Opportunity Fund LP Letter - 2020 In Review

Unbounded Capital invests in the Bitcoin (BSV) ecosystem via early stage equity in companies building on top of Bitcoin as well as asset and derivative exposure to Bitcoin itself. We envision businesses leveraging Bitcoin playing a predominant role in shaping how people interact with and use the internet in the coming decades, and are working to help entrepreneurs achieve that vision.

Bitcoin (BSV) is enabling the next generation of business. BSV as an asset has asymmetric upside and the network has spurred an explosion of entrepreneurial creativity. Unbounded Capital matches deep understanding of Bitcoin with extensive VC and entrepreneurial experience to help build the Bitcoin economy through identifying, funding, and then guiding the best Bitcoin-native businesses.

Opportunity Fund’s mandate is to give our investors the best long term risk-adjusted exposure to this thesis. We do this through venture investing generally at the very early stage and asset and derivative exposure to the asset BSV. At the time of this writing, the portfolio is roughly 70% venture investments and 30% liquid BSV exposure.

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BSV In 2020

January Price Action

At the beginning of the year, we saw the price of BSV go from just under $100 to a high of $450 in just a couple of weeks. This runup was largely based around speculation that Craig Wright moved some of his bitcoin mined in the early days of the network’s existence. He submitted to the court in Florida required by his ongoing lawsuit with Ira Kleiman, under threat of perjury, that a bounded courier arrived with some of the key slices required to access Bitcoin wallets with 850k Bitcoin. He maintained to the court since then that while he has some of the key slices, he does not have enough of them to access the wallets. While we think this in a legalistic sense is true, we believe it is likely that, in the probable event that he wins his case against Kleiman, he would likely get access to remaining key slices (our seminal article on the piece for further reading).

The Genesis Upgrade

In February the Bitcoin SV blockchain restored many key aspects to the protocol, notably removing any cap on the size of blocks. Much of the development work on the BSV blockchain has been to restore aspects of the protocol eliminated from the Bitcoin Core (BTC) developers over the years. Now future developments to Bitcoin SV will occur at the application, miner, or transaction processor level with the protocol set in stone, similar to existing internet protocols. This stands in stark contrast to the BTC, BCH, Ethereum, and every single other notable blockchain that views their blockchains more as software versus a stable protocol.

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Major Institutions Investing in the BSV Ecosystem

Announced at the Coingeek Conference in October, we saw major institutions like leading Japanese VC Global Brains and global telecom giant NTT DOCOMO invest into companies building on BSV.

Tuvalu Adopts BSV

A nation 11,000 strong with no electronic banking system is making history with its nation-wide publicly distributed digital ledger initiative, announced at the end of 2020. Tuvalu, a country consisting of nine islands in the South Pacific, announced ambitious plans to create the first national digital ledger and infrastructure project on Bitcoin SV.


This initiative is a massive step forward for the Tuvaluan people: the project strives to transition the standing economic management process to a streamlined digital record keeping format tailored to the people and culture. 

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Portfolio Overview

HandCash

HandCash had a big end of 2020 with the highly anticipated release of their HandCash Connect SDK (software development kit). The launch of this SDK initiates a major part of HandCash’s roadmap, as the toolkit will allow developers to more easily build Bitcoin applications which HandCash can then service as the wallet and mobile interface. There are early indications that HandCash succeeded in their goal of making Bitcoin app development simple, as several applications launched using the software within the first few weeks of its availability.

One such application using HandCash Connect is the game “Haste” (only available on mobile). Haste is essentially a proof-of-concept of an innovative leaderboard-based incentive scheme that could be widely applicable to many future viral games and competitions. In Haste’s first 72 hours they facilitated nearly 7,000 transactions on Bitcoin, many as small as $0.005 and subdivided into 10+ outputs. This is a great example of the type of application that can only be built on Bitcoin SV, and it illustrates that developer tools like HandCash Connect play a crucial role that provides utility to the app creators.  

Run

Run had a similarly exciting end to 2020. After more than a year in development, the first stable public version of Run (v0.6) was launched. Developers seeking a solution to application development involving user owned objects (think game items or digital coupons) now have a simplified toolkit to realize their vision on highly scalable Bitcoin. The ease of token development on Ethereum through their ERC-20 token standard planted a seed of experimentation on what tokens could do. 

Unfortunately for entrepreneurs and developers, the inability for Ethereum to scale and the associated exorbitant transaction fees rendered the majority of existing token use cases impossible. This relegated tokens to the domain of financial instruments, many of which are now being investigated as illegal securities. With Run making Bitcoin token issuance as simple as Ethereum, entrepreneurs can now fully realize what tokens can do for their applications when they are built on a foundation that is scalable and has minuscule transaction fees.

Last September we saw the popular USDC stable coin launch on Bitcoin with Run’s token protocol. The porting of USDC over to hyper-efficient Bitcoin is a major development for entrepreneurs seeking price stability of the currency for their application users. 

Gaming platform Kronoverse, another business currently using Run, had several exciting updates in 2020, namely the beta release of its flagship game Cryptofights. Cryptofights is a beautifully designed turn-based role playing game with the feel and graphics one should expect of a professionally designed modern game. To get a sneak peek at some of their updated characters, environments, and campaigns check out this blog post.

We look forward to the forthcoming applications in 2021 which will use Run’s token protocol and developer tools!

Planaria

2020 brought us an enormous amount of innovation from Unwriter’s company Planaria. Here is an attempt at an exhaustive list of Unwriter’s output from this year. We likely missed some releases and updates.

Unwriter’s toolset continues to be the backbone of many Bitcoin applications used today. As Bitcoin scales Unwriter’s challenge will be to keep pace and expand what developers can do with the broadening sets and types of information stored on chain. We look forward to seeing how Planaria’s tools and business model develop in 2021.

Xoken Labs

Xoken Labs had a big 2020. Coming out of stealth mode in February 2020, Xoken founder Nithin Mani quickly became an interest of Unbounded Capital due to his scaling and payments solutions. Their first product, Xoken Nexa, was the first implementation of SPV (simplified payment verification). SPV was described in the Bitcoin whitepaper 11 years ago as a key to scale, but Xoxen Labs is the first company to successfully implement this process. The combination of problem solving and technical prowess that led to Nexa is now leading to Xoken Vega, a new node implementation that will professionalize Bitcoin and enable orders of magnitude greater scale for transaction processing. 

Vega remains in development with a launch date of Q1/Q2 2021. Unbounded Capital's close relationship with Xoken is mirrored by Unbounded Enterprise, which has been an early customer of Xoken’s tools as part of their several in development products. We are excited to see Xoken’s existing products used in more applications in the near future, as well as the release of their in development products in the coming months.

UNISOT

UNISOT started 2020 off right with a live demo of their supply chain tracking product at Coingeek London. This impressive debut was coupled with announcements about partnerships with early customers in the Seafood space using a version of UNISOT tailored to their needs called Seafood Chain.

The pilot programs with these initial customers were extremely successful. Their launch on the main chain and other impending customers make this a great company to watch in 2021. The supply chain space is tailor-made for blockchain disruption, and by using Bitcoin SV, UNISOT can charge prices orders of magnitude less than competitors building on other chains.

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Fund History And Performance


Unbounded Capital was born out of a successful run in crypto trading, investing, and arbitrage in 2017. I then began managing founding partner’s Dan Rosen’s capital and the continued success investing gave us the confidence to start the firm and first fund in the SF bay area, officially launching August of 2018. When our firm first started as Ezra Capital LLC with the Ezra New Economy Fund, LP, the mandate of this fund was to opportunistically invest in the broader blockchain ecosystem and to be actively involved in all venture investments.

When UC partner Dave Mullen-Muhr and I attended our first BSV meetup in SF, we had to grapple with the reality that most of what we thought we understood about blockchains might be wrong. Within months the firm came to the conclusion that, to fulfill our fiduciary obligations, we had to change its investment to focus solely on the BSV ecosystem. After this switch in April 2019, we rebranded the firm and fund name to Unbounded Capital and the Opportunity Fund.

Today I am proud to say Unbounded is the premier firm investing into the Bitcoin (BSV) ecosystem across three funds. Opportunity Fund has made five venture investments since the focus on BSV, and of those investments, two have raised capital at higher valuations and all five have continued to grow strongly. And we will be announcing two additional investments for Q1 this year. We have partners in San Francisco, Denver, New York City, and our headquarters has moved to Austin, Texas, where I now call home.

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The chart above compares the performance of the fund from to what we view as the most relevant benchmarks: BSV, the S&P 500, and the Bloomberg Galaxy Crypto Index 1/1/20 - 12/1/20.

Our tracking starts in April 2019 when we began to focus on the BSV ecosystem. Of the gains for the firm since then, about half come from BSV asset appreciation and our leveraged total return swap we did between BTC and BSV, and the other half from our portfolio company markups solely done when they raised capital at higher valuations.

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BSV’s Future In 2021

On a fundamental level, we are more bullish than ever on the BSV ecosystem and BSV the asset, with a bullish disposition for crypto markets in the near term. From the venture investing we are doing, to the numerous weekly conversations amongst the team at Unbounded Enterprise, we see more and more companies choosing to build on BSV and reap the benefits of the technology. We have higher conviction than ever before on the business utility of a scalable blockchain secured by proof of work. Despite the disappointment of  the COVID-related delays to Craig Wright’s trial in Florida, now scheduled for June 1st, we see several promising catalysts for a major BSV price increase over the next four months. These include:

  • February 16th court date for the Wright v McCormack Libel Case

  • Technical improvements to BSV’s transaction processing capabilities which will expand throughput by orders of magnitude

  • Private insight into exciting soon-to-be-launched developments from BSV businesses which will impact large existing markets 

We think 2021 will likely end up being a year where the resolution of legal battles coincides with major technical advances and market adoption, which could cause even more significant market movement for the price of BSV than we initially expected for 2020.

Thank you for reading, and for your ongoing support and confidence in us.

Onwards and upwards,

Zach