“Bitcoin is ingenious and blockchain is important but Bitcoin has not unique value at all” - Warren Buffet speaking to CNBC’s Becky Quick in February 2019
When this interview came out I was bullish on blockchain as a technology, but I was still looking to fully understand its real value as an investment. My first thought while watching the interview was: Is Buffet right about the unique value of Bitcoin, and more in general about the real value of blockchain and cryptocurrencies?
I grew up studying Warren Buffet’s strategies, I applied the Value Investing principles of Graham / Buffet to analyze opportunities in the stock market and I always took for granted Warren’s opinions on investments. But after this interview I had one goal: to better understand blockchain (cryptocurrencies, protocols, applications) as a financial opportunity to analyze what is the real value behind, if one.
The first time I’ve heard about Bitcoin and cryptocurrencies I was a business student and few months later I started my internship in investment banking. My mindset was all about value investing. I tried to apply the value investment framework to Bitcoin at the beginning, but I wasn’t able to make a forecast about bitcoin value due to lack of information and my inexperience with blockchain technology.
Few years later I radically changed my professional career, becoming a developer and a tech entrepreneur. As a developer I had the opportunity to dive into blockchain with a different view: not only as an investment opportunity but as a radical innovation in computer programming. I was excited by the disruptive potential of the blockchain technology and how fun was to build decentralized applications.
The first time I’ve heard about Ethereum was in 2016 when a friend of mine suggested me to buy some as a great investment opportunity and the first time I’ve realized the full potential of Ethereum was when I built a my first dApp (decentralized Application).
Since that day, Ethereum and the whole blockchain space changed a lot. The price of Ether hit unexpected high levels (for a while I had my initial investment touching a 50X returns) before falling down. But at the same the Ethereum technology evolved, improved its performance and security, many protocols were built on top of it and many applications were created. From a technology point of view Ethereum could be considered as a startup in the growth/scaling phase. But what about Ether as an investment? Was the Ether pricing reflecting its real value? I had this question for years, and not only for Ethereum but for the whole blockchain industry. Is there a way to evaluate blockchain projects as I would do for stock/bond investments?
The Buffet’s interview was the challenge I was looking for to better understand blockchain value. After the interview I’ve started digging into blockchain protocols, Decentralized Applications (dApps), smart contracts, digital assets and main cryptocurrencies to evaluate different technologies, make forecast, build valuation frameworks with one goal: understand their value as an investment opportunity.
What is Decentralized Finance (DeFi)
DeFi (Decentralized Finance) is a trending movement in the blockchain space and is growing in interest and popularity among the general public and traditional investors.
DeFi’s projects enable anyone from anywhere to borrow, lend, get insurance or invest in digital assets without intermediaries. DeFi includes protocols, smart contracts, digital assets and dApps (Decentralized Applications) built on a blockchain. DeFi technologies enable users to be part of a trustless, transparent and global network.
As of beginning of March 2020 the total locked value in DeFi projects is ca. 950m USD and in March 2019 was ca. 350m USD and it’s expected to grow in the near future.
The popularity of DeFi movement started with the diffusion of MakerDAO, a platform that generates a stablecoin (DAI), projected to solve one of the biggest problem of cryptocurrencies: the volatility. Today a growing ecosystem of protocols, applications, digital assets, and innovative decentralized solutions is built around DAI and they are the base of a new financial system.
Why DeFi Value?
In the last year I’ve been exploring different DeFi projects, analyzing their technology, the use-cases and their investment potential by evaluating their expected returns and risk in order to make conscious investments using the basic principles of the value investing.
Most DeFi projects are relatively new, the ecosystem is evolving quickly, and many applications are getting traction in the space. Many users are exploring DeFi projects as an alternative investment opportunity.
Some of the projects are not created as an investment tool but they are still providing a value for the ecosystem driving the space to a maturity. Most of the projects are evolving, defining their ideal use-case, fixing their limitations, increasing their security and finding their role into the DeFi world.
This quickly evolution leads to uncertainty and often it’s not easy to have a clear and defined overview of the DeFi projects and the whole industry. The first step into this space for a non-crypto user might be difficult without the proper information and resources. For this reason I’ve decided to create this newsletter. The goal is to provide users with tools and framework to understand and evaluate DeFi projects.
With DeFi Value we are going to analyze the technology behind the main projects, investment strategies, discuss trends, learn how to use them, and make long-term forecast in order to understand the potential and risks as an alternative investment opportunity.
Who is DeFi Value for?
If you are interested in explore and understand DeFi projects and their potential this newsletter is for you.
No matter if you are an experienced crypto trader or completely new to blockchain space. In this newsletter we are going deeper to DeFi projects analyzing both the tech aspects as well as financial implications.
You don’t need any technical or financial background to understand the newsletter but you just need a genuine curiosity about the DeFi space. Different opinions are welcome. The final goal is to understand DeFi’s real value.
DeFi value is more than just a newsletter but it’s an open community.
Who am I ?
I am Daniele Ugolini, a developer and entrepreneur with a finance background. I started my career working in finance, with focus on investment and corporate banking. I quit my job led by the desire to dive into coding and tech. I founded an online school focused on teaching digital skills and building an enterprise software for corporate training.
Since 2015 I’ve been focusing on exploring cryptos and decentralization always with a critical view on both technology and financial implications using my mixed background. DeFi value is the result of this critical analysis focused on having a clear understanding of DeFi real value.
How to be part of DeFi Value?
I am starting DeFi value as a newsletter. I’ll send periodic emails focused on understanding and evaluating different projects. Sign up now so you don’t miss the first issue.
In the meantime, tell your friends about DeFi Value!
Best,
Daniele