ICO Analysis: Hero

The current state of cryptocurrency gambling is not yet the best it could be. While we have the option to bet sports at the likes of CloudBet and others, or to provably fairly roll dice at PrimeDice and others, what we don’t have is enough ways to bet against each other. For most people, the concept of sports betting doesn’t extend beyond betting with each other. This is the concept behind Hero, which wants to enable people to, in a decentralized manner, bet with each other on sporting events. That’s how simple it is at the base layer, but there are a few things yet to go over.

A high amount of untrustworthy and off-shore providers has lowered the trust of people in the current betting market. It is never completely guaranteed that users receive their winnings. All these problems have one common ground—centralization. Centralized systems create excessive risks for users like exploitation of user data, prohibitive legal regulations, vulnerability to manipulation and denial of withdrawals. That is where the blockchain and the HERO coin (‘HERO’) come into play. […] The smart contracts of HERO are designed to not only enable decentralized betting, but to manage whole contests without a middleman. With HERO, there is no need of bookmakers anymore.

It may still be hard to see what they’re talking about. Basically, Hero is going to be a platform that allows people to make fair bets between each other, with no brokers or bookmakers.

What if the community becomes the middleman? […] Here‘s where the blockchain technology comes in place. The HERO Network allows peer-2-peer predictions of the outcome of games to take place independent of middlemen, such as bookkeepers or betting providers. The system relies on an innovative pooling system that makes it possible for players to challenge their friends or the community directly instead of using the services of bookmakers. The objective is to revolutionize the monotonous betting market and to bring back the lost social thought of betting.

Elsewhere in this paper, Hero claim that the system of online gambling hasn’t changed for 15 years. Now, in general, it can be assumed that many things do not change because they simply work. Indoor plumbing, for instance, hasn’t had to improve very much at the base of it. Similarly, one really has to ask: is the current online gambling and bookie system not working? Well, perhaps that’s not truly relevant. Perhaps the question we actually want to ask is: will enough people be willing to try this alternative method?

Enter the Herosphere, which is briefly mentioned elsewhere in the paper, and is an existing community of 200,00 people. In a moment we’ll discuss more about it, but the bottom line is if this community is immediately converted to the token, and they have to buy more of them to place more bets, then it would seem that the token will have a demand out of the gate. This is a positive sign, to say the least, but we’ll have to continue looking here before we can decide if we feel positively or not.

The above being said, what we conclude, really, is that what we’re dealing with is in fact a situation wherein anyone can participate, and the network becomes the bookie. Anyone can offer bets, however. They give the example of a Twitch streamer who might incentivize the audience and be compensated through the network for offering a contest amongst them.

Herosphere

The HERO Network will first be implemented and tested on the Developer‘s own esports platform herosphere.gg where HERO will be exposed to an existing user base of over 200,000 active players.

While it is not made totally clear if the issue will be forced, one thing that is made clear is that every contest will pay 1% of its proceeds to the network as a whole. This is an interesting scheme which may encourage people to hold the token. If that becomes the case, demand for it will only increase, and ability to meet that demand will decline, as holders just continue to collect their rewards.

If this were to happen and a significant number of coins were kept off market, the price would probably increase just by natural market economics. That would be an interesting way to increase the value of a coin, so it will be a good experiment to watch. In any case, the prospect of a dividend on the token is probably a plus for most long-term investors, but short-term investors won’t be in it long enough to care about that part of it. Nevertheless, as previously described, this coin might see solid gains as a result of people trying to hold it for the dividend.

We know that Hero’s team have successfully run their company at Herosphere.gg since 2014. We see no reason they won’t be able to handle the actual implementation of the software. Instead, we’ll focus our attention on the project itself, in this case.

Hero Token

As stated, all token holders will receive a 1% rake back of everything done on the network. This will incentivize at least a small population of investors to hold long-term, stacking up these gains and riding the charts.

We know that 600 million tokens will be issued, but 2 billion will exist in sum total, which is quite a few, but if enough betting activity takes place on the network, then it won’t actually matter how many coins are out there. Additionally, if a lot of coins are held off the market, then the demand for those that are on the market will float the price a bit higher, at least. Tokens will be around 2 and a half cents at opening, giving room for growth. However, with 2 billion coins in the wind, if the price hits 10 cents, you’re talking about a $200 million market cap. If the price hits $20, you’re talking about many billions. So it’s unlikely that we’ll see an extreme upward valuation, but there will definitely be enough play that you can make something.

Distribution

Only 600 million coins are coming out in the crowd sale. The rest will be held back. They give their various explanations, but this is just absurd. The ICO firms that are coming out are increasingly thinking this is just the time to grab free money. We can’t abide these distribution schemes. If there are going to be 2 billion coins in total, then all of them should be available for sale immediately. It doesn’t matter if that lowers the price, or if the target raise is only several million dollars. The coins should be available to the public, since you’re taking the funds that you get from selling the tokens and using those funds, by keeping the tokens as well, you double dip. By keeping that many tokens, you deeply double-dip.

The Verdict

We definitely don’t like the distribution on this one, despite the following explanation:

A total amount of 2 billion HERO will be created by the Developer. The Developer intends to exchange only 600 million HERO (or 30 percent of the Total Coin Amount) in this Initial Coin Offer for Ether. The remaining 1.4 billion HERO (or 70 percent of the Total Coin Amount) will be used for other purposes. The Developer explicitly reserves the right to exchange the retained portion of 1.4 billion HERO for other virtual currencies or sell it for Euro or any other fiat currency at a later point in time at any marketable price. However, the Developer will commit itself to adhere to the following restrictions in the use, exchange or selling of HERO on the market. Especially, the Developer will commit itself to only exchange or sell such amounts of HERO that, to the best knowledge of the Developer, would not have a visible impact on the market value of HERO.

So, overall, we probably wouldn’t get involved. Although there is a nice dividend, overall, there are problems we’d rather not get involved with – like the above.

Risk

  • Too many coins means that the 1% dividends split amongst all coins is a lot less money. -1
  • Moreover, since 1.4 billion of the 2 billion coins belong to the “Developer,” most token holders wouldn’t get much of the proceeds anyway. -1
  • There’s a risk that people may be comfortable where they are in terms of betting. -1

Growth Potential

  • Gambling is big money. +4
  • The established community is a positive. +2
  • We think this thing will work, the token will just always have a low value. +1

Disposition

We arrive at a 4, or less than thrilled, on Hero.

Investment Details

To get a piece of the 600 million coins being offered for sale, visit Herocoin.io on September 14, 2017 14:00 UTC.

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Website: 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