Singapore, SINGAPORE – Bitcoin and Ethereum may be well down from their late 2017 highs, but for savvy investment managers at crypto hedge funds and venture capital firms, their portfolios are well up with returns in excess of 20 times of U.S. dollar investments in some cases. And even though the bulk of digital tokens have come off their highs in dollar terms, up to June 2018, some initial coin offerings (ICOs) were still delivering to their investors no less than 100 percent on their dollar invested amounts.
Unsurprisingly, the bulk of blockhain projects that have done well and continue to do well in 2018 are tech heavy and have strong business and tech teams. Here’s a countdown of the Top Ten ICOs which raked in some serious returns for their investors.
10. Kyber Network
Starting off our countdown is Singapore-based Kyber Network. Founded by Vietnamese PhD student Loi Luu during his stint at the National University of Singapore, Luu’s Kyber Network allows the “instant exchange of digital asset such as ICO tokens as well as cryptocurrencies like Bitcoin and Ethereum which have greater liquidity. While similar to the 0x project, it performs all its actions on the blockchain, while 0x splits functions to on-chain and off-chain components. And while centralized cryptocurrency exchanges are constantly under fire for their security vulnerabilities and sluggish processing times, where it can sometimes take days to withdraw funds, Kyber Network provides a decentralized, on-chain cryptocurrency exchange without the cumbersome order book, allowing secure, near instantaneous cryptocurrency trades at minimal cost.
Kyber Network is backed by Pantera Capital, the only U.S. fund invested in Kyber Network’s ICO, South Korea’s #HASHED, Kenetic Capital, Hyperchain Capital and Signum Capital, delivering for these funds between 1 to 10 times their initial invested amounts in dollar terms.
Entering our countdown at No.9 is another Singapore-based company, Bluzelle, a decentralized data storage and management solution or Oracle for the blockchain if you will. With Bluzelle, developers and regular users can store data for their applications on its distributed network, offering a more flexible and ultimately more secure model than current cloud data storage and management applications. By ensuring that the database does not exist in one location, it negates the possibility of a centralized point of attack for hackers as well as provide the database infrastructure for the next generation of the internet.
Essentially, Bluezelle connects consumers wishing to rent excess database space from providers with additional computing resources. Using this data storage decentralized applications or dApps and application developers alike can optimize their products by accessing reliable data when necessary and storing their data on a secure, decentralized platform. But more importantly, database storage providers can earn BLZ and BNT (the two tokens on Bluzelle’s network) as compensation for providing that storage. Despite what appears to be competition from other file storage protocols like Siacoin and Filecoin, these companies are targeting the consumer market, whereas Bluzelle’s offering is probably more suited for enterprise applications. The lack of an obvious competitor has been a boon for Bluzelle. And its early investors have cashed in handsomely.
Kinetic Capital and #HASHED both took part in Bluzelle’s ICO, delivering between 1 to 10 times their initial invested amounts in dollar terms.
Another Singapore-based entrant into our countdown at No. 8 is Aelf, a decentralized cloud computing blockchain network that features parallel processing and nodes clustering to enable scaling. Aelf is building a customizable operating system specifically for blockchains by focusing on two primary innovations, side chains and a unique governance system known as a delegated proof-of-stake consensus system for more adaptable governance. The blockchain is a decentralized, immutable ledger, but the side chain allows Aelf to run smart contracts on the Aelf platform, which allows for enormous flexibility. For instance, the main blockchain could have Bitcoin branching off as one side chain, with another side chain for asset exchanges and another for other asset types. Side chains themselves can be further subdivided into sub chains foe each type of asset and each of these sub chains can be broken down even further. Theoretically, there’s no limit to the number of divisions possible.
Aelf’s strategy is very similar to Ethereum’s proposed sharding technique, which will allow for a greater throughput of transactions and at a faster rate. Separating the entire platform into side chains ensures that bloating in one side chain won’t affect the entire network.
But because Aelf nodes need to record data from numerous side chains on the main blockchain, normal proof-of-work (Bitcoin and Ethereum) or proof-of-stake consensus algorithms won’t work, which is why Aelf uses a delegated proof-of-stake. In a nutshell, by Aelf token holders are able to vote on which nodes (that secure the blockchain) become mining nodes and in return the elected nodes decide how to distribute mining bonuses to the other nodes and stakeholders, democracy for the blockchain to some degree.
More relevant however is that HyperChain Capital, Node Capital, Signum Capital, FBG Capital and Draper Dragon made close to 10 times on their dollar investments in the company.
ICON is creating one of the world’s largest decentralized networks to allow various blockchains to interact with each other via smart contracts, which has put it at No. 7 on our countdown. After the invention of Bitcoin, there has been no shortage of new blockchain protocols each addressing specific or generic shortcomings of the Bitcoin blockchain. Recognizing that the blockchain world of the future will need greater tools for communication between the various blockchain protocols, ICON is looking to provide a platform where players from financial, security, insurance, healthcare, education and commerce can coexist and transact on a single blockchain network.
Founded by South Korean fintech company Dayli Financial Group, ICON has attracted no shortage of South Korean companies to its protocol, including some of the biggest names in technology like Samsung and ubiquitous chat app LINE as well as Sentinel Protocol, which provides security for individuals, secures cryptocurrency exchange wallets and payment as well as incentivizes blockchain security professionals to become white hat hackers. ICON has drawn in a slew of some of the most promising South Korean blockchain companies to build dApps on its protocol, many of which are geared to deal with issues specific to the lives of South Koreans. ICON ranks consistently within the top thirty cryptocurrencies, providing its South Korea dApp developers sufficient liquidity to run their dApps.
Backers of ICON’s ICO made some serious returns, between 10 to 20 times their dollar investments. Among that list of investors is Kenetic Capital, #HASHED, Pantera Capital, Bitmain and Crosschain, which puts ICON at our No. 7 spot in our countdown.
An open, permissionless protocol allowing for ERC20 tokens to be traded on the Ethereum blockchain using a decentralized exchange, 0x was founded in late 2016 with the goal to tokenize such assets from stocks to currencies to precious metals and enters our countdown at No. 6. 0x features off-chain ordering books with on-chain settlements and transactions on the Ethereum network. To understand why the on-chain, off-chain features of 0x are so important, we first need to understand the benefits and challenges that arise with storing data on the blockchain. The blockchain is a decentralized, or to be more accurate a distributed ledger, meaning that everyone running a node in the network has the exact same ledger stored on their local machine (provided the ledger has been updated). This ledger contains all the transactions that have been validated and put into a block, with transactions basically just a record of who sent what to whom and under what circumstances.
That everyone has access to the data is a big advantage because it allows for transparency and accountability, but that comes at a price as every transaction in the blockchain has to be paid for, to ensure the stability of the network as a whole. Because every transaction is excuted on every machine in the network, slower or smaller devices need to be able to validate a block with the same speed as well as store the same data as a server-sized client does. Transactions with a big amount of data slow down the network, because other transactions cannot be executed in the same block. One way to deal with this is the 0x way. To store hashes on the blockchain instead of data, in other words, the data should be encrypted before hashing it an the proof will be done off-chain through conventional methods, this can help to avoid the costs and pollution of the blockchain. So because 0x puts the order books (the queue of buy and sell) off the blockchain, it doesn’t get clogged up (in theory) and with only the most important transactions such as settlements, on the blockchain, thus increasing efficiency and maximizing resource usage.
The San Francisco-based company, counts its investors as Kenetic Capital, Polychain Capital, FBG Capital, Pantera Capital, MW Partners and Blockchain Capital, returning between 10 to 20 times their dollar investments.
China-based Ontology enters our countdown at No. 5 and is intending to create a revolutionary platform that will enable businesses without prior knowledge of distributed networks to use blockchain technology. From a development perspective, there’s currently no easy way for developers to integrate blockchain into their existing software infrastructure without extensive knowledge of blockchain technology. In other words, there aren’t any easily downloadable plugins or ready-made modules that a programmer new to the blockchain can rely on as a compiled library of resources. But Ontology is looking to upend all that, by creating a flexible design structure that is modularized, pluggable and easily expandable for its blockchain.
To understand Ontology, one first has to understand NEO. NEO, often dubbed the “Ethereum of China,” regularly ranks as one of the top five blockchains by the Chinese government. Backed by Alibaba’s Ant Financial, NEO co-founder Da Hongfei is also the founder of Ontology, a company dedicated to developing blockchain systems. At the launch of Ontology in New York City late last year, Da Hongfei was quoted at the launch event saying,
“Ontology and NEO will build a broad ecosystem using blockchain and other new technologies to serve the real economy.”
And while NEO does not own Onchain, the maker of Ontology, it is very similar to NEO, something which NEO co-founder and Ontology co-founder Da Hongfei has had to clarify in a YouTube interview,
“First, I need to clarify that NEO and Onchain are separate entities, so Onchain doesn’t own NEO, or NEO, Onchain. They are separately funded – NEO is funded by the community, and Onchain is funded by a very famous financial group in China, Fosun. They bought a lot of insurance companies and banks in Europe. So they are separate.”
“Second, Onchain benefits from the NEO ecosystem. The product, called DNA, is very similar to NEO, but it is written in the Go language. OnChain is helping other blockchains and financial institutions to build their blockchains with DNA. It’s basically very similar to NEO, and in the future, with NEOx (the cross-chain protocol) everything can be linked together.”
So Ontology is building a platform that will have the backing of what is likely to become one of China’s biggest blockchain protocols, NEO. Ontology is also looking to solve the issue of privacy protection, untapped data value, data management monopolization and ineffective identity authentication as well, through its multi-chain trust ecosystem that essentially provides four layers of trust.
But key to Ontology’s success is its intention to make the blockchain easily pluggable by existing companies, for instance Facebook, which after the Cambridge Analytica scandal, has been driving hard to restore users’ trust in the social media giant. Fake news also has the potential to be solved by Ontology which could potentially become the go-to source for verifying the accuracy and authenticity of identity and ownership.
Given that trust and authenticity are in short supply globally, Ontology has delivered some spectacular returns to funds and investors who took part in its ICO, with Danhua Venture Capital, #HASHED, Sequoia Capital, all racking up gains in dollar terms well in excess of 20 times.
Tether has a bad reputation for supposedly not having the dollars to back up its USDT token, a charge the company has been trying to dispel for some time now, to limited effect. Entering at No.4 in our countdown is Maker, a smart contract platform that is offering a stablecoin substitute to Tether, known as Dai. Maker is a smart contract platform that controls and sells Dai and stabilizes the value of Dai to one U.S. dollar using collateralized Etheruem smart contracts.
Unlike Tether, Maker offers its transparent stablecoin on its fully inspectable Ethereum blockchain. But just to keep things interesting, Maker issues two coins, Makercoin, which is a volatile token that is used to govern the Maker Platform and Dai which is a price stable coin pegged to the dollar and suitable for payments, savings or to act as collateral, essentially the dollar on the blockchain. Dai offers a stablecoin for gambling, financial markets, international trade and transparent accounting, without the need to trust the Maker Platform that each Dai is backed by collateral, because that information is already placed on the blockchain, unlike Tether, which still requires trust that it has the dollars it claims to have.
And unlike Tether, stakeholders in the Maker Platform use the Makercoin to vote for the risk management and logistics of the Maker Platform through continuous approval voting. Every Makercoin holder can vote for any number of proposals with the Makercoin they hold, as well as submit new proposals. Voters can withdraw or cast votes for any proposal at any time and the proposal that has the most votes from all Makercoin holders becomes the “top proposal” which can be activated to implement changes to the risk parameters of the system. Dai’s governance is also more decentralized than Tether, because Dai can only be created and destroyed by individual stakeholders, unlike Tether which is controlled by the company.
Maker has been hugely successful in large part because it got the economic theory of a stablecoin right for the blockchain and has delivered phenomenal dollar returns for its funds and investors. Being a dollar-based stablecoin has delivered Maker’s U.S. investors, Polychain Capital and Andreesen Horrowitz in excess of 20 times dollar-based returns.
Entering the top three is another Singapore-based payment services firm, OmiseGO, founded in 2013, which operates in Thailand, Japan, Singapore and Indonsia. A white-label digital currency wallet and smart contract platform for ERC20 digital tokens, OmiseGO uses a proof-of-stake algorithm and is a decentralized bank, exchange and asset-backed blockchain platform. Remittance is big business, particularly in Southeast Asia which has a high percentage of migrant workers and up to 10 percent of remittances are lost through transaction fees. OmiseGO’s goal is to change all that by providing a universal remittance bridge to interconnect fragmented payment processors through the decentralized blockchain. Currently a single remittance can go through as many as eight intermediaries before arriving at its intended recipient. And the large unbanked population, particularly in the developing world, is beholden to centralized payment networks with their high fees. By creating digital wallets which allow fully decentralized, peer-to-peer value exchange on an Ethereum-based blockchain, OmiseGO intends to provide financial services to the so far unbanked and forgotten majority of the world.
OmiseGO is also owned and operated by its users and token holders and not Omise, a venture-backed payment systems company. But Omise, has made available its substantial established database of financial services to both OmiseGO users and developers. Omise has substantial networks, being a payment processor for giants such as Alipay, the digital payment giant owned by Alibaba as well as recently signing a partnership with fast food giant McDonald’s and the Thai government to roll out e-payment systems.
OmiseGO has turned in stellar returns for its investors, with no less than 20 times dollar returns for HyperChain Capital, Kenetic Capital, Signum Capital, #HASHED and Pantera Capital, with Pantera Capital enjoying the privilege of being the only non-Asian fund to have invested in OmiseGO.
QTUM, another Singapore-based firm comes it at No. 2 in our countdown of the top ten returning ICOs to June 2018. QTUM attempts to bridge Ethereum’s smart contracts atop Bitcoin’s stable and secure blockchain while utilizing the more energy efficient proof-of-stake method to secure its blockchain. Qtum is also about accessibility. Recognizing early on that the future of blockchain technology lies in widespread adoption, QTUM will focus on implementing tools, templates and other plugins that make it easier for businesses to build and execute smart contracts.
One of the biggest current difficulties with Ethereum-based smart contracts is that while they are extremely versatile, using the Solidity programming language on which Ethereum is based can lead to unforeseen and unforeseeable weaknesses and security vulnerabilities in its smart contracts, something which Qtum is seeking to address. QTUM is an attempt to mesh the best parts of the world’s current two favorite cryptocurrency blockchains, Bitcoin and Ethereum, making smart contracts easier and more secure while allowing for interoperability between the two. In addition, QTUM can piggyback on new development in the Bitcoin and Ethereum development communities while allowing for smart contracts built on Ethereum to easily port over to QTUM.
There are myriad applications for smart contracts, but QTUM has focused on business applications with the goal of transitioning legacy corporate system to blockchain-based solutions that will increase automation and decrease cost. And while most blockchain solutions still require a degree of sophisticated specialized blockchain knowledge, QTUM plans to make the transition, particularly for legacy companies with legacy IT departments to onboard the blockchain in a frictionless manner.
The versatile nature of QTUM has sprouted such blockchain equivalents of internet companies such as BitClave, a blockchain-powered search engine that seeks to deliver superior search results while rewarding users for leaving the breadcrumbs of their search data behind and Qbao, a decentralized social network akin to Facebook and WeChat. Medibloc uses the QTUM protocol to improve the healthcare experience and better manage healthcare data while CFun seeks to create a tokenized creativity platform to better manage intellectual property rights.
QTUM counts among its investors, HyperChain Capital, Kenetic Capital and #HASHED and has delivered them returns well in excess of 20 times in dollar terms.
While Ethereum’s co-founder Vitalik Buterin has long been discussing sharding for the Ethereum blockchain, Singapore-based Zilliqa had already achieved the technology some time ago. The first public blockchain designed to implement sharding, which allows for linear scaling of the blockchain, Zilliqa is the diamond in the rough that venture capitalists are always on the lookout for, which is why it tops our countdown of the top ten ICOs.
To understand the importance of Zilliqa as a technology, its important to think of the blockchain as internet bandwidth, Zilliqa is in essence, doing for the blockchain, what fiber-optic cables did for the internet. Bitcoin currently can’t process all the demand for its network and transaction fees have risen accordingly while Ethereum’s transaction fees increase according to the size of the smart contracts placed on its blockchain. One of the biggest beefs with the blockchain is the number of transactions it can handle per second. Bitcoin can handle a paltry 3 to 4 transactions per second, while Ethereum tops off around 10 to 12. By comparison, Visa handles as many as 45,000. But Zilliqa’s sharding solution works and using its solution, there is theoretically no limit to the number of transactions Zilliqa could process per second.
The secret to Zilliqa’ success is how it fundamentally changes the way in which the blockchain reaches consensus. The blockchain is secure because it works off consensus, meaning that the more votes or consensus are required, the more complicated the voting mechanism becomes and the fewer transactions can be processed, simply because to reach a majority consensus, you have to ask more parties to achieve consensus. Zilliqa addresses this difficulty by fundamentally altering the DNA of the blockchain, using sharding. Think of it as splitting the work of coming to consensus. Because its always easier to come to a consensus in a smaller group (except when it comes to picking a place for lunch), Zilliqa divides the work of running the consensus into smaller consensus nodes, with each group of 600 nodes being called a shard. When a block of transactions comes down the pipe, instead of all the nodes on the blockchain verifying that transaction, each shard processes its algorithmically assigned transactions into a microblock in parallel with the other shards. At the end of the parallel processing period, these microblocks get combined into a full block that’s added onto the blockchain.
Zilliqa also uses a hybrid consensus model to secure the blockchain. Instead of using proof-of-work to take part in the consensus mechanism, Zilliqa uses proof-of-work only to gain entry into the Zilliaq mining process. Once a mining node has used the proof-of-work to establish its identity, it gets assigned to a shard and within the shards, Zilliqa uses Practical Byzantine Fault Tolerance to achieve consensus. The Byzantine Generals problem is an agreement problem in which a group of generals, each commanding a portion of the Byzantine army encircle a city and in formulating a plan for attack, need to come to a consensus on coordinating the attack. The problem is complicated because the generals are physically separated, relying on messengers who may deliver false messages or fail to deliver the message and the generals themselves may be loyal or traitors and may or may not act on the orders. Byzantine fault tolerance is achieved if the loyal generals have a majority agreement on their strategy. Zilliqa improves on this by adding a practical layer. Once a node has proven its identity, it get assigned to a shard, if most of the nodes on the shard agree on the miniblock, it has finality, or no-forking.
Zilliqa isn’t the first decentralized ledger to implement Practical Byzantine Fault Tolerance, with IBM’s Hyperledger and NEO also using a form of the consensus mechanism. But Zilliqa did however create its own programming language known as Scilla to separate state and function. Scilla draws a distinction between the communications aspect of a contract, depending on the actual computational work that the smart contract is doing, whether it is transferring funds or calling on another contract. Scilla helps by being a functional programming language that is more standardized and secure and because it isn’t Turing-complete, meaning it won’t support applications that need particular types of loops or conditional statements, it’s incompleteness is important for security as it allows it to be subject to formal logical proofs.
For all the technology and innovation behind Zilliqa, its extremely brainy team struggled to raise funding in the early days. With the technology behind sharding so new and venture capitalists struggling to wrap their minds around the blockchain, many bigger-name funds passed on investing in the company, but funds like FBG Capital and Kryptos Associates were early investors and saw the potential in helping the blockchain to grow as well as Zilliqa’s technical capability. Since then, other funds and investors have poured into Zilliqa, delivering in dollar terms, returns well in excess of 20 times for their investors, including HyperChain Capital, Kenetic Capital, Polychain Capital, Danhua Venture Capital, Signum Capital, MW Partners and Crosschain.
Because Zilliqa is the quintessential “Facebook” or “Google” of the blockchain era, it enters our countdown at the No. 1 spot, having defied the odds to emerge (albeit momentarily) as a blockchain unicorn (companies whose tokens are valued over US$1 billion).
Bank on the Blockchain Not on the Hype
Venture capitalists and hedge fund managers are savvy, but that doesn’t mean that they’re not immune to hype and projects which cannot deliver. Slick marketing and charisma can overcome even the most seasoned investor, especially where new technology is involved. Theranos stands as a good example of a case where even the most storied investors were caught off guard. But in the cases where fund managers tempered their business sense with a strong technical analysis of a project’s underlying technology, returns for their investors have been nothing short of astronomical. And while venture capitalists are only looking for that one or two blockbuster hits out of every ten invested companies, hedge fund managers have different mandates which necessitate their consistent returns on the projects they invest in, requiring them to examine far more closely the technical prowess of a project’s team, well beyond inspecting their GitHub repositories and commits.
Interestingly, many of the most successful projects were headquartered or founded in Singapore, even if their founders and teams were from other parts of the world. Singapore has managed to find the sweet spot in creating an ecosystem of investors, entrepreneurs to support a vibrant community, which has allowed it to consistently rank among the top three places in the world for ICOs and it comes as no surprise that some of the top performing crypto hedge funds have offices there.