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ICO Analysis: 300Cubits’ TEU

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ICO Analysis: 300Cubits’ TEU

Introduction

This article was posted on Monday, 15:01, UTC.

The TEU token is a project of 300cubits, which is owned by ETH Smart Contract Tech Ltd, a company based in Hong Kong which was founded on the 10th of last month. Their whitepaper really needs some good editing, and that could be why it hasn’t generated quite so much buzz (to this author’s knowledge) on this side of the world. But we won’t take away too much from their innovation or business model on such grounds. It’s easy to get lost in a slick production or a bad one and lose out on good opportunities or miss important warning signs.

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Billing itself as “a cryptocurrency that propels ships,” the aim of the TEU token is to become the settlement currency for the shipping industry. In plain terms, the white paper identifies that dishonesty is rampant within the international shipping industry, and thus it needs transparency that a blockchain can bring.

One prominent shipping executive always says that everyone lies in the container shipping industry. Lies that we do not know, but one thing we know first handed is that the shipment agreements in container shipping are often not honored. Service contracts get re-opened when the freight rates have changed so much. And it happens so often in recent years that freight rates could swing 50-100% within a year or even within a month.

In general, an immutable ledger will be a value-added application for any industry which has a lot of moving parts. TEU understands this and says that they are already adding value as soon as they become available. The shipping industry is massive, after all, and it wouldn’t take an incredibly large slice to make some good money. Moreover, as they have one success after another, they are likely to expand operations across the world. An open ledger would also allow the industry to build its own applications to interface with the TEU token. All of these opportunities mean great potential, but we don’t share the confidence of the white paper in a single release of a cryptocurrency independent of everything else.

We are not suggesting a potential. We believe the TEU tokens will instantly add monetary value to the industry, much like a capital injection. How? A certain percentage of our tokens will be given out for free to the container liners, their customers and those who actively promote the tokens for early adoption. A successful Initial Token Sale (ITS) will automatically monetarize the TEU tokens. Use of the TEU tokens by industry players will validate and enhance the value of the TEU tokens. The adoption of the TEU tokens in the container shipping industry, in return, will influence its trading activities at cryptocurrency exchanges.

Shipping Industry Problem Solver?

In general, it is preferred that solutions for industries come from within them. This way the people creating the solutions have the most intimate knowledge of the industry at hand. Luckily, leadership roles filled by Johnson Leung and Jonathan Lee are leaning on fifty years of experience between them in both banking and shipping. As we often stress here, long careers like these mean connections to the actual means to get the job done. Thus, we feel it is positive that the leadership have spent their lives in the industry they now aim to disrupt.

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TEU stands for “twenty-foot equivalent unit,” which is a measurement used in the shipping industry. The contention of 300Cubits is that the shipping industry is woefully inefficient, and that fraud can be significantly reduced with the blockchain. Their goal is to become the primary settlement currency of the global shipping industry.

How Fast Will The Industry Really Adopt & Adapt?

In concept, Bitcoin, Litecoin, Dashpay, and especially Ethereum should see widespread, fast adoption amongst legacy industries. But they see anything but. The network effect of money is a well-established concept. 300Cubits approaches this project with the idea firmly in hand that they will be adding value. The industry experience of the board has them feeling that this sort of thing will take off quickly, and that their connections can help it get going, it seems. But the problem is: these are promises that are easy to break.

Market penetration is one of the hardest things to bet on, and then we’ve got things like this which are going to slow it a bit more:

Unlike the existing service contracts in the container shipping industry, the smart contracts governing the transactions of the TEU tokens are coded with a set of immutable conditions. Once committed, neither party can alter what has been agreed.

Now, what sort of parties might take issue with such a proposal?

Answer: governments and corporations which benefit from negotiable contracts, ie, whoever is on the take in the shipping industry. Like as not, the self-same people are also at the helm of a few of the companies being targeted by this disruption. While shipping customers might see this idea as totally revolutionary, and a few Hong Kong-based veterans might have a great solution they’re getting fully behind, what you’re really asking for is the whole pie. Use of the TEU token is going to be dependent on companies making use of it – being willing to sign immutable contracts, implementing technology to ensure them, and so forth. Problematic to say the least. From a technological standpoint, sounds like fun. From an investor’s standpoint, sounds like either unicorn or minotaur.

To promote the usage of TEU tokens, we will develop a community with an IT infrastructure, which we call TEU Ecosystem, interested industry participants, application developers etc., to establish the TEU tokens as the de facto cryptocurrency for the container shipping industry. The TEU Ecosystem will include Smart Contract Builder Module, Booking Module, Market Place Module and Positive Credit Agency Module.

The above all sounds great – except, well, none of it circumvents what precedes it, and all of it leaves out the obvious specter of attrition which arises from competing efforts established either in real terms or conceptually.

TEU Token Details

There will be two TEU token sales, during which 40% of the tokens are sold off. A sum total of 100,000,000 tokens will be the fixed supply of the TEU token system. The numerical distribution of this 40% gets interesting:

The amount of TEU tokens to be given out to the industry users will be based on the market value discovered after the ITS as well as its trading activities on cryptocurrency exchanges. […] Based on the value reflected in TEU token trading, industry users shall determine how many TEU tokens to be used for each shipment booking in order to provide an adequate but not excessive economic incentive to both parties to honor the shipment booking. Based on all container liners’ revenue divided by the global container shipment volume at 190mn TEU per year.

They intend to do a second run with the same numbers, a 40% distribution with amounts purchased determined based on an industry scale that most investors will have no experience with. The TEU team will retain a full 54% for marketing and development, and another 6% of the tokens for themselves. Of this marketing & development fund, they authorize themselves to give away as many as they please:

A percentage of the TEU tokens will be given out for free to a selected group of container liners and their customers, or employees of shipping industry to promote the use of TEU tokens as shipment booking deposits and the de facto industry cryptocurrency in general.

Free services don’t exactly raise the value of an offering, but in our era they don’t lower it, either, necessarily. Further, this sounds like a plan to get industry partners on board – okay, good. But, if only a sum of 40% of tokens is on the market at opening, it’s hard to see a real valuation coming out of this thing before it’s completed its second run and markets start operating on 40%.

300Cubits Long-Term Operations

The TEU token is by design like money that performs as value storage, medium of exchange and, when established as the de facto cryptocurrency for container shipping industry, unit of account. Like the use of money, the use of TEU tokens is nearly free except for the gas payment in ETH for miners in the network who ensure the integrity of the public ledger. […] 300cubits will operate on fees generated from the use of TEU Ecosystem that contains modules namely the Smart Contract Builder Module, Booking Module, Market Place Module and Positive Credit Agency Module. Except Positive Credit Agency Module, all modules will need to deploy or execute part of the smart contracts at different stages where some TEU tokens will automatically be exchanged into ETH to cover the gas fees.

Okay, so at least they intend to go down with the ship. See point below.

The Verdict

Ethereum Smart Contracts are a good business to get into at this point in history. We learned from this whitepaper and project that the shipping industry is not currently such. As to the Twenty-foot Equivalent Unit token, we’re leaning toward it being dead in the water.

Risk

  • Little oversight over distribution of initial “marketing & development” team.
  • Way too much with-held from the economy.
  • Industry adoption seems slow if at all possible – despite hype by subject.
  • Price discovery and supply model might be gamable. After all, the industry in question essentially controls the global container freight rate. One scenario imaginable is in which the various cartels conglomerate, raise rates temporarily, wait for TEU tokens to be distributed and sold, and then go back to normal rates. This means that all speculators would have paid an extreme premium.
    • It’s not hard to imagine once you’ve done a bit of research into how the shipping industry actually works. Everything from unions to greedy governments to pirates can throw rates in disarray.

Growth Potential

  • As is often the case, one of the points from the risk category is also a growth factor – in token valuation only. Lots of factors could push industry participants toward the TEU, including unpredictable factors on the open seas.
  • 300Cubits will have some usable products that come out of their existence, but whether they are what they expect or not remains to be seen. In much the same way that numerous banks wanted “blockchain but not Bitcoin,” industry might be very interested in the ability to accurately predict demand for containers – whether that would be worth paying into the TEU system or not remains to be seen. It should be noted that they currently intend to force all users to interact through their system, but supply and demand rule all.
  • A successful disruption of this industry leads to trillions in revenue over decades. This statement is not meant to be mistaken as one which implies that TEU will successfully disrupt global shipping lanes.

Disposition

TEU passes all the checks for “grandiose vaporware.” Let us have a look at their “steps accomplished so far:”

  • Selected Ethereum network as the Foundation Layer of the solution
  • Completed coding of a set of core smart contracts usingSolidity, including the ITS, ERC20 compliant TEU tokensand various shipping prototype smart contracts, etc.
  • Started to test the smart contracts in atestnet environment and live chain of the Ethereum.
  • Formulated the IT infrastructure, which is called TEU Ecosystem for TEU tokens.
  • Completed concept development of various application modules.

Now, they want to raise a bunch of cash and continue on their roadmap. They give themselves until January to recruit programmers and marketers and then release an early version of the Booking Contract Builder d’application.

Groovy. But not with our money.

We rate TEU 3.0 out of 10 for effort. The best approach for this ICO is to see how the first “ITS” (ICO round) goes and reconsider then. We will re-evaluate after August 30th, when their Initial Token Sale concludes, in preparation for their second sale which begins September 13th.

Investment Details

  • Minimum .1 Ether investment. Don’t be like this guy.
  • TEU token will have 18 decimals.
  • “Allotment of TEU pool of a period is based on the proportion of ETH contributed of a contributor among all ETH contributions of the same period.”
    • Translation: “The amount you will get is not defined at time of transaction.”
  • Be sure to use the official website if you decide to jump on the ITS. https://300cubits.tech/
    • Further, be sure to check out pages 19 and forward in the whitepaper. Read the fine print. These are not regulated securities you are dealing with, so it’s never a good idea to proceed without caution.

 

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P. H. Madore

P. H. Madore

http://phm.link

P. H. Madore has covered the cryptocurrency beat over the course of hundreds of articles for Hacked's sister site, CryptoCoinsNews, as well as some of her competitors. He is a major contributing developer to the Woodcoin project, and has made technical contributions on a number of other cryptocurrency projects. In spare time, he recently began a more personalized, weekly newsletter at http://ico.phm.link

Comments
  • user

    AUTHOR embersburnbrightly

    Posted on 3:41 pm August 7, 2017.

    As always, your reviews are incredibly detailed and informative. Thank you.

  • View Comments (1) ...
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