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Can a New Generation of Regulated Token Sales Save ICOs?

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The bad news first: ICOs are in big trouble.

You wouldn’t think so just by looking at the stats: just last week, 400 ICOs were announced according to one of the many ICO newsletters that have gained traction. Last quarter, over $ 1,5 bln were raised by projects accepting primarily or exclusively cryptocurrencies and handing out a token in return. The cottage industry around this new vehicle has grown exponentially, with entire marketing firms and PR agencies rearranging their business to exclusively serve the ICO market.

Upon closer inspection though, a rather different picture emerges. More and more ICOs are missing their funding goals (source: Architect Partners).

And some of the most successful ICOs of the past months are in turbulences, too. One of them is already fighting over money. A second one is having trouble delivering the promised tokens to investors, leading some to speculate on its impending implosion. Compared to startups, most crypto ICOs have failed to deliver on a minimum viable product and real adoption, even with millions of funding in the vaults. And of those startups that successfully raise funds, only 1 in 10 actually use the token in their network.

What about that cottage industry? It’s not looking much better. From scam artists to shady “ICO advisors”, from rampant FB marketing to pump & dump Telegram groups, Russian bots, false followers, fake endorsements, email phishing, and insecure Slack channels with millions stolen from investors as a consequence.

This is very much still a wild, wild west.

But the problems run much deeper.

Originally, blockchain evangelists promised us greater decentralization, democratization and true financial freedom, independent from institutions such as banks and governments. But has this vision of the world really come to pass, or even taken a good step closer to being realized? Is the world more equitable thanks to crypto & blockchain?

In reality, most, or many of the projects are even more inequitable than the broader economy. If you take a look at the Gini coefficient of a couple projects using the ICO Transparency Monitor, here’s what you find:

Gnosis:

EOS:

district0x:

Bancor:

At present, ICOs go mostly to savvy old world investors through pre-sales with the smaller investors often times ‘holding the bag’.

What’s still sorely missing are industry level institutions that take on the task of self-regulation. Any functioning branch of the economy has watchdogs, industry associations, quality certificates, and auditors. Ultimately, any economy needs trust and reliable rules in order to function.

For the first seven years, the crypto world talked mostly about technical innovation and societal critique-by-creating. Now, the conversation has started to shift. The enormous sums of money involved created an urgent demand for answers to questions of legality. What are we to expect from regulators? How will governments treat this new technology? The crypto community is realizing that if it wished to maintain and further develop its reach into mainstream society, tech was not enough to get the job done.

This solves a big problem: how do you enable non-blockchain companies to make use of the technologies advantages? Surveying the current blockchain landscape, the large majority of ventures in the space are themselves blockchain projects.
Current ICOs are also near exclusively run by on-chain companies. They offer utility tokens which you can use for on-chain products. Neufund however allows investors to invest into off-chain companies by putting shares on-chain.On first sight, this is something impossible because shares are some piece of paper or a certificate. Anybody who takes this on faces a huge legal challenge.
But there is a solution: the nominee structure. The nominee holds the shares, the nominee issues the tokens. That is per se totally legal in Germany and any other European jurisdiction.

The first seeds of this self-regulation efforts are forming: the Ethereum Enterprise Alliance (EEA) has been successful at gathering the large corporates under its wings. There are now several initiatives starting the work of educating the public and regulators alike, and crafting policy recommendations for the relevant authorities to adopt (e.g. Blockchain Policy Initiative). Some have even been successful in convincing local and state governments to run entire campaigns for attracting startups in the space to their jurisdiction. Forward thinking mayors and governments are quickly realizing the value of competing early in the coming trend of jurisdictional arbitrage.

Rulesets are a competitive advantage, and an increasingly necessary one in a globalized world. Estonia was one of the earliest to realize this and begin its modernization. In the 90s, the tiny country (1.3M residents) upgraded its governmental and business infrastructure to the internet, making it possible to sign contracts, open bank accounts, and file taxes without ever having to visit a notary or governmental office. Now, the country takes it one step further and offers the benefits of its infrastructure to anyone via the “e-Residency program”. It has attracted thousands of entrepreneurs and digital nomads, many of which also innovating in the cryptocurrency and blockchain space. With the ground prepared for instant adoption, Estonia is even considering to launch an “Estcoin” in their efforts to open source their rulesets for the benefit of all. Many other countries all over the globe have joined the race to be the new ‘silicon valley of crypto’, with Switzerland currently in the lead.

Stricter regulation can benefit startups looking for funding via token sales as well. As Andre Eggert, partner at Lacore LLC, puts it: “Securities law is making sure that the market has the information it needs. An informed market is more liquid and that might even result in increased prices and demand for tokens.”

And already there are a number of companies rising to the challenge. In the US, Equibit and t0 work on bringing equity and financial instruments more generally into the token era. Filecoin, in collaboration with Coinlist, pioneered the SAFT agreement which has since been adopted by a large number of ICOs. Now, Pegasus Fintech is floating the idea for a novel type of token-assisted fundraising they call PIBCO: Public Initial Blockchain Offering.

“The PIBCO model advances the ability of Blockchain and Cryptocurrency based businesses to raise funding in a global environment and meet jurisdictional regulatory compliance.”

~ David Lucatch, Founder & Chair of Pegasus Fintech

In this model, Listed corporates will be able to release Class A shares for conventional currency and Class B shares for cryptocurrency tokens. The tokens are then redeemable for Class B shares, which in turn will be redeemable for Class A shares. Clever!

Over in Europe, a number of ICO platforms routinizing the tech and marketing, but none have brought much legal innovation to the table. The German financial authority BaFin recently announced that it is watching the ICO space closely, warning both ICO organizers and investors to be careful. So far Neufund is the only player in the European market to explicitly push forward the legal and regulatory aspects. A German GmbH (private limited company), Neufund has created what they call Equity Token Offerings (ETO). They plan to make this mechanism available to any number of companies, independent of whether their business model is based on blockchain.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Zoe Adamovicz is an experienced entrepreneur and occasional angel investor. She is passionate about building technology businesses that are impactful, positive and at the same time profitable and powerful. Prior to Neufund, Zoe founded Xyo, a company that re-imagines how people discover apps, Priori Data (app store intelligence), and Concise Software which provides software development and engineering services. She is also a mentor to the Gaza Sky Geeks, where she supports technology entrepreneurship in the challenging area of the Gaza Strip and helps introduce Blockchain. As an expert in technology entrepreneurship and venture capital, she has been following the blockchain space closely for several years. She decided to found Neufund when she realized the potential of blockchain for democratizing access to funding, and changing the VC game for good.




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2 Comments

2 Comments

  1. replicah

    December 14, 2017 at 4:25 pm

    Good article, well done Sam, there’s some very dangerous patterns emerging from ICOs and I hope the market matures ASAP

    • Manymoney

      December 14, 2017 at 5:14 pm

      The writer here went berseck from this point to the other point, the writer should realise that IPO are 99% scams, all loses the people investment, only 1 % of the total Ipos gives some sort of profits at best 20%, erc20 tokens are in its nascent stage, but everyone can track thru blockchain whats going on; whereas Ipos were shady and dark, the investors hardly knows what happens from 4 pm till 9.30 am (example of Indian stock exchange).. currency trading has sat and sunday off and some special holidays, whoever are early adopters of Cryptologies now are good for the future, in this materialistic, its naturally to found bad actors, but they can be caught easily cause txn are done in blockchain, there are many ERC20 tokens who never did ICOs like Postoken, blue, Rebellious and has already made a mark in the market; the show has just began, 95% wealth of 5% populations are going to be equally distributed and will happen.

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60 Minutes Showcases Potential of DNA and Genetic Genealogy; Opportunity for Crypto Investors

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DNA Storage

Throughout the years, 60 Minutes has been responsible for reporting on some of the biggest stories in the world.  Many of the most memorable episodes have involved world leader interviews, stories on endangered animals, profiles of famous celebrities, and occasionally, segments on promising developments in business and science.  A week ago, 60 Minutes had a very interesting report on how the authorities used Genetic genealogy to solve the case of the Golden State Killer, and how the authorities plan to keep using this new field to solve more cold cases in the future.

On April 25, 2018, authorities in Sacramento announced that they had solved the notorious case of the Golden State Killer.  Authorities were able to use a promising new technique called Genetic genealogy to help identify 72-year-old former police officer, Joseph DeAngelo, as the suspected killer.

Genetic Genealogy

Genetic genealogy is a mixture of high-tech DNA analysis, high speed computer technology, and family genealogy.  The end goal is to determine the level and type of genetic relationship between individuals.

In the case of the Golden State Killer, DNA came into play because the killer had committed at least 12 murders, 50 rapes, and many home burglaries.  Investigators were able to obtain DNA from the killer at one of the reported crime scenes.  After many years of frustrating dead ends, a cold case investigator submitted the obtained DNA sample to GEDmatch.  GEDmatch is the largest public genealogy database in the world.  After uploading the sample, authorities were able to generate a handful of leads which eventually led to the front doors of Joseph DeAngelo.

In addition to the Golden State Killer case, authorities have used Genetic genealogy to make arrests in at least 11 other cold cases.  While the science appears to be sound, there is a legal question that has yet to be answered.  There is no doubt that attorneys for the accused will raise the question of privacy and whether using databases, thought to be private, should be legal.

Opportunity for Crypto Investors

While I’ve invested in equities and crypto for many years with varying degrees of success, I’ve never had the opportunity to invest at the beginning of a new frontier.  Fortunately, the opportunity has come.  Encrypgen (DNA) is a genomic blockchain network that provides customers and partners with best-in-class, next generation, blockchain security for protecting, sharing and re-marketing genomic data.  This creates a fair marketplace for a person’s DNA that can be stored private and sold (if a person wishes to do that).

Over the past few months, Encrypgen has been gaining attention in the mainstream media because of their revolutionary technology as well as the fact that their closest competition is still years away.

In August, Encrypgen released a beta version of its Gene-Chain.  The Gene-Chain allows consumers to upload their genetic profile and for researchers to purchase that genetic data.  Within the next 2 weeks, the company plans to release the full version of the Gene-Chain which will officially make them a new pioneer in the field of genomic blockchain security.

With the DNA token hovering at approximately 5 cents, the time is running out to accumulate at bargain basement prices.  I fully expect the token to achieve utility in the next several months which will cause a rocket-like explosion in the token price.  There is no looking back now, only forward, and I love what I see.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Fantom – The Next Big Thing?

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Fantom (FTM) is a a Directed Acrylic Graph (DAG) based smart contract platform in which the more nodes participate in the network, the greater the transactions per second. The project is aiming for 300,000 transactions per second, which would be applied to multiple industries such as food technology, financial services, telecom, logistics, etc. Fantom is designed to offer instant payments, near zero costs, and unlimited processing scalability. Like Ethereum, Fantom supports Smart Contracts but they run on the Fantom Virtual Machine vs the Ethereum Virtual Machine. Why is that important? Because the FVM will allow developers to write dApps that support smart contracts just like ethereum but run light-speed times faster.

A lot of new blockchain projects talk as if they will challenge the top blockchains and take over their spot. While this is speculation and mostly hot air spoken by many projects, Fantom has a great shot at taking off as one of the top blockchains. Andre Cronje, well respected in the ICO scene as a technical blockchain expert, was added as part of the technical team recently. Having a team and community as strong as Fantom does gives it the extra push needed to take off. While other projects are implementing directed acyclic graphs (DAGs), Fantom is the first to do this with smart contract support.

Fantom operates on a system called OPERA, which is divided into three layers:

  • OPERA CORE LAYER – processes transactions, maintains consensus across all nodes via the Lachesis Protocol
  • OPERA WARE LAYER – supports smart contracts, executes functions
  • OPERA APPLICATION LAYER – supports third-party applications, provides publicly available APIs for dApps

Partnerships with credible companies definitely help the legitimacy of an ICO and Fantom has already made numerous significant partnerships such as the Korea Food-Tech Association and Oracle that will significantly enhance their chance of success. The company, in collaboration with NEM Blockchain, has recently announced it’s expansion outside of Korea into Australia. Fantom has chosen Australia due to their innovative culture and supportive government. Fantom is committed to working with local communities and governments to utilize Fantom technology across multiple industries. They are focused on creating real-time use cases of their platform by on-boarding Australian businesses in the next twelve months. Australia has hundreds of merchants who already accept cryptocurrency including the first airport in the world to do so. Fantom has already been working behind the scenes engaging with payment providers about using Fantom token as they expand globally.

Multiple blockchain projects are claiming to be the fastest with the highest tps, but have not come through on their promises. Fantom has an excellent shot at actually accomplishing this and immediately becoming a major player surpassing those that have fallen short.

Unlike many recent ICOs, which are constantly delaying and postponing the release of their tokens due to current market conditions, Fantom is unlocking and listing on October 29th. The project recently released a recent Technical Whitepaper concerning the Lachesis Consensus Algorithm, making another version of the Technical Whitepaper detailing the Fantom Framework ready, and preparing a testnet demo video to be available soon.

With major funds invested for the long haul and markets such as the USA, China, and Korea unable to participate in the much-hyped ICO, there should be quite a bit of immediate interest and demand upon listing on exchanges. The last ICO with similar hype was QuarkChain which also did amazingly well in this market. Fantom had a hard cap of $39 MILLION at the time of ICO raise and is expected to perform well.

Diclaimer: The author has invested in Fantom.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Why Investors Should Pay Attention to Blocknet

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Even in the “crypto winter” we are currently living in, the blockchain industry is still growing. This is a good thing for the industry in many ways, but all of these various networks have developed in a siloed and separated way.

Some companies have emerged that seek to help the various networks work together and harvest synergies. If blockchain was meant to be a new manifestation of the internet, these networks could be considered a new manifestation of blockchains. One such company is Blocknet.

Blocknet’s Mission

Blocknet is often referred to in the colloquial as “Block” and functions as a decentralized platform-as-a-service service. The basic goal is to connect the nodes of different blockchains to create a network of networks. The endgame here is to make it possible for applications to be developed on one blockchain but be used on another.

The network is composed of three key components: a node exchange, coin exchange, and data exchange. The XBridge is the blockchain router than connects nodes on different blockchains and makes it possible for them to communicate with each other.

The XBridge also enables cross-chain atomic swaps using a coin exchange protocol. We will go into more detail into this in a bit, but it is essentially a DEX. Finally, there is the inter-chain data transport that allows for feature sharing and smart contracts to be executed across chains.

Market Demand

Blocknet was founded in 2015 and finally launched their mainnet in September 2017. The market has been looking for a solution like this. There is competition from other networks like 0x, but they have already started to integrate their networks with Blocknet. By seeking to be a super-network, it is eliminating the idea of competition.

A big part of Blocknet is the decentralized exchange (DEX) that it runs. What makes it special and sets it apart from the competition is that it is more than just an exchange for ERC-20 tokens. It enables the trading of every coin that is integrated into the network.

The Blocknet DEX will be designed to enable an unlimited amount of trading pairs, and will enable complete anonymity for users. Additionally, by avoiding a central entity, you always retain complete control over your funds.

BLOCK Token

The token has two functions. First, they are used to pay trading fees and for the operation of applications on the network. Second, they are required to be staked as a service node or staking node. These are the nodes that distribute trade fees or confirm network transactions.

BLOCK trades on Bittrex, and in terms of recent performance, we have seen a heavy decline from the highs that BLOCK reached last year. However, it seems to have reached a bottom and found a support level. As we head in the last quarter of 2018, it could be time for a recovery, and BLOCK seems poised to take advantage of this.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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