Exclusive: Invictus Capital CEO Explains How Machine Learning Can Help Cryptocurrency Investors
Daniel Schwartzkopff, the CEO of Invictus Capital, a cryptocurrency investment management firm, recently explained how emerging technologies such as artificial intelligence and machine learning may be integrated with blockchain-based digital currency platforms.
In an interview with CryptoGlobe, Schwartzkopff explained that “machine learning is a subset of artificial intelligence and the only workable technology able to create self-learning systems at this time.”
Machine Learning Is A Subset Of Artificial Intelligence, Can Be Dangerous
Machine learning is set to disrupt almost every industry – the only safe havens in the near-to-mid term will be those that are heavily skewed towards creativity, empathy and design. Blockchain technology’s ability to provide an immutable, distributed ledger allows us to create autonomous systems that can interact with each other without human intervention or involvement on a decentralized basis with no central point of control or failure.
Schwartzkopff, whose firm, Invictus Capital, uses data science and machine learning to help manage cryptoassets worth $120 million, believes “distributed AI has revolutionary potential but could also be quite dangerous as it would be nearly impossible to shut down if it turns malicious, which is the subject of much debate and Elon Musk has pushed for discussion and potentially regulation with his OpenAI project.”
“Enough Time” To Hard Fork When Quantum Computers Can Challenge Modern Cryptography
When questioned about whether it’s necessary to build quantum-resistant blockchains, such as those being developed by the Quantum Resistant Ledger project, Schwartzkopff remarked:
I think it is useful that work is being done in the field to understand and develop this kind of resistant ledger but realistically we are years away from quantum computers being able to challenge modern cryptography. There will be sufficient time to hard fork into quantum-resistant tech when there is a tangible threat.
Responding to a question about the importance of naming systems and taxonomies for digital assets, Schwartzkopff, a chemical engineering graduate, said:
Absolutely – part of the goal of our educational course is to develop a kind of industry standard for naming conventions and we explain the differences between tokens, coins, utilities, securities and so on. Only through education will we be able to drive the mainstream adoption of blockchain technology.
Notably, the education course that Schwartzkopff is referring to is part of Invictus’ Education series – which is an introductory cryptoasset investment course that “enables average Joes to become successful investors.”
Smart Contracts “Only Useful In A Few Niche Cases”
Interestingly, when asked about whether smart contracts are useful for business, Schwartzkopff said:
Smart contracts are truly useful only in a few niche cases today, but there are dozens of startups fully committed to expanding the functionality and security on offer. There is a lot of potential in smart contracts that we are yet to see. The current technology is the equivalent of where the internet was in the late 1980s or early 1990s.
Crypto20: Crypto Index Fund Tradable “Like ETFs”
Going on to elaborate on what his Crypto20 project is about, Schwartzkopff noted:
Crypto20 is the world’s first tokenized cryptocurrency index fund. Each token represents a share in the fund which holds the top 20 cryptocurrencies by market capitalization. The fund’s hyperparameters were optimized with machine learning to determine the optimum number of cryptoassets (20), the rebalancing period (weekly) and the asset cap (10%).
Investors are able to exchange their tokens for ETH directly through the smart contract when the price updates every hour. It also trades on exchange, like a crypto ETF where it is subject to regular laws of supply and demand, and so could trade at a discount or premium to the underlying assets. The smart contract redemption function effectively offers a price floor, ensuring you can always get at least the net asset value of the token. The C20 token started trading in January of this year and has subsequently operated as designed for the past 12 months with no adverse events, $365m trade volume since inception and with an average exchange price premium of 3% over the underlying.
Evaluating ICO Projects
Schwartzkopff also explained to us how he helps clients evaluate projects and ICO-related initiatives:
We have a very comprehensive internal process which we explore in our course on cryptoasset evaluation. Our dedicated analyst and fund management team work through the due diligence process for each of our Hyperion VC fund investments. We also outsource this capability to family offices and crypto funds that do not have the resources to employ a dedicated analytics team. We have published a few articles on some of the salient considerations to make when evaluating assets.
For those who are interested in learning how to evaluate or assess ICO projects, you can check out ICO Deep Dive Questions, which have been prepared and answered by Schwartzkopff on his Medium blog.
Finally, in response to a question about how blockchain and crypto might contribute to the 4th Industrial Revolution, Schwartzkopff explained:
The $450bn international payments/remittance industry is likely the first to be disrupted as crypto and payments are blockchain’s original ‘killer app’, much like e-mail was to the internet. Banking and finance will be next as the innovative tech makes a lot of the traditional middlemen obsolete. Peer-to-peer economies will likely follow – paying a centralized authority such as AirBNB a large commission will be a thing of the past as blockchain allows for trustless transactions between individuals without any third-party involvement.
Politics will feel the impact of secure voting without recounts or rigged elections. Even charities will see change as dollar spend is tracked so that philanthropists can be sure that their contributions are being utilized effectively.