WandX and the Cuban Collar

Creating a More Robust Investing Platform on Ethereum

An incredibly important feature WandX is bringing to the ethereum blockchain is this: the ability for a nontechnical user to create an ERC20 token.

The ERC20 token is one of the basic staples of the ethereum blockchain. There are 48 ERC20 tokens listed under “Token” on etherscan.io, and over 10,000 ERC20 contracts written on the blockchain. The standard allows for tokens to be more easily traded between DApps and gives a framework for developers to begin their projects with more direction. It’s secure and relatively simple.

But ERC20 tokens aren’t easy to create for less technical users. I’m currently incapable of writing one, although I understand portions of the code.

WandX changes that. WandX allows users to make their own ERC20 token out of a basket of ERC20 tokens and Ether, with plans to allow other non Ethereum based tokens into baskets as well. Check out the working prototype right now that incorporates Meta Mask and Civic.

I can literally have all of my cryptocurrency not just on one blockchain, but in one ERC20 token. That’s powerful.

Why This Matters

The prevailing investment thesis of the past year has been based upon Joel Monegro’s USV post on Fat Protocols, a must read for anyone who is buying cryptocurrencies for speculation or investment. In Fat Protocols, Joel argues that the value in cryptocurrency will gather at the protocol level-this would be BTC, ETH, Steem, NEO, and any other blockchain that can host apps and DApps. For Joel (and presumably the fund he recently started), the best ROI is in these tokens, where one has broad exposure to the market but diversification of risk.

On the other hand, two great articles: one by Coinfund Co-Founder Jake Brukhman and another by Evan Van Ness have questioned this fashionable theory. Brukhman and Van Ness both seem bullish on app tokens[1], or at least outside the zeitgeist of popular theory (generally a good place to be in investing).

If they are right, and app tokens are where a great deal of value will accrue, then using WandX to create ETF baskets of these will be a great way to diversify across tokens without holding just the underlying blockchain token. One could put together a basket of tokens in an area he is confident about: say, blockchain gambling or “tokens with underlying price-to-book value exceeding their current market value”, or any combination that they believe in, and suddenly one has a sector conveniently covered.

Be fearful when others are greedy, and greedy when others are fearful

The “fat protocol” thesis has become such gospel to the cryptocurrency community, with the flipside “95% or more of ICOs will fail” as a major belief of that gospel. That distinction is worth investigating further, as it is parroted around by people as if it is self evident.

It’s this “certainty”, coupled with sub ICO trading of recent tokens, that makes this the perfect time to begin intelligent accumulation of ERC20 tokens. The market “price” of many tokens is affected by skewed sentiment-not a change in the underlying value. If you had hoped to use an ERC20 token, or done your due diligence one why a particular token may be useful to you one day, this is a good time to consider buying some on sale. There are even some app tokens that are currently trading below the book value of the ETH and BTC they hold.

WandX makes it easy to build your token portfolio, which you can then place on their decentralized exchange and sell. If you decide to hold the token, you can, at any time, call a function that will distribute all the individual tokens into your wallet. WandX allows you to build an investment tower out of Legos and break it back down into individual blocks, which is especially helpful considering the ability to “use” tokens in DApps.

The Cuban Collar

WandX is also going to be making futures contracts and options available. This means I could make a basket of stocks that also hold options contracts within it, stabilizing the price over time. The most immediate use for this is for early investors in ICOs and founders who have their tokens locked up for a period of time. If one is concerned about a market crash before they can unlock them, purchasing some put options and reducing (or removing completely) downside risk is a smart move.

The Cuban Collar is one of my favorite stories of smart investing. When Mark Cuban sold Broadcast to Yahoo, he was unable to sell his Yahoo stock for a number of months. He used the options collar and “sold” his upside to protect his downside, and wasn’t greatly harmed by the 90% drop in value that Yahoo took before he was able to sell his Yahoo stock.

Without options, Mark would not be a billionaire. Even better, by selling the upside and buying the downside, this was basically cost neutral![2]

Wouldn’t you love to have the ability to lock in some of your ETH or BTC gains, especially after 2017?

WandX allows investors the opportunity to do exactly that.

Crowdsale is live!

If you’re excited about what WandX is bringing to the ethereum blockchain, you can support them by buying into their crowdsale. Check out their token sale page for more information, and of course do your own due diligence on the team and product before you put your money into it[3].

[1] “App tokens” is a good describer of most ERC20 tokens.
[2] I am not an investor, so if you decide to do something like this consult a professional who knows all the ins and outs of options collars.
[3] This article is not meant as investing advice and I am not an investment professional. I merely point out a product that is available and invite the reader to look at possible uses of it.