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KR1 plots course to navigate the crypto-world

Given the opacity and hyper-volatility of the crypto-currency markets, investing in them effectively can be a challenge. Chief Executive George McDonaugh is hoping to change that. Established in 2016, KR1 is aiming to expand investment opportunities through crypto assets or tokens
Cryptocurrency screen on tablet
Crypto assets or tokens are not crypto-currencies, but assets that sit in the middle of a smart contract or blockchain business.

The first list of crypto-currency billionaires has just been published by US magazine Forbes.

Top of the heap was Ripple founder Chris Larsen, whose crypto fortune weighed in at a meaty US$20bn.

Such is the volatility of the sector, however, that barely a month later Larsen had seen 65% of that value nominally wiped out.

Forbes itself said that given this opacity and hyper-volatility, it could only present the numbers in ranges.

If it’s that tough for the professionals to get a handle on what’s going on, how difficult must it be for the ordinary individual to get involved?

You could just follow the herd, the philosophy adopted seemingly by many who have recently started to invest.

Alternatively, you can find someone who might understand what is going on and back them instead.

A crypto veteran

That is where KR1 PLC (LON:KR1) comes into the picture, says George McDonaugh, chief executive of the NEX-listed investment firm.

He set up the business in 2016 with Keld Van Schreven, but has been involved in crypto world since 2011, which makes him almost a veteran, given the speed at which it is developing.

KR1, a name change recently from Kryptonite 1, invests in crypto assets or tokens.

These are not crypto-currencies, which can be used as a medium of exchange, but assets that sit in the middle of a smart contract or blockchain business.

To interact with the smart contract, you need tokens, which are limited, and if the business takes off, the token becomes valuable.

WATCH: KR1 PLC giving investors access to the 'gems' in the ICO token economy

Ethereum has kick-started the market

Bitcoin was the original and still best-known blockchain-based investment, but it is the launch of Ethereum that has really kick-started the market.

McDonaugh likens Bitcoin to the original Nokia phone, which did a good job in making phone calls, texts and basic photos.

Ethereum, though, is the Apple iPhone with a million potential applications that are now only just starting to be explored.

As new blockchain companies can ‘layer’ on the Ethereum platform, a ‘fascinating range of businesses that have never been able to exist before,’ have been enabled, he adds.

And by dint of the fact it has been around almost from the start of the crypto phenomenon, KR1 is able to get in at the ground floor or seed stage of many of the most promising of these blockchain start-ups, says McDonaugh.

KR1 does still deal in old money. Two fundings of £750,000 each time were carried out over the past year.

The money has been used for token investments, with US100,000 to US$1mln, the normal range, though KR1’s sweet spot is a sum of around US$250,000.

World of opportunities

Currently, KR1 has 26 blockchain investments ranging from token enabling, payment systems, insurance right through to a digital currency custodian.

In a world where the value of an asset can rise ten-fold in a week, traditional yardsticks such as net asset value (NAV) might seem irrelevant.

For what it’s worth, though, in the half year to June NAV rose to £4.43mln (from £99,000 a year earlier and £441,000 at the end of the year) with £4.1mln of that value attributed to its digital currency assets.

That NAV-based on an estimate and will likely have changed materially again over the past six months, given the feverish state of the market.

Credibility is king

McDonaugh is a firm believer in the future of blockchain technology and KR1 also has a supply of bitcoins and Ethereum, which is a requirement to pay its way in the digital society now developing.

The biggest asset in the space currently though is credibility, McDonaugh says, and KR1 is keen to back projects that will also open doors in the future.

This means sometimes it sees projects a year before they arrive in the mainstream.

Tips for crypto investors

McDonaugh argues the best way for ordinary individuals to become involved in the sector is to invest in KR1 as “We do it all for you”.

He does, however, have some tips for people keen to join the crypto club off their own bat.

Top of the list is to establish a twitter feed of 50 or so of the developers and coders at the core of the movement and then sit and listen intently.

McDonaugh has done this already at KR1, though being in the business for seven years means he has a big head start on the newcomers.

Intelligence such as this is crucial to sort out the wheat from the chaff among the deluge of token opportunities available at present.

A select band of trusted technical consultants is used to evaluate projects presented to the group.

Even with that help, McDonaugh admits it’s a difficult market to steer through.

“The tech is almost impenetrable unless you have a doctorate,” he says, but now the first of the businesses are starting to be switched on he believes big change is coming.

“If the infrastructure can handle the volume of traffic, the stuff we can do is going to be incredible.”

At 13p, KR1 is worth £15mln.

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October 11 2017
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