Many investors, particularly in the venture capital space, like to take a hands-off approach to investments. Not Jake Brukhman at CoinFund, whose firm actively participates in various cryptocurrency networks in which his firm has decided to deploy capital.
Some of this comes from the need to understand these networks. CoinFund, launched in 2015, was one of the first cryptocurrency investment firms to get involved with decentralized finance and the yield farming craze. The firm allocates about 20% of its capital to active DeFi investing. “The beauty of these open protocols is that they make it fairly easy to iterate on the technology and really move fast with the speed of software towards efficiency,” said Brukhman. “The problem of investing in DeFi for crypto investors is largely a portfolio construction problem.”
The sheer choice of DeFi projects for investment makes the space challenging, with a plethora of options in the automated market making (AMM) and decentralized exchange (DEX) space, says Brukhman. “As investors, how do we think about what to invest in? Do we invest in all the possible iterations of AMMs and DEXs that come along? Do we invest in the most innovative one? Do we invest in the first one?”
AMMs specifically have key importance in DeFi, Brukhman told CoinDesk, bringing institutional-level liquidity that has enabled the market to grow in 2020. “AMMs enable liquidity like we’ve never really had before,” he said. “Retail users can get the same benefits as a professional hedge fund market maker.”
And while DeFi is a hot subject in 2020, Brukhman’s fascination with scarce items on the blockchain in the form of non-fungible tokens, or NFTs, might be a peek into future developments within the blockchain ecosystem.
Brukhman believes all digital content will end up on a blockchain somewhere. “Non-fungibles are not just about cat pictures, they are not just about art or collectibles,” Brukhman said. “It’s also about domain names, about selling insurance policies and maybe in the future about selling royalty-bearing assets.”
All of this and much more on the first edition of The Thesis podcast!