Making it Easy to Invest in Cryptos - Russian Entrepreneur Unveils 'Tokenbox'

Russia is a crypto leader, and this is one of the smartest teams working on it. Essential reading.

“Ethereum totally changed the game,” Smerkis said. “Bitcoin was a great start, but it’s just one currency ... Ethereum gives anybody the chance to create a currency and we think it’s going to change the world.”

Fri, Oct 27, 2017
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Vladimir Smerkis, the entrepreneur behind Tokenbox.io

Eastern Europe has emerged as an unlikely leader in the global cryptocurrency market, which is finally coming out of the shadows and into the mainstream. And one man, Vladimir Smerkis, is fast turning into a figurehead of this breakout industry with The Token Fund and Tokenbox.io

Smerkis is an unlikely hero for the tech world. He is thick set, moves with quiet authority, and could easily be mistaken for the general director of a massive bureaucratic state enterprise if it weren’t for his open-minded approach, sparkling tech resume and pleasant demeanor.

He is the former vice president of international development at Mail.Ru, one of Russia’s most forward-thinking Internet businesses. But even the opportunity to keep rising in the ranks of one of the country’s hottest digital companies couldn’t keep Smerkis occupied for long.

Smerkis said: “You know, I really did enjoy my time with Mail.Ru. This is a huge company that still manages to innovate, and to innovate well. But after the launch of My.com, which offered games and other Internet services over the air, I felt like I had done everything that I wanted to do there. I was looking for a new challenge in life, and I knew I wanted to be an entrepreneur.”

A Cryptocurrency Leader Has Emerged

At about the same time, a young man who appears quite the opposite of Smerkis began making headlines around the world. Soft-spoken and sleight of build, 23-year-old Vitalik Buterin looks every bit the computer engineer. But he is the engine behind Ethereum, which has set the world alight, reignited a waning interest in blockchain, and ushered in a new chapter in finance.

Ethereum has opened the door to national cryptocurrencies and digital transactions at a state level because it is more than just a currency. It is a blockchain system with smart contracts attached, which means that it has the potential to deal simply and securely with everything from land registries to cashless payments at the local corner store.

Smerkis recognized the potential of blockchain and began to invest his own personal funds in cryptocurrencies. But even that wasn’t enough. The market was ripe and he realized it was now or never to jump in and help steer it forward.

A Token-Based Fund Draws Cryptocurrencies Together

If the market saw its initial wave of funding due to blockchain’s bona fide advantages such as free, open transactions, its dynamics and potential soon started to attract a much broader audience of investors. However, some newcomers burned their fingers fast on the new and extremely volatile market, whose fluctuations far exceed what investors in traditional funds and markets are used to. To stay in play, investors had to watch the market 24/7.

Smerkis spotted a problem.

But he also knew he could fix it. So he and a team of likeminded enthusiasts set about creating The Token Fund, one of the market’s first coin-traded funds. It was a simple enough concept.

The fund’s model resembles that of classic exchange-traded funds (ETFs), which over the past 20 years have remained a popular tool for both institutional and private investors, primarily thanks to their entry and exit features. Just as with shares in traditional ETFs, The Token Fund’s investors buy the fund’s tokens, paying in Bitcoin and Ethereum. The token price depends on the asset size in the fund’s portfolio.

The solution stands out because the fund has a high liquidity and no barriers to entry. Smerkis said: “We have decidedly done away with the barriers that hampered consumers in the past.” The fund offers a simple, secure entry to the crypo-market with a pre-built diversified portfolio.

The first prototype was a runaway success. Before long, Smerkis was fielding calls from around the world. Investors, hedge funds and banks from South Africa to Sweden started getting in touch to try and license the platform. That’s when he found himself at a fork in the road. He could either offer bespoke solutions to clients, or create a turnkey platform for anyone to use.

Smerkis opted for the latter.

A Turnkey Digital Investments Platform

Tokenbox.io is the fruit of his labor.

The platform will help anyone – from major institutional investors to well-informed, qualified individuals – to create a new fund taking stakes in cryptocurrencies or crypto-based businesses.

All investors will be able to choose from a vast array of crypto-portfolios on the platform. With built-in Know-Your-Customer (KYC) procedures and other compliance fulfillment processes, the system will quickly establish digital investments as a vital new asset class for inclusion in any portfolio.

Tokenbox will launch after a funding event slated for next month, which Smerkis refers to as a “Token Generation Event.” He hopes his tokens will become the basis of a new global economy.

Smerkis has stayed faithful to the Ethereum platform, which means that he will provide traders and managers a token-based trading system with the flick of a switch.

Tokenbox will come with a complete trading system, and it will also run through any due diligence and compliance issues to ensure every new investment fund is legal. This should help retain confidence in the system.

“It will also manage mutual settlements with smart contracts and perform KYC/AML on investors on the trader’s behalf,” Smerkis said. “This won’t just cut transaction costs. It will also increase security, and we have a lot more features.”

Smerkis added that his system will provide built-in analytics and algorithmic trading, with suggested trades being recommended based on past performance.

“We have a fantastic group of guys from Zerion Software working on the technical side of the platform,” he said.

Could Tokens Simplify Cryptocurrency?

There’s no question that cryptocurrencies are confusing and even national banks and governments are still struggling to define them. As for investors, many have simply stayed away from cryptocurrencies because there is no straightforward trading system.

Smerkis believes that Tokenbox will be a stable platform that can be replicated worldwide and will take the mystery out of cryptocurrency trading and bring exchanges out of the shadows.

That will allow for more inherent trust, as the regulatory framework grows to encompass Bitcoin, Ethereum, Ripple, Lite Coin and more. Then, the big investment will follow, he said.

“This is the basis of disruptive, decentralized tech that will take cryptocurrencies into the mainstream,” Smerkis said. “The Tokenbox platform will be the first viable solution to bring investors and cryptocurrency funds together.”

The interest in cryptocurrencies is there, but people simply do not know how to get involved. If they do, they’re nervous about the lack of regulation and the seeming lack of understanding.

Consumers would benefit from a simple, understandable vehicle to manage their private assets and those of their investors. It needs to be secure, and it needs to be stable.

“And that’s exactly what we intend to do,” Smerkis said.

Are National Cryptocurrencies The Next Step?

There’s a gold-rush element to the latest wave of cryptocurrencies. There are hundreds of them, and many will simply have to consolidate or die.

Bitcoin has become the benchmark. Effectively, it’s the US dollar of the cryptocurrency world and it’s going nowhere in a hurry. The vast number of smaller currencies, though, could give way to sovereign-backed cryptocurrencies.

Japan, Iceland and other nations are already working on their own national cryptocurrencies.

“We will see serious development in the next couple of years, when big business and governments go all in,” Smerkis said. “The cryptocurrency market is going to change beyond recognition in the coming years.”

The role of tokens is going to evolve as well. They aren’t simply confined to money and the tokens can take on new roles, such as representing shares or voting rights in a company. That can’t happen, however, until the tokens are properly regulated.

Before that, cryptocurrency traders must be convinced to come out of the shadows. They have to embrace a fresh wave of regulations that Smerkis believes will turn the likes of Bitcoin into a self-fulfilling global success story. Tokenbox is the first big step in the right direction to create a well-trusted crypto-asset management ecosystem, he said.

Ukraine and Estonia Are Early Leaders

Russia is fast playing catch-up when it comes to blockchain, as some of Eastern Europe’s smaller nations have stolen the march. There is a massive explosion in tech companies across the region now, and national governments like Estonia and Ukraine are ahead of the curve.

Ukraine, alongside the UK, is arguably the global leader in the blockchain economy.  PrivatBank, its largest private bank, has offered a range of Bitcoin services for the past two years.

With relatively few legacy systems to consider, Ukraine is free to embrace blockchain from a relatively unencumbered start. So now it has partnered with The Bitfury Group to put government data and services on blockchain.

The first blockchain real estate transaction took place in the Ukraine, too, when TechCrunch founder Michael Arrington purchased an apartment in the capital.

Blockchain-Based Government Records Are Common

Estonia created a digital residency program back in 2014, has a Blockchain-based voting system and is firmly committed to a blockchain-based economy. It had even set its sights on launching the “Estcoin,” the first national cryptocurrency, before the EU got involved.

Again, it collaborated with Buterin and was searching for an Ethereum-based solution.

“He’s a bit like a young cryptocurrency prophet,” Smerkis laughed, “taking our dream of a free, secure global economic system to the world. All kidding aside, though, he really does have an amazing mind. Without Ethereum, the future of blockchain simply wouldn’t be as bright.”

How Does Ethereum Work?

Buterin is an unusual face in any financial movement. He was born in Moscow, decamped to Canada with his parents, and then dropped out of college to develop his own “decentralized mining network and software development platform.”

But Ethereum takes the whole cryptocurrency platform to another level. While Bitcoin is just currency, Ethereum comes with integral contracts that can automate payments and transfers when certain conditions are met. That is meant to streamline the entire trading process, as well as manage massively complex algorithmic trading systems with a high level of automation.

It also takes the human element out of contracts, which should reduce errors in the long run.

“Ethereum totally changed the game,” Smerkis said. “Bitcoin was a great start, but it’s just one currency. It’s like the dollar, and that is great in Los Angeles, but useless in Tokyo. Ethereum gives anybody the chance to create a currency and we think it’s going to change the world.”

It’s already in place with a real estate company in Germany and it has all the tools to become a building block for state cryptocurrencies.

Europe Cannot Keep Up With Cryptocurrencies

Estonia’s plan for a government-based cryptocurrency hit the skids when the European Central Bank got involved. Its membership in the EU dictates that it can only use the euro, but this is purely a roadblock and surely will not derail the entire cryptocurrency movement in Estonia.

“It creates certain difficulties,” Smerkis said. “But with the rapid advance of cryptocurrencies, either Europe will have to get with the program, or Estonia will find a loophole.”

With the residency program already on blockchain and business records to follow, a blockchain-based currency could be the final piece in the puzzle that provides a frictionless taxation system that largely eliminates tax evasion at a stroke.

A Cleaner, Brighter Cryptocurrency Future

Estonia, then, has a grand vision for the future of cryptocurrencies and it’s a world away from the Wild West frontier that we have right now. Bitcoin mining is just odd to the outside world, China has banned the currency and it is constantly linked with tax evasion and organized crime. Its anonymity counts against it in some quarters.

Ukraine and Estonia might be leading the charge, but they cannot change the world on their own. Russia has now set out its stall, though, and is set on introducing the “CryptoRuble” before long.

President Vladimir Putin is determined to become a leader in the cryptocurrency market and wants a regulated, legitimate environment. He personally invited Buterin to the St. Petersburg International Economic Forum and is aiming to put Russia on blockchain.

“Ethereum is a potential tool to help Russia diversify its economy beyond oil and gas,” Putin said. “The digital economy isn’t a separate industry, it’s essentially the foundation for creating brand new business models.”

So now the world’s superpowers are getting behind blockchain and critics who claim it’s going to come crashing down seem simply wrong. “Cryptocurrencies are going to change, but only in the way that they’re going to become a part of normal life,” Smerkis said. “We’re seeing that happen slowly across the world right now, and governments are embracing the basic concept.

Dubai wants all its government information on blockchain by 2020, China has banned Bitcoin, but it is determined to implement a distributed ledger system, Sweden has its land registry on blockchain, Georgia has already moved its land registry to the system and the National Bank of Kazahkstan is also starting to work with blockchain.

Blockchain Is Transparent And Secure

Blockchain has two massive advantages – transparency and security. That’s because literally anybody with access to the P2P network can look up each transaction, and they all have to be verified before they are added to the ledger. There is no administrator, which is a huge benefit.

“There’s just no way that a third party can break into the records and it would take huge resources to falsify them,” Smerkis said.

So, Blockchain has come a long way since Bitcoin1 launched in 2009 and it was a system that offered anonymity. Blockchainis a ledger that has a record of every transaction and yet offers total privacy through encryption.

Bitcoin turned into a revelation and the original investors made vast fortunes. A simple $75 investment right at the launch would be worth $75 million right now. That rapid climb is unlikely to happen again. Bitcoin is now firmly established, but the overall business is still growing.

A Balloon Of Trading Interest

Cryptocurrency trading has risen by more than 1,000% in the first six months of the year to $5 billion. At the same time, the total market capitalization of crypto-active assets rose to $110 billion from $18 billion.

Some sources say the number is inflated, but Payspace magazine reckons 41 million people now have a Bitcoin wallet and there are over 80 stock exchanges trading in crypto-assets. Even if this number is high, it’s clear that uptake when it comes to Bitcoin and other cryptocurrencies is on the increase.

“The growth is impressive, but cryptocurrencies are simply not reaching their full potential,” Smerkis said. “The Token Fund has really taken off, and we’re sure our new Tokenbox platform is the right approach. But we need to get our cryptocurrencies ecosystem up and running in several different countries at the same time. That’s the theory behind what we’re doing.”

Tokens Can Change All Businesses

Tokenbox is a system, not just a currency, that can help traditional investors or informed individuals that want to diversify their portfolio, as well as taking entire businesses over to a crypto-based model.

It’s a gateway to the enticing, yet confusing world of cryptocurrencies. It will offer trading advice based on the currency’s recent performance and the whole system will continue to learn thanks to the wonders of AI.

The Token Fund officially launched in March 2017 and now the capitalization of assets exceeds $2 million, with a first quarter US dollar yield exceeding 227%. Smerkis believes that Tokenbox will swiftly surpass the fund’s capitalization, and is aiming for $800 million in accumulated crypto-assets under the management of the funds registered on the platform by Q4 2018.

The world of cryptocurrencies is still a vast and confusing landscape, but this token-based system could tie all the disparate strands together. If it does, then it can drive the whole blockchain economy and take the cryptocurrency revolution to an entirely different level.

And that would mean Smerkis deserves his face stamped on a proverbial digital coin.

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