Key Risks & Mitigants

Regulatory

A rapidly evolving regulatory environment has left many in the blockchain space wondering what will happen next. There is cause for optimism on this front though. Despite much rhetoric and diatribe, distributed applications remain an area of state-sponsored research and development. Even the most questionable practises are not facing outright bans. Instead, they are facing greater oversight in order to protect consumer interests. This is something to be welcomed, as less ethical players are gradually weeded out, leaving (mostly) those operators who are doing something of value - and are operating transparently.

Mitigant: Despite the likelihood of ongoing regulatory developments, nothing in our proposed functionality would run afoul of the current trajectory of regulation. Varidiem isn't a Ponzi scheme and all holdings will be transparent to users and regulators alike. Even so, we must be prepared to make upgrades/amendments to core functionality should regulators require it. Further to this, using tokenised asset pools allows to be forwards compatible with developments such as central bank digital currencies: if it can be bought, we can tokenise it and make available to our users. A degree of vertical integration will also likely be of benefit, for example, an in-house banking license and custodian/broker dealer license, with key operational activities eventually spread across a number of jurisdictions.

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Strategic

The competitive landscape continues to evolve rapidly around fintech and the provision of investing services outside developed economies. Many new entrants have received funding and have deployed functioning services in markets across Asia and Latin America in particular. The problem though is that all of these are focused on self-directed investment (ie. in the style of Robin Hood). Self-directed investment is fine in theory, but it's almost always a disaster in practise. Typically, a self-directed investor has a 90% chance of losing their money (especially where leverage is involved). In any case, the activities associated with self-directed investment are typically trading in one form or another, not investment.

Mitigant: We are not interested in providing yet another trading platform. We want to provide people with access to professionally managed investments, tailored to their risk tolerance and objectives - and to equip them with a range of tools for making sound financial decisions in other areas of their life. The end result will be more akin to Betterment, than to Robin Hood. To the best of our knowledge, nobody is currently focused on providing an holistic digital wealth solution to clients outside developed economies. CLAIMING THE SPACE WILL BE IMPORTANT.

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Technological

Since Varidiem will rely on a combination of existing technologies, there are well-established threats which must be managed - and equally well-established ways to manage them. Many of these (eg. cybersecurity) can be mitigated structurally and through sound product design. Other technological risks include disruption and supercedence (ie. something fundamentally better comes along). For example, the direct tokenisation of stocks (which has so far not been done very well) is likely to improve dramatically in the coming years. We need to be ready for it by being positioned to include new asset types and mode of access.

Mitigant: Varidiem must be built with forwards-compatibility in mind. The most important aspect to get right is the core allocative mechanism. The app, web portal, and what we're allocating between, can all be updated as time goes on (eg. to handle stricter KYC requirements). Ultimately, we will always seek to provide the best solution to our users, whether that's via a TAP, or other form of emergent infrastructure. What matters is that we retain the ability to adapt and evolve in order to ensure we are delivering the best possible service to our users.

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