The first-ever Polkadot ecosystem parachain slot auction was concluded with Acala, a decentralized finance (DeFi) protocol operating on the Polkadot network, winning the auction with approximately 32.5 million DOT tokens raised. With today’s current market price, this puts the dollar value at $1.35 billion.
As earlier reported by Nairametrics, Digital Finance Group (DFG), a digital asset investment company run by James Wo, invested 500,000 DOT tokens, which at today’s price is equivalent to $20.83 million to the project, becoming one of the largest investors in the project.
Nairametrics interviewed James Wo, the founder and CEO of DFG, who is also a board member of the FTX derivative company, formerly called LedgerX. In a previous interview with James, he told Nairametrice how big a believer he is in the Polkadot ecosystem. In this interview, he gave us insights into why his company, DFG, is taking a huge stake in the Polkadot ecosystem and other projects the investment firm is looking to get into.
DFG is a global investment firm with more than $1 billion Assets Under Management (AUM). The firm is focused on empowering blockchain and Web3 companies and claims to be “committed to the long-term potential of blockchain technology,” also managing investments across the crypto ecosystem.
According to the company’s website, its portfolio includes equity holdings in Circle, Coinlist, Amber Group, FV Bank, Chainsafe, and Bloq. DFG is an early investor in new and emerging protocols and projects including Polkadot, Kusama, Avalanche, Solana, and Near.
DFG has become a leading and active member of the Polkadot ecosystem. In our previous interview with James, he expressed his bullishness on the Polkadot ecosystem stating, “There are other layer 1 solutions like Solana, Terra, NEAR and Avalanche that have become good these days but I believe Polkadot is the one that has a lot of great potential in the future to grow.”
When asked why he started DFG, James stated, “I started this investment firm back in 2015, focusing on investing in the crypto space. We started with active investment first because it was early stages in the crypto world and it was basically Bitcoin and a few Bitcoin use cases.
“Being early to the crypto space got us the opportunity to invest in companies like circle, LedgerX, and a few others and because we were early, the return on investment on these projects have been very good. In 2017, when the cryptocurrency market was gaining traction, we began to shift our focus. On one hand we continued investing into great companies like recently CoinDesk, FV bank, Amber group and a few others. On the other hand, we are deploying more capital into the token side from 2017.”
Why so big on Polkadot?
James Wo explained why he and his company are big fans of the Polkadot ecosystem. He stated, “Being an early investor of a few great protocols including Polkadot, Solana, NEAR and a few others, Polkadot is probably the most strategic investment I have ever made. I am still holding a decent amount of the token and I am really bullish on this ecosystem.
“We are also bullish on great use cases and sectors like DeFi, NFTs and Metaverse as we have been big fans of these sectors and a few others. At DFG, we are focused on the Polkadot ecosystem and we want to deploy our capital into different projects and raise support, which will ultimately support Polkadot eventually.
“This is why in 2019, we started a Polkadot ecosystem fund and began investing into great Polkadot projects which includes Acala, Aster, HydraDX, Manta, and a few others. We believe that the Polkadot ecosystem has a lot of great products and sectors and we believe them to be very promising especially now that the Polkadot Parachain Auction has started. What we do is help the project we invest in and help them get a better shot where they can work better in this ecosystem.”
500,000 DOT on Acala
As previously mentioned, DFG invested 500,000 DOT tokens into Acala and that means that the company’s DOT tokens will be locked away for two years before they can have access to the token again. However, locking the tokens for two years does come with the benefit of receiving Acala tokens as benefits. When asked why so much DOT token is going to this project, James stated, “For me, being a huge supporter of Polkadot, locking my DOT for two years and sacrificing the liquidity does not mean so much to me because I would have still held on to these DOT tokens regardless at least for two years.
“For me it’s simple, if I stake my DOT, I get staking rewards on them which is around 12% a year or 1% per month. From a pure investment perspective, the Acala token I get, I ask myself, is it more valuable than the staking reward I get in the next few years which is basically 24% (2 years). So If I stake my DOT, I will get almost one-fourth of my investment (125,000 DOT) as return in 2 years. Is the reward of Acala token more valuable than the staking reward? I believe it will be and that’s from a pure investment perspective and that is why I decided to invest.”
He further noted that Acala is one of the best if not the best project in the Polkadot ecosystem. They do everything related to DeFi for Polkadot. Whether it’s lending or stablecoins, they do it. The tech team is super strong and they are one of the best teams out there. James explained that based on the valuation of Polkadot which is around $50 billion, the valuation of Acala should be somewhere around 10% to 20% of the valuation of Polkadot. This means the valuation of Acala should be around 5 to 10 billion dollars from a very modest prediction.
“If you calculate the reward I can get, because Acala is giving away 17% of their tokens, say the total amount of DOT tokens Acala raises is around 20 to 30 million DOT. With my position, I can get somewhere between 0.5% of Acala tokens which would prove to be more than 125,000 DOT I would earn from staking rewards in 2 years. This is purely an investment perspective and I advise long term holders to join the crowdloan for Acala,” he said.
James also spoke about other projects on the Polkadot ecosystem his company is planning on investing in and he shared his thoughts on the metaverse and why he is also bullish on them.