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By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 9 (Reuters) - Polychain Capital, a hedge fund that invests solely in encrypted digital currencies, has raised $10 million from famed venture capitalists Andreeseen Horowitz and Union Square Ventures, founder Olaf Carlson-Wee said on Friday.
The San Francisco-based fund is focusing on currencies powered by blockchain, a ledger of transactions maintained by a network of computers on the internet without the need of a central counterparty. It has gained immense popularity worldwide due to its potential for keeping track of assets across practically all industries.
"Polychain is investing in blockchain assets," Carlson-Wee said in an interview. "We do not invest in private companies, or hold shares in private companies. We invest purely in tokens or digital assets, and those include assets that people are familiar with like bitcoin and ethereum as well as very early-stage projects."
Polychain is taking advantage of a growing trend among blockchain startups, which generate capital by selling their own digital assets, which are also known as electronic tokens or coins, even before those projects are developed.
This fundraising strategy bypasses traditional venture capital financing, which can be rigorous and take anywhere between six months to a year to complete.
"For the first time, entrepreneurs can monetize their own open-source and peer-to-peer network," Carlson-Wee said. "They can crowdfund and raise money from people across the world on the internet in crypto-currency."
Polychain, which started in September, looks for novelty projects, which can mean solving a problem in a unique way, Carlson-Wee said.
"I am also looking at the competency of the core developing team, making sure that the core developer team can run an open-source network for many, many years on a massive scale," he said.
Polychain's investments typically are long-term.
"The goal here is to own very important components of the future internet for five years," Carlson-Wee said.
Carlson-Wee also said he purchased the tokens from crowdsales and trading exchanges, or even prior to their introduction.
Before founding Polychain, he was the head of risk and product manager at U.S.-based Coinbase, a digital asset exchange and the world's largest bitcoin company. Carlson-Wee was Coinbase's first employee, and he said he was paid entirely in bitcoin. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Lisa Von Ahn)