This does not constitute financial advice, as with all investments it is your financial responsibility to conduct your own DD and assess whether the investment aligns properly with your short-term and long-term strategies.
CODEBASE VENTURES - https://www.codebase.ventures/
TICKER: CODE (CSE); BKLLF (OTCQB); C5B (FSE)
PT’s in CAD: $1 (Short), $3.5 (Medium), $10 (Long)
What is Codebase Ventures?
Codebase Ventures is a venture capital firm based out of Vancouver, British Columbia focused on investing in emerging markets predominantly related to the fields of technology and pharmacy. They have been operational since 2009, finding a good foothold in the blockchain, AI, cannabis and, most recently, psychedelic sectors. Their holdings which we will touch upon today are Arcology (Blockchain), Pressland (AI/News/Media), and very briefly World High Life (Cannabis) and Titan Shrooms & Psychedelics Inc. (Psychedelics). There is a lot to cover with this company, but I am going to focus more predominantly on catalysts that will have them act bullishly in 2021. My overall assessment of this company is that it has been completely underwritten and is likely to be a sleeping giant that could conservatively have $50 (CAD) shares by the end of the decade.
The company’s primary focus at the moment is blockchain and supporting its blockchain initiatives. This is highlighted by their recent acquisitions over the summer.
BEFORE BEGINNING (Skip if you understand what blockchain is and know how it will be used)*Here are a handful of videos one can watch to better understand what blockchain is:*Vice: Inside the cryptocurrency revolution - https://www.youtube.com/watch?v=u-vrdPtZVXcHow does Blockchain work? - https://www.youtube.com/watch?v=SSo_EIwHSd4
HOLDINGS
Arcology (Blockchain) - https://arcology.network/
Currently, Codebase Ventures owns 30% of Arcology, with the option to expand that to 51% ownership.
Arcology is a company focused on building a highly advanced blockchain network with the intention of it being utilized in both public and private sectors. The Arcology network itself is one that is highly malleable with a number of possible use cases ranging from the internet of things to social infrastructure including digital id’s, wallets, and banking, to private industry, to cloud based storage and PC security. The network is being designed with real world applications in mind, and is a strong contender for adoption by governments and private corporations as blockchain becomes increasingly pervasive and essential to society’s day to day lives. It is likely that in the future, most digital devices will utilize blockchain for increased security purposes amongst a number of other things.
There are several essential problems with current blockchain networks; these include expensive and slow storage, unscalable system architecture, lack of serial execution, unsophisticated consensus algorithms, inefficient network communication, weak security models and fragmented ecosystems. All of these problems make blockchain, in its current form, incredibly bulky and impractical for real life application. These systems would be incredibly expensive to implement and sustain, requiring significant computational power. They are also very slow, which is something unreasonable when we consider how many transactions (interactions that can be recorded as data) occur in a given second all across the world. Needless to say… Most blockchain networks cannot be integrated into society on a large scale due to their lack of technological capability to upscale with social demands. While on a micro-cosmic scale we can integrate current blockchain networks to fulfil small duties, we cannot implement them in a way in which something like a smart city or smart cities would be possible. To do this, we would need a network that is fast, cheap and very smart.
This is essentially what Arcology is proposing itself to be. An incredibly fast, cheap and intelligent blockchain solution. They are the world’s first self-organizing, hierarchical blockchain network that is simultaneously scalable, secure and fully decentralized, which is made possible through the use of artificial intelligence and machine learning. In past reports, Arcology has shown itself to be well on its way to surpassing a million transactions per second, which would make it the fastest blockchain network on Earth currently. Simply put, it is a blockchain network for the real world, and it is likely to come out by the end of this year. In between now and then there are a number of catalysts, which I discuss a little further in the catalyst section of this report. There is huge upside potential for this network to be adopted by governments and industries, but for now, I am going to take a step back and talk a bit about some of Arcology’s unique features. The following is based on the Arcology’s recently released technical paper following their first testnet which can be found here: https://docs.arcology.network/docs/introduction.html
Five unique features of the Arcology network- Microservice architecture- Fully parallel transaction processing- Cluster computation- Multifactor consensus algorithm- Self-organization of nodes
Architecture - https://docs.arcology.network/docs/arcology-architecture
From the report, “To achieve Arcology's design goals, it naturally demands a flexible, scalable and loosely-coupled system architecture for client software. At the core of Arcology client software is a microservice base architecture. The only way to enhance blockchain infrastructure to a level that it could support millions of transactions is through horizontal scaling. In this type of design, functional modules are individually deployed on multiple machines connected by a high-speed network.” In other words, Arcology is designed to be fast, and is working on becoming the fastest blockchain network on earth.
Parallelism - https://docs.arcology.network/docs/parallel-merkle-tree
Arcology is the first and only blockchain network to achieve full parallelism. This means that transactions can be recorded simultaneously and stacked as such in the blockchain. This increases the network's security significantly and allows for greater scaling for real-world applications such as high volume financial trading, social media communication, or real-time recording for supply chains.
Cluster computation - https://docs.arcology.network/docs/solution-overview
To quote Arcology directly, “Perhaps most important is a node cluster’s ability to process transactions in parallel. This means there’s no theoretical limit on how many transactions a single node cluster can process — it’s simply a matter of adding more machines.” Combine this with a decently sized crypto mining operation, and the sky's the limit. Codebase recently announced their interest in acquiring a crypto mining operation which would fit in quite well to compliment Arcology. Additionally, Arcology has been weighing the option of a potential coin offering. This would be a logical step to create a peer to peer network to assist with the computational requirements of the network. I’ve attached some DD’s that I’ve done in the past about crypto miners, they are another very bullish sector essential for our blockchain-based future in my opinion.
Consensus - https://docs.arcology.network/docs/consensus
This is a section that I believe is best explained by the report, but the simplified version is this; there has long been a trilemma in the blockchain industry between scalability, security and decentralization. For a long time blockchain networks have only been able to successfully integrate two of the three at any given time, with the successful integration of all three being practically unheard of… until now. Arcology utilizes a system known as multi-factoring consensus which allows all three of these respective areas to be addressed and flips the proof of work vs proof of stake consensus algorithms on its head. This allows for greater flexibility, scalability, speed and performance, and provides a fair environment for would-be-miners of their network. Ultimately, it increases the likelihood of them surpassing their million transaction target and being widely adopted both by central powers (governments and industry) as well as by smaller developers.
Self organization - https://docs.arcology.network/docs/network-partitioning
Taken from the report, “ Arcology uses a unique partitioning algorithm called Self-Organization (SO), a transparent and intelligent process that dynamically groups accounts based on certain criteria, including historical behaviour. This is possible because most transactions are not actually processed in random patterns; over time, many users show tendencies to interact with certain other users. This provides an opportunity to optimize network configuration.
Arcology’s Self-Organization is designed precisely for this. It is:
● Adaptive: a dynamic and ever-happening process;
● Dynamic: active users are grouped into shards to reduce friction;
● Efficient: cross-partition communication is reduced to negligible levels.
Arcology’s Self-Organization is a much more intelligent network partitioning solution, it will significantly reduce cross-partition communication and overhead that comes with it. Self-organizing is the technology designed for scalability.”
Storage - https://docs.arcology.network/docs/data-storage
I also want to include this bit about cloud storage which some of my IT friends pointed out to me.
Storage could be a big play for them and give them a major foothold in competing against cloud storage providers such as Apple, Amazon, Google and Dropbox. Comparing them to a service like Amazon Web Services (which generates Amazon $35.08B USD annually) Arcology has the ability to truly disrupt them. This is because Arcology proposes to be cheaper, faster and smarter in terms of data storage. It also enables for greater customizability in the hands of developers, so this ensures that your data is stored the way you want it to be, ensuring the fewest number of redundancies. No doubt, this could be a huge blow to Amazon who utilizes its AWS for the purposes of deep learning. Even if Arcology steals only a billion dollars out of the cloud storage sector, this should still put CODE at a $6 CAD per share.
2021 is looking to be a perfect year for Arcology and Codebase. There are several major catalysts likely to occur between now and early 2022 for these two companies. Please see the catalyst section of this report to get a better idea of what those are.
Pressland (AI/News/Media) - https://pressland.com/
Pressland is a wholly-owned subsidiary of Codebase, focused on the task of combating fake news. The company is working to build audience engagement tools for news media organizations while authenticating the accuracy of published news. The goal of Pressland is to reinvigorate a new era of public trust in the news and media. They have most recently partnered up with the company Showcase in order to maximize their coverage on engagement efforts.
Taken from a publication:
https://ca.proactiveinvestors.com/companies/news/908847/codebases-pressland-subsidiary-strikes-strategic-partnership-with-digital-platform-showcase-908847.html
“Pressland has now indexed and analyzed over 10 million articles, 2 million keywords and 200,000 writers, according to Codebase. Pressland's platform uses proprietary software which, with machine learning, artificial intelligence and natural language, collects and analyzes the news media’s production data.
When commercial services debut in 2020, this data will be offered as a SaaS (Software as a Service) product to social networks, search engines and news distributors in a bid to fight fake news and misinformation…”
Pressland also appears to be on the verge of becoming a blockchain-based play. This of course makes sense, as blockchain is a secure way of securely archiving news media and user data for the purposes of long-term storage in a non-tamperable way. This of course will be important for the future, and co-aligns perfectly with their ongoing blockchain initiatives. It is likely that it will take minimal effort for the company to integrate their ongoing projects into these services.
World High Life and Titan Shrooms & Psychedelics (Cannabis and Psychedelics)
World High Life and Titan Shrooms are two investments of Codebase. I will be talking more generally about why to be bullish on the cannabis and psychedelic sectors, as I have already covered quite a lot with this report. So, treat this as the icing on the cake. The cannabis sector is poised for a bull run after Biden’s inauguration. A democratic win is good for both cannabis and psychedelics as they have a friendlier legal environment which can be helpful for long term change.
World High Life stock recently dropped however. This is likely due to the ongoing situation in the UK (Brexit, new strain of Covid, etc.) I have to do more research into this, but in the bigger picture it’s a smaller holding compared to their blockchain and AI plays. Still this may leave some concerned, to which I will indicate that during the summer 2020, World High Life had record breaking sales. The macro environment is lining up though that the cannabis sector should be able to have a good boom.
Titan Shrooms is a well positioned company within the psychedelic sector, which will be a massive component of the mental health market in the near future. It is projected that mental health will be a $16 trillion USD market by 2030. There have been a number of breakthrough studies in the last two decades showing the long term impact that psychedelics can have on depression, anxiety, PTSD, addiction and even Alzheimers. It will be a really large market in the future, likely changing the course of medicine altogether. Recently Oregon, DC and New Jersey decriminalized or legalized the medicinal use of plant-based psychedelics. I may write up a DD for a couple of psychedelic stocks in the future.
CATALYSTS
Recently in the News
- Codebase raised $5 million in private placements since December (search up their recent private placement news releases)- Announced that they are finalizing Arcology’s testnet 1.0, going to be going forward with a release of a developer kit towards the end of February. They also gave a loose timeline of upcoming events for Arcology (see upcoming).- They continue to discuss the possibility of a Arcology coin offering in the Summer of 2021. It hasn’t been finalized but if you look at their recent acquisitions in the Summer of 2020, all of them indicate that this is indeed a plan that they will likely be set in motion. Of course it is yet to be confirmed, but I believe we can be cautiously optimistic.- They announced that they are going to look to expand into crypto mining. This is very exciting and very unanticipated. If we look at the crypto mining sector, HUT, RIOT, MARA, DMGI, BITF, HIVE, ARBKF, etc. we can all see that these have become incredibly bullish ventures. This also provides additional support that they may provide a coin offering, as having a crypto mining operation would enable them to do so.
Upcoming
The following is a list of catalysts for Arcology, dates still need to be confirmed, but the likelihood is that this is the roadmap for 2021 to early 2022.
Arcology Working Roadmap Sequence:
- Current Phase: addressing results from Testnet 1.0, refining technical components to improve performance data- Release Software Development Kit - CONFIRMED LATE FEBRUARY- Conduct Testnet 2.0 – focus on stability, user experience and verification - unknown- Potential Coin Offering - unknown- Conduct Full Scale Testnet - unknown- Release Mainnet - unknown
Macro Environment Catalysts
- For the bull case on the blockchain industry and crypto please see news articles in the appendix- Psychedelics will be receiving their first ETF on January 15th. This is likely to be incredibly bullish forcompanies within the psychedelic sector, which should include CODE. While their holdings are small incomparison to their blockchain operations, they are still a part of the sector which is bullish.- Biden being elected gives a good bull case for both cannabis and psychedelics in general, as we are likely to see more progressive laws regarding the medicinal use of both cannabis and psyches than under a Republican United States.
RISKS
Financials
The financial situation of the company is something to take into consideration when assessing this investment. The company is currently operating at a $19 million CAD loss. This is obviously concerning, however when one looks at their company history we can see that most of these losses were incurred more recently and directly align with their recent investments, most of which have come in the form of acquisitions. This is to be expected of any relatively new venture capital firm. Most operate at a loss until their investments come to fruition. The company has been actively trying to mitigate this by conducting a number of private offer rounds. So far they have raised 5 million in these financing rounds.
Dillution
In the past, the company has had issues with dilution. They had to conduct a reverse 10 for 1 split in June, 2020. I think that they currently have their share structure under control, however, it is something to keep in mind with their ongoing financing rounds, where private investors are receiving both common shares and warrants. I don’t think that this will present an issue, especially as these private funding rounds have been increasing the cost per share month over month, but it is worth keeping in mind.
Short Term Bitcoin Bubble
As the company is tied to the blockchain industry, they are undoubtedly tied to fluctuations within the price of bitcoin. Long term bitcoin is expected to well surpass $100k USD in value, however, in the past several weeks, we have seen an unprecedented rise in the value of bitcoin, which has many calling for a correction. I am not sure whether this is going to happen or whether it will in fact simply sidestep at some point. I have attached in the appendix a bull-case for bitcoin in terms of upcoming catalysts. That being said, as with all investments, it is important to price cost average in, as it is your fiduciary responsibility to act responsibly with your money. In the event of a dip, I am planning on buying significantly more CODE as the long term outlook is still quite bullish, and bitcoin too is very bullish in the long term.
CONCLUSION
Codebase Ventures is a company that is positioned quite well for substantive growth in the year 2021, and the decade onwards. Their investments in blockchain, AI, cannabis, and psychedelics are all things that will pay off in the long term. Arcology is a promising venture that should have everyone excited due to the sheer number of catalysts coming our way this year. I believe that a return to former all-time highs of $3.90 CAD, is inevitable on the rise of bitcoin alone. Throw in the rest, and we could easily see $10 CAD by the end of the year. Investors will want to have a position before February, where we should begin to see stable growth to the release of Arcology’s developer kit.
Anyways, on a personal note. I hope that I did this company justice. It was quite a large undertaking to get this DD out to you guys, so I hope that it proves useful. I am incredibly bullish on this company and excited to see what becomes of Arcology. Please do your own DD into them as well. They are, in no uncertain terms, very exciting and very very bullish.
TL;DR
Blockchain is long term bullish, Codebase owns Arcology which has promising blockchain tech, so they are long term bullish. AI, cannabis and psychedelics are also very bullish. Overall, this company is overlooked, and people should seek a position before February.
APPENDIX
Most Recent DD’s
Crypto Related Watchlist:
https://www.reddit.com/r/pennystocks/comments/keb77e/crypto_related_watchlist/
Massively Overlooked Crypto Play - HUT8 Mining DD:
reddit.com/r/pennystocks/comments/k9ss77/massively_overlooked_crypto_play_hut8_mining_dd/
Bitcoin Bullish News
Stimulus:
https://www.washingtonpost.com/us-policy/2021/01/08/biden-stimulus-plan/
M2 Money Supply: https://fred.stlouisfed.org/series/M2
Bitcoin Shortage:
https://www.marketwatch.com/story/bitcoin-is-headed-for-a-supply-shortage-and-that-will-keep-pushingup-prices-11609861504
Institutional Buyers & More Shortage:
https://cointelegraph.com/news/bitcoin-shortage-as-wall-street-fomo-turns-btc-whales-into-plankton
Paypal Crypto Rollout:
https://newsroom.paypal-corp.com/2020-10-21-PayPal-Launches-New-Service-Enabling-Users-to-Buy-Hold-and-Sell-Cryptocurrency
A quote from the paypal article: “Beginning in early 2021, PayPal customers will be able to use their cryptocurrency holdings as a funding source to pay at PayPal's 26 million merchants around the globe. ”
