Ethos is a crypto currency project that I looked at about six months ago. I had a small investment with them which did very well in the run-up that crypto markets experienced in December and early January. I ended up selling Ethos, not because I didn’t like the project, but simply because I was holding too many different coins and I wasn’t able to keep track of the developments in each of them. I recently revisited their website and looked at how they were progressing with their roadmap. I’ve been impressed with the progress that they’ve made, and I still really like the idea behind what they are trying to achieve. This article will outline why I think Ethos makes compelling investment opportunity.
What is Ethos
Ethos refer to themselves on their website as the people powered crypto currency platform. Their stated mission is to:
build a financial ecosystem that is open, safe and fair for everybody. Ethos harnesses the power of design, technology and social intelligence to create a breakthrough solution that will enable everyone to participate in the New Economy.
In essence, they are attempting to make crypto currencies more accessible to everyday people. In the process of doing this they aim to change the way the financial services are consumed by existing users, and make them available to a large number of people who currently lack access to these services. These are the people that are commonly referred to as the unbanked.
I’m genuinely interested in any project that aims to make crypto currencies more accessible. The Ethos platform aims to bring together a variety products and services to allow everyday people to interact with the block chain based currencies, and by doing so gain gave greater control over their own finances.
If you read through the material on the website, and there is a lot of useful material, you can see that these guys are really thinking big picture. Whilst their aims are ambitious, if they were able to achieve half of what they are proposing to do, then I think there is a better than average chance that this project might be successful.
They really deep dive into the way in which modern financial services are delivered to the consumer, and the way in which the current structure of financial markets and intermediaries disempowers many of the owners of financial assets. This material really speaks to the heart the philosophical background to most crypto currencies. If you have a background or interest in mainstream finance, some of the thought papers and discussion pieces that they have produced make interesting reading.
To give an example of the level at which they are thinking, one issue that they discuss at length is the issue of custody. Custody in a financial services sense means who controls a financial asset. Most people would think that they control their own assets, but in reality, many people are inadvertently giving custody of their assets to external third parties who may be benefiting from these assets without the owner receiving appropriate compensation. A very simple example of this is a bank account.
If you have a bank account, and most of us do, then you are granting custody of your money to the bank with which you deposit your funds. Most people think no further than this, and are happy to accept small amounts of interest in return for the convenience of electronic payment systems and the security of having their funds stored with a trusted third-party. In reality, what you are doing is providing custody of your assets to the bank. While most banks will certainly provide you with a suite of services in return for custody of your money, what they then do is use your assets as capital to finance their own investment objectives. In the case of a bank, investor deposits are used to secure loans, which the banks charges interest on and generates profits.
This is a very simple example of asset custodianship in the way in which third-party custodians are able to generate benefits for themselves through the use of other people’s money. There is nothing wrong with this in principle, and most of us need the services that financial intermediaries like banks provide. Ethos however, is aiming to provide a financial system whereby you retain access to the services that you require such as secure storage of funds and efficient payment mechanisms, whilst retaining custody of your own assets.
If this sounds like a very deep and philosophical topic, that’s because it is. But when you read the material which Ethos has posted on the way in which they view these arrangements, and the solutions which they are proposing to improve the existing system, it paints a picture of an organisation that truly sees the bigger picture.
How Is Ethos Going To Change Financial Services?
The Ethos project has a suite of product developments that it plans to bring to market over the next 18 to 24 months. There are numerous features that they plan to add for their users which you can review on the website. I will highlight what I see as three key features that will, if successful, make the practice of owning and investing in crypto currencies significantly easier and more accessible for day-to-day people.
The Ethos Universal Wallet
Ethos intends to create a single wallet in which you can store all of your crypto currencies securely. They will provide a mechanism for you to store your currencies, and a means for you to exchange from one currency to another without the requirement of using an external broker or exchange. At first glance this may not seem like a big deal but when you think about it, it really is. If you are serious crypto currency investor, you probably have numerous wallets holding a variety of different assets. Managing each of these wallets and securing the various private keys that come with them is not an easy task. There is currently no wallet that will allow you to store all of your different currencies in the one place. I personally have six different wallets, purely because I need to have this many in order to hold the different currencies that I wish to invest in. Having the ability to have all of these assets stored securely in the one location, without the need for multiple passwords, keys and software or hardware solutions is a very enticing proposition. Even if the project goes no further than developing this solution, in my mind it would have made a significant advancement in making crypto currencies more accessible.
The universal wallet, UW for short, is the first product that Ethos are rolling out, and is due to go live with their beta released later this month. It remains to be seen what the wallet looks like and what coins it will support in its initial format, but this is a development that I’ll be watching with interest.
Fiat Gateways
Ethos also intends to introduce Fiat gateways supporting multiple Fiat currencies. Once again this will be a big step forward in the way in which consumers are able to access crypto currency investments. If you are fortunate enough to live in a country such as the United States or Japan that currently have large exchanges where you can trade in your native currency, this probably won’t be a great step forward for you. For the rest of us however who lived in countries that don’t have this luxury, the ability to transfer money in any given Fiat to a single central exchange and then trade in that currency to purchase crypto currency assets has the potential to be revolutionary.
As an Australian investor, I am poorly served by the local currency exchanges that accept Australian dollars. I either use an exchange that provides access to a very limited number of crypto’s, or a use an exchange that provides a wide range of assets but very uncompetitive exchange rates.
Generally speaking, purchasing a crypto currency involves buying Bitcoin or Litecoin or something similar and then transferring it to an offshore exchange where I then able to trade that into the crypto currency of choice. Not only is this cumbersome and time-consuming but it involves significant transaction costs. The record keeping involved in trying to account for multiple transactions occurring across multiple different currency pairs is also challenging. The ability to have access to an exchange that supports deposits of multiple Fiat currencies has the potential to make investing in the broader crypto currency universe significantly more accessible to the bulk of the world’s population.
Custom portfolios
Ethos also intends to introduce a feature that will allow users to develop custom-designed crypto currency portfolios. This is very similar to what Iconomi is trying to do with their project. Users will be able to design their own portfolio and then have the investment performance of this portfolio tracked and published publicly. The concept behind this is quite simple, but also very powerful.
If you are a crypto currency trader who feels that you have the ability to design a well constructed portfolio, then you can construct this portfolio on Ethos and have your investment performance made publicly available. Other investors can choose to invest in accordance with any of the published strategies. If an investor chooses your portfolio then you will receive a percentage of their returns as reward for your efforts. This is exactly the same model that traditional mutual funds use to generate income from investing on their client’s behalf.
This feature offers benefit to both the portfolio designer and the end user. From the user’s perspective, if you do not have the time or inclination to design your own portfolio, then you can simply choose a custom designed portfolio based on any of the portfolios shown on the Ethos platform, and have your money invested in accordance with that portfolio’s parameters. The user portfolio will then achieve the same return as the portfolio they have chosen, and they will have the opportunity to have features such as auto rebalancing and auto reinvestment of the earnings as part of the experience. This will make investing in crypto currencies as easy as mutual funds make investing in the sharemarket.
For knowledgeable crypto currency investors who have the ability and time to design effective trading strategies, then the potential to earn significant income from those investors who choose to utilise their strategy also exists. Each individual will have the ability to become their own mutual fund manager, and if successful, have the opportunity to earn significant rewards for success.
Regulation Proofing Your Crypto Currency Portfolio
One of the most impressive aspects of the Ethos project is the way in which they are approaching regulation. Rather than trying to hide from regulation, the Ethos team understand that if they wish to be successful providing financial services across multiple jurisdictions, then they have to get on board with regulation. This is something that they are tackling upfront, rather than treating as a can that can be kicked down the road and dealt with another day. They are already engaged with regulators in many of the jurisdictions that they wish to operate in, and are seeking to develop their platform so that it meets the regulatory requirements that they expect to be imposed upon crypto currency trading in the future.
Like it or not, regulation of crypto currencies is coming and the fact that Ethos is pre-positioning itself to thrive in a regulated environment is a significant advantage for this project.
The Ethos Team
One of the most critical aspects of any crypto currency project is the team developing it. There are many people with brilliant ideas that lack the capacity to implement them. There are many people that are technically brilliant in the block chain arena but lack the innovation and entrepreneurship to bring products to market. An effective crypto currency project marries these two types of individual so that they get the best of both worlds. Ethos is a company that has assembled an impressive team to back their lofty aspirations.
Shingo Lavine
Shingo is the figurehead of the Ethos organisation. He is extremely young (20), and clearly extremely intelligent. I am a big believer in the ability of powerful personalities to move projects forward in any arena. In the crypto currency space, one only needs to look at the likes of Vitalik Buterin or Dan Larimer to see examples of a project driven to success by the brilliance of its creator. I personally hold a large investment in EOS purely on the basis that Dan Larimer is the driving force behind this project. Dan has a track record of being able to bring crypto currency projects to successful fruition. On the basis of this, and almost this alone, I’m comfortable to invest in EOS, as successful people quite often show the tendency to continue to be successful into the future.
The fact that such a young individual heads up this team is a big plus in my estimation. If you want to know more about Shingo, I suggest you jump over to the Ethos website and review his credentials for yourself. Another thing that I like about this individual is that he is extremely approachable. If you join the Ethos telegram channel and ask a question about the projects development, it is quite often Shingo himself who will respond. This level of accessibility to key people is rare in crypto currency projects.
Stephen Corliss
Stephen is Ethos’ head of global strategy and compliance. Stephen’s pedigree is as good as any project member that I’ve seen on any crypto currency being marketed to date. Stephen was the chief operating officer of BlackRock, the world’s largest investment management company. Prior to assuming this role, Stephen was the chief operating officer of BlackRock subsidiary, Ishares. Ishares were pioneers in the development of the exchange traded fund industry and remain one of the dominant forces in exchange traded funds in traditional investment markets. To have access to an individual with such depth and breadth of knowledge of traditional financial markets, regulation and product development is incredibly significant for a company with Ethos’ ambitions.
Vishal Karir
Another former BlackRock employee, Vishal has extensive experience in funds management and implementation of technology based product solutions in traditional financial markets. At one point in his time at BlackRock Vishal was responsible for investing $1.5 billion worth of client funds. He was also involved in the development of automated trading solutions for many of BlackRock’s retail investment products.
Adam Lavine
Not to be confused with the lead singer of Maroon 5, Adam has an impressive pedigree of his own in developing and implementing technology solutions for some of America’s largest companies. What strikes me most about Adam however is that he is Shingo’s dad. Pause for a second and think of how many people you know who would be willing to go work for their own son. The fact that Adam has such faith in his son’s project speaks volumes for the talent of Ethos’ CEO.
Conclusion
I think that Ethos is one of the most exciting crypto currency projects currently going around. Till now it has been little more than an ambitious project, with few runs on the board. The launch of the universal wallet later this month will be the first true test of whether the project team can deliver on their very ambitious goals. Despite the challenges inherent in such a broad and ambitious strategy, I think that the team that has been brought together to develop Ethos is one of the most impressive in the current crypto space. On this basis alone Ethos is worth a look. If you think that they can realise half of what they are aiming to do, then the investment case for Ethos is very compelling. I personally own Ethos tokens and am looking forward to seeing what the next 12 to 24 months brings for this project.
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