The crypto asset marketplace is over-saturated; there are simply too many projects and assets within the space that do not warrant investment, yet they have large market caps and significant valuations. This is set to change in 2018, and is already well underway.
As a result, I have taken a very bullish view on Aion, who will be the beneficiary of capital outflows from weaker projects and into stronger ones, and more broadly, increasing volumes of capital flows throughout the entire space as public awareness and market participation increases.
I like to think of Aion as a Master Limited Partnership (MLP) within the oil industry, rather than the conventional “pick and shovel” play. A MLP is a company that owns and operates midstream assets, such as pipelines, utilities, and storage facilities, and regardless of the underlying price of oil, MLP’s generate revenue so long as oil is flowing through their assets. This is analogous to Aion, who is working towards becoming the midstream asset owner and operator for the crypto asset ecosystem.
Aion has already made its intentions clear to create interoperability within the Ethereum blockchain, which also gives it access to the vast number of ERC20 token projects. This is exactly where the majority of malinvestment within the space has occurred to date, so when the narrative shifts and capital begins to flow out of these poor investments and into other areas of the ecosystem, Aion stands to benefit as this capital flows through its system generating fees, and most importantly, usage that lends itself to the network effect and further usage.
Moving deeper, liquidity is a major paint point within the crypto asset marketplace, and many projects are competing with Aion to offer a solution to this lack of liquidity via interoperable systems. This is the major barrier: Aion is entering a highly competitive niche market with a large financial incentive allotted for the best solutions, which means that competition will be the major risk.
Yet, I believe that Aion’s existing partnerships will provide them with the resources and momentum needed to remain ahead of the pack (e.g. Moog, Bancor, Ripple Ventures, Deloitte) and become one of the go-to solutions for liquidity within an ecosystem that will come to be defined by liquidity, speed, and efficiency.
After all, what good is a distributed, P2P economy if you are limited to a small number of payment channels and linking to/from various channels incurs unnecessary friction? This friction has come to define our existing economic system, so projects working to reduce friction in the blockchain based economic system are where the real revolution lies.
Zooming out a bit from just the crypto asset economy, I believe Aion’s focus on reducing friction in the transfer of assets offers substantial upside. It remains to be seen how sovereign governments and central banks will respond to the proliferation of cryptocurrencies and crypto assets, however, the solution is clear.
Either (a) sovereigns adopt their own digital protocols, or (b) they do not adopt their own digital protocols, and instead allow existing or to-be-developed (TBD) assets, tokens, and protocols to fill the void as the overly indebted and highly-contested fiat system begins its gradual unwind.
Regardless of what occurs in the macroeconomic picture, Aion is pushing forward into the bleeding edge of what will become a lucrative endeavor, regardless of what currency it comes to be denominated in. This is contrary to the crypto maximalist view.
Should sovereigns adopt their own digital currencies (highly likely), then the first thing that will be required is a system that parallels the Eurodollar market. Much has been said about the Eurodollar market, but in short, it is the system that provides liquidity for international trade. A vital function for our interconnected, globalized economy, to say the least.
By working on becoming the Eurodollar market of the existing digital currency market, Aion will be positioning itself in a highly sought position for if (when?) sovereigns decide to unveil their own digital currencies. Owning a stake in Aion gives us exposure to this possibility because should sovereigns unveil their digital currencies, they will likely do so in relative haste, and rather than poaching top talent from the private markets they will likely select existing private services and protocols to become the backbone of their global, digital liquidity systems. This does not seem far-fetched to me, although perhaps 3-5 years away.
In the other scenario, existing and TBD private digital currencies will grow to become the new economic standard. Aion is already well on course to become a part of this industry standard as a provider of liquidity, as a solution architect for linking two various blockchains, and ultimately, as one of the most valuable functions in the quest for scalability. While everyone focuses on the blockchain protocols properly scaling, the larger picture indicates that increased liquidity may be the tried-and-true solution to this scalability concern, as increased liquidity will reduce pressure on the blockchain protocol processing capabilities by offering off chain scaling solutions.
Aion is becoming a very well-known project with an impressive leadership team and a noteworthy advisory board; Aion’s CEO Matt Spoke is an early board member of the Enterprise Ethereum Alliance. The network reach from this leadership and advisory team may be the factor that puts Aion ahead of its competition and moves Aion closer to becoming the industry standard protocol for the Internet 3.0.
While Aion has only inked a deal with Ethereum to date, they will reduce their risk and maximize their chances of succeeding in becoming the industry standard interoperability protocol by also partnering with the other heavy hitters and largest competitors to Ethereum: NEO, EOS, and Cardano.
I truly believe Aion is a relatively de-risked investment setup that warrants serious consideration. Although the project is receiving more attention and hype surrounding their recent releases, they are genuinely working to solve a major pain point in a fast-paced, dynamic marketplace. Only businesses that reduce pain are worth investing in, and when you also add into the mix the project’s capable business and development team, it creates for a compelling investment thesis.
Thesis Summary:
Aion – Capital has been too widely dispersed throughout the cryptocurrency market, a consolidation and concentration event is underway. Bigger picture, digital assets are here to stay and liquidity and interoperability will always be a vital service. The most effective way to express a bullish view on digital assets is via a midstream operator who stands to benefit from increased capital flows, increased volume; this midstream operator is not necessarily exposed to underlying prices, but rather volume and usage, thereby reducing risk.
DISCLAIMER : This content is for informational, educational and research purposes only. This post is not to be taken as personalized investment advice.
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