CoTrader bills itself as the world’s first trustless investment plaform. The Tel-Aviv based start-up has an ambitious goal: to disrupt the $85 trillion global investment funds industry with blockchain technology.
With a proliferation of complex cryptocurrencies and ICOs, and new scams hitting the headlines every week - CoTrader seeks to help investors by offering a platform for blockchain smart funds that allows investors - called CoTraders - to invest together with the best proven investment fund managers.
To get my head around the core concept, to understand why it could be a very disruptive platform, and to find out his opinion on the future of the space, I spoke with Gary Bernstein - CoTrader’s founder and CEO:
Avi Rosten: Can you give me a brief summary of how the platform works?
Gary Bernstein: It’s the first time in history that investors are empowered to invest together with somebody, but always with the ability to withdraw from any fund at any time, and with proof of the fund’s performance as well as assurance of what the fees will be.
Users can automatically build up a performance history by trading and holding through their own smart fund wallets. Top performing fund managers and influencers have a tremendous incentive to be listed on the funds marketplace and compete for CoTraders' funds, because this multiplies their own earnings hugely.
So for example, today if you want to invest together with someone, you have to send someone your asset, and when you send the assets - it can then be hard to get assets back. With our platform, you you can always pull back your portion of whatever is left in there.
Let’s say someone opens up a smart fund - an ETH smart contract - and puts in 10 ETH, and trades it for something else - other ERC20 tokens for example, after some time, let’s say its worth 10x…now I see this fund has gone up 10x, a lot of people are going to rush money at this fund because they want to also make 10x on their money….
They send assets to their smart fund, but the manager cannot withdraw funds from investors, only the depositor can ever withdraw, that’s what’s cool about the blockchain.
AR: How does it differ from eToro or another social trading platform - is it the case that with the others - because they are centrally controlled - in theory they could stop you accessing your funds?
GB: Yes that’s one of the primary differences - you don’t hold your own assets.
EToro is a stable company, but with some of their competitors a lot of the time you have to keep your assets in a lot of different exchanges - for a long time. If you left your money in an exchange for a few years who knows what will happen to it. But with a smart fund you can leave it there forever, the only thing a manager can ever do is trade.
The other difference is that elsewhere you don’t have the same proof of performance and are able to see what percentage the fund manager is taking.
Normally its hard to prove you’ve done well, people don’t want to send assets to you, and there are regulatory concerns in terms of being a custodian of funds. But with our platform we’re not custodians, we don’t hold the assets and neither does the fund manager…the smart contract holds the funds.
It makes it very easy to become the Airbnb or Uber of investment funds..anybody can create a fund and anybody can join that fund - it's revolutionary in that sense…
AR: How will investors profit from your ICO?
GB: The tokens (COT) will get locked to the funds. E.g. 10% would get locked to the funds.
Say you put in 10 ETH, 1 ETH will get locked up in our COT token, and when you withdraw from the fund you will be able to withdraw that 1 COT and get it back - so basically the value of a COT is in relation into the utility of the platform - as much as it's used - its value goes up.
The other way its used is that all profits from the platform need to be held somewhere, so we’re going to buy back COT with all of the profits and some of those funds will be used to progress the platform, and whatever is not needed can be burned. The DAO (Decentralised Autonomous Organisation) can vote what to do with the funds.
In addition, the token can be used to hide the trading strategy of the trader: people would be able to copy your trading strategy because it's on the blockchain - the token assists with hiding your strategy.
AR: How has your project progressed, where is it at now?
GB: We raised some seed money, progressed to a working blockchain alpha - demo.cotrader.com - where you can see the transactions happen.
We’re taking it live hopefully within the next month even before the sale….as far as the exact sale date - we’re looking to end it by August..there’s a bonus structure for early investors, but we’ll have the product actually ready to use…we have a real product ready to go..I think with this element we can create some market enthusiasm.
Then further on we will implement the privacy features, and we hope to support any assets.
AR: How did you get into crypto, and what gave you the idea for CoTrader?
GB: I started following crypto really early, around 2011. I’ve been an entrepeneur in various areas for five years and I’ve been in software for over 20 years.
I’ve always liked the idea of social trading, once I saw decentralised exchanges picking up with Bancor etc. I thought now there’s really an opportunity because you can exchange things without dispute.
The challenge was how do you preserve privacy, and then I saw that things were developing in that area as well…This was over a year ago, then we started to write provisional patents for the platform, and we started to sell some tokens, build the team, and took it from there..
People were very excited about the idea - it’s a very intuitive idea, a lot of people are doing things in this space but people are often missing a way to put things all together in a way that’s secure.
AR: That leads on to my next question: do you think there are a lot of ICOs riding the hype talking about “blockchain” because it helps them get investment and attention?
GB: I absolutely agree, a lot of projects don’t make sense on the blockchain. In a lot of cases you don’t want your information being public, even if its encrypted. In a lot of cases you’d rather have one central authority have it. The upsides don’t make up for the downsides. And then there are a lot of fraudulent cases too… “Cupcakes on the blockchain!”
I think the market is also maturing, CoTrader in contrast helps people look for the next killer blockchain app..
CoTrader I believe is a killer-app because it’s the first time you can disrupt the fund-management industry - which is a huge industry……you can disrupt how it works because of the platform’s proof of performance, assurance of fees…
AR: Do you think the ICO bubble will burst soon? If it does burst do you think it will damage projects like yours?
GB: The flood of new crypto projects in a sense is bad because there’s so much noise - so fewer ICOs could be an upside….but when the market is lower it can be harder to raise larger funds.
But then again - the amounts raised don’t make sense. Often they’re raising $50m or $100m for a company that not only has no users or product yet, but sometimes doesn’t even have a viable plan to have a product. Some of them can probably never even work…
On the one hand there’s this mantra to decentralise and sell 70% of the tokens, but on the other hand normally companies will sell 10 or 20% of equity in rounds because you want to have an incentive for a company to move a project forward.
I guess the market will shake the bad projects out…
AR: Do you see the end in sight for the current bear market?
GB: In a sense bitcoin is still very cheap compared to gold, which is worth $7-$10trn and that’s just 10 or so per cent of the earth’s Gold - if I’m correct - that has been mined.
So just a store of value of one metal is worth 30 times the crypto market right now.
And gold is sort of inferior to many cryptocurrencies - you can’t send it over the internet, it can be confiscated - and has been by governments before, and its actually not limited by supply. Of course you can also fork cryptocurrencies, but you can’t create more bitcoins of exactly that type.
So in some sense I feel like that the market is just beginning, and as the world becomes more technological e.g. with IOT devices and other bots talking to each other, buying things from each other, and using smart contracts - it almost becomes hard to imagine a world where crypto doesn’t continue to grow a lot more - as well as distributed ledger tech in general…
Money is one of mankind’s earliest technologies, it precedes writing…It’s only gone through a few revolutions from bartering, to seashells, to gold, to paper notes representing gold, to plastic representing paper notes, to Paypal - or something else centralised…
It’s the first time we have a non-centralised version..I’m sure it's just the beginning..it has many multiples to go..when we’re going to see it? Who knows...
I don’t really see it [the current bear market] as a crash - it peaked at 20k, but its come down to what it was before, overall if you look at a longer graph it’s growing, and when big banks and institutional money will come in, it will really take off…
I don’t know about the next 6 months, but within the next 2 to 3 years I could easily see another 10x or 30x for the whole market…