Research suggests one in four millennials are planning to invest in cryptocurrencies over the next year. That’s why a number of emerging projects and offerings are targeted, at least in part, at making investing in crypto easier and more attractive to individual investors.
Longtime crypto investors proudly tout their willingness to HODL, or hold, their stakes at a time of market upheaval, but a new model may make doing so more attractive for newcomers used to earning interest on their traditional investments.
Compound is building an Ethereum-based protocol for “pooled liquidity lending markets.” This could provide large institutional holders a highly liquid way to hold and borrow crypto for strategies such as short selling, and in August, Compound announced partnerships with more than 25 financial institutions, mostly hedge funds and crypto investment platforms. But for individual investors, the concept is more like an interest-earning money market account that maintains liquidity.
There are now thousands of digital assets of all types out there including coins, tokens, forks, stablecoins and collectibles.
Users commit, or “supply” crypto assets using Compound’s app and earn interest until they withdraw it. Algorithmically calculated interest rates vary by coin, from 0.03 percent for Augur’s reputation token (REP) to 0.18 percent for Brave’s basic attention token (BAT) as of late September.
“Our goal is to become the interest rate layer for token assets, allowing any type of user (individual, hedge fund, or application) to earn interest, or borrow tokens, while maintaining instant liquidity,” strategy lead Calvin Liu said in a blog post.
More Options, or Buy Them All
Last week, one of the largest consumer crypto investing platforms, Coinbase, announced a new coin listing policy that would greatly expand its offerings beyond the five cryptocurrencies currently available on its platform. Essentially, Coinbase is planning to list any digital asset whose issuers submit an application that meets its standards, although the company will restrict access to investments based on regulations in each jurisdiction.
“There are now thousands of digital assets of all types, including coins, tokens, forks, stablecoins and collectibles,” the company said in its announcement. “One of our top customer requests is to add support for these new assets, and we have been determining how to do this in a secure and compliant way for those assets meeting our standards.”
Coinbase also added a “bundle” investment option, allowing users to purchase a market-weighted “basket” of the different coins the service currently offers. It’s not a new concept: Circle Invest has offered a similar “buy the market” option. For its part, Coinbase is positioning its bundled option as a way for new investors to get their feet wet.
“Buying a single cryptocurrency can be easy if you know what you want,” Dan Romero, vice president and general manager of Coinbase Consumer, said in a blog post. “But knowing which cryptocurrency to buy, and feeling confident in the amount you purchase, is where a lot of people lose confidence.”
So-called “stablecoins,” currencies pegged to fiat currencies or assets such as dollars and gold, have been available for some time, but Circle envisions making them a key part of its own investing infrastructure. Last week, Circle announced its USD coin (USDC), which will be available on its Circle and Poloniex exchanges, allowing users to convert fiat currency to its liquid, dollar-backed token to enable easier transactions involving other cryptocurrencies. Co-founders Sean Neville and Jeremy Allaire argue that doing so will create “a safe, transparent, and trustworthy layer for fiat to operate over open blockchains and within smart contracts.”
In the long run, “market infrastructure like stablecoins will become the base layer that supports every financial application,” Jeremy Allaire, chief executive officer at Boston-based Circle, told Bloomberg.
Making ICOs Easy as A, B, C
Even token issuers are finding new ways to make investing in their ecosystems more easy for newbies. As part of its ongoing token sale, distributed journalism platform Civil has turned the process on its head to help inexperienced crypto investors get involved. Instead of requiring users to install a wallet, register for the token sale, complete the KYC/AML requirements and then acquire ether before being able to purchase its CVL token, Civil allows users to first buy tokens directly with dollars and then walks them through the regulatory and registration steps. (Disclaimer: The author has purchased $25 worth of CVL tokens as part of his reporting in order to better understand the buying process.)
“Since we formally announced the token sale on August 3, many people have reached out expressing support for this project – and candid feedback that they want to participate, but prefer a more straightforward process to do so,” co-founder Matt Coolidge wrote in a blog post.
