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Altcoin Report - November 2022
Regulatory compliant securities platform
Note: this report is accurate as of its publication but some details will change over time. Please check the posted date above.
With blockchain technology, you can create all sorts of financial products, way beyond NFTs and altcoins.
Holders and issuers can slice, dice, fractionalize, and combine almost every type of financial arrangement into all sorts of new and innovative financial products, for example, synthetic tokens, equity agreements, convertible notes, lending and borrowing products, derivatives, and products people haven’t even invented yet.
When these products carry any type of legal obligation, you have one big wrinkle: laws.
Those laws may change from one country to another, and sometimes from one town to another.
While the assets do not change, each jurisdiction forces people to use, buy, and sell these assets in different ways. Issuers still need lawyers, accountants, financial experts, auditors, and consultants to create an offering, get regulatory approval, and bring it to market—something the legacy financial system does just fine (arguably better than blockchain).
What if somebody created a universal platform to raise money and issue securities anywhere, anytime, without those layers of middlemen, while also giving users a guarantee that their actions always comply with the relevant laws?
Today’s project is building a globally compliant, decentralized capital market for securities and other products that need regulatory approval. Bitcoinist named it one of its top 5 DeFi projects and NewsBTC ranked it as a top 5 interoperability project.
With a novel token designed to capture value from its use, a team with a compelling vision, and partnerships that add crucial components to its platform, you can expect it will capture a very big piece of a very big market if it succeeds.
I hate to speculate on potential returns, but a 10,000% gain seems reasonable from today’s valuation (though not all at once).
That may seem crazy but it’s a legitimate possibility given the size of the project, the way it’s structured, and the scope of its addressable market.
What is that project?
AllianceBlock. The token is NXRA.
Why AllianceBlock matters
AllianceBlock is a DeFi hub that supplies a suite of interoperable products that enable seamless gateways between TradFi and DeFi. The platform uses end-to-end infrastructure to empower individuals, startups, and businesses to build, navigate, and participate in decentralized, secure, and compliant blockchain solutions.
It has already launched its mainnet, DeFi Terminal, Bridge, DEX, and Fundrs fundraising platform. In the coming months, it plans to release its single-sided liquidity provisioning tool, data tunnel, and Trustless IDentity Verification (TIDV). Scroll to the bottom for more details on each of these elements.
Once complete, the network will handle registration, compliance, settlement, life-cycle management, financing, auditing, data flows, and the exchange of financial instruments. Developers and third parties will add APIs and bridges for users.
At that point, entrepreneurs, banks, consultants, and financial firms will have a global platform for security tokens. They can interface directly with AllianceBlock or hire services to do the work for them. AllianceBlock will provide the infrastructure and access to global markets.
In contrast to other security token platforms, NXRA separates the regulatory compliance layer from the data, privacy, and workflow protocols.
This layer enables users to create, finance, and leverage their securities on the platform regardless of local rules or geographic location. With it, banks and financial firms can connect to DeFi protocols and build decentralized financial projects with certainty their activities comply with applicable laws.
On top of that, AllianceBlock has several partnerships to complete the larger ecosystem.
Ocean Protocol will provide a data layer for KYC and identity services. Chainlink will provide oracles. Frontier will give users an interface for lending and insurance. Orion Protocol will serve as the exchange for NXRA-created securities. Ramp DeFi will provide liquidity for NFTs. PARSIQ will monitor events across different blockchains and connect those events to off-chain apps and devices to automate different workflows.
Other key partnerships involve Quant Network and API3. AllianceBlock will offer Quant Network’s Overledger solution to blockchain and non-blockchain companies. API3 will provide decentralized ID solutions and Airnode, an enterprise-grade API to connect users to the blockchain.
AllianceBlock has also brought on data analytics company Covalent to get real-time, granular, and actionable blockchain data for developing AllianceBlock’s solutions.
This approach gives AllianceBlock a competitive advantage: a whole decentralized ecosystem with regulatory compliance.
What will NXRA tokens do?
NXRA tokens serve four main purposes:
Medium of exchange for services and assets on the platform.
Rewards for institutional, data, and service nodes.
Fees for the use of the network.
Incentives for developers and liquidity providers.
NXRA tokens also form the centerpiece of a mechanism to keep prices pegged to their relevant real-world currencies. It’s too complicated to explain but designed to drive value to the NXRA token while letting users redeem securities in a stablecoin pegged to their local currency. As a result, users will not have to worry about changes in the price of NXRA affecting the value of their assets.
What will make NXRA’s price go up?
Every time somebody creates an asset on AllianceBlock’s network, that value gets captured as NXRA tokens until somebody redeems the NFT related to that asset. On top of that, 25% of all fees get burned, reducing the overall supply of NXRA.
As more people use the platform and third parties set up storefronts, consultancies, and apps that interface with AllianceBlock’s platform, they will grow the network, generate more transactions, and create more NFTs, locking up more value as NXRA.
Using AllianceBlock’s DeFi platform, they can leverage those assets for stablecoins without selling them. As a result, they can keep that value locked as NXRA tokens.
All this activity will drive NXRA’s price up.
What about adoption?
Finance is notoriously slow to change and banks are incredibly risk-averse. Blockchain-based securities will take a while to gain traction.
While the big guys will wait as long as possible (they have billions of dollars at stake), the bet is those small issuers will switch as soon as they’re ready.
AllianceBlock has a fiat on-ramp to bring customers on board. A portion of this money goes to buy NXRA tokens, the rest goes to support the team. This gives the project an outside source of income while also driving value to NXRA.
Assets can range from titles and deeds to cross-chain hedging and insurance products for liquidity miners. Pretty much anything people can do in the legacy financial system, they can do with AllianceBlock.
As long as AllianceBlock makes these activities easy, convenient, and accessible for institutions and common people, you can expect they’ll use it. That’s a challenge for all crypto projects, but I’ve seen each iteration of the platform as it has evolved and I believe AllianceBlock can do it.
What could go wrong?
As with all altcoins, the team could fall apart, people may not use the platform, and a DAO or dApp on bitcoin’s layer 2 can replace it. Also, even though AllianceBlock audits all of its code using Certik, mistakes happen and some key features may not work.
But that’s totally hypothetical and you can say that about every project.
Specific to AllianceBlock, I see three challenges that could doom the project.
First, this space is crowded, with lots of competitors. You have non-crypto companies like Securitize and Tokensoft, other securities-focused blockchain projects like Polymath and Tezos, and Ravencoin, which has integrated with tZERO, a security token exchange that already has US regulatory approval. And, you never know whether businesses will use a private, permissioned blockchain instead.
While AllianceBlock can integrate all of them as partners or users, it’s hard to predict how this dynamic will play out.
Second, a lot of the success depends on partnerships with other blockchains. What happens if their partners fail to deliver?
Last, the whole project involves a lot of work. You need to have ID solutions and audit processes to make sure securities go to people who are legally allowed to buy and sell them, data services to make sure users have good and readily-accessible information, and a bunch of other elements. Who knows what roadblocks they might encounter as the platform grows?
How high can it go?
The world has at least $300 trillion in private assets that anybody can securitize, plus hundreds of trillions more in derivatives and personal items that can one day get recorded on a blockchain.
Certainly, there’s no chance AllianceBlock—or anybody else—will capture all of that market. Not only do you have other blockchains competing for market share, but you also have a bunch of non-crypto businesses aiming to provide this same service, as well as legacy institutions that already do this and will take decades to dislodge.
So what? From today’s valuation, AllianceBlock needs only to capture an outsized share of the market relative to its size. It’s even possible those non-crypto businesses will start to use AllianceBlock as their backend.
We don’t need to speculate on the addressable market or the NXRA token’s potential to go up in price. Literally, the sky’s the limit.
Keep in mind, less than half of NXRA tokens have come to market. As new tokens enter, they will put downward pressure on prices. Also, staking rewards will go to institutions and governments that run nodes, not just commoners like you and me. How much incentive do those big entities have to restake their rewards instead of selling them?
On the flip side, when users create tokens or use the network, 25% of their fees get burned, reducing the total supply of NXRA—but it’s unclear how much these burned tokens will counterbalance new emissions.
As such, temper your short-term expectations and focus on accumulation while the team and community grow.
Today, it’s only a $30 million market cap. Tiny. It’s not a stretch to say that NXRA can return 100x from HODLing and more if you stake or participate in the network, as described below.
How to buy NXRA
Use any exchange with a good trust score on Coingecko and move your NXRA to any wallet that supports erc-20 tokens. You can also use Balancer or Uniswap.
How to stake NXRA for rewards
At this moment, the best way to get NXRA rewards is to deposit into one of the liquidity pools. See your options on the AllianceBlock DeFi Terminal.
Keep in mind, when you do this, you risk “impermanent loss.” These pools recalibrate as prices change. Depending on when you withdraw, you might lose tokens even if the total value of your stake grows.
If this sounds confusing, it is. Welcome to DeFi. Binance has an article that may help you understand this.
You can also stake NXRA on Fundrs to earn rALBT, a reputation token that enables participation in presale and private sale rounds for projects launching on the platform.
All of these options require you to take custody of NXRA in your personal wallet. I use Trezor for storage and Metamask to interact with smart contracts.
(Disclaimer: on the date of publication, I have staked my tokens on Fundrs.)
Details on Each Element
This tweet gives you a rundown of the platform.
This video gives you a rundown of TIDV and its importance.
This chart walks you through the basic process.
If you missed my previous altcoin reports, tap the button below to read them all: