A free, comprehensive 30-page guide on cryptocurrencies that will help investors,

money managers and wealth advisors understand the new cryptocurrency and blockchain sector.
By the end of this guide, you should feel comfortable discussing and evaluating cryptocurrencies
with your clients. Think of it as a cheatsheet for you on the blockchain and cryptocurrency sector.
CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS
AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
 TABLE OF CONTENTS

Two Sides: Blockchain is New, its History is Not 4

Why You Should Care 5

What You’ll Get With This Whitepaper 6

Overview of Blockchain and Cryptocurrencies 7

Is your Client Right for Cryptocurrencies? 11

How Not to Lose Clients With Crypto Advice 12

Navigating the Regulatory Landscape 14

The Answers You’ll Need 18

Key Stats About the Blockchain and Cryptocurrency Sector 22

Blockchain in Action 23

How to Buy Crypto 25

Appendix 28

About Flipside Crypto 29

3 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
TWO SIDES: BLOCKCHAIN IS NEW, ITS HISTORY IS NOT

A brilliant new technology comes to the fore. Established players seek to control this new innovation
with lawsuits. New players, looking to escape the legal heat, move to exotic locations.

Locked into a battle between innovation and legislation, naysayers brand the newcomers as rogues and pirates.
Yet, these new players end up thriving. They start building reputable companies. They start innovating
and building brand new products that flout the rules in productive ways. “Unstoppable”
incumbents start to recognize that the tide is turning against them.

The newcomers gradually win. A whole new industry, once underground, is legitimized by a record of proven
customer success. A special guest of the old guard decides to meet with the newcomers.

The guest’s name is Thomas Edison.

And the exotic new location of the meeting, so far away from Edison’s New England headquarters, is Universal
City, California: home to scrappy, innovative film newcomers such as 20th Century Fox, and the precursors to
Universal Studios and Paramount Pictures. In short time, these studios will become
the cultural capitals of the world.

4
WHY YOU SHOULD CARE

In times of great change, there are always two broad camps that emerge. Whichever side you end up being
on will determine your own trajectory -- both personal and financial. It will determine the trajectory
of you and your clients.

The world is littered with the quotes of naysayers: look at Darryl Zanuck (a Fox executive)’s
prediction that:

”Television won’t be able to hold on to any market it captures after the first six
months. People will soon get tired of staring at a plywood box every night.”

While cryptocurrencies and blockchain might be new, the cycle accompanying them are not.

This is old news for tech investors. When Amazon, Netflix, Google and Facebook got started, there was a ton
of doubt about their viability. Google was derided for not having cash flow until they launched Adwords.
Now, everybody’s portfolio needs to include a slice of these tech giants in order to succeed.

Blockchain itself is at the same critical inflection point in film, television, and the Internet once were.

Doubters like Ray Dalio think of the entire cryptocurrency ecosystem as a bubble. Investors like George Soros
are giving the green light for their family office to begin investing in the industry.

Major players like Morgan Stanley are writing white papers about the industry. Goldman Sachs is looking
to get in, and JP Morgan sits on the Ethereum Enterprise Alliance. Talented entrepreneurs are pouring into
the industry. Many talented engineers from top-flight schools such as Harvard or MIT have launched themselves
into blockchain. Amazon and Bank of America are filing blockchain and cryptocurrency patents.

As institutional investors, talented entrepreneurs and millennial adoption turn crypto fads
into habits -- you’ll be in the perfect spot for investment.

You can determine what side you and your clients are on with this next great change.
 

5 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
 WHAT YOU’LL GET
WITH THIS WHITEPAPER
1
An overview of the blockchain and different
cryptocurrencies​, with a focus on defining the sector
with as little bullshit as possible. By the end of this
section, you should feel comfortable relaying what
exactly blockchain and cryptocurrencies are
to your clients.
2
A section that focuses on w ​ hether your clients
are a fit for cryptocurrencies​.
3
How ​not to get laughed​out of the room
while bringing up cryptocurrency.
4
An o
​ verview of the regulatory landscape​,
with an exclusive interview with a legal
expert in the field.
5
Answers you’ll need​to client questions
about blockchain and cryptocurrencies.
6
Key numbers​that define the sector and
can help you easily summarize it to clients.
7
Real case studies​of businesses and governments
using cryptocurrency and blockchain.
8 How you can buy​cryptocurrencies.
9
An appendix with all the rest.
6
Guli Arshad,
Chairman
at Nuland & Arshad
(The Optimist)
Mr. Arshad has over twenty years of experience in the investment field.
Prior to founding Nuland & Arshad, Inc., he worked as a management
consultant, real estate advisor, technology entrepreneur and venture
capitalist. He is also active in the non-profit area as a former trustee
of the Buckingham Browne & Nichols School and current trustee of
American International School of Florence, Community Therapeutics
School and The Ladders Program.
Mr. Arshad graduated from Oberlin College and holds two masters
degrees from Harvard University including a Masters in Business
Administration.
What are your impressions of the crypto market?
It’s an unusual market, but increasing regulation and more institutional
players (for example, the creation of bitcoin futures) will certainly add
more credibility. It’s a hard industry for conservative value investors
to grasp, mostly because cryptocurrencies don’t seem to be backed
by cash flows or anything tangible and because there’s so much
volatility, more conservative investors might assume there’s fraud
or a bubble economy being built.
I’m certainly not somebody who has been very conservative before
-- I’m quite comfortable with risk, and I’ve done private technology
investing for the last 35 years, so maybe I’m not your typical wealth
advisor or investor. I really like the idea of cryptocurrencies because
they are a distributed ledger and because there’s a finite supply of
them -- I think fiat currencies are too centralized and central authorities
have too many incentives to go around
and essentially print money.
The cryptocurrency sector is really interesting to me. I think of it
as Internet 3.0 -- cryptocurrency is really the first wave of this. The
international adoption of tokens and the seamless international
transfer of value is also really appealing -- I’m bullish on this market
and I’m thinking of going out there and purchasing a bunch of tokens
beyond Bitcoin and Ethereum.
Where did you go to get your research done on the industry?
I generally go to different events in the Greater Boston Area, usually
hosted by VCs and funders that want to shed more light on the
industry. I’m also a part owner of Flipside Crypto and I use their Slack
community to learn more about the industry.
How do you approach talking to clients about the industry?
I oftentimes get inquiries from people who trust me and who are
looking into the industry. I’ll usually tell them to go talk to a well-
managed fund and learn from different investors. I personally find
Flipside Crypto and the Slack community there to be very valuable for
this, but I can see a lot of other different communities out there that
might help.
For me, the important thing to get across is the long-term value of the
industry, not the craziness of the short-term gains. It’s understanding
what holds value and which tokens will realize the long-term value that
really matters. I always recommend talking to investors or funds in the
industry that can describe those tokens.
OVERVIEW OF BLOCKCHAIN
AND CRYPTOCURRENCIES
Here’s how you can use this section: We’ll give you the information you need to create
an informed strategic view of the blockchain and cryptocurrency sector -- and
we’ll define terms for you so you’ll never be lost if the topic comes up.
What is bitcoin?
Bitcoin was the first cryptocurrency, created by
Satoshi Nakamoto in January 2009, with a seminal
whitepaper.
It proposed to be a decentralized payment system
that relied on a network of peers rather than
any centralized authority to regulate and verify
transactions and account balances. Created by a
reward system known as mining, and capped at 21
million total tokens, it has quickly grown to become
one of the most exciting innovations in financial
technology. It is the cornerstone of both blockchains
and cryptocurrencies.
So what the f@$k are blockchains, really?
One way to describe the blockchain is to compare it
with how trust and data are distributed in
a regular bank.
Think of each bank having a ledger that tracks
deposits, withdrawals, and balances for each client.
The client places all of their trust in the bank.
They neither control nor access the ledger in question.
Decades of financial regulation and experience
with matters such as wildcat banks have created
a framework where we should trust financial
institutions. However, this is nowhere near foolproof
as we’ve seen with Wells Fargo, Equifax, and Lehman
Brothers.
Instead of trusting each authority to maintain
and oversee each individual bank ledger like in
the conventional financial system, the blockchain
distributes account balances, verification, identity,
and transactional flow along the international
network of nodes.
7 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS
So instead of banking with a centralized set of servers
located under the control of Wells Fargo, Goldman
Sachs or JP Morgan, you’re dealing with a set of
nodes distributed around the world, with no central
authority controlling or delegating actions on the
chain. Any individual can start a Bitcoin node
on their laptop.
Nodes must agree on a common set of rules known
as a consensus protocol in order to create and stream
valid data. As an example, in order to accept a new
block of transactions, miners have to show proof of
valid work in order to get their “reward”: in Bitcoin’s
case, a block of Bitcoin and transaction fees
for mining that block.
That is both the peril and the promise of blockchain.
It is a mechanism that enables a world without
intermediaries, yet one that poses problems of
scalability and interoperability. Blockchain’s biggest
selling point is also one of its biggest weaknesses.
Because data and has to be distributed around a
network of servers with no central control mechanism,
every individual server has to store a copy of the
data, and the entire network has to agree to new
transactions before validating them. This makes the
network more computationally expensive to run than
a standard, centralized data server.
The Advantages of Blockchain
1 · Transactions are decentralized, so there are
no intermediaries
2 · Transactions are immutable
(unchangeable) once recorded on the ledger
3 · Transactions on blockchains are
transparent and public by default
4· Transactions are non-reversible
5 · Anybody can examine the code
or run a node
AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
So wait, what the f*%k are cryptocurrencies​?
In traditional financial circles, you may have
heard of blockchain as a promising new
technology, while cryptocurrencies are disdained.
Cryptocurrencies are built on top of blockchains --
they are an expression of value associated
with the blockchain in question.
As an example, you can think of Bitcoins as the
cryptocurrency you can trade and capture value
from the Bitcoin blockchain.
If TCP/IP were a blockchain, you’d need
InternetCoin to access Facebook or Amazon
or Netflix. InternetCoin would be the crypto
asset while TCP/IP would be the protocol layer
equivalent to the blockchain.
Instead of all of the value of Facebook accruing
to Facebook shareholders, you’d actually have
the protocol layer, the technology Facebook is
built on, gain and capture value through the use
of cryptocurrencies.

Crypto assets built on the blockchain may not

necessarily be separate currencies (some might
be tied to real-world assets such as a % of a
company or the price of commodities) but for
the sake of keeping the discussion consistent
and clear, we will be calling all crypto assets
cryptocurrencies.
Blockchains are the underlying technology and
protocol that make distributing data and trust in
a decentralized fashion possible.
Cryptocurrencies are the tokens of value
that allow blockchains to capture the value
of any applications built on top
of them -- as a result, they have become
investment vehicles that allow individual
and institutional investors
to invest in blockchains.

Key features of cryptocurrencies:

··· Built on top of blockchains
··· Allow you to extract and invest in the value of the underlying blockchain
··· Can be traded on exchanges and between different users
··· Validated by a consensus algorithm by a network of servers spread around the world

DIFFERENCES BETWEEN BLOCKCHAIN AND TRADITIONAL FINANCE

BLOCKCHAIN/CRYPTOCURRENCY TRADITIONAL FINANCE

AUTHORITY Decentralized, no owner controls Executives responsible to directors

a blockchain and shareholders

TRUST You have to trust the code You have to trust the financial
intermediary who handles your money

DATA Distributed in chains of mined blocks, Segmented in organized chunks placed

placed in servers around the world in central servers under the control
of one legal entity

REGULATORY FRAMEWORK Gray area: a mix of old financial rules Well-established, with the history
and developing ones of many legal precedents

8 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
Five Example Cryptocurrencies

Cryptocurrency name: Bitcoin

Description: The original cryptocurrency, it still dominates the market as the largest crypto,
and serves as a gateway to investing in other cryptocurrencies.

1 yr return (as of 05/31/2018): 332.31%

Cryptocurrency name: Ethereum

Description: A platform for smart contracts, where programmers can create their own
“Distributed Apps” on the Ethereum blockchain. The ERC-20 token standard also ensures
that a lot of cryptocurrency tokens are built from a template based on the Ethereum blockchain
(ex: Zilliqa, OmiseGo, and Status and more are ERC-20 tokens). Traditionally the second largest
in market cap behind Bitcoin.

1 yr return (as of 05/31/2018): 248.43%

Cryptocurrency name: ZCash

Description: ZCash uses what’s known as zero-knowledge cryptography to encrypt transaction

amounts, senders and receivers, and account balances. It’s part of a category of coin known
as “privacy coins” -- those that obscure parts of the blockchain from prying eyes.

1 yr return (as of 05/31/2018): 105.85%

Cryptocurrency name: Golem

Description: Golem allows for the decentralized exchange of computing power.

It aggregates a supercomputer by paying individual users for the use of their computers.

1 yr return (as of 05/31/2018): 141.36%

Cryptocurrency name: Funfair

Description: Funfair uses cryptography and peer-to-peer networking to provide

a blockchain-powered casino platform that can be run by a whole new set
of decentralized operators.

1 yr return (as of 05/31/2018): 188.99%

9 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
The Difference Between Bitcoin And Ethereum

You might have heard of the two most common and largest blockchains: the Bitcoin
and Ethereum blockchain. What are the differences between these two giants?
Why does the Ethereum blockchain exist?

Ethereum addresses a feature lacking in Bitcoin: the ability for programmers to be able to easily develop
their own applications and their own logic on top of the blockchain.

The implementation of smart contracts, the ability for programmers outside of the core team to be able to create
functions that use the underlying blockchain to execute actions such as say, registering real estate transactions,
does not exist on the Bitcoin blockchain.

10 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
IS YOUR CLIENT RIGHT
FOR CRYPTOCURRENCIES?

Here’s how you can use this section: Here are a few questions you should ask your clients
before you bring up cryptocurrency investments to them.

As a financial advisor, you might have clients coming in who are interested in cryptocurrencies.
How do you know which ones are a fit for cryptocurrency investing?

We’ve prepared a set of questions you should ask before getting any serious conversations started.

Are they accredited?
Most cryptocurrency projects require you to be
accredited in your country of origin in order to invest.
Make sure your clients have enough income in order
to support a riskier investment.
Are they willing to risk their invested capital?
Cryptocurrencies are risky. Clients should go into
every investment decision with the clear-eyed view
that if all goes south, no government entity or
insurance scheme backs cryptocurrencies.

Do they have a high tolerance for volatility?
Cryptocurrencies are very volatile: while there is a
lot of room for growth, 30% intraday swings are not
unheard of.
Make sure your clients know what they’re getting into
and assume that your clients will have to have a risk
score of 9 or 10 on a scale of 10 before they even
really seriously consider cryptocurrencies.
Are they technically savvy and do they understand
the utility of the technology?
It helps for your clients to be technically savvy and to
understand the uses of blockchain technology.
Are they willing to go through periods
of illiquidity?
Many crypto funds will, as a hedge against extreme
volatility, demand that you keep your money with
them for a year at a time. This means that crypto
investments can be illiquid and your client should be
ready to weather that if needed.
They should be prepared to not have access to the
capital they invest for at least a few months.

Without technical familiarity or the ability to be savvy

with new technologies, advice that pushes your
clients to cryptocurrencies will fall flat on its face.

11 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
HOW NOT TO LOSE CLIENTS WITH CRYPTO ADVICE

Here’s how you can use this section: Here’s a systematic approach you can use so that if you were
to bring up blockchain and cryptocurrency investments to your clients, you could approach it in a
measured manner that helps engage them to the possibility of the field.

We get it: a lot of the research we’ve done shows that wealth advisors understand blockchain
and cryptocurrencies, but that they’re afraid to bring it up to their clients because they’re scared
of being laughed out of the room.

It’s perfectly valid to wait until clients approach you with inquiries and questions about cryptocurrencies
before diving in.

If you wanted to be proactive and bring it up to them, however, here’s an approach we recommend.

Focus on how technologies have been mainstreamed
Any investor is likely to now hold some amount of
Facebook, Amazon, Google, or Netflix stock -- the
earlier they were in on those tech giants, the more
outsize returns they’d have gained.
Put your clients back into the past, and ask them
what they thought of those companies a few years
ago. Now ask them what they think of them now.
Drive your clients to the insight that those large tech
giants are where they are now because people had
the foresight to invest in them earlier.
your clients -- especially since many cryptocurrencies
are capped in terms of circulation and so perform
similarly to a gold-standard or pegged currency,
which will be attractive to a class of investors.
However, using case studies can help demonstrate
that blockchain technologies offer distinct advantages
for businesses and governments, in tracking supply
chain issues, tracking collectibles, vote auditing, land
registries, creating local or product-specific currencies
and much more. We have some of those case studies
in a later section.

Now ask them to think about cryptocurrencies.
Relate cryptocurrencies and blockchain to investment
patterns of past innovations and put your clients
in the driver’s seat of pulling a comprehensible
framework over this brand new industry.
Focus on real use cases of cryptocurrencies and
blockchain and start driving your clients to recognize
the potential endgame
A lot of wealth advisors and clients we’ve talked to
can understand the basics of cryptocurrencies and
blockchain, but they don’t know enough specific
examples to understand what the endgame of the
sector is.
Value investors will have a hard time thinking of
bitcoin and cryptocurrencies as anything more than
a non-cash flow generating inflation hedge.
There’s always a place for an inflation hedge in your
portfolio. That part shouldn’t be too hard to convince
You can then tell clients that cryptocurrencies are the
way forward in terms of capturing value from these
new blockchains.
Another way to drive this point home is to compare
them to more liquid versions of the shares
that are held privately for early-stage startups.
Cryptocurrencies allow access to an asset class that
previously was almost entirely network-based
and insider-based.
Imagine investing in Facebook very early on as
opposed to during the IPO -- that would have been the
difference between making a billion-dollar return (as
in Peter Thiel’s case) and merely making
a few thousand.
This will help appeal to clients that are value
investors, and will help them understand that there’s
an endgame that goes way beyond virtual gold for
this new asset class.

12 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
Evaluate blockchain and cryptocurrency projects with
a framework in mind
Talk to clients about a systematic way to evaluate
new blockchain and cryptocurrency projects without
the hype of short-term price fluctuations.
A framework might go something like this:
1 · Look at the team. Are there strong business,
design, and technology players in the space? Do
they have proven track records of building impactful
companies?
2 · Look at if they’ve raised a traditional round
of venture capital or if they’re associated with a
high-prestige accelerator in the crypto realm (ex:
Consensys). Those are strong positive signals.
3 · Can the landing page and whitepaper of the project
simply explain a viable business model and a realistic
paying customer?
13
Be fair and balanced about the risks and downsides
There’s no escaping the fact that the blockchain
and cryptocurrency sector still have a lot of risks
and downsides.
However, there is a way to paint the earlier picture
of the upside while reasonably managing expectations
on the downside.
Focus on projects that have legitimacy and which are
going to create long-term value and avoid those with
thin teams or scanty thinking about their business
model, legal strategy, and policy engagement.
Get people to recognize that the risks present now are
the same risks technology investors have always seen
in the past.
CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS
AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
NAVIGATING THE REGULATORY LANDSCAPE

Here’s how you can use this section: Understand how regulators and policy-makers are evaluating
cryptocurrencies and the blockchain - and be able to share a first-hand POV from a compliance
expert in the field.
What regulatory frameworks apply to blockchain? How are governments and regulatory agencies
reacting to this brand new technology?

··· The chairman of the CFTC (The Commodity Futures

Trading Commission) has taken the position that
cryptocurrency regulations should “cause no harm”.

··· The Federal Reserve, traditionally the regulator of

banks and money, has declared cryptocurrency to be
out of their regulatory scope.

··· The Securities and Exchange Commission is

looking into initial coin offerings and seeing what
securities regulations should apply to them.

··· Around the world, there are hubs of crypto activity.

Singapore and Switzerland are creating ecosystems
such as Crypto Valley in Zug, with forward-facing
regulation and flexibility towards cryptocurrency.
The Ethereum foundation and a host of Ethereum
token projects are now growing in Zug.

··· The Financial Conduct Authority in the United

Kingdom has created and embraced a fintech
sandbox for cryptocurrency startups, giving them
the flexibility to experiment.

··· In Canada, the Ontario Securities Commission,

the largest provincial securities regulator has created
Launchpad: a similar regulatory sandbox.

Ultimately, legislators in Congress passed the Telecommunications Act of 1996 and codified the regulatory
positions of the FCC into legislation, marking an end to telephone policies for the Internet and allowing Internet
providers to escape burdensome common carrier obligations such as mandatory bundling
and rigid price controls.

This allowed the private sector to be more innovative on how they could provide broadband services.
It helped spur the growth of the Internet in the United States.

14 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
We are facing a very similar moment in the blockchain and cryptocurrency industry, one where regulatory
agencies are starting to define their policies. It’s a time of uncertainty and change, but also
a tried-and-true part of many innovative shifts in technology.

It’s a time of uncertainty and change, but also a tried-and-true part

of many innovative shifts in technology.

On the technology side, you have programmers from Harvard and MIT flooding into the industry to build on this
exciting new technology: on the legal, compliance and financial side, you’re seeing an equivalent pull for forward-
facing, talented individuals who want to explore dynamic new ideas.

For some more insight on this rapidly evolving field, we interviewed John Beccia, who spent five years leading
compliance at Circle, the cryptocurrency-based startup that recently raised $110 million at a valuation
of $3 billion from investors such as Goldman Sachs.

15 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
 John Beccia
Co-founder and CEO of FS Vector
Ex-General Counsel and Chief Compliance Officer
of Circle
John A. Beccia, III is the co-founder and CEO of FS Vector,
an advisory firm that provides regulatory, risk management,
government relations and compliance consulting services for fintech,
cryptocurrency and other financial services firms.
Prior to his current role, Mr. Beccia was General Counsel and Chief
Compliance Officer of Circle Internet Financial, Inc., a company that
provides digital currency solutions for consumers. He also served as
Senior Vice President and Deputy General Counsel for Boston Private
Financial Holdings, Inc., a publicly traded bank holding company
and was Chief Regulatory Counsel and Research Director for The
Financial Services Roundtable where he was responsible for all
regulatory affairs and assisted with legislative efforts for the trade
association. Mr. Beccia is currently an Adjunct Professor at Boston
University School of Law and is a frequent speaker on fintech and
cryptocurrency matters.
Mr. Beccia has a Bachelor of Arts degree in Political Science from
Providence College, a J.D. from Roger Williams University School of
Law, and a LLM in Banking and Financial Law from Boston University
School of Law.
Tell us your story and what got you involved with Circle? What’s your
role there like?
The cryptocurrency industry is filled with people from various
backgrounds. Mine comes from what you can regard as a more
“traditional” background in finance. I did a lot of work on legal and
compliance matters with banks and dealt with policy issues while at
The Financial Services Roundtable in Washington DC. I collaborated
with government agencies and regulators on compliance questions
such as those associated with money laundering and consumer
protection.
I was one of the first employees at Circle, joining the company as
the General Counsel and Chief Compliance Officer.  I helped build
out the compliance framework from the ground up and focused on
trying to shape the regulatory framework for the nascent blockchain
industry. My previous experience in financial services was useful in
trying to apply certain laws and regulations to a new business model
in an uncertain regulatory environment.  Regulators are focused on
protecting consumers and investors.
In the early days, the regulators had serious concerns about the risks
associated with cryptocurrencies, such as potential money laundering
or the security of digital assets. It was important to alleviate these
concerns to allow these businesses to get to market and develop
products that could benefit the consumer. My philosophy has always
been to engage regulators proactively and focus on educating and
collaborating with them. We had a very strong team and culture
around compliance at Circle.  We understood the importance of active
engagement with regulators as well as developing strong processes
and controls to mitigate risks.
16
How does your experience in “traditional finance” generalize
to cryptocurrencies -- and what are some of the differences?
Regardless of whether it’s traditional finance services or
cryptocurrencies, it is important to form relationships with regulators
and understand what they are focused on as it relates to your
business or the broader industry. In terms of regulation, the approach
is risk-based, regardless of the business model. Regulators have
a mission to protect consumers and the integrity of the financial
system and thus are focused on the safety and soundness of firms
and how the business interacts with consumers and investors.  
Businesses should be aware of the risks of associated with their
model and implement controls commensurate with the risks to
ensure consumers are protected, regulators are satisfied and other
stakeholders (such as investors and other business partners) have
confidence in the approach taken.
Many of the regulations (and government agencies) are similar
whether is traditional finance or cryptocurrency. The distinction
lies in the differences of the model, types of activities, the delivery
of the products and the risks posed.  New business models, and
especially new technologies like the blockchain, make it challenging
to interpret and apply certain laws and regulations. Although many of
the agencies are similar, most of the focus with regulation in the early
stage was at the state level and that has shifted over the last year
or so.  
The main difference between cryptocurrencies and traditional finance
is that new products and technologies are developing so quickly
and the regulations are a moving target whereas financial services
regulation is more stable with the largest overhaul happening in 2010
with the Dodd-Frank Act following the financial crisis.  In traditional
financial services, major changes to regulation seem to be a reaction
to major events. With cryptocurrency, the agencies have been
somewhat proactive in trying to account for innovation and work with
industry players to develop a framework. As a practitioner in this
industry you need to be engaged early and often
to ensure compliance.
What about money laundering? Aren’t cryptocurrencies just a form of
“flight capital?”
Money laundering exists throughout the entire financial sector
-- it’s not just confined to cryptocurrencies. The anti-money
laundering efforts of industry are vital to protecting the financial
system.  Partnering with law enforcement and regulators is important
to detect and deter bad actors from using the financial system for
illicit means.
It is important to acknowledge is that while we can mitigate risks, we
can never fully eliminate it. The key distinction for cryptocurrencies
is that they pose unique risks that need to be accounted for and
addressed through regulation and industry compliance.  The
Financial Crimes Enforcement Network (FinCEN) established the first
guidance in this industry in 2013 which stated that firms engaging
in converting (or exchanging) digital currency are money service
businesses and must register with FinCEN and establish an AML
(anti-money laundering) compliance program.
Industry players have dedicated substantial resources to this
area and have created comprehensive programs to detect illegal
activity.  These programs include strict Know Your Customer reviews
at the onboarding stage, monitoring of transactions and reporting
of suspicious activity.  Given these firms are technology-based,
they have been able to develop innovations on how to monitor and
detect risk in a manner that is more efficient than traditional financial
institutions. External vendors have also developed forensic and
other regtech tools that have bolstered compliance efforts. In many
cases, this actually makes it easier for government investigators and
regulated exchanges to track down financial criminals.
[Author’s note: this was how the FBI was able to track down the
transactions done by drug exchange Silk Road on Bitcoin].
How are governments, regulators, and policy-makers viewing the
cryptocurrency industry right now?
Almost every government agency has a working group looking into
bitcoin, cryptocurrencies, and blockchain. Some of the regulatory
focus has shifted over the last year. With the advent of ICOs, tokens
and the increased trading activity, agencies like the SEC and CFTC
have become more engaged from a policymaking perspective as well
as enforcing laws against bad actors.
I would expect to see more enforcement actions over the next year
as regulators conduct sweeps and look to crack down on bad players
in the industry. From a policy perspective, regulators and legislators
have signaled that they want to balance their need to satisfy their
missions with the ability to promote (and not stifle) innovation.   applications were and I saw the ability to disrupt these models and
With this said, more clarity is needed in several areas so the
technology can thrive.  There needs to be more coordination among
global regulators to ensure that minimum standards are established
and that there is some level of consistency among regulations.  The
industry also needs to do a better job of coordinating with regulators
and establishing best practices for their activities. This is a critical
time as the industry develops with quite a few uncertainties that need
to be resolved in order for the sector to really mature.
What are some of those uncertainties and regulatory grey zones?
There’s a lot of uncertainty around initial coin offerings (ICOs),
tokens and trading activity. There is a lot of focus on issuers (in the
case of token originators) and exchanges. The emphasis is on what
is or isn’t a “security” and the impact that may have.  The most
commonly traded cryptocurrencies (i.e. Bitcoin, Ethereum, Ripple,
etc.) do not meet the definition of securities under the Securities
Act  of 1933 (although some have questioned whether Ether and
Ripple are securities). The SEC has not given definitive guidance on
how to treat cryptocurrencies.  In March 2018, the SEC issued a set of
requirements that it deemed necessary for a digital asset exchange
compliance for firms trading “securities”.
Most of the largest US exchanges offering these cryptocurrencies are
licensed as money transmitters and are not registered with the SEC
or CFTC.  Money transmission regulation in the US exists at both the
state and federal levels.  At the federal level, these businesses must
register with FinCEN and comply with AML requirements.  While state
laws vary, the majority of the states require licensing as a money
transmitter for platforms that exchange cryptocurrency, regardless of
whether fiat currency is used. The state of New York has regulations
specifically designed to cover cryptocurrency activity. Seeking
multiple state licenses requires significant resources to prepare
applications, establish compliance protocols and ensure ongoing
reporting and oversight obligations are met.
17
There is also different levels of regulation and philosophies from an
international perspective. Some countries have taken a hands-off
innovation first approach while others are discussing ways to ban
certain activities.  The United States has been slow to develop a
comprehensive framework that fosters innovation. Other countries,
like the United Kingdom, for example, are using things like regulatory
sandboxes to allow for new products to get to market in an
environment in which regulators and industry players can learn about
the risks and develop appropriate guideposts.
There is also a lot of overlap and interest between cryptocurrency
firms and traditional financial services.  In the early days, exchanges
were reliant on bank partners to facilitate transactions. Now,
banks are trying to find ways to leverage the technology directly
and cryptocurrency players have been reportedly exploring getting
their own banking license in order to expand offerings. Meanwhile,
regulators are trying to determine how certain business models
should be regulated. The Office of the Comptroller of the Currency, for
example, tried to develop a new fintech charter to oversee innovative
companies.  
Through it all, what got you motivated to get into cryptocurrencies,
and what keeps you motivated?
When I first started with Circle, I didn’t know much about the
blockchain.  I had a steep learning curve when it came to the
associated technology and the opportunities it presented.  As I
started going down the rabbit hole I became excited about the
possibilities because I understood how clunky existing financial
provide benefits to consumers, some of which were underserved
by traditional financial services. In 2013, the focus was on how
the blockchain (and Bitcoin in particular) could change payments
by offering the ability to improve the speed and security of these
transactions.  
I was excited to work for a company that was a pioneer in this
industry and was building products based on this technology.  I was
also attracted to the challenge of working in an industry where new
regulatory frameworks were being developed on a global basis.  
The power of blockchain technology is limitless and could impact
industries beyond financial services. I’m really motivated by the
amount of change in the cryptocurrency sector over the last year.
There are new platforms based on smart contracts and an explosion
of different investment vehicles as the capital markets have been
impacted positively by these advances. I feel privileged to work in
such a fascinating industry and I look forward to seeing how this
technology is leveraged in the future and what benefits it can offer.   
THE ANSWERS YOU’LL NEED

Here’s how you can use this section: Understand the general landscape of both blockchain
and cryptocurrencies, then tackle commonly asked questions from your clients.

Now that you’ve brought up some of the upside and downside of blockchain and cryptocurrency,
we want to equip you with common answers to the most frequently asked questions
your clients might ask.

What are the differences between cryptocurrencies and fiat currencies?

There are in practice quite a few differences between cryptocurrencies and their fiat counterparts. Here are a few
of them enumerated.

··· While fiat currencies are backed by a government and usually run by a central bank, cryptocurrencies are not
issued by any G20 governments (as of yet). The vast majority of cryptocurrencies do not have any government
backing.

··· Cryptocurrencies are virtual-first. There are no physical representations of cryptocurrencies

that can be traded, unlike physical cash.

··· Many cryptocurrencies have limits set on how many can be mined -- so there is a physical limit to how much
cryptocurrency can be in circulation -- something akin to when the USD followed the gold standard. In practice,
there are few fiat currencies now that are pegged to another currency or which are pegged to a certain supply
level.

··· Cryptocurrencies are often validated by a process that involves “mining” -- what’s called “proof-of-work”. There
are other validation systems for their creation including proof-of-stake. What’s important to note here is that in
order for a cryptocurrency unit of value to be created, it requires consensus from a set of distributed nodes rather
than the central authority that fiat currencies require.

··· The transaction of value involving cryptocurrencies is recorded in a root blockchain: a distributed ledger that
has a validated record of cryptocurrency spend. This means that unlike cash, which can be circulated and passed
through in the economy with little oversight, cryptocurrency spend can actually be tracked in depth.

FIAT CRYPTOCURRENCY
GOVERNMENT-BACKING Yes No
VIRTUAL Some physical representation in cash Entirely
LIMITS ON CIRCULATING AMOUNT None unless enforced with regulation Designed by default with limits
CREATION Stamped and approved by a central Mined or validated by decentralized
bank servers
TRACKING Cash is untrackable unless marked Transactions are tracked by default
on a public blockchain

18 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

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How are blockchains/cryptocurriences created?
There are three main mechanisms for creating
blockchains and cryptocurrencies:
··· Creating it from scratch: When Satoshi Nakamoto
launched Bitcoin, he was creating a blockchain
and cryptocurrency from scratch.
··· Forking: this is a hard reset for an existing
blockchain that segments the existing blockchain into
two separate chains.. This “forking” is what happened
when Bitcoin Cash split from the main Bitcoin chain.
··· There are also what are called “ICOs” or initial
coin offerings: These offer the opportunity for tokens
built on top of blockchains (such as those built on
the Ethereum blockchain, known as ERC-20 tokens)
the ability to go to market and start being distributed
widely.
How are units of cryptocurrencies created?  
Cryptocurrencies follow different consensus protocol
rules for determining when a new unit of value has
been created.
··· Proof-of-work: a system where nodes have
to “mine” new blocks of cryptocurrencies through
solving cryptographic problems.
··· Proof-of-stake: where validators who lock up parts
of their cryptocurrencies are given a probabilistic
chance of validating a new block.
··· Other consensus algorithms exist, such as the
hybrid proof-of-activity used by the popular blockchain
Decred to dictate how cryptocurrencies are created.
What are the governance features of
cryptocurrencies?
··· Most cryptocurrencies are run by organizations
that resemble early-stage tech startups: usually teams
of designers, engineers, and product builders.
··· There is generally no central authority governing
a blockchain or cryptocurrency, but rather a loose
consortium of stakeholders, usually a combination of
the founding team, programmers contributing open-
source code, and some important investors and users.
19
··· An important distinction to make here is between
public blockchains and private ones. Private ones can
be permissioned and a central authority can decide
who can participate in a private blockchain. Ripple,
for example, builds blockchains for a consortium of
banks. Ripple acts as a central gatekeeper, giving only
certain agents the possibility of recording their data
on that particular blockchain.
··· In public blockchains, it’s very hard for this
gatekeeper to exist: anybody with computing power
can go out and buy or sell cryptocurrencies and
interact with the blockchain either through mining or
through owning tokens.
··· There are organizations like the Ethereum
Foundation for public chains, composed of notable
figures in the Ethereum industry. However, while they
help guide stakeholders towards proposed solutions,
they don’t wield any force or clout beyond that. The
Ethereum Foundation offers grants for novel solutions
to Ethereum problems, but doesn’t enforce their use.
What’s the scalability problem of cryptocurrencies?
You might have heard that Ethereum and Bitcoin can
process much less transactions per second than the
Visa network. This is because each transaction needs
to be verified by a set of decentralized nodes.
Solutions are currently being implemented to address
this, with sharding on the Ethereum blockchain and
the Lightning Network being looked at for Bitcoin.
These two technical solutions will allow for many
more transactions to be processed through the
Ethereum and Bitcoin blockchains
What is the long-term utility/endgame of
cryptocurrencies?
Think of cryptocurrencies as being an expression of
value for the blockchains they reside on. The Ether
cryptocurrency is built on the Ethereum blockchain.
The Ethereum blockchain and the Ether
cryptocurrency will gain value as more people have to
use Ether to trigger different functions and different
smart contracts.
You can imagine different blockchains evolving as
TCP/IP did into the Internet. Instead of all of the value
accruing to utility providers and software companies
built on top of the Internet, you could argue that
the protocol itself will be worth something.
CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS
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What are the tax treatments of cryptocurrencies like
in the United States and other jurisdictions?
··· In the United States, cryptocurrencies are regarded
as commodities, and you must report capital gains
tax on any realized capital gain to the IRS. The IRS
has subpoenaed tax records from exchanges such as
Coinbase, which have complied. You can expect tax
law enforcers to be vigilant here.
··· It’s advised that you send your client to a tax
advisor who is familiar with the industry.     accreditation/funds.
··· The recent tax law passed in the United States
specifically forbade the like-for-like exemption on
capital gains some had been employing for trades
between different cryptocurrencies. Tax legislation
is quickly evolving in the industry and regulators
are constantly looking at different treatments of
cryptocurrency: make sure that you’re up-to-date with
recent changes in relevant legal jurisdictions.
.
Are you able to trade between different
cryptocurrencies?
Yes, different marketplaces exist for you to trade
cryptocurrencies for other cryptocurrencies such as
Binance. Exchanges like Binance have about 400 high-
volume cryptocurrencies that you can trade with each
other and you can cash out in fiat. In practice, you’ll
probably need to use a cryptocurrency such as Bitcoin
or Ethereum to cash out your holdings in fiat.
Are ICOs scams?
··· While many initial coin offerings are unregulated
offerings, there do seem to signs of goodwill and
good faith in the industry.
··· Each project should be evaluated on its own
risks. Each has its own objectives, teams, and legal
structure.
How do I get involved with ICOs?
Initial Coin Offerings are a marketing mechanism to
distribute cryptocurrencies, often used by tokens
built on one of the foundational platform blockchains
(ex: Ethereum). They’re akin to crowdfunding for
cryptocurrency-based projects.
Most ICOs have a period where they have a private
sale of tokens, usually at a discounted rate to what
20
will eventually offer in public sales, to exclusive
partners or large private investors.
In practice, you have to be personally connected to
the project founders or know somebody who is in
order to get in at the private sale event.
There are Telegram groups and Facebook groups
devoted to investing in cryptocurrency that can
help you find those different deals if you wanted to,
though it’s largely a matter of network and proof of
Once you have that, you can begin connecting to
people starting ICO projects and ask to be part of their
private list. Calendars such as the following will have
a record of upcoming ICO events.
What are some index funds and hedge funds that
cover the crypto sector?
There are numerous funds dedicated to
cryptocurrency investment, some with a more
passive “index fund” like approach while others are
aggressively managed and closer to approximating
“hedge funds” in the industry.
Index Funds
··· The Coinbase Index Fund
··· CRYPTO20 is a tokenized version of
a cryptocurrency index fund.
··· Flipside Crypto offers proprietary data science tools
to extract which cryptocurrencies are the ones most
likely to create long-term value. It then automatically
rebalances the basket of cryptocurrencies fund
investors are exposed to, while offering an online
learning community for those interested in learning
more about cryptocurrency investment.
Hedge Funds
··· Polychain
··· Multicoin Capital
··· MetaStable
··· BlockTower
CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS
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The difference between hedge funds and “index
funds” in the industry really have to do with fee
structure and the lockup structure of different funds.
In practice, many “hedge funds” in the crypto industry
have a 2% management fee and a 20% fee on returns
-- and a one-year lockup period.
It’s recommended that if you invest with a fund,
that you invest in one with a good reputation in the
industry, significant assets under management,
proactive thinking on compliance, and a favorable
lockup and fee structure.
What kind of protective or privacy measures should I
take with cryptocurrencies?
Are cryptocurrencies backed by any countries
or authorities?
··· While many countries are pursuing research
in the industry and some are launching their own
cryptocurrencies (The Venezuelan Petro for example),
no cryptocurrency is currently backed by the FDIC
or a major Western government.
··· None of the G20 economies have released a
central-bank backed version of cryptocurrency as
of May 2018. Xi Jinping and Chinese authorities have
spoken about the importance of blockchain, and
Russia is looking to launching a central-bank backed
cryptocurrency.

··· Always keep your private keys and exchange login

credentials safe. Usually, this means storing them .
on paper, and being very safe with where this data
is stored online. You have to hold your private key
very closely -- anybody with access to the private
key of a wallet or your credentials for logging into a
cryptocurrency exchange can access and control your
funds.

··· Use hardware wallets such as the Trezor

if you want to be more secure.

··· Use privacy coins such as Monero and ZCash if you

really want absolute privacy. These cryptocurrencies
are built to obscure account balances, ownership,
and transaction history.

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KEY STATS ABOUT THE BLOCKCHAIN
AND CRYPTOCURRENCY SECTOR

Here’s how you can use this section: You can use the numbers in this section to summarize
what’s been happening in the sector to your clients. Think of this as a cheatsheet for key stats about it.

Bitcoin Price*

2009: $27 USD

As of June 14th, 2018: $6,620 USD

This amusing Guardian story describes somebody

who bought $27 USD worth of Bitcoin in 2009 (which
was 5000 bitcoin at the time). He then checked in 2013,
when it was worth about $886,000 USD. He used about
one-fifth of that bitcoin stash to buy a nicely-priced
condo unit in the middle of Toyen, one of Oslo’s
most pricey areas to live.

Of course, if he had kept that 1,000 bitcoin, at its all-time high (at $20,089 on December, 18th, 2017),
he would have netted $20.8 million USD!

83x return on Ethereum

If you held Ethereum between January 1st, 2017 and May, 1st, 2018, you would’ve made more than 83x return on
your money. It would have taken you the equivalent of 38 years from 1980 to 2018 holding your money on a fund
weighted on the Dow Jones Industrial Average for you to have made a similar return.

$600 million raised in ICOs by mid-2017

By mid-2017, initial coin offerings had raised more than $600 million for different projects. ICO financing
has now outpaced traditional venture capital for early-stage capital.

34% loss

This return doesn’t come without risks. Several cryptocurrencies have seen intra-day trading swings of 50%
or more. Between December 17th and December 30th of 2017, Bitcoin lost about 34% of its total value.

When BitConnect, a cryptocurrency lender, decided to discontinue its lending program (and after it was
subpoenaed by financial regulators), the cryptocurrency lost over 90% of value over a single day -- going
from $330 USD to $20 USD in a matter of fewer than 24 hours.

Outranking Jesus**

The growth isn’t just confined to financial return.

For a brief period in Google Trends, bitcoin significantly
outranked Jesus Christ in terms of search momentum.

* Source: https://commons.wikimedia.org/wiki/File:Bitcoin_Price_History.png
**Source: author screenshot of https://trends.google.com/trends/explore?q=bitcoin,jesus

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BLOCKCHAIN IN ACTION

Here’s how you can use this section: Here are real case studies of the tangible value cryptocurrency
and blockchain projects are creating for enterprises and governments. You can use it as examples
to your value-investment minded clients about the potential of the sector.

Are cryptocurrencies destined to be some form of failed virtual gold? Or are they going to be useful
for the average consumer? Here are some case studies of the blockchain in tangible use cases,
solving both business and policy issues.

PREVENTING FRAUD IN THE ART WORLD

Have you ever wondered where that rare art piece came from? Was it perhaps stolen? Is it even
an authentic piece?

The blockchain is tailor-made to help with this problem. You can use it to track a piece of data from place
to place -- and you can map that piece of data to anything you’d like: a part in the supply chain.
Or a piece of rare art.

THE CODEX PROTOCOL IS A REAL USE CASE FOR THE BLOCKCHAIN THAT IS MAKING IT EASIER TO VERIFY
AND AUTHENTICATE RARE PIECES OF ART -- A $2 TRILLION MARKET.
Codex was able to raise $190,000 for charity at Ethereal, a blockchain focused symposium in Brooklyn through
a rare art auction. The Codex Registry was able to track down where each piece of art came from, and was able
to display to bidders exactly who the artist was and how the art piece came to be commissioned and created.

This auction was the first step towards disrupting a $2 trillion industry focused on rare collectibles and fine art.

PAYING FOR BETTER CONTENT

An advertising-driven model for content incentivizes cheap views and bad, clickbait laden content. Alternative
models that seek to valorize deeper engagement and more fulfilling content have emerged to fill the void.

Enter a new cryptocurrency-backed content startup, Steemit. The platform operates the same way as players like
Reddit, but with one important difference: upvotes for content come with monetary value in the form of STEEM
Dollars. It’s a platform where you can be rewarded for posting content with cryptocurrency.

This is what Steemit promises. The platform is now one of the most active social communities on the Internet.
People who aggregate posts and get enough engagement can earn $500-$1000 USD worth of Steem dollars per
post, a rate that is much higher than any traditional advertising model can provide. In the long term, this may
promise to be a better deal for content creators than competitors such as Reddit and Medium that have raised
millions of dollars in venture capital.

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Governments Are Using Blockchain + Crypto

LAND REGISTRIES ON THE BLOCKCHAIN, THE EASIEST AND MOST EFFICIENT WAY
TO INCREASE GDP FOR DEVELOPING COUNTRIES

Recently, at a talk at Ethereal in New York City, Bermuda’s premier talked about converting the land registry
of the island nation from a traditional records system to one that is placed on the blockchain.

Land registries are often marked by inaccurate or incomplete records. Any inaccuracies can quickly deprive
entire families of their livelihood. After the 2010 Haiti earthquake, an inefficient and corrupt land registry service
hampered reconstruction and forced the island into a period of tough economic stagnation
as businesses and homes could not be built due to confusion over who owned what parcel of land.  

Using the blockchain to improve this process has been tested several times in nations around the world.
In Haryana, India, a proof-of-concept was presented to highlight real-time transparency and tracking
of land/real estate transactions by using the Ethereum blockchain.

A Swedish consortium experimented with the concept in Sweden, and opined that while it would confer
significant economic benefits to developed countries, for “countries without a trustworthy real estate ownership
record and land registry, a similar project may be the easiest, most cost-efficient and fastest way to increase
GDP in the medium term. It will serve as a foundation for better investments in land, enable the development
of a mortgage market and a credit market in general, and become an institution for trust in one of the most
fundamental parts of an economy: land and real estate.”

For “countries without a trustworthy real estate ownership record and land registry,
a similar [blockchain land registry] project may be the easiest, most cost-efficient
and fastest way to increase GDP in the medium term.”

VOTING WITH THE BLOCKCHAIN

Recent elections in nations around the world have thrown the democratic process into doubt.
How can one ensure that votes are authenticated, audited and tabulated in real-time?

At the most recent presidential election in Sierra Leone, a milestone was being achieved. Agora,
a blockchain company accredited by the National Election Committee in Sierra Leone, was using
a private blockchain to audit the results of the national election in real-time.

Agora, a blockchain company accredited by the National Election Committee

in Sierra Leone, was using a private blockchain they had created to audit
the results of the national election in real-time.

Agora tabulates results from paper ballots, and registers those counted by impartial observers into
a transparent blockchain solution. This allows voters in Sierra Leone to trust the results, and gives
Sierra Leone’s democratically elected government a stronger claim to the people’s will.

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HOW TO BUY CRYPTO

Here’s how you can use this section: You can learn how to buy crypto yourself
or recommend places where your clients can get exposure to this sector.

You may be wondering how to get your clients set up on buying and investing in cryptocurrencies
and blockchain technologies. Here are some common mechanisms for cryptocurrency investment.

Buying cryptocurrencies on Robinhood

Robinhood is a popular zero-fee brokerage with a desktop and mobile app. Using this app, you can trade both
Bitcoin and Ethereum (the two largest cryptocurrencies) in Arizona, California, Colorado, Florida, Massachusetts,
Michigan, Mississippi, Missouri, Montana, New Mexico, Pennsylvania, Utah, and Wisconsin. The app can be
downloaded on mobile, and bitcoin and Ethereum can be purchased on it the same way ETFs, stocks and other
investment vehicles are available on Robinhood.

The support section of Robinhood offers detailed instructions and an FAQ section on how to get started with
the application.

Buying on exchanges
You can use exchanges such as Coinbase (the most commonly used one in the United States) to get access to
Bitcoin and Ethereum funds. For more coins and tokens, you might use an exchange such as Binance. Exchanges
will offer desktop and mobile apps that help you easily set alerts, and buys and sells.

Cryptocurrency-specific funds
Cryptocurrency-specific funds are a way to get involved in the blockchain and cryptocurrency industry without
any of the risk inherent in any of the processes above. Funds such as Flipside Crypto will help manage funds
placed in a cryptocurrency basket and simplify things such as custody, the actual buying and selling of crypto,
and automatic rebalancing of your portfolio. It could make for a good option if you’re looking to get invested in
the cryptocurrency industry without having to go through the hassle of setting everything up yourself.

25 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

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Glossary Of Terms
Blockchain:
The foundational technology behind the blockchain
and cryptocurrency sector, a distributed store of data
that is processed and stored on decentralized servers
around the world. This is a new way of distributing both
trust and data in contrast to traditional systems where
a central organization holds all of the cards.
Think of it as a chain of verified blocks of data -- each
block of data containing, in the case of cryptocurrency,
who has transferred value to others, or in the case of a
land registry project, who owns what plot of land.
Cryptocurrency:
A token or currency built on top of blockchain
technology, which helps capture value from users of
the blockchain. You can think of Bitcoin as the first
application and cryptocurrency stemming from the
blockchain.
Node:
Any computing server around the world can run as a
cryptocurrency node, which can store a copy of the
blockchain and serve to verify transactions being done
on it.
Hash Rate:
A measure of the computing power dedicated to any
blockchain by the miners validating transactions and
blocks. The higher the hash rate, the more active the
chain is and appealing it is to miners, and the harder
it is to attack the chain, and infiltrate it with false
transactions (known as a 51% attack).   or not under current conditions.
Proof-of-work:
A system where blocks of transaction data on the
blockchain are mined and validated by specialized
computers who earn a reward for solving specific math
equations: this is deemed as proof-of-work.
26
Mining:
A practice in proof-of-work systems where computers
are dedicated to solving math problems in order to
claim the right to mine a block of data and to get an
amount of cryptocurrency.
How it works in some more detail: the cryptographic
mining piece involves solving cryptographic puzzles.
A computer needs to find a nonce to combine with
unverified transactions to output a verified string.
Proof-of-stake:
Proof-of-stake allows people who own a selection of a
blockchain’s tokens to make decisions on validating
the chain: in practice, it’s a much less energy-intensive
practice than mining and the proof-of-work system.
Decentralization:
A measure of how much authority is held by a central
holder. You can argue that blockchains are naturally
more decentralized than other methods of distributing
data because there is (in the case of public chains) no
gatekeeper on who can join: as long as you have the
computing power, you can participate in the blockchain.
Instead of all of your data residing in one central
provider (ex: Equifax), it now sits, and is processed and
verified by a global network of computers.
However, while decentralization is an ideal advanced by
many in the blockchain and cryptocurrency community,
there are different degrees to which it can be achieved
As an example, the mining pools that create most of
Bitcoin are mostly based in China: a consortium of
these mining pools might decide to mount what is
called a 51% attack: where they use their assembled
computing power to change the rules of the blockchain
and facilitate conditions such as “double spend”
-- the ability to infinitely spend the same block of
cryptocurrencies, essentially creating wealth out
of nothing.
CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS
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Distributed ledger:
An analogy often made about cryptocurrencies for
financial agents: the understanding that instead of a
centralized bank ledger, blockchain and cryptocurrency
offer the promise of distributing balances throughout a
network of computer servers.
An important point to note here is that distributed
ledgers aren’t a new concept: the island of Yap used
individual tables and yelled at each other whenever
transactions were made, as early as 500 AD. However,
blockchains and cryptocurrencies do offer a global,
virtual network that can scale reasonably well to
current financial needs.
Interoperability:
The problem of what happens with so many different
blockchains and cryptocurrencies with different
functions associated with them. Blockchains like
Aion are looking to solve the interoperability piece by
making different blockchains and cryptocurrencies
interoperable, or compatible with one another: imagine,
for example, a world where Bitcoin can trigger the
same amount of functions as Ethereum. This is what
the interoperability piece is trying to solve.
Fork:
When a blockchain fails to reach consensus and has
to do a hard reset, with one chain adopting one set
of rules and another adopting the original set of rules
-- this is known as a fork. This is essentially what
happened with Bitcoin (the original chain, now referred
to commonly as Bitcoin Core) and the new forked spin-
off Bitcoin Cash.
Initial Coin Offering:
Another way to originate tokens for a blockchain,
it in practice involves a marketing process, private
sale, then a public sale of a newly-listed token, which
then aims to be listed on as many cryptocurrency
exchanges as possible. Note that there is no standard
way of conducting initial coin offerings, or really much
regulatory oversight here.

Hash functions/tables:
A more technical and precise description of the
underlying technical foundation of how data is shared
and stored on a blockchain. Hash tables are a concept
that has had a fair bit of history in computer science
and are used to solve other data problems as well.

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CONCLUSION

We hope throughout this white paper that you’ve learned more about the blockchain and cryptocurrency sector,
and that you feel more comfortable engaging with clients about the topic.

Our hope in creating this guide was to empower wealth advisors and money managers to make informed
decisions about a new and exciting sector. With each great change comes different sides, some more resistant
to change and some more open to it. We hope you can now decide which side you stand on.

28 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
ABOUT FLIPSIDE CRYPTO

Flipside Crypto develops baskets of cryptocurrencies

based on proprietary algorithms which evaluate market maturity,
developer behavior and utility of crypto projects. Our baskets provide
investors with a simple way to obtain minimally correlated, diversified
portfolios of cryptocurrencies. Investors may access these baskets
via Flipside Crypto Funds, our Daily Crypto Basket offering,
or through our Institutional Partners.

Contact our CEO, Dave Balter,

at dave@flipsidecrypto.com
for more information

29 CRYPTOCURRENCIES AND BLOCKCHAIN: A GUIDE FOR INVESTMENT ADVISORS

AND WEALTH MANAGERS DEVELOPED BY FLIPSIDE CRYPTO
 CRYPTOCURRENCIES AND BLOCKCHAIN:
A PRIMER FOR INVESTMENT ADVISORS
AND WEALTH MANAGERS

flipsidecrypto.com

The information provided does not constitute investment advice and should not be used as such.  
The opinions provided are that of the author and are not to be intended as investment advice.
Always consult your investment professionals before making investment decisions of any kind.