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Prospectus crypto|fund

crypto|fund Prospectus

Internet Finance Services 1


Dear Partner,

First of all, let me to introduce myself. My name is Oluseyi Akindeinde and I am a General Partner and the Fund Manager of crypto|fund a product of Internet Finance Services an Inverse Information Systems Limited division.

I honestly hope our only chance to make a good first impression has worked and that you like the image of as well as the energy we try to transmit. Art, ethics, and promotion of good values represent the core values that mantle this company and mean a great deal for myself and the other members of this project.

As you may know, IISL is a Digital Asset company which primarily focuses on digital assets that belong to the Blockchain Sector.

The Blockchain sector has been growing steadily since the creation of Bitcoin in 2008-2009 and it has offered tremendous investment opportunities since then. Despite the considerable growth it might reach, we are still in the early stages of this new and revolutionary technology. It is very likely that numerous investment opportunities will keep showing up in the next 5,10,15 years while the tech is being developed and tested.

The crypto|fund offers a range of Crypto Funds to invest in where each one has its risk level and return objectives. Movements, portfolios and news related to the funds will be public in real time. Additionally, there will be a weekly report and extensive free information section on Blockchain investments for investors, beginners and experts. Everything shared for free.

Transparency, honesty and close relationships between the investors and management are the overarching driving forces of our operation. Therefore, expect cordial business relationship from us as we do not plan to approach any of our current or future investors and partners with an impersonal treatment. Hence, I expect that you approach us in the same way, comfortably and openly. I believe this sort of communication will promote a proactive and positive environment where everyone can express their own views avoiding frivolous situations. The Fund’s communication channels will always be open to your questions, suggestions and complaints. Thus, do not hesitate to contact us if you ever need, request or wish anything being done or if you have any queries.

IMPORTANT: The Private Funds from Inverse Information Systems Limited are considered as Venture Capital Funds. This is a synonym for HIGH RISK in our investments. Therefore, volatility is commonly very high in the markets where we plan to invest and the general daily trend will be around movements of 5-20%.

Bearing the above in mind, we strongly recommend NOT to invest money that you currently need or that you might be in need of in the future. The objective of the fund is to turn a minor working capital into a much bigger one. However, we aim to bring huge returns for our investors in a reasonable amount of time (5-10 years). In other words, If you’re looking for a safe place to invest your savings this is NOT your place.



The Fund’s objective is to achieve consistent year over year performance during the next 5-10 years that can go from +50% to +100% annual performance in the most conservative fund, to objectives of +200% annual in the most aggressive fund.

To put it bluntly, the fund’s goal is to turn every N10 Million initial investor into N50 Million in 5-10 years. It may look like a dream, an impossible goal, a MAGIC goal, but believe me, IT IS POSSIBLE and we will work hard to make that dream real.

To round up the presentation, I have to say that we cannot promise you anything. Maybe the Blockchain sector and crypto assets fall into oblivion, or perhaps it rises to become a key player in humanity’s goal for achieving a more free and decentralised society. However, everything seems to point towards the latter. Think of the Internet in 1995. I believe we are in a similar state with Blockchain and here is your opportunity to get in on the ground floor. My point is, opportunities are much greater than the risk taken and Blockchain presents us with a once in a lifetime investment opportunity. There is not much to lose, but a lot to gain.

I don’t expect you to just be our client and limited partner, I expect you to be our companion in this big adventure. It won’t be easy, bad times will come, objectives are very high, but IT IS POSSIBLE.

“Dreams at first seem impossible, then seem improbable, and finally, when we commit ourselves, become inevitable”. – Mahatma Gandhi

Your fund manager,

Oluseyi Akindeinde General Partner | Fund Manager Chief Investment Officer



The emergence of blockchain technologies has generated a new digital asset class in which scarcity is based on mathematical properties. Through cryptographic verification and distributed ledger technology, blockchain-based digital assets can be created, issued, and transmitted using software. Inverse manages a private crypto fund committed to exceptional returns for investors through an actively managed portfolio of these blockchain assets.

Before digital currencies, sequential electronic ownership of property on the internet didn’t exist. Bitcoin sparked the emergence of a new asset class designed in the image of limited resources, but existing as a highly transportable and divisible method of wealth transfer that circumvents the inefficiencies of middlemen or physical commodity stores of wealth. Low to zero correlation with any other asset classes over its nine year history in combination with its anti inflationary mechanics, uniquely positions Bitcoin as an invaluable instrument for savvy investors looking for uncorrelated returns. Since its inception, Bitcoin has outperformed all other alternative investments while allowing portfolio managers to diversify the source of their returns.

At the time of writing there are over 1000 various crypto currencies and assets, with the combined market capitalization of over USD 180 billion (as at September 2017). The birth of an entirely new asset class, along with its possibilities for technological disruption, has created a market boom never seen before. Since the beginning of the systematic tracking of the crypto market in April 2013, the total value of all legacy and newly introduced currencies and assets have grown 85-times, with almost 8-fold growth year-to-date. What started as a completely new monetary concept has grown over every prediction, with legislation trying to play catch up with the market, and institutional investors recognising the wider potential the blockchain technology brings, with its unlimited use-cases from land registry to identity verification to a means of payment.

Our expertise is understanding digital currencies and other alternative blockchain assets and associated technologies with sufficient tradable liquidity to provide a unique uncorrelated value proposition. In a world where increasingly interconnected financial markets make true statistical diversification more difficult, cryptocurrencies and blockchain assets are emerging as the fastest growing asset class whose gains are not dependent on the factors underlying most investments.

Blockchains are not just about money; that is just the most visible vector of disruption, and arguably its most potent, since money fuels the engine of human (and soon machine) incentives.

Beyond its promise to be the first open source, stateless money, Bitcoin is also broadly redesigning the information architecture that underlies our world in ways that empowers its participants. Bitcoin’s blockchain has ushered in unrestricted/uncensored peer-to-peer exchange, secure identity, decentralized consensus, and record keeping validation, to name some of the leaps Bitcoin is responsible for.

1 Crypto Market Insight



The idea is that if we can build a transparent network of monetary exchange without the corruption and third parties, we can do it with just about anything. This includes how we trade, how we think about the voting process, how to end wars, and how to create prosperity within society.

Digital currencies are inherently poised to radically transform our financial system, but it won’t happen overnight. At Inverse, we believe investors deserve an established, trusted, and accountable partner that can help them navigate the grey areas of digital currency investing. That’s why we are building transparent, familiar investment products that facilitate access to this burgeoning asset class, and provide the springboard to invest in the new digital currency-powered “internet of money.”



The crypto|fund will allow qualifying investors to gain an exposure to crypto without the need for much of the administrative burden and risk associated with acquiring cryptocurrencies, including: • the knowledge of the various exchanges available to purchase various cryptos

• the requirement to sign up and provide personal and corporate details to those exchanges before being able to purchase crypto;

• transferring cash to the exchange and complying with various transfer limits; executing orders at the best price;

• selecting and storing crypto with associated private keys and seeds using secure wallet procedures; • the process for transferring crypto back to an exchange account and selling them; and

• understanding the security and audit procedures for their holdings.

Investing in crypto through the crypto|fund will allow investors gain an exposure and interest in cryptocurrencies without needing to navigate these items, whilst also benefitting from wholesale rates on pricing and insurance offered through the Fund. Investors in the Fund will receive monthly Net Tangible Asset (NTA) reporting which will take the compliance and administration burden away.

2 Why The CryptoFund



Inverse Information Systems Limited is an early mover in the blockchain and digital currency ecosystems whilst being the first “Pure Play” company focused on cryptocurrency and blockchain technologies

The crypto|fund is an open ended cryptocurrency fund that solely invests in and deriving value from the price of cryptocurrencies and blockchain assets / tokens.

The crypto|fund is set-up as an open-ended Special-Alternative Investment Fund in the form of a limited partnership dedicated to investing into a range of Blockchain & Cryptocurrency-related investment opportunities.

It’s aim is to make the growth of Bitcoin & other Blockchain based currencies accessible to professional or well informed (semi-professional) investors.

The fund enables investors to gain exposure to the price movement of cryptos through a traditional investment vehicle, without the challenges of buying, storing, and safekeeping cryptocurrencies and blockchain assets.

We believe the best way to deliver uncorrelated returns is with a portfolio isolated from increasingly correlated financial products that are susceptible to the same systemic risks. We are banking on the decentralization of the blockchain technology to provide alternative growth that is uniquely uncorrelated to the turbulence of mainstream financial markets.

We safeguard your portfolio, no matter what happens in the market and utilize our understanding of cryptography to ensure the custodial security of funds. While we monitor market conditions to make small portfolio adjustments, we adhere to our long-term trend following strategies based on our perspective of economic fundamentals. Our dedication to our approach helps prevent short-term thinking from impairing long-term performance.

The Investment Fund provides a secure structure to gain exposure to the price performance of various cryptocurrencies and blockchain assets.

3 About The Fund



The crypto|fund is carefully managed through an “Adaptive System” designed based on a combination of fundamental analysis (FA), technical analysis (TA), and most importantly, sentiment analysis (SA).

The crypto|fund’s strategy is to invest into blockchain based cryptocurrencies such as Bitcoin as well as altcoins directly, benefitting from different markets and pricing as part of our strategy to achieve optimal results for investors. Evaluating chart-analyses, market indicators and current price to utilise market swings of all investment opportunities under the strategy of the fund. This offers opportunities even in phases of declining cryptocurrency markets.

This System has been exclusively optimized and based on highly speculative assets trading, however, it would perfectly suitable in every other investing area. In the end, speculation represents a large part of financial markets.

The crypto|fund’s investment style strives to achieve long term consistent returns. Our endeavour is to obtain nice and positive annual returns rather than focusing on past weekly and monthly performances. Therefore, we forget about past achievements and prefer to focus on long term positive results derived from our Adaptive System.

It is very important to bear the following in mind: Virtual Currency (VC) markets are highly volatile. Therefore, you could see your investments down -20% or more in just a few days. However, markets are very irrational and unpredictable in the short term so you shouldn’t pay too much attention and worry about short term movements.

Regarding the offer, Inverse will be launching a different type of fund: The crypto|fund Private Investment. This Fund is based on the Blockchain assets and will only include assets/coins with strong fundamental criteria. This fund will initially invest in one or a few of the Top 10 crypto-assets by market capitalization as given by coinmarketcap.com. The fund may also set aside a percentage of total funds to be used in targeted Initial Coin Offerings (ICOs).

We focus on expanding the breadth and diversity of our holdings by researching new cryptocurrencies to invest in. The industry is in a high growth phase, and does not require financial gymnastics to squeeze out gains. We do not intend to day-trade, time the market, speculate, leverage, or arbitrage. We hold assets with solid foundations that have the potential for substantial future gains.

Our ultimate goal is to create investment strategies that provide potentially high-yielding, uncorrelated returns in a world of low-yielding, correlated assets.

4 Investment Strategy


http://coinmarketcap.com


Largest Cryptocurrencies by Market Capitalisation (August 2017)

source: coinmarketcap.com


http://coinmarketcap.com


Investor’s in crypto|fund benefit from its diversification and large scale investment as opposed to an

individual investment into any of the underlying cryptocurrencies or mining capacities.

The Fund offers the opportunity to easily and automatically have capital gains and dividends reinvested into the fund without a sales load or extra fees – forward looking planning and an adequate liquidity reserve aim at making investments sufficiently flexible.

Our specialist approach to blockchain assets is designed to give you the potential to make your whole portfolio more durable. While the crypto|fund may comprise only a portion of your investment strategy, our rigorous and disciplined process may help you seek greater returns while managing risk.

Whilst we know you deserve to know how your money is being invested, we’ll provide clear explanations throughout the process, and we can compare our fund’s impact on your portfolio against other indexes or benchmarks. You will always feel confident about the security of your portfolio and our thought process behind our asset allocation strategy.

The fund is completely rule-based and transparent. Based on a set of well-defined guidelines and expert index committee to handle extraordinary unforeseeable events, the index is built and maintained in a manner that is reliable, predictable and comprehensible for all parties.

Among other things, a cryptocurrency needs to have, in order to qualify for inclusion in the index, sufficient market value, liquidity, security and reliable data feed from exchanges. In order to ensure sufficient diversification and tradability, the constituents’ weight is capped at 20%.

Due to lack of a designated exchange for a particular currency, crypto|fund is designed as a secondary index, drawing inputs from price subindices for individual cryptocurrencies, whose trading pairs are weighted according to their trailing 7d volume.

The fund is made up of a selection of the top 10 crypto-assets

5 Fund Structure & Index Methodology



The crypto|fund is managed by professionals that are experienced in the field of blockchain

technology/cryptocurrencies as well as in the asset management and crypto asset securitisation industry. An independent investment committee provides investment recommendations and the team decides at any time where to invest, hold or re-invest the money held by the fund into other altcoins and tokens as well as when to buy and to re-balance the investments.

We identify the most promising use cases for crypto-assets and within those use cases we vet the teams, projects and communities. We will hedge risk by betting on directly competitive projects.

Our investment thesis is simple:

Blockchains will impact trillions of dollars of economic activity across many industries globally. Crypto-assets have fixed supplies; therefore increases in demand drive up prices. Diversified funds are the most effective way to manage exposure to this volatile, rapidly evolving asset class.

We provide 3 forms of value for investors:

1) Primary research — we take a technology-first approach to crypto. We dive deep into white papers, review technology, economics, game theory, etc. We look for projects and protocols that can rethink major classes of global commerce. We invest in protocols that meet our quantitative and qualitative metrics. We monitor the market and adjust our holdings as new information emerges and market conditions change.

2) Security — we store all private keys in cold storage on air gapped computers. This means that private keys — the keys that literally control the money — never touch the Internet. Moreover, we’re implementing our own layer of multi-signature support across all assets that we manage, even those that don’t natively support multi-sig at the protocol level.

3) Rebalancing — we rebalance portfolios monthly. This is exponentially more arduous when combined with cold storage.

Buy & Hold

A distinction should be made between “trading” and “investing”. The Fund operates primarily by what is known as a “buy and hold” strategy, based on the fundamentals over the long-term. The Fund does not trade Cryptocurrencies over the short term for profit. The Fund also does not attempt to “time the market”, nor does it perform any type of margin trading. The Fund invests in Cryptocurrencies that are expected to increase in value over the long-term; we aim for investing in Cryptocurrencies with real merit and a competitive edge. These Cryptocurrencies are identified primarily through fundamental analysis, with a focus on the value proposition, which can be defined as identifying any factors that would create a demand for that particular Cryptocurrency.

6 Fund Management



Diversification

Although the portfolio consists of a large range of different types of Cryptocurrencies, the majority of the Fund’s capital is allocated towards the portfolio top ten in terms of market capitalization. Compared to the smaller ones, these Cryptocurrencies are all well established with more liquidity and can be considered more secure, stable and reliable.

Analysis Techniques

Assuming that the best Cryptocurrencies will over the long-term appreciate the most, the Fund’s investment decisions are primarily based on a thorough fundamental analysis of each individual Cryptocurrency. However, the Fund also employs technical analysis to optimize the timing of when to either buy or sell. Furthermore, code analysis is applied, enabling independent verification of any technical claims made by the Cryptocurrency’s developers.

Fundamental Analysis

Fundamental analysis attempts to determine the actual merit of a Cryptocurrency. These are some of the factors are considered when evaluating a Cryptocurrency:

Value proposition: This is the most important aspect of the fundamental analysis. It is the principal identification of what gives a Cryptocurrency value, within a pure supply and demand market, considering that the supply is completely predictable in the case of Cryptocurrencies. The value proposition is what would create future demand for each Cryptocurrency, which is often a combination of the below principles, however, with a first priority of finding a clear mechanism, incentive or use case that would stimulate demand directly for that particular Cryptocurrency.

Governance: Governance is very important in a Cryptocurrency network since it can often determine the rate of innovation and security of a network, this is also known as the consensus algorithm, which determines how a Blockchain is governed. This can vary from mining based governance to stake holder voting and more. In general, good governance is considered to have a clearly defined governance procedure, including a voting mechanism with incentives that works towards the public good. This should be aligned with what is in the best interests for the network itself.

Game theory: Applying monetary incentives is how decentralized governance on Cryptocurrency works. This relates to predicting human behaviour and aligning incentives in order to bring about positive outcomes. Monetary incentives can also determine how a network would react to different adversarial circumstances within a political space.

Politics: The politics of Cryptocurrency can often determine the outcome of conflicts within a Cryptocurrency and the larger Cryptocurrency space. This can be dependent upon different factions, influence and ideology of relevant contributors. Ideally however a well-designed governance model should resist malicious actors and align incentives towards the public good.



Economics: The economic policy behind Cryptocurrencies, including inflation rates, emission schedules, supply and demand, distribution and in some cases mechanics such as dividends, buy backs, interest and voting powers.

Network effect: Network effects allows Cryptocurrencies to continue to maintain dominance in the market. Network effects also affect security and helps to create a virtuous cycle and positive feedback loops.

Security: Most Cryptocurrency networks become more secure against attacks as they grow larger, as it makes attacking a network more difficult and expensive. This is part of the virtuous cycle which gives Cryptocurrency such strong network effects.

Utility/use cases: This relates to the practical benefit a Cryptocurrency could provide. This could be for use cases as diverse as shares, currencies or even the underlying global crypto- infrastructure.

Competition: The type of competitive edge any Cryptocurrency has compared to all competitors within any of the use cases covered.

Innovation: The technology behind Cryptocurrencies is evaluated in order to better assess their innovative potential, regarding competitiveness, utility and competence.

Team: The people behind Cryptocurrencies can be a driving force for development and adoption. We perform background checks to better assess the competence and reliability of any business or development teams.

Institutional adoption: Looking at the uptake of large institutions using these technologies for their own purposes, like the Enterprise Ethereum Alliance, or various other Cryptocurrencies aimed at building enterprise solutions.

User adoption: Using a combination of different measures in order to determine the actual adoption and use of Cryptocurrency by users.

User experience: We apply the motto of fast, cheap and easy in the case of front-end user faced systems. This however might not be applied to more back-end enterprise solutions.

Usage: Based on Blockchain analysis we can have a good understanding of the actual economic activity on most Cryptocurrencies and factor that into our evaluations.



Volume: Trading volume can be a significant indicator for the adoption of a Cryptocurrency. Investments by the Fund in Cryptocurrencies that have insufficient trading volume are restricted.

Analytics and social media: The use of tools such as google analytics, following social media and search engine trends.

Exchanges

For the purchase and sale of Cryptocurrencies, only regulated exchanges that apply KYC/AML policies will be used. Decentralized exchanges may also be used where feasible. In the cases where the Fund needs to acquire Cryptocurrencies that are not yet available on fully compliant exchanges, a third-party intermediary that is compliant with KYC/AML requirements will be used.



Investor Profile

The fund is suitable for individuals and institutional investors such as family offices, pension funds, insurance operators and banks. The fund is specifically designed for investors with a medium-to-high risk appetite and a desire for long-term high capital appreciation.

The value of the Units of the Fund and any income derived from them may rise and fall and accordingly a Participant may not recover the original amount invested in the Fund. An investment in the Fund should not constitute a substantial proportion of an investor's investment portfolio and may not be suitable for all investors.

An investment in the Fund is especially suitable for investors:

. Who are willing to risk a (significant) depreciation of the investment and can afford such risk

. For whom the investment in the Fund will represent only a part of their total investments

. Who do not need any income from this investment

. Who intend to hold their Units in the Fund for at least for a period of 1 to 2 years

Investment Amount

The minimum investment amount is N10,000,000 this will be converted into bitcoin at the prevailing rate before asset allocation. Additional investments (fresh funds) shall be in multiples of N2,500,000

Fee Structure

Management fee shall be a 2% deduction of any principal amount / fresh funds invested (which will cover initial setup. And trading related charges). There shall also be 20% performance fee. This will cover any and all withdrawal charges of the called back funds. For instance if your initial deposit of 5M grows to 10M over the course of the investment period, N100,000 (i.e 2%) will be deducted from this principal. The payout will be 9M (i.e 10M less 20% performance fee on carried interest of N5M)

Minimum Tenure (Lockup Term)

The minimum fund tenure is 365 days from the date of investment. Note that termination of investment before maturity will attract a 25% fee on the total value of investment.

7 Profile, Fees and Agreement



Redemption

Redemption of funds / call-back shall be done within 10 working days of initial notice in writing.

Preservation vs Performance (For The Risk Averse)

We offer a no-obligation service to risk averse customers who want a minimum guarantee of initial principal whatever happens in the market. Capital preservation of this nature will be accompanied by a 50/50 share (between customer and us) on any accrued interest on the said principal. The principal sum is guaranteed to this class of customer in the unlikely event of a loss or downturn (minus the 2% management fee). Minimum lockup term of 365 days still applies.

AGREEMENT

. The Investor hereby agrees to entrust to Inverse Information Systems Limited (the Fund Manager) the amount(s) stated in the investment account opening form and all subsequent amounts invested thereafter by the Investor, to be invested together with other investors’ funds for the purpose of the Investments specified in this Agreement as defined in “Fund Structure & Composition” above. Such amount shall be remitted to the Fund Manager upon the signing of

this agreement.

. The Investment Manager undertakes to invest the amount entrusted to it by the Investor together with the funds of other investors in accordance with the terms and conditions of this Agreement.

. The Investor has independently studied and is satisfied with the Investments. The liability of the Investor is, however, limited to the funds entrusted to the Investment Manager in accordance with this Agreement.

The Investment Manager undertakes to maintain the funds entrusted to it separate from its own assets and away from the claims of its creditors.

. The Investment Manager shall accrue to the Investor his part of the profit received with respect to the investments made in accordance with this Agreement immediately such payments are received and cleared whether on principal, profit or any other account whatsoever.

. The Investment Manager shall provide the Investor with a statement of their investment on a regular basis.

. The Investment Manager shall not be liable for any loss of capital invested under this Agreement except it is proven that the Investment Manager breached the conditions of this



Agreement either through gross misconduct or is proven to be negligent in keeping or managing the said capital.

. This Agreement shall commence on the ______ day of________________________20___

IN WITNESS WHEREOF the parties hereto have set their hands and seals the day and year first above written.

THE COMMON SEAL of the within named Fund Manager, crypto|fund (Inverse Information Systems Ltd) is herein affixed in the presence of:

_____________________________________ DIRECTOR

SIGNED SEALED AND DELIVERED by the within named INVESTOR

__________________________________________________________________________________ NAME

____________________________________________________

SIGNATURE



What drives the price of a given crypto asset?

The simple answer is supply and demand. However, for every major crypto asset the supply is fixed (or growing at a predetermined rate) so price is primarily a function of demand.

Demand for a specific crypto asset is driven by the buyers’ use case, such as:

A store of value – digital gold such as Bitcoin

Ability to purchase a good or service – such as compute power on the Golem network or smart-contract execution on the Ethereum network

Voting rights on the changes to that network – In many blockchain networks, coin holders can vote on new features and functionality

Ability to earn fees – Augur, TenX and others pay fees to their token holders

Ability to transact anonymously – certain crypto assets like Monero and Zcash can be sent 100% anonymously

The crypto economy’s ability to serve users in these ways grows according to the laws of network effects. This attracts more users and drives up demand. As demand grows, prices of crypto assets will rise.

What does blockchain technology enable that wasn’t possible before?

Blockchain technology is a fundamental computer science breakthrough that enables digital transactions with no intermediaries or trust required. This means that you can have truly open global networks where anybody can join and participate with no questions asked – and most importantly no central party to ask them. This allows the networks to grow quickly to global scale. Networks of this magnitude create tremendous value for their participants.

Blockchain technology also enables a new ownership & governance structure for these open global networks. They are not owned or controlled by a company or state, but are rather owned and controlled by network participants themselves. As a blockchain network grows, it does not enrich and empower the select few. Instead, the very users who drive the value of the network also own the network.

What are regulatory risks?

Protocols themselves cannot be regulated. However, governments can and will regulate flows of fiat money into crypto. This is already commonplace in China.

Appendix I FAQ



Why are there multiple crypto assets? What is the difference between them?

You can think of crypto assets as digital commodities. Oil is useful because it helps your car go from point A to point B. Corn is useful because your body needs food. The value of each of these commodities is a function of its utility (driven by chemical properties), supply, and demand.

Each crypto asset also has a unique structure (the protocol) which defines its utility. Some of the different use cases and examples of crypto assets that serve that use case are:

Store of value (digital gold) – Bitcoin, Litecoin

Smart contract infrastructure – Ethereum, Stratis, Waves, NEO, Tezos

Distributed computing/storage – Golem, Maidsafe, Siacoin, Storj, Filecoin

Distributed oracles/prediction markets – Gnosis, Augur, Stox

Confidential transactions – Zcash, Monero, DASH, PIVX

There are many more crypto assets.

What is the difference between crypto assets and cryptocurrencies?

It’s helpful to borrow the digital commodity analogy from the last question.

Oil and corn are both valuable because they provide some utility. You could theoretically trade X barrels of oil for Y bushels of corn. But this would inefficient, as the number of people who want to make this particular trade is low. Instead, society denominates transactions in a currency – US dollars, Euros, Yen, etc. People who have oil and want corn trade oil for dollars and dollars for corn.

The same is true of crypto assets. Today, Bitcoin is the dominant cryptocurrency. Crypto assets have a price that is frequently quoted in US dollars on websites like coinmarketcap.com but most crypto assets are actually denominated in Bitcoin and the prices you see have been converted to US dollars.

What makes one crypto asset a better investment than another?

Some of the metrics we look at are:

Aggregate network value

Liquidity

Number of nodes

Capacity of the network (the specific way to measure this varies by network and what the utility of that network is)

Geographic data

Coin inflation structure



Numbers and types of on chain transactions

Most of the metrics we look at are proprietary. We also weigh each crypto asset against qualitative criteria such as:

Does this use case benefit from the blockchain’s unique technical properties or would i t be better on a centralized database?

Is the crypto asset necessary for the core protocol function?

How is the governance mechanism designed?

Who are the lead developers?

What are the switching costs for users?

How strong are the network effects?

Will the value of the crypto asset increase as the network grows?

What are the biggest risks when investing in crypto assets?

For a given crypto asset, the largest risks are volatility and adoption risk.

Volatility is self explanatory. This is easy to see by looking at historical prices of any crypto asset.

Adoption risk is the risk that the protocol and network of a given crypto asset fail to materialize as the protocol developers anticipated. This is analogous to the risk of investing in startup companies – most will fail.

The best way to mitigate against that risk is to diversify. Diversification is proven to be an effective way to reduce risk in all asset classes.

What are the security risks?

When you own a crypto asset, what that really means is that you are the only one who knows the private key (password) which controls that crypto asset. There is no private key reset function. If you lose your private key you can no longer access your crypto assets.

There is no way to reverse a transaction. Therefore, if someone else obtains your private key, they can send all of your crypto assets to themselves. You will not have any recourse.

The other major risk is exchange risk. Exchanges such as Coinbase, Luno, Poloniex, Bittrex, Bitfinex, and others store private keys. If an exchange is successfully attacked while you have funds there, your funds may be at risk. Shift’s security processes are designed to minimize the amount of time that crypto assets are on exchanges. Shift’s crypto asset are stored in cold storage the vast majority of the time. See below for details about cold storage.

From a security perspective, private keys are the crypto assets.



There are 3 industry best practices to securely store your private keys: cold storage, multi-signature, and diverse backups. Shift employs these practices and many others.

Cold storage means that your keys are held on a device which is not connected to the internet. If strictly enforced, that means that an attacker would have to physically possess the device that holds the keys in order to steal them. This does not prevent you from transacting as you can still sign transactions offline and then broadcast the transaction from a different computer. The logistical process of implementing cold storage is arduous but highly secure.

Multi-signature means that you need to use multiple keys to transact the crypto assets. There are multiple ways to accomplish this. Some crypto assets have this functionality built into the protocol. For others, you can encrypt the private key in a file which requires multiple passwords to unlock. The idea behind this is the same idea as having someone initiate a wire and someone else approve it.

Diverse backups means having backups on different type of storage media (hard drives, flash drives, SD cards, etc) in different locations. This mitigates the risk of your only flash drive getting corrupted or a vault getting flooded and you losing your private keys.



Cryptocurrency

Cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency. Ex: Bitcoin and altcoin.

Token A piece resembling a coin issued for use (as for fare on a bus) by a particular group on specified terms, a piece resembling a coin issued as money by some person or body other than a de-jure government. Ex: Litecoin

Altcoin Any form of digital crypto currency that isn't Bitcoin, an alternative coin. Ex: Ethereum, Steem, Litecoin.

Address A code used to store/send/receive Bitcoins and other cryptocurrency consisting of 26-35 alphanumeric characters. It is also the public key in the pair of keys used by Bitcoin holders to digitally sign transactions. Ex: Address: 175tWpb8K1S7NmH4Zx6rewF9WQrcZv245W

Blockchain A full list of all the blocks that have been mined since the creation of Bitcoin. A blockchain is a data system that allows for the creation of a digital ledger of transactions on a non-centralized network. Cryptography is the main operator that allows for users to engage with the ledger without the need for any central figurehead. In layman’s terms, this means that people and computers all over work together to create a network instead of a network being made by one single person or company. This network is enabled and protected through cryptography! We have seen this used in currency, data transfer and on. The blockchain is comprised of “blocks” and is constantly growing as each new record, datum, or block is added onto the chain for everyone to see.

51% Attack A 51% attack is a situation where more than half of the computing power on a network is operated by a single individual or concentrated group, which gives them complete and total control over a network. Things that an entity with 51% of the computing power can do include, but are not limited to:

• Halting all mining.

• Halting and manipulating all interpersonal transactions.

• Use singular coins over and over.

Appendix II Glossary



Fork When two or more blocks have the same block height, forking the blockchain. Typically occurs when two or more miners find blocks at nearly the same time. It can also happen as part of an attack or as result of public decision to make the chain "lighter," faster and less expensive $/per transaction. Ex. SegWit, SegWit2x

Hardfork A permanent divergence in the blockchain commonly occurs when non-upgraded nodes can't validate blocks created by upgraded nodes that follow newer consensus rules Ex: See SegWit2x, BTC unlimited

ICO: An Initial Coin Offering, a way for a new cryptocurrency project to raise money for their project by offering a select amount of coins for sale to the public at a base price. Ex. Bancor ICO, Civic ICO, DCORP ICO

Mining The act of generating new bitcoins by solving cryptographic problems using computing hardware.

Pump and Dump Inflating the value of a financial asset that has been produced or acquired cheaply, using aggressive publicity and often misleading statements.

Smart Contract A two-way smart contract is an unalterable agreement stored on the blockchain that has specific logic operations akin to a real-world contract. Once signed, it can never be altered. A smart contract can be used to define certain computational benchmarks or barriers that have to be met in turn for money or data to be deposited or even be used to verify things such as land rights.

Shorting Selling a cryptocurrency in hopes of buying it at a lower price at a later time to gain profit.

Volatility The measurement of price movements over time for a traded financial asset."

Wallet A digital or physical address in which cryptocurrency can be stored/sent/received. Accessible through a private key. Ex: Myetherwallet, Trezor, Ledger nano



YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A VIRTUAL CURRENCY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT TRADING VIRTUAL CURRENCIES CAN LEAD TO SIGNIFICANT LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL.

THEREFORE WE ADVISE THAT YOU ONLY INVEST AMOUNTS YOU ARE WILLING TO LOSE.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

All investments involve the possibility of profit and the risk of loss, including the loss of principal. This document does not constitute an offer to sell or the solicitation of an offer to purchase any security or investment product. All information is current as of the date hereof and is subject to change in the future.

THE crypto|fund (PRIVATE) IS ADMINISTERED BY INTERNET FINANCE SERVICES a division of INVERSE INFORMATION SYSTEMS LTD.

Appendix III Disclaimer



Below is a list of our service providers. Please note this may change from time to time as circumstances and markets dictate:

Appendix IV Service Providers


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