ICO Analysis: Monetha
Both the hype and criticism surrounding Monetha have been strong, so we must be upfront and cognizant of this as we go. That said, what Monetha believes, first and foremost, is that reputation is a problem for merchants equally as important as accessing the Ethereum blockchain. This is essentially how they open the whitepaper:
Three significant problems that merchants face: trust and reputation, payments, and an inability to reach the growing Ethereum economy.
A bold move, the establishment of this at the outset, since, one could argue that it’s not a statement of fact in any sense. Are merchants actually facing the problem of being unable to access “reach the growing Ethereum economy”? In some circles, this claim is laughable. We hope that in any circle, it’s dubious. Truly, everyone from top to bottom in the cryptosphere is aware that we’re all very early here. Things are progressing nicely, to be sure, but we’re in at the ground level. Merchants accepting Ethereum aren’t necessarily going to prosper by virtue of that, so the idea that they are facing it as a problem is intriguing but probably inaccurate.
However, the author understands that businesses can benefit from the blockchain. We like projects such as Aragon for this reason. Aragon doesn’t presuppose that businesses need the blockchain, it only stands to help those who decide to integrate it. All of this adds up to say: from the inside, this statement may seem normal, but in real terms, it’s inane. No merchants are facing the significant problem of the inability to reach the growing Ethereum economy. This can safely be rejected as a concept. Nevertheless, Monetha does elucidate on the “problem” a bit further, making another bold claim in the process:
An inability to participate in token-enabled digital asset economy potentially worth $10T by 2025.
Trust, reputation, and payments, however, we can see these as valid problems that a blockchain company can help firms with. We just have to make a departure from the standard glossing over of obvious hype.
Their solution essentially involves taking a blockchain-powered payment gateway and building atop it a decentralized reputation system that allows people to have some modicum of real information about the people they are dealing with across the world.
- Monetha claims to offer merchants the ability to do transactions five times cheaper and 10,000 times faster.
- These people are fond of big numbers.
From a high-level, Monetha make accurate references to the “merchants” of trust we have in eBay, Amazon, and other large scale retailers who act as gateways for smaller ones. It’s true that reputations must be built within each system in order to thrive within them. A system which subverted this might have some value, but we have to keep in mind that the trust we’re speaking of, and the merchants thereof, is at the behest of the masses, rather than the merchants.
At the basic level, what their software intends to do is add additional information to a blockchain database regarding a merchant. Accordingly:
Every time a transaction is made the blockchain will record the time of the transaction, both receiving and sending wallet addresses, warranty conditions, delivery time, and all other information that is typically needed to ensure trust. All the sensitive information will be hashed and only available to authorized users in a beautifully designed user interface. Based on that information, clients and merchants will be able to file/solve a claim, rate ach other, etc. Every time a transaction is made, claim registered, solved or unsolved (according to the purchase details saved during the purchase), review written, etc., the smart contract will automatically change the trust level for each of the parties involved.
The above is the kernel of the idea. Expanding the eBay reputation model to the rest of the web, while at the same time bringing unprecedented numbers of firms into the Ethereum fold, accepting digital currency in an almost-native fashion. Or, such is the goal. Lofty goals abound in the ICO world.
Back to Earth
We must bring them down to earth, so let’s keep it real: many, many people have found it profitable to simply do business through the trusted third-party platforms. Amazon, eBay, Alibaba, and others have access to partnerships with shipping firms that are lucrative for sellers. For these and other reasons, supposing the Monetha concept works and is five-times cheaper, it will still take some time before it actually sees wide adoption among the merchants in question. This is under the best circumstances, regardless of everything. While it will be fun to speculate on the Monetha token, and interesting to watch them progress, we cannot expect that they will actually revolutionize the commerce market, digital or in-person, without several shifts happening far outside their control.
Let’s not be unclear, though: there is plenty of room for payment rail providers. Payments is what blockchain does best, and building more robust versions of them is not a pointless pursuit by any means.
Let’s not be lost in the sauce, either: the “mobile payments” solution is far less important in actual commerce than the hype train would have us believe. Think about this from the perspective of someone who wants the whole pie, now. The real money is still happening either at the personal computer terminal or at the payment processing terminal in the retail outlet. Mobile payments are not that important, unless, of course, we’re talking about something that has extreme volume, such as a bill payment service. Monetha cites research that probably entails as much:
Monetha’s framework could, though, accommodate something of this nature, and they do appear to be nimble enough to pivot when necessary.
We like Monetha’s business model – a 1.5% flat fee for merchants only. This fee is competitive as compared to the rates offered by most payment processors. Finding a way to communicate directly with bank accounts would ultimately be the last mile here, but we don’t see much talk or focus on it. However, we have to comment on the usage of the proceeds from said business model.
Monetha intends that 1/3rd of this 1.5% (or 0.5% of all activity on the Monetha network) should be earmarked for a Voucher Smart Contract, from which they will dole out rewards to token holders in the form of discounts at Monetha merchants. Apparently from the other 2/3rds of their revenue they intend to incentivize clients of Monetha merchants with 0.2% in tokens.
The system comes off as gimmicky, but it could work with some strong early players. When we say strong, we mean people who will have the ability to either force the issue or simply have such scale that by virtue of adding Monetha, Monetha grows.
At the beginning of the article, we noted that some criticism has been lodged against Monetha. While we have a more analytical complaint, we wanted to relay this succinct message from Reddit user bestteamever171:
Monetha will charge a 1.5% transaction fee from merchants. Of that, 0.5% will go to a “Voucher Smart Contract” in a for of MTH for Monetha token holders for an ability to use that in the Monetha’s ecosystem and other 1% will go to the company as revenues. (Coinbase also enables merchant to receive payments with a working API, they charge 0 fees to use their services)
On top of that only 50% of the tokens issued in the ico go to investors, this also means if Monetha were to sell all of their tokens, they would still pocket 66% of all future revenues. At this current model, investors are really only getting 16.5% (33% x 50%) of the revenues generated from Monetha. This is not even considering the massive competition they have in this space from Omise, Tenx and Metal. There is really no point in having an ICO if the project is this centralised and unfair, this project sounds more like a cash grab. Also removing any criticism of their ICO on their reddit? What kind of ‘decentralised’ project would silence critics?
Now having enough of an understanding of how the thing will work, we can proceed to decide if this is how we want to invest money or not.
We see a lot of confidence building in the team behind Monetha. We see a strong presentation on their website and in their communications. Let’s see if there’s anything to worry about.
In co-founder Andrej Ruckij, we get “a gigantic experience as Vice President of Development at “Adform”: global digital advertising company. He is an engineering star who led a 300+ team of engineers to create the scalable Adform technology that is now used globally.”
According to some tertiary research, Adform are a big and legitimate outfit who’ve raised in the neighborhood of $30 million in the past few years. In January, they had some layoffs. Interestingly, according to Ruckij’s LinkedIn profile, this is also when he left the company. “Redundancies” were cited for the mass of the layoffs, but it does bear noting that Ruckij and two others left Adform to found Monetha. They had previously sold their venture Wowtto, an outdoor advertising start-up, to Adform.
The author came by this information from another member of the Monetha team, Laurynas Jokubaitis, who also left Adform as soon as he was able to help found Monetha. Prior to Wowwtto, Jokubaitis had an internship with Swedbank.
The last member of the trifecta is Justas Pikelis, who has spent much of the blockchain revolution as an entrepreneur. Prior to his efforts at Wowwtto and other independent efforts, he worked as a marketing executive for a company called Peek & Cloppenburg, and before that, in some form of entertainment. His specialties seem to lie in marketing, and he was probably a useful addition to the Wowwtto team.
An array of advisors exist on the page as well, as well as competent staff members. In analyzing Monetha, there are concerns besides whether or not the idea of providing mobile payment applications and easing trust, reputation, and blockchain integration for merchants is a big one or not. And in these three primary founding members we have a question, as well: with an established history of developing and then cashing out, how much future does the platform actually have?
Legally speaking, we have nothing preventing the exit via acquisition strategy, and being a token holder doesn’t earn you any control over such. The token is not a consensus mechanism, after all. Legally speaking, you’re powerless at your very best, as seen here:
Monetha GmbH is not a financial intermediary according to Swiss law and is not required to obtain any authorization for Anti Money Laundering purposes. Acquiring Monetha tokens shall not grant any right or influence over Monetha GmbH’s organization and governance to the Purchasers.
The entire purpose of the Monetha system is to ensure integrity in transactions, for the benefit of both merchants and clients. In the below illustration, they show how a claim of a problem might be resolved through the Monetha system:
They elucidate a bit further:
The client and merchant resolve the claim resolution “offline” or on Monetha’s off-chain messaging system. After both parties agree on resolution terms, the merchant enters those terms (e.g. money back, shipping out new product, etc.) into the merchant’s user interface. Resolution terms are saved on the blockchain. The merchant then waits for client’s confirmation.
All of this sounds great and maybe even attractive for merchants who are having trouble establishing trust in the world. But the thing of it is, it also sounds like a lot of extra work for the merchant, for what gain? A transportable reputation? Okay, we can see some value in that. Some.
Token Alleged Inherent Value
Apropos of everything aforementioned, let’s establish that this token will only carry value if the network itself is quickly picked up and adopted. We can see that the team would be dedicated to get to at least that stage, so let’s suppose this happens. Then the value of the token is reliant on a few things, chief among them being its supply. What is happening with the supply of MTH tokens, anyway?
(2000 ⋅ 67000) + (28000 ⋅ 2400) = 200,120,000,000 tokens. 201,200,000 tokens will be retained by Monetha, as mentioned by the Redditor near the beginning, and demonstrated in the above image. This is extreme. This makes high valuations hard to picture, makes the risk of exit even more painful to imagine. But let’s keep it in perspective, as short term we can probably see real profit taking here.
Look directly above at that distribution again. Be sure you’re comfortable with that. If you are, and you believe this is a valid product worth pursuing, then it’s probably worth the effort.
- We note the founders have exited one company already. We gather there’s a risk they could do it again here. So we dispose of 2 of their team points.
- We believe there is massive overconfidence at every level of this ICO, from founder to investor. The product may not meet expectations, roundly speaking. -2
- Such high inflation means that high token values are out the window. You will have to tread carefully trying to play this field, if you want to speculate. Merchants will probably enjoy it, if they benefit from it, which we guest. -1.5
- Very professional delivery, and good advisory selections. +1
- Team knows what they’re doing. +2
- Product could see some adoption, and therefore growth. Growth of its usage means growth of the value of the token, which will be depressed by a massive distribution. +2.5
- Token will be immediately made available to you for trading, which is a plus for understanding early on how the market will take to the token. We really credit them for this boldness – +2.75 – which we will use to later judge their performance on said markets.
Numerically, we lean in favor of this, at 5.25, especially in the short term, as there will be quick trading following the ICO. At a price of 2000 MTH per Eth, we expect to see a tertiary market emerge quickly, with pressure on the source (which has no maximum contribution per investor) exhausting initial supply quickly.
On August 31st, details of the Eth address to invest in are scheduled to appear at https://www.monetha.io/en/crowdsale. However, the author advises extreme caution before sending any funds. Please Google “Monetha + scam” before sending money anywhere. A clever hacker can manage to silence most of their channels which might warn people that they were sending Eth to the wrong address. Scams are getting old in ICOs, so please do not fall victim to anything, and ensure you have the right address when you send funds. As per usual, they ban US investors. Please make sure you follow all instructions, get the correct address, and invest wisely.