-all or a few that will be winners-take-most. And btw, the Bitcoin ETF is the first but not the last that is going to be launched in my opinion. That’s the next shiny toy on Wall Street. For at least some of the below coins, I believe that there will be spot ETF’s listed for these cryptos. So, at the very least, follow the money.

Below are my Top Picks Crypto picks for 2024 and beyond which I believe will be the monster winners of Web 3.0. And yes, I own all of these cryptos, so I put my digital money where my mouth is.

Chainlink - $LINK

Chainlink is the Amazon.com of Web 3.0. Chainlink is the classic, pick-and-shovel play of Web 3.0. It is core infrastructure. Chainlink started as an Oracle service connecting off-chain data to on-chain applications that are needed to settle any transaction. It is true middle ware. It also had and continues to exhibit a critical feature of a winning company which is that it continues to grow its technology platform and capabilities and not just blindly so, but rather with a keen eye towards foreseeing how the technologies in the Web 3.0 space are evolving and building products that will be critical to making disparate platforms work in a Web 3.0 future. Chainlink has also refused to take any outside capital beyond its initial ICO to grow the company. This is a testament to how serious it is about building a real technology company and to not falling victim to many others that are tempted (and it’s easy) to follow paths to try and get quick price appreciation. Also, as with any technology company, the technology is important but also the people are critical. Eric Schmidt is an advisor, and one simply cannot ignore what that means to attract someone who (in part) was responsible for what Google is today.

Chainlink is also playing a crucial role in Real World Asset Tokenization. Capital markets are undergoing a disruptive and transformative phase with the tokenization of real-world assets. Tokenization involves creating a digital representation of tangible assets (whether financial or physical), such as bonds, ETF’s, commodities, real estate, collectibles, energy infrastructure, etc. and of course, money itself which is going digital with the rapid adoption of Central Bank Digital Coins (CBDC’s). The potential size of assets that might be tokenized globally is estimated to be $475 Trillion. That’s a “T”. While the current value of tokenized assets only stands at a few billion today, it is a sign that we are very early in this cycle and megatrend. Tokenization brings many benefits such as efficiency in payment and settlements, reduced latency of money transfer (whether within a country or cross-border), cutting out middlemen, reducing transaction costs, security, and liquidity. Chainlink’s partnership with SWIFT, the global interbank messaging system, cannot be overstated. Chainlink recently completed several successful tests of the transfer of money as well as tokenized assets across multiple blockchains. These successful tests showed that any tokenized asset could be transferred, not just digital money. Global economies function based on the transfer of money in exchange for goods and services. The future of money and value transfer is digital. Chainlink is the middleware that facilitates most (if not all) of this future transfer of tokenized value.

SWIFT also utilizes Chainlink's Cross-Chain Interoperability Protocol (CCIP). CCIP connects various blockchains securely. CCIP is revolutionary since it facilitates communications between any blockchains, but not as a bridge just for token transfer. It allows any two blockchains written in different languages to talk to each other at the individual code level. That is extraordinarily hard to do. In a world where Web 3.0 is likely to have multiple blockchains and ecosystems and have scale based on their own use-cases, connecting them seamlessly is critical for the seamless flow of information. Chainlink's CCIP is the de facto cross-chain standard, enabling different blockchains to transfer value safely. CCIP allows for arbitrary communication to take place at the base level, aka what TCP/IP did for Web 1.0 in transferring atomic level data between any two websites, i.e. the bits and bytes themselves. No other blockchain does this. CCIP’s power cannot be overstated. In a fragmented and likely increasingly fragmented evolution of blockchains, one thing that will be a common denominator is that they all at the core level will have to talk to each other. Chainlink is “the” Layer 0.

Chainlink is at the center of the future world of the transfer of “everything”. Chainlink’s market cap is currently $15 B. Amazon’s market cap is 1.5 Trillion. You do the math.

Avalanche - $AVAX

Here is another Amazon of Web 3.0. Remember Real World Asset (RWA) Tokenization I just mentioned above? Remember this word. RWA is like buying Bitcoin in 2009. The financial sector is witnessing a transformational and seismic shift with the advent of blockchain technology and the tokenization of real-world assets (RWA). This natural evolution of the financialization of “everything” is a disruptive force to traditional finance, paving the way for a more digital, efficient, and inclusive future in asset management.

Tokenization is the process of converting rights to an asset or a company into a digital token on a blockchain. The benefits of tokenization include improved liquidity, transparency, and accessibility, lower transaction costs, faster settlement, to name a few.

There are many forecasts for the future size of the RWA tokenization market but even the smallest is extraordinarily large. Citibank projects that by 2030, the market for blockchain-based tokenization of real-world assets could soar to $4-5 trillion, an 80-fold increase from current levels. Boston Consulting Group forecasts the tokenization of global illiquid assets to become a $16 trillion industry by the end of the decade. A survey by Celent and BNY Mellon showed that 91% of institutional investors are interested in investing in tokenized assets, showing increased demand from institutional investors for this technology and its benefits. The size of global assets that could be tokenized is $475 Trillion. It spans everything from traditional financial assets such as debt, ETFs, currencies, private equity, and venture capital funds, but also physical RWA’s such as real estate, commodities, energy infrastructure projects such as wind and solar farms, natural gas and oil pipelines, and grid scale batteries (to name a few), art, diamonds, and in general any private company.

The most common tokenized asset types currently are stocks and real estate but debt and commodities such as gold are also in the mix. HSBC just unveiled a platform that uses distributed ledger technology to tokenize the ownership of institutional clients’ physical gold held in the bank’s London vault. Tokenizing Gold allows for the easy transfer of this currency. Try shipping a bar of gold to someone. Compare that to sending Bitcoin to someone. There is no comparison.

Avalanche is potentially reaching escape velocity already in this burgeoning field. In late 2022, Avalanche was the blockchain protocol that was used to tokenize asset management firm KKR’s ($504 B assets under management) Health Care Strategic Growth Fund II (HCSG II). Avalanche blockchain was also used in November of last year as part of a proof-of-concept tokenization project with JP Morgan, Apollo Global, and WisdomTree under the Monetary Authority of Singapore's Project Guardian. WisdomTree is a market leader in tokenization, well ahead of any other ETF issuer having tokenized 13 ETF’s. This recent collaboration shows the potential of blockchain, smart contracts, and tokenization to streamline portfolio management, particularly for alternative assets that have faced liquidity challenges for issuers such as large real estate portfolios as well as facilitates access to capital to private issuers to fund their businesses and projects. Tokenization allows institutions to hedge large illiquid portfolios of real assets. Try selling 1 B of real estate? It also facilitates capital raising for everything from renewable energy to small businesses. Banks are not lending due to constraints on credit caused in part, by exposures that were highlighted due to Silicon Valley Bank and others. Tokenization is the grand equalizer that helps facilitate the freer flow of capital without the traditional constraints of current capital markets models. Through fractionalization, it also allows retail investors to participate and invest in asset classes that they don’t have access to since many require significant amounts of capital.

The race for dominance of which blockchain will be at the center of asset tokenization is rapidly heating up. While there may be no “winner-take-all”, Avalanche stands out in leading the pack and is quickly establishing a dominant foot hold in the space and building a moat. The Avalanche Foundation has also allocated up to $50 million. This initiative, named Avalanche Vista, aims to demonstrate the value of tokenization in sectors like equity, credit, real estate, and commodities.

So why is Avalanche poised to become the Layer 1 protocol that will be at the center of RWA Tokenization and not Ethereum $ETH? That is because of the many superior qualities that its blockchain protocol possesses which are must-haves for institutions. Among its many features, the following are the key standouts necessary for institutional investors:

On the back of these recent milestones, the $AVAX token has rallied recently. But it is important to look at the size of the market for RWA. Over $475 Trillion of assets globally can be tokenized. With a fully diluted market cap of approximately $28 B (at the time of writing), while large in absolute terms, the potential value of Avalanche must be viewed in the context of the opportunity and size of market. By those measures, it is early days for Avalanche and other L1’s and L2’s. As John Wu , president of Ava Labs (the firm that created Avalanche) said, “It creates a faster, more efficient way for companies to issue assets, individuals to own them, and everyone to transfer value”. This sentiment was reinforced by CEO and Founder of AVA labs, Emin Gün Sirer, when he said “that the invention of blockchain and digital assets is a game-changing event” and that tokenizing RWA provided “peace of mind, assurance, and auditability.”

So perhaps this protocol’s name is very befitting of its potential. The value of this token is not a light dusting of snow, it’s an Avalanche.

Solana - $SOL

While Ethereum is the dominant Layer 1 and isn’t going anywhere, it is unlikely there will be a winner-take-all in the Layer 1 space. Rather there will be several Layer 1’s that will establish themselves and be dominant players in ecosystems that they are best suited for given their technological solutions. In thinking long term, which I do as I am more of a long-term investor, one of the things that I try to envision is not just the current state of the size of an ecosystem, but what does that ecosystem look like at scale. Layer 1’s of course must contain some key must-haves such as security, decentralization, low transaction costs, instant finality, and a viable crypto-economic model that incentivizes market participants to secure the network and earn an adequate rate of return for doing so which is necessary to support the protocol and ensure long-term viability. Just like people are the life blood of any organization especially in the technology space who must be properly incentivized to work for that centralized company, the people supporting a blockchain protocol must be properly incentivized to work for that protocol in a decentralized fashion. One key must-have of a Layer 1 for it to be successful at massive scale and be dominant in whatever ecosystem it operates in is speed which in turn affects transaction costs that then becomes a self-reinforcing feedback loop that helps the protocol grow in a non-linear fashion. Solana is such a protocol.

While Solana’s speed gives it a superior advantage in terms of speed for many use cases such as DeFi, its recent technological innovation that it introduced called cNFT’s peaked my interest as a game changer in the NFT space giving it a substantial leg up vs other Layer 1’s for this particular ecosystem. And while no doubt Ethereum is working on increasing its transaction speeds with its planned upgrade EIP-4844: Proto-Danksharding which is its first step on its way to full sharding which will significantly increase its transaction speeds and further lower transaction costs, it is a long way away. Solana is already there in terms of transaction speeds. Again, I think about the future which is one of scale, and by that, I mean massive scale.

While NFT markets have experienced their fair share of drama and roller coaster rides, it is early in the days of the evolution of NFT’s, and their use cases will also expand beyond their original role of unique digital images. One such, and potentially much larger use case, is one of digital identity and proof of ownership connecting real-world assets with a digital, and immutable certificate of proof of ownership and authenticity using their unique properties. This use case, as well as potential others, can usher in a substantially larger growth trajectory for this asset class and result in long-term volumes of NFT mints, transactions, and sales to dwarf even the highest peak levels that were reached once they gained notoriety.

I don’t focus so much on the word “NFT”. It can easily be named ABC. Rather I focus on the technological innovation which an NFT offers; one of a unique and immutable one-to-one relationship between a unique asset and its digital proof of ownership which establishes provenance. In a future world where NFT’s represent billions of unique assets that have to be minted and transacted at scale to facilitate the liquid trading of those assets, a technology is needed that can handle that type of volume and at the same time at low cost and high speed. Just like in any market for it to be efficient, scale, speed, and cost matter. NFT’s are no different.

Solana with its recent innovation of cNFT’s might prove to have the competitive edge in the long run as the demand for significantly larger volumes of NFT’s to be minted at reasonable prices materializes. So, what are cNFT’s? Solana, in collaboration with Metaplex introduced a groundbreaking innovation in the NFT space - compressed NFTs (cNFTs). These tokens store their data off-chain and utilize a Merkle Tree for hashing, a feature that significantly reduces minting costs. CNFTs are powered by Solana’s state compression, a feature that allows as many as 1 million NFTs to be minted with just around $110. That’s disruptive. By lowering the costs involved in NFT production, it can potentially promote adoption of the entire space and become an “easy access point” for new people to try out collecting NFTs thereby drawing a wider user base. With lower costs, users might be able to purchase and collect NFTs without having to risk large amounts of capital to acquire large collections. By lowering costs dramatically, Solana may take the edge over Polygon, and Ethereum for that matter since this one critical difference lowers the risk of losing money over NFTs. Facilitating the easy and fast transfer of NFT’s is critical for investors and traders since it provides a built-in risk mitigant which is necessary to facilitate trading. Lowering financial risk for traders and investors will attract capital and that capital is necessary to make any market functional as it attracts liquidity and price transparency. That liquidity and price transparency translates into owners of assets, many of them artists and creators who are relying on this new digital representation of their creative talents to make a living an in turn empowers more creators. I don’t think the world will ever be too long creativity. But beyond creators, any asset owner who wishes to digitally represent their asset whether financial or physical stands to benefit as well from all of the benefits that an NFT or digital certificate of proof of ownership that that NFT provides it will also stand to benefit as well. Magic Eden, a leading NFT marketplace on Solana, has been leading the charge in showcasing numerous cNFT collections and exemplifying their potential.

LayerZero's recent integration with Magic Eden further increases the potential of cNFTs to become the dominant player in the NFT space. LayerZero has just unveiled a "gas abstraction" tool, facilitating seamless cross-chain NFT swaps. This tool, named "Gas Station", was developed in collaboration with Magic Eden and is designed to decrease user friction and therefore adoption rates when transferring NFTs between chains.

It's no surprise that the TVL on Solana has rapidly accelerated from around 300 MM to a current 1.4 B in less than 3 months. And while the TVL on Solana is far from roughly 10 B in November, 2021, this rapid increase is a testament to how this technological change has provided a new regime for what the future potential for Solana could be.

Solana has reached escape velocity as well in my opinion and the future at scale is looking bright for this Layer 1.

The Graph - $GRT

I love data. Data continues to grow at extraordinary and highly non-linear rates. Approximately 328.77 million terabytes of data are created each day. Much of this data is increasingly being stored on various blockchains and again, thinking into the future as a long-term investor, not only will there need to be technology that allows developers and users to query that data but also make sense of it and synthesize that data into meaningful and useful output. The Graph is squarely the blockchain protocol that has firmly cemented itself as the Google of Web 3.0. It too is what I consider core infrastructure needed to maximize the use of Web 3.0.

The Graph simplifies querying complex blockchain data and provides a seamless toolkit for developers of blockchain apps allowing them to focus on building the applications at hand rather than developing their own code to query various blockchains for data that their apps need. Most very successful companies take away pain points and facilitate repeatable processes with a simple and elegant solution to a large problem. Simple of course to imagine but difficult to implement. The Graph owns Web 3.0 search and hence why it’s a monster.

But just like most successful companies start with a simple and focused solution, true massive winners leverage that solution but continue to innovate. Just like Google started with an elegant, powerful, and minimalist interface which allowed to create mass adoption, it continued to innovate becoming one of the largest winners of Web 2.0. Chainlink did the same thing. It began as an Oracle solution bridging off-chain data to confirm and settle transactions on-chain. And just like Chainlink didn’t stop there and has now continued to innovate beyond where it started, so too is The Graph continuing to innovate.

The key innovation that it has recently announced in its roadmap is its planned integration of Large Language Models (LLM’s) and AI to its data and search functionality. And while there is much hype around AI, the hype is not all hype. AI and LLM’s are already proving themselves to be truly groundbreaking innovations that are changing the world for the better. Data is one thing. But making sense of that data (especially at such a large scale) is critical to maximizing the use of that data. Vast quantities of data become useless if there isn’t a way to make sense of it, draw complex and non-obvious relationships from it, and synthesize it into actionable and useful information and conclusions. AI, and in particular LLM’s do just that. This evolution by The Graph is smart and is why I like this as a top pick for my core portfolio of the winners of Web 3.0.

The Graph's roadmap for 2024 and beyond will extend beyond subgraphs to a comprehensive range of data services. The key components of The Graph’s AI roadmap include plans to integrate LLMs to enhance query capabilities, allowing for more sophisticated data analysis and interpretation. The integration of LLMs will enable developers to generate complex queries significantly increasing use cases of data accessibility and importantly analysis of that data. Again, data is only as useful as the ability to draw conclusions from that data. The Graph will also use LLM’s to assist developers to build and optimize their code in querying that data. Here is where AI is not replacing human coders, but rather making them more efficient and enhancing their effectiveness which in turn allows them to build more sophisticated tools and solutions, faster, and in more innovative ways. LLM’s will also allow developers to build more complex knowledge graphs of the vast amounts of data. Data is the raw building blocks of knowledge. Mapping that data and connecting and drawing inferences from it creates knowledge; literally, it makes the vast quantities of data useful and smart and democratizes that knowledge empowering all contributors of that data to benefit from that shared contribution. If just this concept isn’t in the spirit of blockchain itself, I don’t know what is. LLM’s will also be used to curate and verify the data, ensuring its reliability and integrity across the Web 3.0 ecosystem. Finally, LLM’s will help The Graph optimize the protocol itself creating a positive feedback loop and self-learning mechanism much like deep reinforcement learning is used to train robots how to avoid mistakes and learn like the way humans learn themselves. I don’t mean to sound too futuristic but really the holy grail of knowledge is for machines to learn “how to learn” which goes to artificial general intelligence. This can benefit humankind at scale where the shared wisdom of data and societal contributions exemplify the principle that the whole is much greater than the sum of their parts.

The Graph is not just another data play or just another AI play. It is core Web 3.0 infrastructure like the other blockchain protocols that I am betting on without which Web 3.0 won’t work or at least won’t work as well and reach its maximum potential. The Graph is truly the data graph and the graph of knowledge of Web 3.0.

Stellar Lumens - $XLM

There is no doubt that the future of money is digital and on blockchain. Global cross-border payments are expected to skyrocket from USD 190 trillion in 2023 to a staggering USD 290 trillion by 2030. Many countries have launched Central Bank Digital Coins (CBDC’s) with a significant number in planning and/or testing phases. While the well-known stand outs vying for this massive pie are Ripple and SWIFT in partnership with Chainlink, the Stellar blockchain should also be watched. Stellar represents a unique and different approach to international money transfers and financial inclusivity.

The Stellar network enables swift and cost-effective transactions globally. The unique nature of the Stellar blockchain is that it is a peer-to-peer network eliminating traditional financial intermediaries and therefore significantly reducing transaction costs while at the same time achieving this with fast settlement. Stellar Lumens has an average settlement time of 3-5 seconds with extraordinarily low transaction fees. What is unique about this blockchain protocol is that it uses its native token, $XLM to acts as a bridge currency on its Decentralized Exchange (DEX). The DEX allows for the efficient conversion of any currency pair to another even if there is no single currency pair available in the order book. By using the $XLM token as the bridge token of exchange, it decouples the exchange of any single currency to another from the US Dollar for example which is the world’s reserve currency thus preventing any imbalance of global flow and removes the transfer of money across the world from relying on any country’s currency preventing potential imbalances to affect the exchange rate. Since the native $XLM token is a utility token which isn’t controlled by any central authority or government or bank, it removes monetary imbalances from being created by one or more central banks.

Another feature of Stellar Lumens is that it facilitates small-value transactions, and micro-payments which promotes financial inclusion. With so much of the world population either underbanked or non-banked, the Stellar blockchain levels the playing field and empowers individuals from poor nations to transact with each other in a peer-to-peer fashion without relying on large institutions. This is groundbreaking.

Stellar’s technological innovation has led to an international consortium of users and entities adopting Stellar for its efficient and equitable cross-border money transfer capabilities.

Stellar Lumen’s innovative approach caught the eye of The International Monetary Fund (IMF) which recently recognized the potential of digital assets like XLM to be used in cross-border payments alongside Ripple. In a document titled “New Evidence on Spillovers Between Crypto Assets and Financial Markets,” the IMF pointed out the advantages of blockchains like Ripple and Stellar to facilitate cross-border transactions. This really caught my eye. And while Ripple has dominated the news cycle because of its recent win in its case against the SEC, I believe Stellar has largely gone unnoticed which I believe is an opportunity to invest in this crypto at an attractive value relative to Ripple and certainly relative to the size of the cross-border money volume itself.

I think Stellar Lumens could be a monster in the making as the future of money goes digital and its very, very early days.