AuBit plans to lead the way by offering annual returns as high as 43%, made possible by harnessing the power of ‘network effects’. From Moneyweb.
In what is undoubtedly a portent of things to come, AuBit, which launched its Freeway financial platform in 180 countries in July, promises to upend traditional finance by offering the world’s first yield on gold at 20%, on bitcoin at 33% and on the US dollar at an astonishing 43%.
These are wild claims, but the company’s founders are betting their reputations – and investors’ cash – on delivering on this promise.
The company’s promotional introduction starts out with these fighting words: “The traditional centralised world of asset management is breaking – if it’s not already broken. Despite the advantage of what many call privatised gains and socialised losses, where banks get to keep their profits and are saved by government money upon failure, they have failed to deliver value in real terms to shareholders during the longest boom market in history between the great financial crisis and the Covid pandemic.”
Co-founder and director Peter Neilson explains that yields like 20% or even 43% are not unusual in the crypto space.
“There are some so-called yield-farming platforms offering annual returns of 100% or more per year, but we believe these are unsustainable. What we are offering is sustainable.”
One of the perennial criticisms of gold as an asset class is that it offers no yield. That criticism is no longer valid, says Neilson. Freeway is appealing to virtually anyone of any financial means in more than 180 countries to jump on board – even if all they can afford is $1.
Read: Now you can earn a return on gold with crypto asset AuBit
AuBit founder and co-CEO Sadie Hutton says: “Not only do we virtually eliminate transaction costs, we return 80% of fees to users by processing transactions on our own blockchain, removing middlemen and fees. It’s part of our social finance philosophy to reinvent the world of asset management towards greater access and equality of opportunity no matter where users live, no matter their current level of wealth.”
Network effects
All this is made possible through what are known as network effects – a concept originally floated in the 1980s by engineer Robert Metcalfe to explain the exponential increase in the value of a network through the addition of each single user.
Metcalfe’s Law, though normally applied to telecoms companies, has also been used to value and predict bitcoin’s price with some accuracy.
“Network effects have revolutionised just about every industry,” says Joel Krueger, global chief investment officer at insurer Aon and AuBit’s chief investment advisor. “However, no-one has yet used the right tech to leverage their potential in the world of finance and asset management, until AuBit.”
The more people who participate in the Freeway platform, the more revenue will be generated and returned to users. Investors are free to choose their favourite investments and finance products like stocks, bonds, commodities and cryptos. They can also buy a fraction of an Apple stock, or Tesla, and increase their holdings in these assets through the network effect. In other words, you may choose to buy 1% of a Tesla stock and slowly increase that to 2% through rewards earned via the network effect.
Obstacles addressed
CEO Graham Doggart says many companies have promised to bring financial services to the masses, but all have stumbled on the issues of costs, complex and opaque product formulation and regulatory prohibitions.
“I think what we are bringing to the market is a world first, since we have addressed each of these obstacles to bring financial services to virtually anyone. All it takes is $1, and a smartphone.”
Neilson says AuBit’s Freeway platform is a new kind of Revolut-Robinhood ‘super-hybrid’ that plans to go to market within two years. Robinhood, with an estimated 18 million accounts and the ability to trade more than 5 000 listed assets, is planning a stock exchange listing in the near future and has been valued at around $35 billion.
What’s interesting about AuBit is its blue-chip management team drawn from HSBC, Goldman Sachs, Prudential and Google. It has also acquired a European brokerage to position itself in the highly regulated EU market. This allows it to onboard pension funds and large institutions, in the process of redefining the finance space by redistributing fees to users.
The jaw-dropping part about AuBit’s Freeway offering are the annual returns of 20-43%.
Part of this will come from set-asides generated through the network effects, and part from a quant trading team that has a track record of generating returns of 50% and more a year.
How it works
To get the 43% return, you have to invest in a stablecoin called USDC, which is backed 1:1 by the US dollar (and has avoided the ongoing controversy around USD Tether, which has many in disbelief as to its purported claim to be fully backed by US dollars).
However, the Freeway platform is also expected to begin accepting regular fiat card payments this summer.
What will also draw huge interest from the crypto community are ‘staking’ (investment) returns of 20% a year for Ethereum, 20% for Binance Coin, 33% for bitcoin and 43% for Euros.
To take part, you have to purchase Freeway Tokens to a value of at least 25% of the total value of your Freeway account. So, if you invest $1 000 in bitcoin via Freeway, you have to also purchase $250 in Freeway tokens – this is inspired by the mutual society business model, where customers are also owners in the company. Those tokens trade on exchanges much like shares do and should appreciate to the degree that the company generates earnings.
The platform is now live and you can create a Freeway account for yourself today here.
