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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.

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.

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 2 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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Altcoins

Crypto Markets: Bloodied But Not Broken

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As legend has it, prize fighter Jake Lamotta returns to his corner at the end of round four of one of his early boxing matches with blood all over and his face was a mess.  Trying his best, his trainer tells Jake, you’re doing great kid, they haven’t laid a glove on you. To which Lamotta replies, well you better keep an eye on the referee because somebody is beating the crap out of me.

Lately, those of us who have a passion for the world of cryptocurrencies are feeling that somebody is beating the crap out of us. Trouble is, it is hard to figure out why.  Just as we are about to land a punch with the SEC declaring that bitcoin and Ethereum are not securities, ditto that for ICOs that do not convey an equity interest in the issuer, whamo prices drop to 2018 lows.  

The Other Side Of The Coin

We read of the recent hack of a tiny South Korean crypto exchange and pundits blame this for helping to push prices lower.  However, the market seemed to completely ignore this week’s progress in the Mt. Gox litigation. There is actually a decent prospect that investors that held $450 million in bitcoin at 2014 prices will be compensated in nitcoin.  If my arithmetic is working right, this is good news considering the 2014 Blbitcoin price was less than $2.00.

Institutionalizing Crypto

While most eyes last week were fixated on falling prices, exchange giant Coinbase let it be known that it was preparing a crypto custody service.  This may appear as a boring administrative step but that is hardly the case. This move is being heralded as the final step in opening crypto to institutional buyers.

Before Coinbase’s solution the problem has been that, despite the highly secure nature of bitcoin and other cryptocurrencies, the wallets where they are stored are a regular target for hackers.

For investors, making cryptos more accessible to institutional investors is every bit as important as adding retail merchants that accept crypto for goods and services.  

Finding Crypto Support From Unexpected Places

Last Friday various media outlets point out how The U.S. Supreme Court mentioned bitcoin and cryptocurrency while issuing a ruling on a seemingly unrelated case. Here is what the U.S. Supreme Court had to say on June 21st in the case of Wisconsin Central LTD v. United States:

“What we view as money has changed over time. Cowrie shells once were such a medium but no longer are, our currency originally included gold coins and bullion, but, after 1934, gold could not be used as a medium of exchange, perhaps one day employees will be paid in Bitcoin or some other type of cryptocurrency.”

In spite of the current oversupply of naysayers, the legacy of crypto is increasing daily. Now even the Federal Reserve Bank of St. Louis is collecting and publishing prices of bitcoin, bitcoin cash, Ethereum and Litecoin. A year ago at this time, such a notion would have been absurd.    

Suspension Of Efficient Market Thinking

For those who have been kind to follow these ramblings know that I am a big believer in the theory of efficient markets.  The key to this theory is that people have all the available information about a particular investment asset and act upon is rationally.  Of course, this is not to say that everybody reads the information in the same way. That is what makes for buyers and sellers.

Lately, there has been a complete suspension of an efficient market for crypto. All coins and tokens have been dumped without regard for fundamentally positive events, some of which we mentioned above.  Since the vast majority of crypto is owned by individuals, the wisdom of the crowd (or in this case mob) psychology prevails. The last time this was the case it was bitcoin alone that lost some 80% of it’s value starting late in 2013.  But that took more than a year to play out. Since the infamous $19,000+ peak, bitcoin has lost 68% so history is getting close to repeating itself.

It may also be a sign that a bottom in prices may be getting closer. The values are clearly there to be had. Now if only those of us who have a longer term view can find other who share a similar view.

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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4.4 stars on average, based on 82 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Analysis

Crypto Update: Bitcoin Plunges Below $6500 as Heavy Selling Resumes

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The cryptocurrency segment is having another very negative day after a calmer period, as selling pressure intensified yet again. All of the major coins turned sharply lower, with the laggards of the recent period, Litecoin, Monero, and Dash confirming their downtrend and the relatively stronger coins also taking a beating.

The total capitalization of the segment dropped below $270 billion, and from a long-term technical standpoint, several currencies are in precarious positions. With no clear news catalyst behind the move, technicals are playing a very important role, and last week’s lows will likely be in focus in the coming days.

BTC/USD, 4-Hour Chart Analysis

Bitcoin is still relatively weak both on the short- and long-term time-frames, and it dropped back to the $6275-$6500 zone that has been acting as primary support during the recent leg lower. Given the importance of the long-term zone between $5850 and $6000, a break below $6275 could set up a crucial test in the coming days. For now, traders still shouldn’t enter new positions, while investors should hold on to their coins as the bullish secular trend is still intact.

No Hiding From the Selloff as Altcoins Broadly Lower

LTC/USD, 4-Hour Chart Analysis

With the weakest coins leading the way lower again, new swing lows are likely in the majority of the coins, although there is still hope for bulls that a major long-term breakdown can be avoided. Ethereum fell below $500 after touching the declining short-term trendline, and it remains in a bearish trend, even as it’s still in a much better technical position compared to BTC, holding up well above the April lows, and being further away from last week’s swing low as well.

ETH/USD, 4-Hour Chart Analysis

 That said, we remain negative regarding the short-term outlook for the second largest coin, and traders shouldn’t enter new positions here.  Above the $500 level, strong resistance is ahead between $555 and $575, while primary support is found at $450, with further zones near $400 and $480.

BNB/USDT, 4-Hour Chart Analysis

There are no real hiding places for crypto investors from the current selloff even as Binance Coin is still holding up relatively well, within a clear uptrend and above crucial technical support.  That said, as we warned before, given the broad downtrend in the segment, traders should be cautious with new short-term positions.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

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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4.6 stars on average, based on 280 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Analysis

Italy Spooks markets Again as Stocks Remain Under Pressure

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European stocks Led the way lower today despite a bullish start in Asia, as equities gave back their gains when Daimler published a surprising profit warning, which was deeply affected by the recent trade war developments, reigniting fears of a tariff-driven downturn in global trade.

DAX, 4-Hour Chart Analysis

The Old Continent got into more trouble later on, when two anti-EU officials were named in Italy, resurrecting fears of a clash between the systematically crucial country and the core of the Eurozone. Italian yields rose in European trading, and although they are still shy of the levels hit during the May scare, the periphery could be in trouble as the ECB pledged to exit the market by the end of the year.

Nasdaq 100 Futures, 4-Hour Chart Analysis

The main European indices were smashed lower during the session, with the DAX hitting a two month low, still being very weak relatively speaking compared to its US peers. US stocks sold off heavily following the opening bell and they failed to recover, unlike two days ago, and the major benchmarks traded well below yesterday’s levels just before the close.

The Nasdaq and the Russell 2000 lost some of their recent mojo, pulling back heavily of the all-time highs during the day. All in all, the risk off shift continues to dominate across the board, as we expected and we remain negative on risk assets here, especially regarding emerging markets, even as the Dollar’s rally could be over for a while.

Dollar Pulls back as Pound Surges

USD/CAD, 4-Hour Chart Analysis

The Dollar took a beating as the Philly Fed Index came in much worse than expected, and as the Bank of England sent hawkish signals, pushing the Pound and the Euro higher. The central bank left its benchmark rate unchanged at 0.5%, but a rate hike this year got much closer, with a key member of the bank voicing inflationary concerns.

The Greenback fell more than what the events would imply, so a larger scale consolidation could have already started in the currency following the recent gains and the marginal new high yesterday. With the EUR/USD pair nearing the 1.1450-1.15 support zone, the USD/CAD hitting 1.33 and the AUD/USD touching 0.7350, a meaningful counter-trend move would be timely in the surging reserve currency.

WTI Crude Oil, 4-Hour Chart Analysis

Gold continued to drift lower before the Dollar’s reversal and it hit $1262 for the first time since lat December before bouncing back above the $1270 level in late trading. Crude oil also fell sharply in early trading, and the WTI contract traded with a $64 handle before rallying back to $66 per barrel.

The OPEC meeting, which is expected to result in a supply increase by the cartel made the crucial commodity very volatile in recent days, but we expect the bearish trend to continue, with a likely dip to the $60 level in the coming weeks.

Featured image from 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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4.6 stars on average, based on 280 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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