The Token Fund – Cryptocurrency Initial Coin Offering Investing?
The Token Fund is like an exchange traded fund (ETF) for Bitcoins and altcoins. The fund aims to make it easy for individual investors to participate in the world of cryptocurrencies and blockchain technologies. Here’s everything you need to know about The Token Fund.
What Is The Token Fund?
The Token Fund is an investment vehicle created by Viktor Shpakovsky, Vladimir Smerkis, (both of whom are listed as fund managers) and Evgeny Yurtaev (listed as The Token Fund’s Architect). The goal of The Token Fund is to issue tokens (under the symbol TKN) that allow users to purchase and securely store a variety of digital assets.
Today, there are hundreds of digital assets. Investors understand the value of these digital assets. However, it can be hard to diversify or treat digital assets as a smart investment – especially if you can’t keep up with every new ICO that takes place. Here’s how The Token Fund explains its investment model:
“There are hundreds of digital assets. Choosing representative digital assets to offer cross-section can be a challenge. The Token Fund represents a constantly adjusted cross-section of the new economy with the most potential.”
Essentially, The Token Fund is like an exchange traded fund, an index fund, or a mutual fund for digital assets. Users enjoy low fees and minimal thresholds, making TKN a powerful investment vehicle.
The Token Fund’s Portfolio Composition
Here’s the current breakdown of The Token Fund, as of May 24, 2017:
- Bitcoin: 35.2%
- Ethereum: 27.2%
- Siacoin: 5.8%
- Ripple: 5.1%
- BitShares: 4.1%
- Golem: 2.5%
- Iconomi: 2.3%
- Steem: 2%
- Zcash: 2%
- Waves: 1.7%
- Monero: 1.7%
- Augur: 1.6%
- Melon: 1.6%
- Storjcoin X: 1.4%
- Ethereum Classic: 1.3%
- Aragon: 1.2%
- MaidSafeCoin: 1.1%
- Litecoin: 1%
- Dash: 0.9%
- Blockchain Capital: 0.1%
- Humaniq: 0.1%
Why Wouldn’t Investors Buy These Digital Assets On Their Own?
What’s to stop an investor from buying a portfolio containing all of the assets listed above? Why wouldn’t an investor manage their own digital asset investment portfolio?
There are several reasons why The Token Fund is better than individual investments. First, initial coin offerings (ICOs) are taking place on a near-daily basis. There are hundreds of new coins on the internet. Some of those new coins gain traction and support among the community, while others are glorified “pump and dump” schemes.
The Token Fund’s whitepaper claims they analyzed 100 coins in the first half of 2016. Of those coins, the average achieved yield was 357%, and only 13 coins yielded negative returns. However, they don’t want to mislead investors by focusing on returns, as explained in the whitepaper:
“However, returns can be misleading and expertise in the investment field as well as an understanding of crypto coin content is needed to gain optimal exposure into the crypto investment universe.”
Individual investors might have limited knowledge of cryptocurrency, but they don’t want to miss opportunities related to under-valued digital assets. That’s a problem The Token Fund seeks to solve.
Two Types Of Cryptocurrencies
The Token Fund’s whitepaper splits cryptocurrencies into two types of assets:
Pioneer Currencies Based On Blockchain Technology (Such As Bitcoin)
These types of digital assets act as an alternative for the transfer of wealth across the globe. They’re transparent, secure, and effective currencies. The intrinsic value of these currencies lies in their use as a medium of exchange and as a store of value. The value of these currencies is driven further by the number of transactions and demand.
The closest equivalence to app tokens is company shares. With app tokens, the company acts as a decentralized, autonomous organization. These organizations have become increasingly popular in the last year. Many of these organizations allow users to buy tokens today in exchange for goods and services in the future.
The creators of The Token Fund believe that app tokens “will, with the help of smart contracts, replace the traditional type of services”.
The Token Fund’s Fund Managers
The Token Fund has two fund managers: Viktor Shpakovsky and Vladimir Smerkis. These two fund managers are responsible for the following decisions:
- Making investment decisions
- Providing efficient, transparent, and provable operations
- Ensuring the security of the fund and taking contingency measures
The fund’s investment goals are to focus on solutions “that enable the essential autonomous infrastructure for supranational economy”.
Those solutions include decentralized computation, data storage and communications, decentralized exchanges, investment solutions, prediction markets, pegged assets protocols, cross chain gross settlement systems, identity protocols, DAO and smart contract frameworks, reputation systems, and social networks.
Overall, the fund plans to appeal to conservative investors. However, the fund’s whitepaper cautions that cryptocurrencies have a high volatility – even when investing with a conservative approach. The daily volatility can exceed 10%.
However, there’s a benefit to cryptocurrencies for conservative investors: there’s a very low correlation (in many cases close to 0) when cryptocurrencies are compared to one another. In conventional investment funds, there’s a high correlation between stock prices – so when one asset slumps, assets similar to that asset are also likely to slump.
Rules Of The Token Fund
The Token Fund abides by certain investment rules, including all of the following:
- Only eligible currencies can enter the selection process, which includes currencies based on blockchain technology
- The portfolio should be limited to those currencies which are easily tradable on the exchange on a daily basis, and the average turnover in the last 6 months should not be below $100,000 USD
- After a selection is made, the structure of the portfolio is based on pre-defined rules; rational investors should not be exposed to individual currencies, which is why a maximum weight of 25% should be applied
- The only exception to the 25% rule is with Bitcoin, which acts as a balance to the volatility of the altcoin market; in the case of Bitcoin, the maximum weight in The Token Fund could exceed 25%
The Token Fund Fees
The Token Fund has a unique fee structure where investors are charged an entry fee and an exit fee. However, The Token Fund’s whitepaper does not mention any ongoing fees aside from these two:
When a purchaser wants to enter The Token Fund, 5% of their issued tokens will be deducted to reward fund managers (4% share) and tech support (1% share). The whitepaper also mentions an amount for referrals, although it doesn’t list the share a referrer receives.
When a purchaser wants to exit The Token Fund, 5% of issued Bitcoins or Ether of the payout will be deducted for fund managers (4%) and tech support (1%).
The TKN Tokens
The Token Fund uses TKN tokens. The tokens are Ethereum-based tokens of value.
The Token Fund’s creators chose Ethereum because of its security and predictability as well as its use of robust and well-supported clients. Ethereum is also easy to list on exchanges, and already has infrastructure in place. Plus, Ethereum’s popular smart contracts enable a more transparent and secure way to share profit among token holders.
Right now, the TKN price sits at $40 USD per TKN (as of May 24, 2017). When the fund originally launched, the value of one TKN was $10. The fund has been largely fueled by the spike in the value of Bitcoin.
How To Join The Token Fund
You can join The Token Fund at their sign up page.
Should You Invest In The Token Fund?
The Token Fund appears to be a legitimate investment opportunity. The fund plans to invest conservatively – although it will still be subject to the inevitable vulnerability of the cryptocurrency markets.
So far, the fund has achieved a growth of 300% USD since launch (between just March 27 and May 24, 2017), which has largely been fueled by a 65% increase in Bitcoin. As it stands now, The Token Fund has been very successful.
Watch for more information about The Token Fund to appear online over the coming months as it continues to grow.