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ICO Analysis: adToken

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The problem of digital content has long been foremost on the list of those which can be addressed by the blockchain and cryptocurrency. Without someone paying for the creation of good content, there would be very little of it available. In the beginning of the Internet days, there was not even a secure way to transact over the Internet, let alone the mechanisms to secure its contents. because of that, the idea of paid subscriptions was incredibly hard to swallow, though over the years it has matured in the form of premium services and the likes of Netflix. Thus, advertising is still the dominant way that content online is paid for, and the creators of adToken don’t see that changing in the future. Rather, the problem they intend to address is not the method of paying for the content, but the fraudulent conditions in which advertisers currently are forced to operate.

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As CPM rates have declined, downstream publishers and those who rely on advertising have begun resorting to cheating the algorithms with bots which can mimic human behavior and falsify traffic statistics. The decreasing cost of these methods has made the average advertising dollar of a given firm far less effective, as it’s said in the adToken Whitepaper:

Ad buyers are increasingly frustrated by having their money stolen. While programmatic ad buying is undoubtedly the path forward for quantifying the value of ad buys relative to direct dealing and is the highest growth area of digital advertising, programmatic is, at present, a morass for quantifying efficacy in advertising non-installable goods. The behaviors of humans on web pages are easily mimicked by bots and the flagging of bot network signatures is essentially a cat and mouse game. This leaves advertisers mostly powerless against the incentive structure of the downstream supply chain.

The solution that adToken presents is a registry of valid publishers who are not scamming the system for ad buyers to consult. Applications can be made and challenged in a decentralized manner and changed later on through the same governance model. The idea is that by becoming involved and moderately exposed in the adToken economy, ad buyers will save money long-term by only dealing with publishers who have been verified as honest. Additionally, the governance model is also used to change constants in the same; meaning that the periods for challenging new domain entries or the period of validity can be changed by token holders.

The Economics of Virtue

The purpose of the registry will be to provide value to ad buyers, so the whole system will rely on honesty and virtue from its participants. If a bad domain is submitted and no one challenges it, for instance, then the whole system can be tainted, with that bad domain siphoning funds and giving adToken a bad reputation. However, this point clearly illustrates a more important one: the incentive for adToken holders themselves to desecrate the system is not there because it will inevitably affect the exchange value of their token. Therefore, as a liability, this is limited in terms of rational self-interest to outside parties who likely have a competing service.

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However, adToken does not appear to be trying to monopolize the digital advertising verification through the cryptography sphere. Instead, applicants will also be able to indicate if they are accepting Basic Attention Tokens as well, which are part a similar effort operated by Brave Software that is also creating a browser, which will allow web users to earn money for allowing advertising through.

The economics of virtue appear faulty at first glance, but when one thinks about it a bit deeper, one sees that it can be viable. For instance, a single attack of the kind outlined above would result in significant governance changes within the system. Perhaps a mandatory challenge/review would then be introduced, in which someone actually has to prove the site has never engaged in botvertising.

The voting process is interesting. The applicant provides a domain and an adToken deposit.Then, there is a challenge period during which another person can put up an equal deposit as a challenge. If a challenge is present, adToken holders are able to put up tokens to vote against or for the application. If the application fails, the person who challenged it receives half the deposit they put up, and everyone who voted in their favor also receives an even dispensation from the other half. The applicant loses all their deposit, but anyone who voted in favor of them receives their own voting deposit back.

This does leave the system vulnerable, still, to attackers with large bank rolls. However, one can guess that the parties with the most interest in this platform succeeding have deeper pockets than those who fear its success. One is a group which must resort to fraud to profit, the other is a group which simply wants its advertising dollars to effectively perform (by actually reaching humans instead of robots). From the whitepaper:

Token holders have one concern, which is to flag fraudulent and low quality applicants to the pool and win votes to reject those applications.

The adChain Team

adToken itself is actually a conglomerate of various operations, including ConsenSys, MetaX, the Data & Marketing Association, and the adChain Association. The DMA obviously has little technical input on the project, but having their backing earns this project significant credit, as it is their purview to better the conditions for their industry. The team is composed of elements of ConsenSys and MetaX, beginning with Mike Goldin, who works full-time at ConsenSys and had previously interned there during college a couple years ago. He has to his credit a successful smart contract for something called Ujo Music, which operates in the same space as several others regarding the identification, licensing, and payment of music artists.

Their primary development efforts seem to be at the behest of Miguel Morales, who works at MetaX and has worked at two other software-focused firms in the past. Morales is a highly competent developer. In relation to this current project, he recently wrote a tutorial regarding interactive bid requests.

In advisory roles, they have Shailin Dhar and Raleigh Harbour, both of whom share massive experience in the digital advertising world. Dhar is the author of an influential document on the subject, while Harbour formerly worked for AOL, who pioneered the industry early on, becoming one of the first important and sizable advertising networks.

Presumably, the team will rely on the vast human resources of ConsenSys and MetaX for actual development, so the significant lack of highly-technical people listed in their team section does not necessarily equate to technical debt. The major organs of this project will function in management and advertising anyway, since getting the word out to publishers and advertisers will be paramount in the success of the platform.

Investment Details

The adToken crowdsale will go live via Ethereum only on June 26th at 9 AM Pacific time. 500 million tokens will be for sale that day, with 100 million already being sold in pre-sale funding arrangements. An additional 400 million are split evenly between MetaX and ConsenSys, for a total of 1 billion coins in the economy.

This distribution is arguably a red flag, in traditional ICO analyses, due to the high level of coins that are not being released to the public. The least they could have done is pull the 100 million tokens they used for fundraising already from the 400 million being distributed between the firms, correcting the balance so that the majority are in the wild, while 40% remain in the citadel. Instead, 10% are unknown, 50% are in the public, and 40% are held by the founders. The pre-sale arrangements could be fictional or falsified, as well, making the thing suspicious on these grounds. In general, a small pre-mine or with-holding is acceptable to fund development, but the coins should be left to the market by and large for value and legitimacy.

A more in-depth map of the distribution is here:

No real information on how to actually invest is present yet, but presumably, that information will be available on June 26th. However, the site does say a MetaX GUI for participating will be built in the meantime. You can sign up for a reminder at the adToken website. A specified starting price has not been listed, but it does not that only the sending address will be able to receive the tokens, so do not fund the investment with an exchange account that you do not control.

The Verdict

adToken is a great idea with limited drawbacks. Let’s go over the drawbacks:

  • Potentially lots of others in the space, creating a sense of attrition in terms of growth. If a site cannot get whitelisted at adToken, perhaps it can somewhere else. This could lead to confusion in the market, and mean that reputation will be the primary factor in the value of adTokens. If this happens, the trajectory of the token itself could be straight up or down.
  • The vulnerability of deep-pocketed attackers from other whitelist operations or those who benefit from the problem’s existence. Penetrating the reputability of adChain would not be trivial, but could be possible. The system relies on there being enough active, rational participants to ensure against these types of denigrations. Anytime such problems were to arise, other plays in this market would have an opportunity.
  • The period between launch and gaining a reputation as a way for advertisers to actually save money and as something they should participate in could be prolonged, which means that the token and project themselves could be overshadowed by later efforts that get luckier in the beginning.

All of these things being the case, people could still profit in adChain. If you wanted to make money on the side, picking up some adTokens and making it your businesses to challenge faulty domains could be profitable. Entire firms could be built around this concept, and confederations of such firms could raise oceans so all ships float higher. The value of adTokens themselves will ultimately be determined by how badly submitters – publishers – want them, so the more of this virtuous work you did, the better the platform and higher the value of the token would be. This is somewhat unique in terms of tokens and cryptocurrencies, in a sense that the holder is not entirely powerless to influence the value of the token; instead, by doing good work, the holder can potentially increase the value of the token.

Of course, you’re also relying on the notion that others will do this by signing on. This is problematic. It’s not all there is to it, though, but let’s dock two points based on that fact. Now we’re at 8 remaining. We’ll take another half point for the risk of non-self-correction, another full point for 500 million tokens withheld from the market, and call adToken, as a whole, 65% safe in terms of likelihood of recouping your investment.

This is not a guarantee in any sense. Just as Exscudo appears to be moving forward without any issues, despite the concerns of this writer, adToken could fall flat on its face and receive no interest at all, thereby devaluing your purchased tokens to nothing at all. But given the assessment above, this seems unlikely.

 

 

 

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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5 stars on average, based on 1 rated postsP. 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




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5 Comments

5 Comments

  1. embersburnbrightly

    June 6, 2017 at 10:19 pm

    A very thorough and informative analysis you have presented here; thank you!

  2. GhostCap

    June 7, 2017 at 12:44 am

    Been interested in some analysis on this one. Thanks for the breakdown! Very helpful.

  3. Navster

    June 7, 2017 at 3:25 am

    I would have liked to see more about how adToken competes or works in the same market as Basic Attention Token. It was mentioned very brief but I think it’s a lot to think about considering the ‘hype’ and ‘brainpower’ behind BAT.

    Thank you for the good insight as always Mr Madore.

    • P. H. Madore

      June 7, 2017 at 10:57 am

      My understanding of this aspect is that site publishers are allowed to indicate if they accept BATs for advertising payments. Applicants are allowed to supply limited additional metadata, including payment types, but the example given in their whitepaper is BAT, which to me is more of a philosophical move to say: we’re not trying to compete with BAT, but could be a way to facilitate its usage.

      Specialized smart contracts could be written using BAT and adChain, I reckon. Other tokens will probably come to the fold. Adult entertainment advertisers will probably want their own version as well.

      Actually, thinking about this all in depth makes me want to analyze and maybe make some bets on the future of advertising and the plays therein.

  4. GRACE88

    June 10, 2017 at 2:52 pm

    Thank you. Very useful analysis in comparison to BAT.

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Analysis

Daily Analysis: The Usual Post-Fed Pump and Dump…

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Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2700 -0.51%
DAX 12,470 -0.14%
WTI Crude Oil 61.28 -0.83%
GOLD 1325.00 -0.43%
Bitcoin 10480 -8.71%
EUR/USD 1.2336 0.61%

The script that we laid out for the FOMC meeting minutes has worked almost perfectly, with the major US indices completing a roundtrip that triggered most of the “weak” stop-losses, before a powerful move lower into the close.

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The predictable late-session intraday volatility aside, markets were quiet and choppy for most of the day, and the Dow, the Nasdaq, and the S&P 500, all closed just slightly lower, while covering 2% during the session, with the tech-index’s relative strength evaporating in late trading.

S&P 500 Futures, 4-Hour Chart Analysis

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Forex Markets and Commodities

What drove the decline in equities was the renewed rise in US Treasury Yields, and to answer the most important question of the day; yes, in fact, the yield-Dollar correlation of the past few months broke down, and today the Greenback rallied together with bond yields.

10-Year Treasury Yield, 4-Hour Chart Analysis

While that is how it should work according to common sense and economic theory, the recent inverse correlation helped a lot of trends in reaching extremes, and those extremes now might reverse.

The outperformance of US markets, the Euro strength, and the weakness in European equities were among those trends, and it’s interesting to see that the bullish technical setup in the EUR/USD is crumbling and the US indices are in the deepest correction since the Brexit.

EUR/USD, 4-Hour Chart Analysis

While there is no assurance that these changes are permanent, for now, we remain short-term bearish on US equities, and continue to look for upside in the battered Dollar.

At the end of the day, the Dollar finished higher against all of the major fiat currencies, although the Yen showed notable relative strength amid the stock rampage near the closing bell. Interestingly the USD vs. risk-on pairs trend continues to lead the other asset classes, as we have noted several times, and that could be something to monitor in the coming days and weeks.

Commodities had a mixed but ultimately bearish session, with oil and gold suffering both suffering losses amid the risk-off shift, although crude already traded lower before the FOMC release, while gold traded in close correlation with the Euro throughout the day.

Cryptocurrencies

The segment had a decisively bearish session, with only a few coins showing considerable relative strength amid the sell-off. Bitcoin, Litecoin, Dash, and Monero are still the leaders of this cycle, while Ethereum is the most notable laggard, pulling most altcoins lower as well.

ETH/USD, 4-Hour Chart Analysis

On a positive note, the majors held up relatively well amid the stock turmoil, but the next few days will be crucial, as important support levels could be tested. That said, most of the coins are well clear of the crash lows, and there is more than enough support below that, combined with the still present bullish signs should keep investors confident that a new uptrend is underway and new rally highs are ahead.

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Analysis

Technical Analysis: Altcoins Lead Markets Lower as Bitcoin Still Looks Strong

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All of the largest digital currencies are in the red today, following heavy overnight selling, a bounce in European trading, and another round of losses around the US market open. Ethereum is still in the worst short-term shape among the giants of the segment, and that’s in line with the slightly delayed cycle of the coin that we have been monitoring.

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The technical divergence between the leaders of the market and the laggards yesterday is still dominant with the 6 coins that spearhead the rally, BTC, LTC, NEO, Dash, Monero, and ETC, are still in much more bullish setups than the rest of the majors.

Bitcoin is also well below its recent rally highs after breaking down under the key $11,300 level, and a test of the $10,000 support now looks likely, while a move to the $9000-$9200 zone would still keep the rising trend intact.


BTC/USD, 4-Hour Chart Analysis

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The overbought short-term momentum readings are being cleared, and despite the slightly bearish volume patterns, we expect the coin to continue its new bullish cycle after the correction, with targets above $11,300 ahead at $13,000 and $14,250.

ETH/USD, 4-Hour Chart Analysis

Ethereum is now trading below the key $845 level as the correction continues, as we expected, and the coin remains stuck in the dominant declining trend, for now. We still expect a breakout in the coming weeks, but a test of the $740 level is possible before another rally. Further support below that is at $625 and $575 and we don’t expect a new low in the coin, so investors could still accumulate the coin near the main levels.

(more…)

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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Analysis

Pre-Market: All Eyes on the FED and the Dollar (Again)

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FED-Days usually bring very special sessions with a choppy illiquid environment before the “big announcement”, an almost usual stop hunting spike in both directions right after the release, and a rather random, but strong trend in the close that usually defines trading for the next days.

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For this reason, a lot of traders like to take the day off until the FED-decision, and only trade after the event. Why are we talking about this today? Because although there is no interest rate decision this month, the meeting minutes of last month will be published this evening, and what moves the market in this period is rate expectations, not actual decisions.

And by the market, we mean basically all traditional asset classes, and through the rising trend in yields and the consequences of that, rate expectations arguably affect the cryptocurrency segment as well. So what do we expect from the FED? Nothing. We will leave that to the rest of the players, and trade upon the reaction of the market; after all that is what counts. At the end of the day, central banks will try to prop up the market, we can take that for granted.

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S&P 500, 4-Hour Chart Analysis

The overnight session in stock futures was in line with the above-mentioned expectations for a quasi-Fed day, with no clear trend in Asia or Europe, and very choppy price action across the board. Yesterday’s late-session decline is still weighing on investors sentiment, but there are clearly positive signs as well, even as we remain bearish for the coming weeks.

The key levels to watch are still the same, the 2735 and 2700 levels in the S&P 500 (25350 and 24800 in the Dow), and the Nasdaq could remain crucial to keep the hopes of bulls up, should it retain its relative strength.

Dollar-Yield Correlation Switch?

EUR/USD, 4-Hour Chart Analysis

Currency traders might have noticed a subtle shift between US Treasury Yields and the Dollar since the Volatility-Armageddon (actually a bit later than that). In the “old regime” the rise in yields was through the changes in rate-expectations was actually hurting the value of the Dollar, while lately, that negative correlation disappeared and even reversed briefly.

Why is that so important? Because the previous correlation helped the rally in US equities as yields rose, while the new regime could mean that European and Asian stocks will finally gather relative strength, should yields continue to rise. Tonight we might get closer to the solution of this puzzle, as the reaction to the FED-minutes will show how correlations are shaping up now.

Currencies and commodities are also little changed today, although the Dollar continued to edge higher overnight, while enduring a small sell-off as we approached the US open, despite the largely negative European PMI indices.

So watch the Dollar, the Nasdaq, and most of all Treasury Yields today in late trading, and expect choppy conditions until the very end of the US session.

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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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