Coinsilium #COIN – Investor Q&A September 22nd 2021 September 22, 2021 – Posted in: Blog, Coinsilium (COIN) – Tags: , , , , , , , , , , , , ,

Coinsilium Investor Q+A 22.09.21

Q: The NFT sector is expanding so quickly, do you think the next gen Marketplace being built by Coinsilium’s subsidiary, Nifty Labs, and Indorse will still be able to deliver a Web 3.0 equivalent for this space?

 

COIN:  In its first iteration, the Nifty Labs NFT marketplace will offer standard features similar to those in place on the most popular marketplaces; it will not specifically deliver a Web 3.0 experience to its users. The unique feature of the marketplace will be as the first one to be integrated with the RSK blockchain combining EVMcompatible solutions with the security of the Bitcoin network.

Of course we do mention Web 3.0 decentralised services as one of Coinsilium’s key focus areas and strategies, and in the fullness of time we do expect to be able to contribute to the transition of several Web 2.0 services towards Web 3.0. It is also important to note that NFT storage is already aiming in this direction when it comes to storing files on decentralised solutions like IPFS, but providing a full Web 3.0 experience was not our short term objective with our NFT marketplace project.

 

Q: With the BlockBots avatar project, isn’t this just another range of limited-edition avatars, similar to so many in an increasingly crowded marketplace. What sets this apart from other avatar project collections such as Mafia Fish?

COIN: To clarify, BlockBots is not a Coinsilium project, it is being launched separately by Indorse, our investee and partner in Nifty Labs, with Coinsilium advising on the sale and token model.

The main difference between the BlockBots NFT project and the other generative NFT avatar collections is that BlockBots will be part of a larger ecosystem where NFT holders will be able to challenge each other to earn peripheral NFTs and use the Indorse token (IND) to trade these NFTs. Most of the current avatar collections on offer are produced by new teams, set up specifically for those projects; they are not run by a team that has been developing blockchain-centric solutions together for the last five years with an existing ERC20 token and the support of large institutional investors such as the venture arm of India’s largest English-speaking media group – which is the case for Indorse!

We are confident that the Indorse team can develop a more structured offering to the NFT market by tapping into its smart contract know-how and adding gamification elements which have the potential to attract a large community of NFT collectors and online players.

 

Q: What will the Greengage investment return to Coinsilium, both as a company in terms of deal flow, and its shareholders?

COIN: Earlier this month we announced that Coinsilium had completed an investment in Greengage which plans to become the first merchant bank for the digital finance sector via its wholly owned Gibraltar subsidiary Greengage & Co. Ltd. Greengage & Co. Ltd is currently engaged in the regulatory approval process with the Gibraltar Financial Services Commission (“GFSC”) to receive a Gibraltar banking license. The investment was made for a total consideration of GBP500,000. GBP200,000 in convertible notes and GBP300,000 equity in a secondary stake sale that values Greengage at GBP27.3m. There is also a strategic aspect to this investment in that it is also expected to lead to a close working relationship between both companies in Gibraltar as we seek to jointly explore potential solutions which aim to address some of the regulatory hurdles currently challenging broader DeFi adoption.

Investment Rationale: For the equity component of our investment, the valuation of £27.3m was key as it gives us ‘skin in the game’, on reasonable terms, in a start-up bank with serious ambitions in the digital finance markets. The next key milestone for Greengage will be the granting of its banking license in Gibraltar. Subject to approval, we would expect this event to mark a material uplift in the assessed value of our investment. Over the long term however, if Greengage can deliver on its strategy of offering a range of banking services to crypto asset companies, then the growth opportunity becomes even more exciting, since this is a burgeoning and distinctly underserved market.

The terms for conversion of the convertible loan note component are as stated in the Company’s announcement of 20 August 2021.

Strategic Rationale: As stated in our announcement of 8 September 2021, it is the intention of Greengage and Coinsilium to work closely together to explore opportunities to develop regulatory compliant Decentralised Finance (DeFi) commercial products and solutions. We are most excited about the opportunity that DeFi presents, and we strongly believe that from a technological perspective, DeFi applications have the potential to collapse the costs of financial services and create an entirely new highly cost-effective business model for the global financial services industry.

However, right now most De-Fi products and services are operating in a regulatory ‘grey-zone’, and those entities operating in mature markets are coming under increasing scrutiny from regulators. There have been a number of high profile instances to date, the latest to come up on the SEC Radar were Coinbase and Celsius. We therefore don’t see an easy route to mainstream adoption for DeFi without the establishment of recognised standard practices in order to provide some degree of regulatory certainty.

This forms the basis of the opportunity we see with Greengage and together we will be looking to pursue opportunities and research DeFi projects and solutions that have the scope to be developed to function within a regulatory perimeter. Greengage’s track record and ambitions within regulated markets, combined with Coinsilium’s commercial experience and industry knowledge, positions us well for this endeavour and we are most excited by this opportunity.

 

Q: How is the NFT Vision Hack progressing, and what has it generated for Nifty Labs and Coinsilium in terms of business opportunities?

COIN: The NFT Vision Hack, which was co-organised by Coinsilium and Indorse, has been a very successful hackathon with the participation of thousands of developers and a first selection of more than 100 teams across the four tracks sponsored by Indorse, Rarible, Circle and IPFS. The winners of the NFT Vision Hack were announced on Tuesday 21st of September in an online award ceremony.

Hackathons are a great way for us to keep our finger on the pulse of the latest trends in the blockchain space as developers tend to innovate whilst getting inspired by the most recent successful projects.

Apart from interacting with talented developers and entrepreneurs from around the world who could become potential investees (we have invested in hackathon winners in the past, such as Blox), it also gives us the opportunity to get acquainted with our fellow track sponsors and Coinsilium gets visibility alongside industry heavyweights such as Circle and IPFS which in turn contributes to reinforcing our cutting edge profile in the industry.

 

Q: Are you concerned that Coinsilium is falling behind given other competitors like Jack Dorsey coming to the party?

COIN: We are still at an extremely nascent stage in this industry generally and specifically, when it comes to NFTs, the game has hardly started; although it is growing at an exceptionally rapid pace and as you say, attracting some very big players.

But like the start of the dotcom boom of the 90’s, the current user experience is still relatively ‘clunky’ with some fundamental challenges (banking, payment integration, regulation, education, and more)  that need to be overcome before anyone can even start to think about mainstream adoption as a realistic vision.

We therefore don’t view the NFT market as a ‘first past the post’ or ‘a winner takes all’ kind of race; at least not at this early stage. We also welcome the involvement of big players as they are the ones that will pave the road for us and draw the oxygen of publicity into the sector.

Competition is a great thing and whilst Coinsilium is in no position to go head-to-head with US ‘Big Tech’, it can certainly play the market to its strengths, whilst following the trends closely and watching which way the wind is blowing. Then, given our experience and connections in the industry, as and when we see opportunities for Coinsilium, we can use our relative size and nimbleness to our advantage.

 

Q: How confident are you that Nifty Labs marketplace will generate profits in the medium term and can you explain your monetisation strategies for this subsidiary with a broad timeline to successful completion?

COIN: We certainly intend that Nifty Labs will be a profitable venture for Coinsilium in the long term. But right now it is a start-up so we are initially investing in the business and will continue to do so in order to get it to a position where it can target sustainable recurring revenues. Profit is something that comes once you have recouped your investment and in the early stages of any tech venture you have to be able to fund your business to create scale and grow.

In this respect Coinsilium has kicked off the process by granting Nifty Labs a working capital facility of £250,000, as announced 22 March 2021. This has enabled it to commence work on its first major undertaking with the technical build of an NFT marketplace which, when complete, Nifty Labs will then look to commercialise. Amongst the commercialisation options under review include white labelling, third party licensing, potentially operating the marketplace on a proprietary basis or through partnership/s or a combination of all or some of the above.

As a development studio, Nifty Labs will also be looking to offer an array of commercial development and advisory services to third parties as well as having the capacity to develop further in-house products and services as per the slide below, extracted from our most recent corporate presentation. Right now however, Nifty Labs main focus remains on its NFT marketplace build.

 

Q: We expect your H1 Interims Result by the end of September – has Coinsilium been actively managing the treasury during the recent crypto market volatility?

COIN: Our Interim results are expected to be released shortly so we wouldn’t want to preempt this.

 

Q: The recent placing – were these funds solely earmarked for the Greengage deal or can shareholders expect further investments in the sector?

COIN: As we announced at the time of the placing, the funds raised were primarily to be used for strategic investment purposes, particularly in the NFT and Open Finance sectors and to accelerate the Company’s growth trajectory.  Since then we have completed on the Greengage investment which we are most excited about. With regards to any other potential investments, as Eddy commented at the time of the announcement: “Prior to the Placing, Coinsilium was sufficiently funded for current activities until January 2022.  Accordingly, these new funds will provide Coinsilium with the firepower to accelerate its growth trajectory by being flexible and opportunistic when presented with new strategic opportunities in the digital marketplace”. The key word here of course is ‘opportunistic’ which you can only afford to be when you have the available cash to deploy and can execute quickly; both of which Coinsilium is now in a position to do.

 

Q: Given your answers to the above it is clear there are a lot of reasons to be positive. Why do you think the Share price is so depressed?

COIN: I don’t think it would be accurate to describe the share price as being ‘depressed’. We operate in a highly speculative market which is prone to extremes, and both the traditional and the crypto markets have not performed well over the summer months. That said, our share price has been on an upward trajectory since the start of the year: albeit with some sharp spikes and volatility. But the underlying trend has taken us from under 2p in December 2020 to around 8p where it stands today.

I think it’s fair to say that Coinsilium has to date been a slower burn than some of its listed crypto/blockchain focused peers. I also think the market probably looks at Coinsilium as still having a lot to prove with our new venture builder strategy, which is understandable given that our transition only really commenced at the start of this year.  There was also the timing of our transition from our previous business model, which coincided with the crypto markets emergence from their two year ‘crypto winter’ cycle which ran through from  2018 to 2020.

These days, investors who follow us closely will hopefully be as excited by Coinsilium’s prospects as we are, and whilst it may be somewhat frustrating to have to wait for the broader market to catch up, that could change at any time, especially as and when positive news is released into a conducive market and speculative interest takes hold – which is often the case in this sector.