Two Prime brings institutional-grade crypto asset management

0:01i'm ashton addison from event chain for investmentpitch media and fintech news network and today on blockchain interviews we have alexander s bloom the founder and ceo of two prime alex welcome to the show it's a pleasure to have you here today hey likewise ashton glad to be here great well let's kick off the interview by learning a little bit about two prime

0:21for those who don't know and exactly how you're bridging traditional finance and cryptocurrencies yes so you know broadly to prime is a fintech company that's creating financial products that blend aspects of traditional investment along with unique structural features of of cryptocurrencies um it's founded myself and my partner dr mark fleury mark previously

0:47uh founded an open source software company called jboss that was acquired for 350 million dollars in 2006 and he lets me hang out with him sometimes i've been working in the blockchain space and in traditional and crypto hedge funds and vc funds uh since 2013 uh prior to that i was in in the peace corps but um yeah the interest of two prime of this first product we have called ff1 is

1:10basically a global store of value that's both available on cryptocurrency exchanges as well as in a private investment vehicle um so it's pretty much globally accessible it's a liquid product it is backed by a basket of blockchain assets that we invest in from leading cryptocurrencies to lp interests and venture funds uh to other interest earning investments lending a variety but it's

1:33sort of a portfolio management approach to a massive assets that supports the price of a publicly traded token but because there's also a finite supply when people buy more of it the price goes up because there's more people wanting the same thing on a market um so that's kind of the you know general overview of what we do it's there's some similarities to something

1:54like grayscale bitcoin investment trust um but with a different basket of an actively managed portfolio underlying it rather than uh just like bitcoin yeah that's very interesting and i want to dive into the stable growth part of it because you know in a little bit here but in terms of uh fundraising and talking about the financing for for blockchain companies

2:15uh the approach that two prime is taking is a little bit different than what's been happening in traditional finance or uh traditional crypto of what happened in 2016 2017 with you know icos and stuff can you talk about you know how to prime is trying to reinvent that and take it to the next level and hopefully bring more you know professionalism and

2:36regulation into merging crypto and traditional finance together yeah so i think you know one aspect of what we've done is just the way the thing is sold uh is we call it this continuous token offering but uh i guess as opposed to you know traditional ico you would see first of all you have a token that represents basically nothing and no ownership of anything no legal claim on

2:59anything no assets underlying it other than you know this abstract concept of network value and then a lot of those tokens are sold privately at massive discounts like 80 90 in some cases to fund just getting onto an exchange getting the basic tech made and then the thing goes on a public exchange it's sort of like a super early stage ipo the price goes way up all those people that bought

3:22it at 90 discount get uh their money out and the people that are retail buyers get left holding essentially vaporware in some cases and so we saw this repeated over and over uh in the crypto space years ago uh which ultimately is damaging and you know gives people a bad taste in the mouth and they have no more money to participate and kind of re-validates a lot of suspicion

3:45and fear around the industry and so yeah for us we've uh basically we only sell into the the market as there's demand for it and so the goal isn't like a one day huge value growth or like huge sale and then we disappear but just an incremental increase in sales and demand through information on the treasury investments underlying it as well as just marketing

4:08and and advertising but we didn't sell any tokens at any discount prior to just listing on bit thumb exchange at three dollars and then we just continue to wait for people to sell it obviously like right now it's trading at four dollars and 51 cents i think as of this morning and you know if somebody buys a few thousand dollars more it'll trade at 452.

4:30and um it's just kind of incremental sales based upon real demand rather than hype and marketing and these asymmetric uh access to to the investment prior to a public trading listing and the other thing is with you know we don't have we're not a tech company we're not uh mark i worked and studied at mit as a phd in theoretical physics i also uh attended mit and tufts university and

4:56i have a tech background but part of our insight is also that a lot of the innovation and and things that are actually working in the crypto space are not the thousandth and first blockchain that is really just kind of a marketing and narrative i think in a lot of cases to excite people about something new but instead is really financial innovation around better stores of value

5:16transnational movement of currency um and rapid fundraising and so when we sell a token the proceeds of that sale goes into a basket of assets that are just used to support the price of the token it doesn't go to my pocket it actually doesn't even belong to me it belongs to a treasury that we just manage so those are some differences from a regular like ico approach

5:41definitely and there's been a lot of flaws and you know self-regulation sort of with that uh the old ico offerings and there was always that dark period where they raised funds and then it's almost like the team disappeared and you know you hope that they're working on the project but they sort of have all the funds up front you know for all of the future rounds that they could be

6:01doing whereas with two prime you're going for more you know as an analogy you know raising a seed round a small amount and then as you get to the point of the next milestone series a and series b then you can raise more and you're saying that this creates more stable growth in the token or the coin you know can is that sort of the correct analogy for it

6:26yeah so i think you know it's sort of a hybrid between something like a stable coin and bitcoin so in the case of bitcoin you know it's basically pure sublime demand dynamics that dictate the price there's no underlying asset that gives bitcoin value it's just scarcity and demand uh and there's you know some innovation around the way that's transferred and secured

6:45on a blockchain but uh there's nothing that gives it value other than supply and demand dynamics and on the other side of it you have something so as a consequence like because the value of it is not tied to like some nav or some underlying asset if you have the same supply and growing demand the theoretical limit price of bitcoin is infinity right like

7:07if everybody wants it is willing to pay more for it and there's nothing to other than demand to value it it could go up to anything yeah as same time you sound like a stable coin which is completely backed by an asset or at least they you know claim to be but they also have infinite supply so every new dollar purchased of you know usdc or gusd or tether creates a new tether token

7:30representing a dollar right and the goal is to state a dollar but the price is never you're never going to speculate really on the price of the usdt it's supposed to be at a dollar if it wasn't something to be you know really wrong so what we've done is take that finite supply aspect of a bitcoin and combined it with the asset backing of something like tether or other you

7:50know basket of blockchain investments and combine those together into something that both has asset backing so anytime we make a sale it supports the price and we have like if somebody wants to buy back sell back their token we have that cash is sitting in a treasury to support that and at the same time um because there's finance applied the price can go up as there's

8:09increasing demand it's not not too different from like a um like what curve finance or uniswap or some of these uh algorithmic market makers are doing um it's just that the proceeds are going to a basket of assets rather than just being held as ether bitcoin directly yeah and this is quite a unique approach and it seems like you're trying to or it may create a new wave

8:35uh you know across the industry and i'm sure you see this as a more professional incredible method of fundraising do you think that the blockchain industry will start or should start adopting these methods of fundraising yeah i mean i guess it depends what your goals are i mean if you're a our goal is to create something that holds value well and can be accessed

8:59globally and prove out this model of finance supply and so that's you know it's more financial innovation if your goal is to make a blockchain that does something that hasn't been done before then you need financing to develop technology which is expensive you need to hire a bunch of people uh and there might not be revenue returning for that business proposition

9:18for some time and so uh for what we're doing it works well and i mean it depends on the kind of use case you're looking for we're interested in the kind of financial structural aspects of of the way crypto works and provides global access to a a product um but uh i think if you were i mean i think there's a reason like in the vc world there's stage funding based upon

9:40milestones and progress and i think uh it's a question of incentives like if i have a billion dollars to create a tech company because i want to be a billionaire but i have all the billion up front i don't have a lot of motivation to like make all the tech i've already gotten to the end point it depends if you're intrinsically extrinsically motivated but

10:00uh it's certainly for most people is a different incentive structure if you just have a ton of money all of a sudden especially if you're you know i think a lot of people that are young and trying to innovate it's not you know part of it is a profit or a financial incentive to to change their lives and so if it's changed suddenly like why would i give that money back to make something

10:19and so i guess it just depends on what you're trying to achieve but uh stage financing in our case like a rolling sale of a product uh i think in some cases is just makes a lot more sense definitely and there already has been billions of dollars that have been raised for blockchain companies in you know the more self-regulated way and this method really wasn't

10:39too much of a part of it but even though billions of dollars were raised it seems like we're a long way away from mainstream adoption you know is the methods of fundraising that two prime is using a part of one of the stepping stones of getting to mainstream adoption and also do you have any other points about what else needs to be done in the industry to

10:59reach more mainstream adoption yeah so i think the first question is like what does mainstream adoption mean uh because obviously when we're talking about blockchain we're talking about there's a financial layer as well as a technical layer and so if it means like we're using and tracking all of our data for our health care and supply chains and stuff on a blockchain

11:20uh obviously there are technical innovations around scalability um just coordinating systems like i think one of the issues is like if i run a supply chain company and my competitor wants to share data i'm not really that incentivized to have this open public blockchain ledger to share all the activities of my business with my competitor so it's hard on a social

11:40level to orchestrate some of the uh technical possibilities but on a financial level you know i think we see a lot of money moving to a digital realm um and you know the mainstream financial system becoming more and more sort of structurally unstable and so uh you know i think it's sort of you know it's an interesting kind of struggle between sort of human authority around like this

12:06is a government we make rules we're going to use these different tactics to affect the economy versus an algorithmic approach that says i don't we are not the government we are a computer program and our authority comes from logic and reason people some of that is a transition of belief from human leadership to algorithmic decision making um so i think that's a hard leap to make like

12:27it's a lot easier for me as a most people to believe in a leader and follow a human just as mammals than it is to follow uh some abstract idea around a bitcoin or a blockchain that most people don't understand and so i don't know i think it's an interesting conversation that's going on in society right now um and i think what we're doing i think sound like financial products that you

12:50know don't screw people over that makes sense and can be explained to people and can at least keep a pace of inflation and solve problems as far as you know our goal isn't to do a thousand x return it's uh to give people a place to put money safely that can at least grow a pace with inflation um and so i think that that serves there's a ton of money in the world floating

13:12around looking for safe places to go some it's people in like venezuela that have the hyperinflation and just want somewhere else to put their funds and then there's very wealthy people that just don't want to lose their money their goal isn't to triple their money i think bill gates is perfectly fine with the wealth level he's at and so i think both of those

13:28groups we can solve a problem and i think the more problems we solve as an industry the more there's mainstream adoption mm-hmm yeah and it's interesting you mentioned the you know there's a bit of structural issues going on with the american markets right now and a lot of people are trying to figure out where to put their money and bitcoin was born in the last

13:47financial crisis you know the 2008 crisis and now here we are in a you know potential potentially even bigger crisis and cryptocurrencies have been moving quite a bit so far in 2020. you know do you have any thoughts on is now the time uh now that we're in another crisis that you know bitcoin is ready to take the next stage and are there any things in the traditional

14:08markets that may be triggering this yeah so you know our group is bullish around uh the performance of bitcoin or i mean even more so right now i'm interested in the performance of ethereum i think it looks like like the bitcoin to ethereum ratio of of what their prices are it looks like ethereum's increasingly breaking out and grabbing more

14:34market share or reducing bitcoin dominance so you know that's coming from a few factors one is actual development and innovation within the space actual um increase in institutional purchases as we see at groups like great scale that are you know selling more shares at grayscale by aum than bitcoins are being created and so there's supply demand dynamics that are

14:56accelerating uh technical changes around like proof of stake for ethereum 2.0 that are upcoming as well as a lot of the d5 products that are coming up allowing people to basically leverage and do yield farming in innovative ways that both avoid regulation and uh allow for this sort of uh super leveraged financial system to start to emerge which is pretty risky but uh also further

15:21extends the use case of ethereum i think all those things are bullish indicators for where where the market's going obviously the happening happened with bitcoin as well recently um so i think all those things are positive and then on top of that the like quantitative easing of just tons of trillions of dollars of new money entering the system from multiple

15:38governments throughout the world well it has to go somewhere you know it's not being released directly uh injected into the economy through bitcoin but some of it will trickle down there and when you have consistent supply and growing demand growing amount of uh cash for it then like there's only one thing that you know happens i don't know the timing of that and there's

15:58obviously other factors for example there's a lot of traders and investors that pull a lot of that value and profit out through arbitrage through short-term trading high-frequency trading that you don't see realized into the profit of bitcoin but are being injected into the bitcoin economy and basically taking off the table almost immediately from traders but

16:19there's definitely movement and a lot of fundamental indicators that suggest the price would continue to move upwards for both bitcoin and ethereum at least in the short to medium term yeah it's very interesting times we're in right now alex and we're running out of time for the interview but if the viewers are looking to learn more about two prime fundraising methods

16:39or reach out to you and connect with the uh your project what's the best way for them to learn more yeah so you can go to our main website two prime two prime dot io you can follow us on twitter to underscore prime you can follow me on twitter at just like my name there at alexander s bloom we'll also be launching a direct to consumer purchase of the token out on our new

17:04domain back that assetup.com uh starting the first week of august i i'm very proud of that that pun uh so uh those are good places to get started we have a telegram group two prime as well um and you can always email info at two prime.io great well i will leave those links in the description box below for the viewers thanks so much for taking the time alex

17:26i do really appreciate it all the best with two prime and uh let's follow up in the near future pleasure to speak with you thanks