I have been fairly quiet over the last two years on social channels because I was focusing on personal life and was heads down in building out two amazing businesses Qume(www.qume.io) and Himikara(www.himikara.com). Both these businesses are increasingly important in today’s macro-economic environment. This is a long post outlining the thought process and evolution of these two businesses.
Some of the things we have been speaking about for many years around the narrative for BTC seem to be playing out now:
1. Quantitative easing
2. Increasing global debt
3. Digital store of Value
Paul Tudor Jones, founder of Tudor Investment recently wrote an in-depth letter outlining his thesis for allocating capital to BTC– https://www.scribd.com/document/460382154/May-2020-BVI-Letter-Macro-Outlook. He called it “witnessing the birth of an asset class” in an interview with CNBC. This is what I had tried to reference in a medium post back in 2017 –https://medium.com/@zenprivex/on-tokens-and-markets-1-10a98affb9fe in order to share some of the learnings around the fundamentals of the crypto market.
Late 2017 was peak crypto and we got to see first-hand the multiple ICOs and the 100X pumps to the moon only to crash land to earth very quickly. Most projects had no fundamentals and we made it very clear to most of our investors to stay out of it unless they can afford to lose whatever money was being invested. At that point, I was traveling to a new country every week and met some amazing people with very unique backgrounds — https://medium.com/@zenprivex/i-have-met-more-than-2000-people-from-the-crypto-industry-here-is-the-lowdown-73601bd7aed9
Reflecting back, it became evident starting mid-late 2018 that several large institutions such as Fidelity and ICE (Bakkt) started looking at crypto very seriously. Over the past 2 years several large institutions globally have built some of the core infrastructure around custody and security associated with digital assets. This includes crypto specific banking infrastructure built by the likes of www.sygnum.com. All of these developments and the increasing interest in crypto derivatives has created a sense of maturity in the crypto markets.
At ZPX, we built out some very interesting products including a decentralized non-custodial exchange on the 0x protocol. Turned out it was far ahead of its time, especially for the Asian markets. The process gave us massive learnings and a broad understanding of the crypto industry and we noticed a gradual shift to the derivatives markets. Most important being that Asia is leading the charge in crypto in terms of both real-world use cases as well as financial innovation. For instance, millions of USDT a day are being used for trade financing across Asia. Term rates on stable coins pegged to local Asian currencies are higher than any US dollar backed Stable Coin. The launch of the Digital RMB from China has been admirable. The De-Fi narrative around decentralized banking has massive use cases in countries like India. Structured products being offered to local miners are currently picking up interest as well.
The realization that most of the value is being captured by exchanges forced us to take a deeper look at the exchange ecosystem –https://multicoin.capital/2019/10/29/exchanges-are-open-finance/. Two things became evident
1) It was fairly easy to build a spot exchange and offered very little as means to build a moat
2) Most of the volumes were moving towards crypto derivatives being offered with leverage
This is what led to us spending 18 months in building a high performant derivatives exchange with ultra-low latency and high throughputs. Qume was born out of the need for professional crypto derivatives trading venues. While we are still in the early stages of the evolution of the platform, we have been able to hit some key milestones.
How is Qume different
1) Cash settled — all futures are settled in USD vs BTC
2) Low latency which is becoming increasingly important especially for arbitrage opportunities
3) Operating under the regulatory sandbox offered by the Central Bank of Bahrain
India has been a sleeping giant and with the recent changes with respect to the Supreme Court and the RBI the crypto markets in India have come alive again. Given the depth of talent and hunger to achieve, I am sure India will emerge as a leader in the blockchain/ crypto revolution. We are actively exploring opportunities in India currently.
Up until a couple of generations back my family members were predominantly landowners in the central part of India. Even today, the family has land and has some farming related activity more as a hobby than a profession. (Shoutout to my mom in picture with a new born calf at the farm house)
Demand for food will only increase going forward as the global population is expected to reach 9.8 billion people in 2050 and 11.2 billion in 2100, according to the United Nations (UN). This national geographic feature outlines how we need to start thinking about the future of food — https://www.nationalgeographic.com/foodfeatures/feeding-9-billion/.
In addition to multiple middlemen in the supply chain a lack of the cold chain ecosystem is a big issue in countries like India where 30–40% of the produce is wasted. Himikara was originally set up to build off grid cold storage infrastructure to help farmers store produce on the farm.
Over the course of testing and re-testing various iterations within the agri supply chain, Himikara focused its efforts on high yield production for specific crops.
The farming technique achieves 10X the yield per acre by deploying sensors for controlled environment agriculture(CEA) using far less resources. Under CEA, the following variables are tracked and controlled:
- Temperature (air, nutrient solution, root-zone, leaf)
- Humidity (%RH)
- Sunlight (intensity, spectrum, duration and intervals)
- Nutrient concentration (PPM, EC)
- Nutrient pH
The focus at Himikara is to significantly increase farmer yields while offering attractive returns to ESG investors to enhance impact. The team has done an exceptional job at creating market linkages to ensure that produce is sold in a timely manner. This is an attractive investment opportunity for family offices and HNW individuals looking for high yields and sustainable impact with clearly defined metrics. Especially at a time when is very hard to generate stable yields given the macro economic situation with the pandemic.
The pandemic has exposed gaping holes in the global food supply chain. Food security and farmer income are key topics for any government to address and should be viewed as national security issues. This became evident when Qatar, a country mostly dependent on imports was cut off from the gulf region a couple of years back. Innovative deployment of technology combined with interesting financial structures will enable us to scale up agriculture to meet our collective objectives.
In the last week or so there have been reforms in Indian law which unlock this market as well making it far easier for a platform like Himikara to thrive.
In conclusion, I am long digital ‘commodities’ and long real commodities. With a rise in populism, general anxiety and added pressures with climate change, I believe both of these businesses will be increasingly important in our society in the future.