ICO Analysis: Stox (STX)
Stox is based on the premise that the primary reason prediction markets have not been fully adopted is that they are both overly regulated and hard to maintain in centralized settings. By using the blockchain for their project, then, the assertion is that both of these problems will be solved and therefore prediction markets should pick up. In their own words:
Stox is an open source, Ethereum based platform for prediction markets where people can trade the outcome of events in almost any imaginable category – sports, celebrity marriages, election results and even the weather. The platform targets mainstream audiences and provides a haven for investors to find refuge from traditional financial instruments and participate in prediction events with the purpose of making profit, leveraging their knowledge in almost any imaginable field.
On the face, a quick and obvious question arises: why does something like this need crowdfunding? Why not just launch and offer the product, and if you want to offer people a chance to invest in the platform, do that separately from the operation? After all, if you build a mechanism for trustless bets on prediction markets, then all you have to do is ensure that there is a requisite fee for using it, and you will derive revenues. What does Stox intend to do with the funds raised? This is the first question that arises.
The second is whether or not regulation and centralization are really the barrier to prediction markets being adopted. After all, several such markets do exist, and they’re popular enough. But could it also be that this form of “investing” is just too close to gambling for most people who consider themselves investors? This could, indeed, be the reality, and if it were, then there is an immediate consequence for Stox: it becomes just another prediction market. It is also far from the first cryptocurrency-based prediction market, with several existing in the market including Predictious, Fairlay, and, of course, Augur.
Thus we’ll have to determine, really, if Stox is bringing anything new to the table.
The first interesting note about Stox is that it uses the Bancor protocol in its design to maintain liquidity. One aspect this adds to the Stox token is that its supply will be elastic, based on market maker demands which are influenced by their Bancor reserves. Market makers are participants in the Stox ecosystem who create the events and secure the necessary liquidity to ensure them. The backers of Stox, invest.com (more in the next section), will act as the first market makers.
Event operators are required to provide a collateral in STX which is locked in a smart contract for 24 hours past event resolution. The collateral amount should be proportional to the amount of STX placed on all outcomes.
The types of participants in the Stox ecosystem are as follows:
- Providers, who bring participants into events through existing or new platforms built on Stox. They can rebrand the Stox app or use the original to bring people on board.
- Operators, who act as both market makers and event creators, as well as find reputable oracles to determine odds for events.
The way it works is simple enough. An operator provides the liquidity to cover the event using a Bancor smart contract, which is defined in the above quotation, then finds a reputable oracle to provide odds for the event, then offers the event on the Stox platform. Stox holders are then free to place wagers on the event. The event can be a sporting match, political contest, or any other future event. Unlike regular sports books, prediction markets require many different types of expertise to determine odds, and it’s entirely possible for two makers to offer the same event at different odds.
Stox Token Details
The initial STX offered on the platform will be generated by the Stox company itself. Future Stox supply will be dynamic, based on Bancor smart contracts that are made by operators. In essence, the total market capitalization of STX will be in relation to the amount of Bancor staked to the network, and the total number of STX will be relational to that. 4% of the total STX contract will be represented in Bancor, so it would seem that if there are 4000 BNTs, there can be 96,000 STX, and so forth. This situation will mean that the token can be relatively volatile for investors as events happen and money changes hands – which could be a big plus. The initial rate for an STX is .005 Ethereum each, where the current price of BNT is over .008. This price seems high considering the important role that BNT will play in the economy.
Stox is primarily the motivation of people from Invest.com, a top-tier trading website which manages portfolios and facilitates trades for people. Last year, invest.com had $50 million in revenue. They opened shop in 2014. Stox Ltd, which is based in Gibraltar, is a related effort. Given the success of their previous venture and their intimate relation to financial technology, we see no reason to investigate the team much further. They are definitely competent enough to achieve the goal, it’s just a matter of whether or not the goal is really something investors need at this point, or whether it’s worth buying in at this price, anyway.
The liquidity model of Stox is very confusing and confusing typically means bad. We note that Bancor tokens are not incredibly valuable on their own, but they are being used as the ultimate settlement currency. Bancor itself has a number of mechanisms in place which are intended to float value high in more volatile times. We take all this into consideration and still can give it to no more than one positive point for the effort at guaranteeing people can enter and exit routinely.
We note Stox’ own assessment of competing interests and assert that they are underestimating the potential of being lost in the noise. While they are building a platform which they believe they should be able to more successfully leverage through creating partnerships and the like, they are still entering an already thriving marketplace with lots of brand loyalty and the like. Because of this, we deduct 0.5 points.
The success of the Gnosis ICO was incredible, and no one wants to miss out on the second version of that. The hype bubble will expand around Stox, and people will want in. This will present early opportunities to capitalize on ICO prices. However, .005 is a high price for entry considering the value of Bancor – in effect, if Stox really succeeds, it will itself raise the value of BNT perhaps as much as it does its own. We grant 5 points for the potential of another GNO.
The ability to white label the application by other firms will hopefully lead to expansion and decentralization. We grant another point based on this.
If you weren’t keeping track, our score is: 1 – .5 + 5 + 1 = 6.5.
The Stox ICO begins within the next 24 hours. We recommend caution in exposure here, as you will likely find discount coins following the initial offering.