Dynacoins: First Bitcoin Mutual Fund

Friday 09 January 2015

In a world of scams and hacks, pump-and-dumps and market manipulation, one crypto outfit seeks to bring transparency and stability to investors through a diversified, community-supervised Bitcoin Mutual Fund.

Many people have compared bitcoin to the Wild West: a lawless, unregulated place where anything goes and there are few repercussions. Bitcoin’s relatively short history has been pock-marked with the scars of unfortunate episodes too numerous to catalogue in full. Investment opportunities, the community has learned, can offer very different returns for those who stump up their hard-earned cash, and the entrepreneurs that run the schemes – and then run off, swiftly trousering the money and disappearing from view.

One of the most notorious of all these was Pirateat40’s investment ‘opportunity’ that suckered community members into parting with hundreds of thousands of bitcoins back in 2012, in the hope of 1% daily returns, before it transpired it was all a ponzi scheme and he vanished with the money (until he was apprehended and found that what happens in crypto does not always stay in crypto...). Ponzis are a popular way of defrauding investors by paying out new money to existing investors. This works well as long as newcomers sign up in sufficient numbers. As soon as they stop then a tipping point is reached and the funds run out very fast and the scheme collapses. (Ponzis are not unique to the crypto world, Bernie Madoff’s scam and UK National Insurance Contributions being the two largest examples from the real world.)

A libertarian investor's dream
However, there’s no denying that crypto offers some incredible opportunities for investors. It’s a small and rapidly-developing sector, with ground-breaking and world-changing tech. Sadly, though, it’s the legacy of Pirateat40, Gox and a hundred other scams and hacks that colours investors’ outlook when it comes to these new investment opportunities. How to tell the good from the bad?

Enter Dynacoins, a team on a mission to present investors with a transparent, secure way to earn legitimate returns from
cryptocurrency activities. We talk to Jon, founder of Dynacoins, about what makes the platform different.

Jon got started with bitcoin ‘relatively late’, he says – though still early enough to get in before it had really hit the news and prices were still down in single figures. ‘The first time I heard about bitcoin consciously was on a Libertarian website back in 2012. It was like a dream come true for a Libertarian heart and firm believer in Austrian economics.’

It was his early experiences with some of the less reputable elements of the bitcoin world that led Jon to start Dynacoins, along with a business partner and developer.

‘Dynacoins was born out of the frustration of getting scammed by a few dishonest and irresponsible companies

where I’ve invested some of my coins previously. Currently we are a team of three: my partner and our developer, who

preferred to become a partner, instead of being paid for his work. We’ve initially invested about 150 bitcoins

of our own coins to develop our fund’s investment strategy.’

Conservative strategy
That investment strategy is characterised as ‘conservative’, seeking to build value slowly and reliably over the long term (returns are posted on the site weekly, and have averaged around 1.5% per week over the first month). Dynacoins looks for safe and sustainable opportunities rather than seeking to chase the next big thing. Currently their portfolio is divided across a number of different areas: SHA and Scrypt cloud mining, liquidity provision (some exchanges borrow for leverage), PAMM (percentage allocation management module – a way of enabling investors to piggyback on successful traders’ accounts), and a small proportion of the total fund reserved to put on select promising altcoins – always a buy-and-hold investment.

Getting started hasn’t been easy. For starters, finding the right developer was critical. ‘Our software is unique and was developed according to our requirements. We also needed to implement the highest level of security possible.’ The custom-built platform includes two-factor authentication and a separate transaction pin, as well as usernames and login credentials. Due to bitcoin’s disregard for global borders, as well as their libertarian ideals and respect for privacy, no documentation is required – customers are practically unverifiable when dealing with bitcoin, in any case.

The biggest challenge, though? ‘Finding a bitcoin-friendly jurisdiction. We’ve talked to registrars in the Cayman Islands, the Bahamas, Panama, the Seychelles, the British Virgin Island and all declined our business model once they’ve heard the word “bitcoin”! Finally the Marshall Islands accepted our business model and here we are.’

Who guards the guards?
One of the factors that really sets Dynacoins apart is its model of supervision. A supervisory board is being formed, drawn from well-known members of the bitcoin community who are also Dynacoins investors. Future boards will be elected by members. This group of up to five people will be responsible for holding the fund’s managers to account, and will have access to different balances in order to be able to verify them whenever necessary. Additionally, ‘We hold very few clients funds. About 90% of customer placements are invested with well known and hand-picked Bitcoin companies. The 10% or so which are part of our reserve fund are kept offline in cold storage.’

Dynacoins is accepting new members. To find out more, visit https://www.dynacoins.com/

Brandon Hurst

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