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The world may be on the verge of large-scale adoption of “private money” such as Facebook’s Libra, a major investment bank predicts, although there are still hurdles to overcome before the vision can become reality.

According to the JPMorgan Perspectives report, released this past weekend by the major investment bank JPMorgan Chase, people are ready to embrace so-called “private money,” meaning any type of currency issued by a private institution.

The argument for this is that the vast majority of fiat currency as we know it today is already privately issued, by the way of fractional reserve banking.In this system, which all nations today have adopted, private banks indeed create electronic money every time a loan is given out.

However, governments in most countries still have a monopoly on issuing cash, although this only accounts for a very small portion of all the monetary transactions that are made in society.

In the report, titled Blockchain, digital currency and cryptocurrency: Moving into the mainstream?, the bank placed a heavy emphasis on the role of stablecoins.

Meanwhile, the report largely dismissed traditional cryptocurrencies for their high volatility, saying “volatility remains a severe impediment to broader adoption” and that crypto currently has “a limited role” as an asset for portfolio diversification and hedging.

According to the report, stablecoins that are backed by financial assets is the type of and asset that will first gain large-scale acceptance and that may challenge traditional fiat currencies.

However, issuers of stablecoins should be prepared that their business may be about to face regulatory scrutiny at a whole new level compared to what has been the case so far, with regulators treating them much in the same way as traditional banks are treated.

As JPMorgan notes, “the privilege of doing so [issuing private money] comes with significant regulatory oversight and costly compliance obligations.

”On the same note, the report said that “rapid adoption and scale are hindered by the underlying technology and the need for substantial regulatory oversight,” while estimating that blockchain-based solutions in traditional banking are still “three to five years away.

”In conclusion, the report authors reiterated that the regulatory hurdles for a stablecoin to be accepted for tax payments to the government – which could be seen as a stamp of approval – remains “significant.” In addition, it also listed the sourcing of stablecoin collateral and energy requirements of proof-of-work cryptocurrecies as potential limitations.

“Absent substantial and ongoing improvements in efficiency, it will be very difficult for truly distributed stablecoins to achieve global scale, in our view.

 Reliance on a central authority for validating transactions and maintaining the integrity of the ledger is a possible solution, but does not offer the same benefits as a true [distributed ledger technology],” the report concluded.

The Consumer Token Offering (CTO) framework seeks to be a set of best practices for launching new tokens or Token Generation Events on Ethereum.

By Ki Chong Tran






The crypto industry reached new heights in 2017 and early 2018 in large part because of the FOMO and hype generated from ICOs, but that was also one of the main reasons for the dizzying crash that followed.

Scams, false promises, and legal repercussions have made ICOs a thing to be feared, but new technology adapts and evolves. Out of the Initial Coin Offering (ICO), came the Security Token Offering (STO), the Initial Exchange Offering (IEO), and now the Consumer Token Offering (CTO).

Crowdfunding has always been a very strong use case for blockchain technology because anyone on the planet was able to participate in funding and owning a piece of a promising new network by buying a token or coin.

 Since distributing tokens via blockchain is simply too effective and desirable to ignore, new practices are being worked out on how to do this best and that is where the Consumer Token Offering (CTO) comes in.We explore this new phenomenon below.

What is a Consumer Token Offering?

The Consumer Token Offering (CTO) framework seeks to be a set of best practices for launching new tokens or Token Generation Events on Ethereum.

The framework centers on 10 key concepts of token usage, governance, distribution methods, distribution purpose, supply, conflict resolution, security, marketing, consumer protection, and compliance.

The CTO framework is designed to be an open and evolving collaborative effort that will hopefully create a high standard of trust and reliability between token projects, token holders, and regulators.  

Consumer Token Offering Framework Concepts

The Consumer Token Offering framework outlines 10 concepts:

• Tokens should be useable for goods, services, or content and not for money-making schemes like equity and investments.
• The management and governance of the token should be transparent and clearly identifiable as decentralized or not.
• Tokens should be distributed fairly and transparently.
• The reason for the token distribution should be clear and transparent.
• The rules for the supply, creation, and destruction of tokens should be clear and transparent.
• There should be a procedure to deal with conflicts.
• Related smart contracts, dapps, and tokens should be audited for security.
• Marketing should not be misleading.
• Projects should protect and empower users.
• Project should consult with legal counselors to make sure they are compliant with all relevant laws.

Who Invented the Consumer Token Offering?

The CTO is a framework created by the Brooklyn Project, which is a collaboration led by the ConsenSys Legal Team and consisting of different blockchain industry partners.

Did you know?

Two well-known projects that have used the Consumer Token Offering framework are Civil and FOAM. They were both launched on the Consensys Token Foundry platform in 2018 and applied a rigorous standard that required token offering participates to prove that they were knowledgeable about the project and the crypto industry in general.

In order to participate, Token Foundry users had to pass a quiz as part of the onboarding process and buyers were not able to sell their tokens until they proved that those tokens were actually used.

A brief history

• November 2017 – The Brooklyn Project is launched at the height of the ICO and crypto boom.
• September 2018 – Version 1.0 of the Consumer Token Framework is released after public feedback.
• April 2019 – The US Securities and Exchange Commission (SEC) releases their crypto offering framework called ‘Investment Contract Analysis of Digital Assets’ as general guidance for new token offerings.

What’s so special about it?

The problem with ICOs is their completely unstructured nature, which makes the process vulnerable to fraud, rampant speculation, and legal repercussions. Security Token Offerings STO are more legally compliant but are restricted to qualified or accredited investors, which defeats one of the main purposes of a token offering, which is to have a wide and diverse network of early adopters.

Initial Exchange Offerings (IEOs) are centrally managed by exchanges, which negates the permission-less and decentralized feature of blockchain technology. The CTO hopes to be the best of all worlds by creating a voluntary set of standards

SEC Framework Concepts

The release of the SEC framework for token offerings offers the clearest guidance so far for token sales from U.S regulators. The main points that the framework discusses are whether there is an expectation of profit and whether the project is truly decentralized.

Basically, if there is a usage for the token right away and it is not explicitly an investment device and the platform is decentralized, then the token might not be a security.

When comparing the SEC and CTO frameworks, the CTO framework may be compliant in that it emphasizes tokens having a use case and not having an expectation of profits as it did with FOAM and Civil. However, it should be noted that the SEC framework does not offer any legal guarantees so projects still need to proceed with caution.

The Future

Though Consumer Token Offerings have not been widely adopted in the crypto industry, it is a big part of the future for ConsenSys, which is behind fundamental and vital projects in the Ethereum ecosystem. Joseph Lubin, ConsenSys’s founder, said during his keynote address at the 2019 South by Southwest (SXSW) Conference that they will be conducting four or five CTOs in the year. It will be interesting to see if other projects follow their lead.

Crypto exchange Bitfinex shareholder Zhao Dong has revealed details of the company’s reported plans to issue a native exchange token, which he claims will launch via a $1 billion initial exchange offering (IEO) in the coming days.

According to a report from crypto news outlet CoinDesk on May 1, the Chinese bitcoin (BTC) billionaire posted to a public chat on local messenger WeChat on Wednesday, outlining that the sale will offer a total supply of 1 billion tokens, priced at $1 apiece, with a minimum buy-in of $1 million.Zhao — who runs a major Chinese BTC over-the-counter trading desk and is the founder of Singapore-based DFund —  reportedly further claimed that $500 million tokens had already been vouched for.

He is cited as having said that “only qualified foreign investors will be allowed to invest,” and that all those interested must make a soft commitment to the IEO by May 5.

Once investors will have had a chance to review the token’s white paper, they will then be able to either cancel their soft commitment, or cement it as a hard commitment by providing a 10% deposit, Zhao reportedly added. The shareholder further outlined that:

“The system works on a first-in, first-served basis. If all tokens are fully allocated, we will not have to run the IEO to the retail channel, it will be like a private placement.”

The new token has reportedly been characterized by Zhao as a hybrid of the model used for crypto exchange Binance’s native token binance coin (BNB) — which is used by Binance users to pay for exchange trading fees — and Bitfinex’s erstwhile BFX token.

As previously reported, BFX tokens were issued by the exchange in 2016 to compensate Bitfinex users affected by a major hack, which had resulted in the theft of around 120,000 BTC.

Upon Zhao’s first revelation of the Bitfinex’s alleged IEO and proprietary exchange token plans on April 29, the news sparked a wave of community concern in light of the lengthy history of controversies that have beset both Bitfinex and affiliated USD stablecoin company Tether.

As recently reported, the New York Attorney General’s office has this month alleged that Bitfinex lost $850 million in user deposits, and had subsequently secretly covered up the shortfall using funds from Tether — the latter of which has itself come under renewed criticism for allegedly being only backed 74% by USD reserves.

In an official statement, Tether rebuffed the allegations, stating that the “New York Attorney General’s court filings were written in bad faith and were riddled with false assertions, including in regard to the purported $850 million loss.

Fervent blockchain supporters claim the technology has the potential to transform the world we live in – and venture capital investors (VCs) are paying attention.

With hefty funds to deploy, and returns to make for their limited partners, it’s common knowledge that VCs are always looking for the next big thing.

A huge part of their job entails evaluating nascent technologies to separate innovative companies doing revolutionary work from more derivative projects – and blockchain is no exception.

In fact, research released last year showed that the number of VC blockchain deals doubled in the 12 months up to October 2018, by which time investors had already poured $3.9 billion into companies across the globe.

According to Pitchbook data shared with Hard Fork, venture capital investment in the US cryptocurrency and blockchain space has been steadily increasing year on year – going from a mere €14.43 million in 2013 to €723.13 million last year. The number of funds closed has increased, too (17 in 2013 and 106 in 2018).




Courtesy of Pitchbook

Back in 2017, a TNW contributor argued that Initial Coin Offerings (ICOs) would render traditional VCs a thing of the past, but a different story has played out all-together.

At Hard Fork, we want to know what piques investors‘ interest, what drives them to back certain companies, what they’re uninspired by, and why.With this in mind, we reached out to notable figures to find out what’s driving investment in the space.

Viable solutions

Octopus Ventures Zihao Xu’s first encounter with Bitcoin took place when a friend emailed him the cryptocurrency‘s whitepaper in 2012. At that time, a coin’s price oscillated between $5 and $13 throughout the year.

“I found it really intriguing as I’d been interested in the idea of denationalized money since my university days,” Xu told Hard Fork.

Xu believes those interested in Bitcoin‘s underlying blockchain technology before the asset price took off fall into three categories. First, the tech enthusiasts who were interested in the code element.

Then, those in finance who figured out they could trade Bitcoin and potentially make money. Finally, the libertarians who saw the potential of censorship-resistance, decentralization, and a free market for money.Initially, Xu fell into the latter camp, but fast forward seven years and his vision for blockchain technology has altered significantly.

I no longer think blockchains are the most elegant or suited type of database. In fact, the idea of using a blockchain to distribute a database is probably the most crude one conceptually – giving every node a full copy of the entire database is old-fashioned.

Xu wants to find viable blockchain solutions which could help the technology achieve mainstream adoption. He’s trying to avoid companies that use blockchain for the sake of it, or because it’s a buzzword that’s likely to entice investors.

“We look for companies or projects building something with the core value that comes from a set of functions native to [decentralized ledger technology] (DLT), and cannot be attained in the absence of DLT.”“Right now, only a small handful of projects fits this criterion, but cryptocurrency functionality is improving and expanding all the time,” he added.

Tech convergence

Jamie Burke came across Bitcoin entirely by chance.He became so enamored with the technology that he set up Outlier Ventures – credited with being Europe’s first dedicated blockchain VC and venture platform – in 2014.

At the time, Bitcoin hovered around the $300-$400 mark and there seemed to be little, or no, interest outside of the academic and developer community.But things changed quickly. A year later, in the Summer of 2015, Ethereum – the brainchild of Vitalik Buterin, Gavin Wood, and Joseph Lubin – burst on the scene.

“When Ethereum came along and introduced their vision for a virtual machine as well as the way they financed the project through what was only the second ICO at the time, it became clear this promised to be as transformational as The Web was in the 1990s and [it] was something we had to be part of,” Burke told Hard Fork over email.

It was then that academics’ and developers’ interest in the technology started to transcend into the commercial arena, with Microsoft sponsoring Ethereum’s DevCon One conference that same year.

Burke says he’s been bullish about the underlying potential of decentralized ledgers from the very beginning.

What’s been surprising to me is how quickly startups in this space have rushed to codify assumptions into their design decisions before testing and validating them. Equally, I have started to realize just how much cultural baggage ‘crypto’ owes to the field of cybernetics, the new communalism of the 60s, and its merging with the libertarian right of the 90s.

Burke thinks the current cryptocurrency winter, which has resulted in some companies making significant layoffs, will be hugely positive for the space in the long-run.

The perceived scarcity of funds in the blockchain and cryptocurrency space, Burke believes, will force founders to concentrate on what really matters: building usable products to solve real-world problems, and in turn, achieve adoption. It’s basically the survival of the fittest.

“We speak to over 100 inbound projects a month and have met over 1500 blockchain startups since our founding. Many don’t go beyond the first round of due diligence because they have no experience or understanding of the industries they want to touch or are too dogmatic,” Burke noted.

He believes the real value will be found where, and when, blockchain helps enable other technologies such as artificial intelligence, internet-of-things, as well as augmented and virtual realities.

It will be then that blockchain will serve as a viable solution to store the increasing abundance of data required to power advancements in these fields.“We definitely don’t look at blockchain and cryptocurrency in isolation,” he explained.

Staying close to the problem

Burke is not the only investor to think that blockchain technology’s success – and therefore its potential viability as an investment – will rely on its convergence with other technologies.Sherman Lee, a partner at early stage accelerator program Zeroth AI, agrees.Lee discovered Bitcoin in 2014.

Three years later he began to look at blockchain technology as a solution to a problem he’d encountered with AI training.

“During the great bull run of 2017, the euphoria was incredible. Hundreds of teams kept popping up with whitepapers with amazing visions. As an engineer, I was quite skeptical on the ability of all these teams to deliver on their promises of 1 million transactions per second. As an investor, well, it didn’t matter because we started seeing parabolic gains on our investments.”

A year later, everything changed. The bear market of 2018 brought everyone back to reality. Token prices crashed, leading to projects and companies running out of cash, with many ceasing operations completely.“Many thought cryptocurrency was dead, but not me. As an engineer, I saw real technology being built by incredibly talented people.

All the scammers and speculators have mostly disappeared. All the noise is gone. We now have left only the strongest teams. These are the ones that will survive,” he said.Lee wants founders who are “super close” to the problem they’re solving and understand that to be a sustainable blockchain company, you have to have a path to revenue.

“The ability to self reflect is also valuable. Many companies got caught up in the ICO hype and now they have to clean up the mess,” Lee added.

Data, data, data

Will Orde, a technology investor at Oxford Capital, discovered cryptocurrencies in 2015, when Bitcoin‘s value moved between $200 and $500. Two years later, in 2017, Oxford Capital began to seriously explore applied uses of blockchain technology.

“When I started looking at cryptocurrencies in 2015, the core premise was focused on digital currencies – Bitcoin being the most famous. But over time I think the more interesting applications (in the immediate future) are using distributed ledger technology in more practical situations, particularly around data.

”As a fund, Oxford Capital wants to back companies at the point where products first hit the market – and blockchain is no different.“Recently I’ve been focusing on use-cases revolving around the creation, sharing and management of data in multi-party situations.

You can find situations like this in many sectors, from insurance to personal identity.”Importantly, though, Orde is quick to point out that, like many others in the market, he’s not interested in blockchain companies looking for a problem to solve.He wants “someone with a clear vision for what they’re building, a balanced skill set, and an ability to get stuff done”.

Real innovation

Alicia Garabedian also discovered Bitcoin in 2015 when she was working at Morgan Stanley.Real exposure to the blockchain ecosystem, though, came in 2017 when she joined Samsung Next, where she’s an investor.

When she first came into the space, Garabedian thought cryptocurrencies were about speculation, and admits she didn’t really understand the underlying blockchain technology.

“As I learned more, I became captivated by the speed of industry, the growth of the ecosystem and intrigued by the influx of ambitious entrepreneurs,” she shared with Hard Fork.Today, Garabedian is looking for real applications, actual enterprise implementation, and consumer adoption.

“We are interested in the deep, enabling technology that capitalizes on the potential of blockchain. We look at companies that are doing something new and innovative with blockchain, as opposed to leveraging it as, say, a data store. In this sense, we are less interested in companies that are trying to put something on the blockchain, or creating a token, without clear justification or end game.”

In her experience, blockchain technology proves to be useful when there’s an issue that lacks distribution, not only geographically, but organizationally.

But, will investment in cryptocurrency and blockchain startups continue to rise or stagnate?

Well, it’s highly likely the number companies that raise considerable amounts via ICOs will stagnate, and those building a solution without a problem will struggle (or even cease to) exist.It seems that, somewhat predictably, the future looks bright for blockchain businesses which fundraise reasonably with a clear path to monetization.

A clear value proposition and a solid market strategy are also a must. This is what’s really attracting investors and that’s unlikely to change.

Table of content

• • Blockchain Technology 101
    Blockchain roundup: Invaluable advice from top blockchain experts
    Blockchain: A technical primer
    by Greg Brady

• • Blockchain Advanced Development
    From Java to blockchain: How to become a blockchain developer
    Interview with Eugene Kyselev
    dApps 101: Tips and tricks to get you started
    by Michael Kordvani 
    Making smart contracts safe with Hyperledger Sawtooth
    Interview with Dan Middleton
    “The currently unrivaled programming language for smart contracts is Solidity for the Ethereum blockchain”
    Interview with Alfred Shaffir
    Programming a crypto mining rig: How does it work? 
    by Amir Gvili
    How Can Blockchain Technology Help Boost Cyber Security?
    by Victor Stolyarenko

• • Blockchain Impact & Strategy
    Overledger aims to open blockchain’s “borders” and facilitate development of multi-chain applications
    Interview with Paolo Tasca
    School is in session: Blockchain education is needed ahead of mainstream adoption
    by Nicola Stojano

• The Fourth Industrial Revolution will take center stage at the World Economic Forum's (WEF) annual meeting next week in Davos, Switzerland.
• It's a term used by CEOs, policymakers and industry to describe technologies like artificial intelligence, quantum computing, 3D printing and the internet of things.
• Some companies and governments are struggling to keep up with the Fourth Industrial Revolution.

Elizabeth Schulze | @eschulze9



What is the Fourth Industrial Revolution?  1 Hour Ago | 04:10


The Fourth Industrial Revolution will take center stage at the World Economic Forum's (WEF) annual meeting next week in Davos, Switzerland.The concept, a theme of Davos this year, refers to how a combination of technologies are changing the way we live, work and interact.

Klaus Schwab, founder and executive chairman of the Geneva-based WEF, published a book in 2016 titled "The Fourth Industrial Revolution" and coined the term at the Davos meeting that year.

Schwab argued a technological revolution is underway "that is blurring the lines between the physical, digital and biological spheres."Simply put, the Fourth Industrial Revolution refers to how technologies like artificial intelligence, autonomous vehicles and the internet of things are merging with humans' physical lives.

Think of voice-activated assistants, facial ID recognition or digital health-care sensors.

Schwab argued these technological changes are drastically altering how individuals, companies and governments operate, ultimately leading to a societal transformation similar to previous industrial revolutions.

The first three industrial revolutions

Zvika Krieger, the head of technology policy and partnerships at WEF, told CNBC on Tuesday there is a common theme among each of the industrial revolutions: the invention of a specific technology that changed society fundamentally.

The First Industrial Revolution started in Britain around 1760. It was powered by a major invention: the steam engine. The steam engine enabled new manufacturing processes, leading to the creation of factories.

The Second Industrial Revolution came roughly one century later and was characterized by mass production in new industries like steel, oil and electricity.

The light bulb, telephone and internal combustion engine were some of the key inventions of this era.The inventions of the semiconductor, personal computer and the internet marked the Third Industrial Revolution starting in the 1960s. This is also referred to as the "Digital Revolution.

"Krieger said the Fourth Industrial Revolution is different from the third for two reasons: the gap between the digital, physical and biological worlds is shrinking, and technology is changing faster than ever.

Telephone vs. 'Pokemon Go'

For evidence of how quickly technological change is spreading, Krieger pointed to the adoption of the telephone. It took 75 years for 100 million people to get access to the telephone; the gaming app "Pokemon Go" hooked that many users in less than one month in 2016.



Toru Hanai | Reuters

Pokemon Go app on an iPhone, Tokyo, Japan, July 22, 2016.Companies in industries from retail to transportation to banking are vying to incorporate new technologies like augmented reality, 3D printing and artificial intelligence into their operations.

A 2017 study by the European Patent Office found the number of patents filed related to the Fourth Industrial Revolution increased a growth rate of 54 percent in the past three years.

"Technology, and specifically digital technology, is so intertwined with many businesses, as well as our social and economic lives, that trying to separate 'tech' from 'non-tech' is becoming increasingly redundant," said David Stubbs, head of client investment strategy for EMEA at J.P. Morgan Private Bank, in an email to CNBC.

Left behind

Companies, governments and individuals are struggling to keep up with the fast pace of technological change.

Krieger, who served as the U.S. State Department's first-ever representative to Silicon Valley from 2016 to 2017, said technology is often missing from policymakers' "toolkits.

" As a result, he said, companies are left filling a void trying to understand how to implement — and regulate — advancements like A.I."There's an absolute hunger for concrete things companies can do," Krieger said.



Will robots take our jobs?  10:40 AM ET Tue, 30 Oct 2018 | 03:10

Jordan Morrow is the head of data literacy at analytics firm Qlik. He said individuals and companies lack skills, like interpreting and analyzing data, to successfully compete in the Fourth Industrial Revolution.

"Not everyone needs to be a data scientist but everyone needs to be data literate," he said in a phone interview with CNBC. Studies show technologies like artificial intelligence will eliminate some jobs, while creating demand for new jobs and skills.

Some experts warn of a "winner-take-all economy," where high-skilled workers are rewarded with high pay, and the rest of workers are left behind.A 2018 report by investment firm UBS found billionaires have driven almost 80 percent of the 40 main breakthrough innovations over the past four decades.

In 2016, Schwab predicted inequality would be the greatest societal concern associated with the Fourth Industrial Revolution.

"There has never been a time of greater promise, or one of greater potential peril," he said.

Follow CNBC International on Twitter and Facebook.

• Lack of rules, transparency leaves issuance amounts murky
•  More digital tokens are being issued through direct sales

 
So far this year, initial coin offerings have raised $22 billion, or half of that -- depending on where you look.

With the cryptocurrency market nearly 80 percent off its peak, a critical question is exactly how much the ICO boom has deflated. That becomes harder to answer when even the most commonly used websites that track the phenomenon disagree on the figures.

Blockchain may be billed as an immutable public ledger, but in the controversial world of crypto it spawned, establishing truth can be tricky when disclosure standards are still being improvised daily.

In the case of ICOs, it remains hard to ascertain the amount of funds a issuer claims it’s raised when no one has to submit any regulated filings or even reveal their identities.

“At the end of the day, there’s no way to really agree on the information based on provable facts,” said Alex Buelau, co-founder of Oxford, U.K.-based listing site CoinSchedule.

“It’s early days. The question is how can the industry create an incentive for these guys to report accurate numbers? At this point there’s no incentive.”

Most data trackers, which make money from charging token sellers for listings or other services, rely on issuers for information on the ICOs.Take Ruby-X, a crypto exchange project.

CoinSchedule says it raised $1.2 billion; ICORating, $200 million; Autonomous Research says it’s chosen to exclude it, since its online footprint was unreliable. Ruby-X, which hasn’t disclosed where it’s based, didn’t reply to e-mails seeking comment.

Or consider an even more extreme example: Venezuela’s sovereign Petro. In March, President Nicolas Maduro said it has garnered $5 billion in offers; in April, he said the sale raised $3.3 billion; the token’s website says $735 million, the figure cited by CoinSchedule and ICORating.

Even with the best intentions, collecting basic facts about token sales can be a challenge. ICORatings combines information from issuers, investors and the blockchain itself. Elementus, a new startup, tracks data from the blockchain, supplemented with reported figures that it considers credible.



With the ability to trace actual transactions, on-chain data are more reliable and comprehensive, which is why their fund-raising totals are higher, says Elementus co-founder Nuria Gutierrez Prunera. The downside is that on-chain data don’t capture investments in fiat currency.

Autonomous Research goes through about 50 different underlying trackers to compile its ICO data and manually removes entries it considers untrustworthy, said Lex Sokolin, global director of fintech strategy.

The trackers it depends on have varied over time as their quality can fluctuate, possibly because the economics of maintaining a database have weakened, he added.To complicate things further, the nature of ICOs is also evolving.

A growing portion of tokens are offered privately to selected investors, rather than crowdfunded via the internet as the innovation was initially known for.Read More: Hedge Funds Flip ICOs, Leaving Other Investors Holding the Bag “It’s a lot more difficult to find out information about private sales,” said Sasha Kamshilov, co-founder of ICORating in St. Petersburg, Russia.

“It’s really important for regular investors to know the actual price and conditions of a private sale.”

The Dragon token, which professes to offer a payment system for the entertainment industry, told Bloomberg News in August that it raised $12 million in a public round and $408 million in its private sale.

For that sale, Elementus and CoinSchedule gave the $420 million total, ICORating had $3.9 million, whereas CoinDesk and Autonomous had $320 million.Telling the right story about crypto matters when debates over its future are raging amid the fading speculative frenzy.

After Autonomous published a report that showed token offerings were down 90 percent from their monthly peak in September, it received criticisms that that month actually saw more than $1 billion of funds raised, rather than the $300 million it cited earlier.

“There’s always a little bit of a difference, but when things were going up it didn’t matter at the edges,” said Sokolin at Autonomous. “Now that things are getting tight people want to tell different stories.”

The cryptocurrency market has been in decline since January, but it appears blockchain startups are still profiting big. Indeed, new data suggests Ethereum-based initial coin offerings (ICOs) are sitting on $830 million in reserves – that is despite having already sold almost as much ETH as they initially raised.

According to data from BitMEX Research, blockchain startups raised a total of $5,463 million worth of Ethereum $ETH▼1.02% (approximately 15 million ETH) in ICOs by September 2018. Interestingly, the sum almost matches the total amount of ETH these companies sold during the same period – $5,452 million (or 11.3 million ETH).

The data essentially shows that most blockchain startups sold their ETH at a value higher than initially raised. This is also what made it possible to secure the funds initially raised (in terms of dollars), but also keep a huge treasure trove of Ether in reserve.




(Source: Ethereum Blockchain, BitMEX Research, TokenAnalyst, Token Data, Price data from Etherscan)Indeed, it would appear that ICOs sold much of their Ethereum before the price dropped 85 percent, from $1,400 last December to $230 in September 2018.

As a result, ICOs have realized profits of $727 million, while still retaining $830 million worth of Ethereum (3.9 million ETH) in reserves. It would seem the ETH being held is pure profit for the ICOs.




(Source: Ethereum Blockchain, BitMEX Research, TokenAnalyst, Token Data, Price data from Etherscan)BitMEX points out the findings are significant in two ways. On the one hand, it shows that most ICOs don’t engage in “panic selling” as a strategy to off-load funds.

On the other, it highlights how easy it is for blockchain startups to run ICOs for quick cash rewards.As the value of Ethereum remains low and panic selling isn’t a strategy ICOs seem to endorse, it is unlikely that we will see any ICOs sell more of their ETH funds for the time being.

However, even if these ICOs did decide to off-load all 3.9 million Ether that they currently hold, it’s unlikely that this amount would be large enough to negatively impact the price of Ethereum – given that there is 102 million ETH currently in circulation.If you’re interested in everything blockchain, chances are you’ll love Hard Fork Decentralized.

Our blockchain and cryptocurrency event is coming up soon – join us to hear from experts about the industry’s future. Ticket sales are now open, check it out!

Kieran Smith 


The buy and hold strategy of ICO investing is losing its appeal for retail investors who have become more discerning about where the put their money and the active management style of hedge funds is starting to attract billions of inflows from wealthy investors willing to punt on a new style of fund manager.
Capital consultancy Greyspark have released a report charting the changing landscape of cryptocurrency investment.

As the marketplace matures, two tidal shifts are taking place: ICOs are losing popularity with retail investors, and avenues for institutional investors to enter the space are increasing.Disappointing progress, poor marketing and the proliferation of scam projects are cited in the report as the key reasons for the falling success rate of ICOs, and their returns have been significantly reduced in 2018. Crypto hedge funds on the other hand have seen continued growth despite a slight downturn in parallel with the bear market.

Half of all ICOs fail to hit funding target
According to Greyspark, half of the ICOs from 2017 and 2018 failed to hit their funding target, and as many as 890 token sales raised no funds at all. But in the same period, more than 40% of ICOs (743 firms) raised more than $1 million.

This data suggests that since the mania of 2017 has subsided, investors have become increasingly astute, and the quality of projects has risen in tandem.

Greyspark's report found that in Q2 2018, 15% of ICO projects already had a working product, compared to only six percent of projects in Q1.Despite the lagging performance of ICOs, the report finds general cryptocurrency development continues unabated—at least when measured by growth in Google search queries (still up from last Autumn despite the bubble) and by number of exchange sign ups, which show a similar upward trajectory.

But as the market matures, this growth is taking a new form. Retail investors swayed by the marketing of ICOs are being replaced by institutions, whose trading is largely conducted through OTC crypto trading desks and a small number of crypto hedge funds.

These avenues are relied on by institutional players to help them overcome the challenges they face when entering the market—including access to sufficient liquidity, privacy, security, and reduced counterparty risk. "Financial institutions have started to engage, although carefully, with their first cryptocurrency-related projects and the whole industry is evolving rapidly with the clear objective to attract the big money" said hedge fund manager and report co-author Eitan Galam, in a statement.

As of September, the number of crypto hedge funds has increased significantly, and after bouncing back from a drop in January, the total number of funds is now approaching 150, up from only nine in 2012.

What is a crypto hedge fund?
In the traditional financial world, hedge funds use their expertise to invest the money of institutions and wealthy individuals—luring them in with the possibility of earning returns much greater than those offered by standard market index trackers by managing market ups and downs by taking long and short positions.

In a similar way, crypto hedge funds provide active portfolio management for cryptocurrency assets, using a range of different investment strategies to try and generate larger returns than would be granted by following the market movements of any one cryptocurrency.

This approach has proved appealing to institutional investors, who usually don't have the inclination to keep up with such a fast-moving market, or the means to store large amounts of cryptocurrency safely.

Crypto hedge funds hold up to $5 billion
According to the report, while institutional trading in crypto is still relatively low compared to other asset classes, the number of crypto hedge funds has increased significantly over the past two years, and is expected to reach between 160 and 180 by the end of 2018.

These funds—which are usually run by fewer than five people—are made up from a mix of both defectors from the traditional world of finance seeking escape from the excruciatingly low yields of bonds and equities, and famous figures from within the crypto community.

Collectively, these funds manage up to $5 billion in crypto assets, mostly on behalf of institutional investors, wealthy individuals, and Venture Capital firms like Sequoia Capital and Andreessen Horowitz, who have both backed Naval Ravikant's crypto hedge fund MetaStable.

Active versus passive debate enters crypto
In recent years managed money has underperformed passive strategies with the proliferation of ETFs which have eaten into hedge fund profits and market share. Traditionally hedge funds have charged notoriously high fees dubbed the "Two and Twenty" ratio which is a flat 2% management fee on top of a 20% slice of the profits if they reach a certain threshold.

So if a fund has $1 billion in assets under management (AUM) it is guaranteed an annual $20 million regardless if it generates a profit or loss, and with their underperformance in this extended stockmarket bull run even wealthy individuals have switched to passive funds.In contrast, the SPY ETF, one of the world's most liquid exchange-traded funds that tracks the S&P 500, has a management fee of 0.09%.

Hedge fund managers have responded by cutting their fees to as low as 1:10 split.What this investment means for crypto is not easy to predict, but by acting as supersized individual investors—or 'whales' in crypto parlance—these funds add liquidity to the market, potentially creating greater price stability, and in the long run more confidence for increasingly mainstream institutional investors to enter the space.

It’s no longer the case that blockchain startups can run a successful ICO with just an idea and a token. In this article, you will learn how to assemble the fundamental components of a successful ICO pitch deck


A persuasive ICO deck or pitch that addresses investor considerations is key to successfully selling your token. However, most startups spend too much time with an expert technical team building the perfect blockchain-based technology, only to find that they’re unable to develop and present a compelling ICO pitch to raise funds.

Here are some of the key components we’ve found from working with successful blockchain clients that make up the general structure of a successful ICO pitch:

1. Prove you’re solving a real problem by leveraging the blockchain
The increasing popularity of ICOs has resulted in numerous projects where the application of blockchain technology appears to be an afterthought and potentially unnecessary. Getting clear as to why you’re building the blockchain application and illustrating the magnitude of the problem you’re solving will help you get initial buy-in from investors.

“ICOs have gotten a bad rep because many perceive them as a cash grab,” says Jack Yeu, CCO at Switcheo Network. “If your identified ‘problem’ can be solved by using a database instead of your solution, is it really a problem worth investing in?

”In your pitch, it should also be made clear that your solution is relevant to a problem that people are facing at this current moment versus something that people theorise might happen.

2. Sound token economicsMost crypto-investors are usually interested in one thing —the value appreciation of the tokens that they purchase. To allay doubts of a dud token investment, blockchain founders need to be able to clearly articulate how their tokens are created, how they will be used and why they’ll grow in value over time.

More popular as of recent, blockchain companies running ICOs mostly create utility tokens that can be spent or exchanged for services, rebates or goods. That way, tokens get burnt after use and become more scarce. The result? The token’s worth increases naturally.





Source: BOLT Token website


Making a case for the longevity of your token value means illustrating what the circulation of the currency will look like as well as highlighting scenarios for increasing demand, adoption and scarcity. Communicating how the tokens work in the grand scheme of things will increase your chances of swaying investors.

3. Highlight the competence of your team 
As with any company or solution, it’s the people and teams behind it that make or break the project. Ask yourself these questions:

What are the technical strengths of my team?Do the members have any notable achievements or associations?Are their experiences relevant to the blockchain solution in development?
Token holders want to invest in not only the longevity of the technology but also the people behind it. Identify the greatest strengths within the team and keep the format of the team profiles consistent. Another tip is to avoid making general boastful statements like: ‘creator of multiple successful startups’. Instead, always use quantitative numbers or facts to substantiate any statements. (e.g. former CEO at X, 20 years in IT). 





Source: LAToken Pitch Conference Pitchdeck


Here’s one example from LAToken (raised $20M). The format of introducing the team is consistent. It states their position and their experience and describes their roles.

4. Detail your ‘post-ICO’ plan
Some investors buy tokens to HODL for the long-haul and not just sell immediately after the ICO is over in anticipation of value growth. As such, they’ll want to know exactly what founders plan to do in the months or years ahead. This is called your 'roadmap' and it should include:

i) Marketing and Growth Plans
Community members want to know how you’ll continue to acquire and retain new token holders to bring added liquidity and value to tokens on sale. This helps to instill confidence in holders that the tokens they own will continue to stay relevant and valuable.

ii) Project Timeline
Having clear set dates (e.g. 2018 Q4) helps keep founders accountable for their promises made before the ICO and lets investors closely track the progress of solution development. A simple linear illustration in these cases usually works best. 



Source: Inmediate.io - Blockchain Insurance Ecosystem

5. Financial plans and ICO proceeds
This is perhaps the most important piece of information for any token investor — the mechanics of the raise and how ICO proceeds will be distributed. Prospective investors need to know the factors to consider in their purchase.

This means including the token price, whether there are hard caps and limits to the number of tokens and also how these will be distributed to their wallets.

Unfortunately, there have been a number of blockchain companies that have taken token holders for a ride, by misspending proceeds or never get any closer to realising their solution idea. “Investors have become more wary of ICOs with token caps that are too high.

 Hence, we decided earlier on that we’d only raise what we needed” says Switcheo’s Yeu, “The question you need to truly answer as a founder is whether you really need that much money?”



A transparent breakdown like the one above from Inmediate.io is a good example of accounting for proceeds to be raised during an ICO and what a successful token sale would entail.

Navigating this new world of cryptocurrency and blockchain can be confusing when you’re trying to get traction in the initial stages. However, as with any difficult endeavor, strategies that work will leave patterns and we can learn from these successes and apply the lessons to our own projects.About the author:

Eugene Cheng is a Partner and Creative Lead at HighSpark - a strategic presentation and training company that works with Fortune 500 companies and blockchain startups to communicate more powerfully. Eugene writes about blockchain trends, business and marketing for leading publications like Lifehack, Techinasia, e27 and more. 

As servitisation business models continue to grow in popularity, it's only natural that we are now seeing as-a-service offerings emerge for blockchain applications. Blockchain-as-a-service (BaaS) has established a strong market presence and is promising enterprises a way to utilise the much-hyped technology



As business put evermore information online, understanding BaaS suppliers and agreements has never been more important. BaaS vendors have a duty of care and must be able to explain the benefits and the risks of their servicesA recent survey from Gartner revealed that the current number of blockchain deployments in enterprises is scarce.

According to their research, only 1% of CIOs indicated any sort of blockchain adoption within their organisation, while only 8% were in short-term planning or active experimentation with it. Furthermore, 77% said they had no plans to investigate it further.Given the amount of excitement we’ve all heard about blockchain, this is a rather anti-climatic response to such a hyped technology.


There is, of course, more than one reason for the reluctance.





Figure 1 – Blockchain Adoption, Worldwide. Source: Gartner (May 2018)


It’s been argued that all the marketing hype around blockchain has resulted in CTO’s and IT leaders unsure about what is real and what is not.Phil Fersht, founder and CEO of HfS Research, wrote in his article: “Sadly, blockchain runs the risk of being yet another representative of the ludicrous hype our industry has fallen for hook, line, and sinker.

We live in a hype bubble that we so desperately need to burst and find our way back to reality.”

>See also: How CTOs can introduce blockchain to the enterprise

On the other hand, beyond the overblown confidence in blockchain, IT leaders, who would actually like to implement it, are being held back by the lack of qualified blockchain developers.

David Furlonger, vice president and Gartner Fellow, said: “Blockchain technology requires an understanding of, at a fundamental level, aspects of security, law, value exchange, decentralised governance, process and commercial architectures.”

“It, therefore, implies that traditional lines of business and organisation silos can no longer operate under their historical structures.”

Blockchain-as-a-service

Faced with a sense of disillusionment and concrete roadblocks, for the enterprise blockchain appears as an elusive piece of kit, however, new offerings from a whole host of tech giants may be providing a gateway for accessibility.

Organisations like Oracle, Microsoft and IBM have launched blockchain-as-a-service (BaaS) offerings.

Although their solutions differ from each other in various ways, they all seem to be establishing themselves as a way for enterprises to take on the nascent technology without the cost or risk of developing it in-house.

>See also: Deciphering the buzz around blockchain


Poised to play an important role in the IT sector, BaaS, similar to the way other software-as-a-service (SaaS) offerings work, allows customers to leverage cloud-based solutions, to develop and use their own blockchain apps, smart contracts and other blockchain functions while a cloud-based service provider takes care of all the necessary tasks and activities relating to the infrastructure.


BaaS offerings have the potential to offer a real solution to the talent shortage, as CTOs and business leaders will be able to utilise their external vendor’s pool of talent, from a financial point of view, it also provides them with an opportunity to play around without having to invest in a new infrastructure.


Bill Fearnley Jr, the IDC research director of Worldwide Blockchain strategies, stated, “One advantage of partnering with a BaaS provider is how users can leverage the lessons learned by the provider to help make their systems more secure.

”For clarity, it is worth breaking down in more detail what a relationship between an organisation and a BaaS vendor entails.

Typically a BaaS vendor provides all the necessary blockchain technology and infrastructure to a customer for a fee.  The vendor is then responsible for setting up and maintaining the back-end of the blockchain’s infrastructure.

>See also: The rise of subscription billing in software and digital servicesMany BaaS vendors are trying to distinguish themselves by providing competitive side-offerings, such as training, or additional security options.

Security and blockchain

While BaaS may mean that the costs of implementing blockchain will be a lot less than doing in-house development, security must be taken into account.

Blockchain is commonly considered a step in the right direction for securing processes, but similar to most things in computing, security is not inherent. Blockchain uses public key encryption, hashing, and digital signatures, and other mechanisms, most of these are well known, however, they are not always administered correctly.

Mistakes in securing a blockchain, or simple bugs in the platforms can and have happened, and they cause serious disruption.

>See also: More than just cryptocurrency: The advent of blockchain for business


Understanding the technicalities and security issues associated with BaaS is very important. Looking online, it is hard to find a comprehensive security assessment of the various blockchain-as-a-service offerings out there. With this in mind, it will mean that the CTO’s looking into these services will need to take a more hands-on approach. 

This is ultimately similar to what CTOs and IT leaders have to do when considering cloud vendors.


As business put evermore information online, understanding BaaS suppliers and agreements has never been more important. BaaS vendors have a duty of care and must be able to explain the benefits and the risks of their services.At the same time, for a CTO, a good starting point would be to set out principles of what they expect from the BaaS provider, such as deciding what type of assurances they require.

The BaaS market

Here is a list of some popular blockchain-as-service (BaaS) providers to have a look at:

• IBM Blockchain Platform

• Microsoft Azure Blockchain

• Amazon’s Blockchain Templates – AWS Blockchain Templates aims to help organisations and individuals quickly create and deploy blockchain networks on AWS using different blockchain frameworks.
• Oracle Blockchain Cloud Service

By On Yavin


Corruption creeps into everything. While the blockchain revolution was started with grand ideas of decentralization and privacy, its growing popularity has led to unsavory elements looking for ways to corrupt it for their own means. The ICO industry is an especially popular target for bad behavior.

Some people are just out for the money and the blockchain is a convenient tool for them; from fraudulent ICOs to advisors and rating agencies accepting payment to promote projects without doing basic due diligence. We’re here today to shine a light on some of the worst offenders and call for more vigilance and better behavior going forward.

Let’s dive into the rabbit hole…

The case of Cremit

My research team was analyzing Cremit’s ICO and found disturbing problems, as can be seen here. These issues are not even the worst part. When my head of research approached the advisors of Cremit, he received the following response to his questions:





Mr. Vladimir Nikitin is considered to be one of ICOBench’s top experts! How can a crypto expert allow himself to join the advisory team of an ICO without doing proper due diligence on the team?When my head of research approached another advisor, this was the response he received:





His team allowed him? He has been added as an advisor to ICO without even researching the ICO and the team himself? Tell me this is some kind of joke!ICO advisors – you have a responsibility to the blockchain and the crypto community.

You can’t keep joining ICO teams just because they pay you to do so! You should be joining teams because you believe that they have potential and you want to see them grow and succeed.

Still, the answers from these alleged top experts were better than what my head of research received when he tried to reach out to the rest of the team, including Cremit’s alleged CTO, marketer, developer, as well as a third ICOBench advisor.

None of these individuals could be bothered to respond. As of publishing, we’ve received no response from any of them. You can see here how multiple attempts to contact their brand manager and one of their developers went unanswered.

What are the ICO rating sites saying?

Now let’s continue to the ICO rating websites out there. While my research team was analyzing the ICO mentioned at the beginning of this blog post, they discovered the following:





ICO rating websites – stop assigning higher ratings to the projects that pay you. Doing so greatly impacts our industry in a negative way. If you can’t put in the effort to properly and professionally review ICOs before rating them, it’s better that you go offline rather than hand out fraudulent ratings. 

ICOBench continues to disappoint

I wish I could say that falsely inflated ratings were the only problems my team found on ICOBench in the course of their research. They found failures to provide accurate information about ICOs and failures to catch obvious scams. Let’s look at a couple examples.





For Ink Labs Foundation, ICOBench listed the wrong exchanges. As seen in the images above, CVProof’s coin is available on these two exchanges. Our research and discussions with members of the community suggest that this is an issue with ICOBench’s methods of collecting exchange data.


In order to save time, ICOBench uses a bot to crawl the various exchanges to see which ones are offering a coin with the ICO’s symbol. The problem arises when the ICO has chosen a symbol that matches one that is already in existence.

An easy example of this is the ICO BitChord. They chose BCD as the symbol for their token; however, BCD is already in use for Bitcoin Diamond, which would lead a bot to believe that any token offering Bitcoin Diamond is actually offering BitChord.

While this is a good reminder for ICOs to make sure that they’re choosing a unique identifier for their token, it also highlights the importance of not over-relying on automation. It’s one thing to have a bot crawl the exchanges to save you the time of manually checking them yourself, but there should still be some human oversight.

Before this information is added to an ICO listing, it should be checked and confirmed to avoid such mistakes. I would suggest taking an extra step in cases like BitChord/Bitcoin Diamond, such as making notes of tokens with identical or similar symbols; in this way, we will be able to avoid investor confusion.


More concerning than this issue, however, is the instance of Veio, where ICOBench failed to spot an obvious scam.Some scams are difficult to see coming. Some broadside experts who should know better. Some, like Veio, think they can fleece investors by creating a team populated entirely by stock photos.





It’s ridiculously easy to investigate this; just do a Google image search and you can trace an ICO team member’s photo back to its source. This isn’t the only example of scams making use of stock photos or other people’s social media profile pictures to create a team out of thin air.

We’re not sure how much longer ICOs will try to use this easy-to-spot method, but in the meantime, there’s no excuse for rating sites not to do this quick and easy research into the identities of the projects they’re rating.While ICOBench did eventually catch on to the fact that Veio was a scam, for a time this ICO was listed on their site with a 3.5 rating.





ICO ratings should never be done for payment. ICO rating websites need take extreme measurements to avoid corruption. Don’t get me wrong – I am not against profiting financially, but there are red lines that should never be crossed. Paying for advertisement, including premium listings, is fine and is a common practice.


To build brand awareness and exposure you need to pay for your marketing efforts. However, paying for ratings is completely different and doing so is misleading ICO investors, especially the inexperienced ones. The crypto industry has enough problems with world governments and banks, we don’t need to add to these issues by perpetuating the reputation that the industry is filled with scams and fraud.

We need to do everything we can to protect ICO investors so that the industry will continue to grow and continue to change our lives for the better.

The community has had enough!

I’m not the only whistleblower! A quick tour of the crypto experts on LinkedIn will turn up many others directly calling out ICOBench, fraudulent raters, and the pay-to-play mentality rearing its ugly head in the crypto community.





Hosam Mazawi called this issue out back in April, pointing out a couple of blatant examples of ICOBench advisors giving a scam a good rating, only to hastily revise their ratings when other, more vigilant sites spotted the truth.I enjoyed Hosam’s article so much that I reached out to him for his opinion about Cremit. He provided this insightful quote:

It doesn’t make sense to see ICO’s rated 4.9/5 or 9/10, when you compare them to ethereum ICO.Let’s assume that ethereum is 10/10, now compare every other single ICO to ethereum as benchmark, what rating would you give Cremit ICO with their “top star” ICO bench advisors?

 


Steven J. Bodnar spells it out clearly. “Web crawling does not equal due diligence.” It takes actual research to provide ratings of any value, and this combination of slap-dash effort and bribery is pulling the entire industry down into the mud.






Bruno Skvorc seems to believe that the writing is on the wall for ICOBench. He doesn’t think that they are going to be able to recover from this damage to their reputation, especially not since so many experts refuse to be associated with them, as seen here:






You’ve got to respect Jen Buakaew. She doesn’t pull any punches about the steamier side of the blockchain industry. She could have just stopped at ICOBench, but her other points have some real merit even if they’re outside of the scope of this blog post.





Other people seem optimistic. Sophia Ha Ho is refusing to take sides, and rightly pointing out that this is an embarrassing situation for all of us to be in. She’s holding out hope for ICOBench to turn things around, which may make her a minority in the crypto community.


In the meantime, those who still believe in the value of ICOBench’s ratings may find themselves ridiculed on social media, as happened to Zhazira Lepess, founder and CEO of ZAZA.






Getting a 4.9 out of 5 rating on a legitimate site would be something worth crowing about, but if you’re proud of your rating on ICOBench, people will be happy to drag you back down to reality. I especially like this pointed comment from Robert Herman:





A “pointless rating meaning nothing”. How much longer until it goes beyond meaning nothing? At this rate, anyone sharing their ICOBench rating may risk facing suspicion that they paid to get it.The fact that you can pay for a better ICOBench rating is an open secret, to the point where it’s no longer shocking when you hear about it.


Well, Markus Hartmann, co-founder of Alethena, might have some insight to share about that. You see, like me, Markus is concerned about the current state of ICO lists and ICO rating, so he decided to see what would happen if he tried to improve the ranking of his own ICO.There’s a lot of great stuff in Markus’s article, but this really brings it full-circle.

This needs to stop.

This behavior we have seen with ICOBench, Cremit, and others cannot continue. My team, and those who share our convictions, will continue to fight scammers. We will fight the ICO teams who believe they can fool investors and get away with it.

We will call out the corrupt ICO advisors who join projects without conducting their due diligence.We advise all crypto experts and ICO advisors to stop thinking about making a quick buck, and instead consider their own integrity and the future of the crypto community.

The blockchain can accomplish great things, but not if it’s being held back by greed and dishonesty.


Discover more from Cointelligence here: https://www.cointelligence.com/content/ico-rating-expert-corruption/

Andrew Gillick, 11 Jul 2018 -Bitcoin, Blockchain, Cryptocurrency, Opinion

An idyllic lakeside town nestled in Switzerland is becoming the unlikely global control centre for blockchain and cryptocurrency. Zug has been dubbed “Crypto Valley” for attracting startups, ICOs and brain power but the country as a whole is carving itself out as the dominant thought and policy leader in the industry.

With its culture of financial secrecy and favour for the ultra-wealthy, should we be asking whether this is such a good thing?

Historically, Switzerland is synonymous with growing the wealth of the rich and hiding it away from the rest of the world to preserve it. Private banking, vaults of gold hidden deep within mountains and personal financial alchemy have become the country’s domain of expertize since the Japanese outdid them at watchmaking with their quartz technology.

Why are the Swiss so interested in crypto?

Since bitcoin was conceived as a way to send pseudo-anonymous transactions it is only natural that the Swiss would be interested in a technology that makes their job of hiding people’s money easier.

Switzerland is the world leader in private banking and home to the world’s largest private wealth manager, UBS, with $2.3 trillion of assets under management for high net-worth individuals — Credit Suisse is the third largest wealth manager behind JPMorgan.

Comparatively, this is over three times the annual GDP of the entire country. Both Swiss bank CEOs and policymakers are alert to the potential disruption crypto assets pose to this business if people really were to use them as a store of value as opposed to gold.  These fears are shaping the corporate form of the industry as the Swiss create novel ways of integrating the new technology with its legacy financial sector.





The price of bitcoin against the US dollar BTC/USD in red over gold and US dollar XAU/USD.One of the major benefits of crypto assets over the traditional physical storage of value, like gold, is precisely that it is digital and doesn’t need to be physically stored.

However, an almost parodic industry has been created in Swiss wealth management - computer servers housing cryptocurrency private keys stored in Swiss gold vaults, hidden within alpine mountains.

This month, the company that operates the Swiss stock exchange, SIX, announced its plans to launch a crypto trading platform that will be “the first market infrastructure in the world” to be fully regulated where digital assets can be issued and existing securities can be tokenized. The Swiss seem determined to put an “official stamp” on crypto first.


Home of the World Economic Forum 
With a population of just 8 million, Switzerland has a disproportionate representation in the financial world, with the world’s largest banks and the most influential financial think tank, the World Economic Forum (WEF), situated there.

The not-for-profit WEF was created in 1971 by German economist Klaus Schwab who was also a business professor at the University of Geneva at the time.

Its annual conference in the alpine town of Davos has become the Coachella of the financial world where politicians, bankers, CEOs, rock stars and celebrities of all kinds network apparently for the benefit of mankind.

The invite-only event costs in the region of $72,000 for membership and a ticket — and as much as Davos has become the mecca for globalization and neo-liberal economics, it has also become a focus point for protestors who make an annual pilgrimage there to object to its corporate doctrine.  

The Swiss school of cryptonomics
In 2016, Schwab the 80-year-old progenitor of the WEF published a book titled The Fourth Industrial Revolution, outlining his thesis of the future economy and the chronology of the previous three — contrary to years of acceptance that there has been just two preceding revolutions.

To propagate Schwab’s Fourth Industrial Revolution thesis, the WEF has established the Centre for the Fourth Industrial Revolution in the US. This month it also opened a centre in Japan and later this year will open centres in India and China.   

The centre says it engages with “governments, leading companies, civil society, and experts from around the world to co-design and pilot innovative new approaches to policy and governance in the Fourth Industrial Revolution.

”The centre is “co-designing and piloting policy frameworks and governance protocols across nine areas of focus” - among them AI, machine learning, IoT, drones and blockchain technology.The forum’s board of trustees is a diverse bunch of politicians, business people and royalty, among them former US vice president Al Gore and Alibaba founder Jack Ma.

That global centres of research and policy-making for the future of these emerging technologies are taking place under the banner of one man’s book is almost unheard of — apart from Scientology’s L Ron Hubbard. Would we be receptive of Al Gore’s Centre for Inconvenient Truths that influenced global climate policy?

Conclusion
Many countries are positioning themselves for the impending technology revolution — regardless which iteration — and many of them are smaller nations like Malta, Cayman Islands, Gibraltar and Lichtenstein that want to protect the financial centers that make up a significant part of their economies.

Switzerland is no different in this regard but its expertise in growing and hiding the money of the world’s ultra wealthy and helping them circumventing jurisdiction tax laws is a culture antithetical to the “unbanking the banks” ethic that cryptocurrencies have sprung from. 

The WEF, while by no means an official representative of Switzerland, is the pinnacle of neoliberal economic thinking of a class of millionaires and billionaires that pushes for globalization uber alles (even though Trump’s protectionist policy has proven its powerful efficacy).

The massive push of its Fourth Industrial Revolution doctrine espoused by one man is worrying and has the potential to take the financial power of cryptocurrencies away from the people they were created to empower. 

See more analysis from Brave New Coin here: https://bravenewcoin.com/news/should-we-trust-the-swiss-with-shaping-global-crypto-policy/

Zug is a municipality and small town located just outside of Zurich in Switzerland. The tiny region has earned itself a reputation for being known as “Crypto Valley,” due to its establishment of a global hub for virtual currencies. Equally as important, a number of blockchain and DLT (distributed ledger technologies) innovations have also occurred in Switzerland, ranking it as one of the top 10 European countries for starting a blockchain company.

For example, Zug recently demonstrated the successful test of a blockchain-based voting platform. Zug is also known for attracting the team behind Ethereum, the leading open-source, public, blockchain-based distributed computing platform. The Ethereum Foundation, which promotes and supports the cryptocurrency, is based in Zug and Bitcoin Suisse helped advise the group on its initial coin offering (ICO) in 2014.

However, according to Swiss entrepreneur and cryptocurrency investor, Marc Bernegger, the legal and regulatory actions in Switzerland have further fueled Zug as the world’s “crypto valley.”

Of course, one example for Zug’s success in the cryptocurrency space is due to the creation of Ethereum. As a result, some of the most relevant people, especially the tech guys—the geeks behind all the protocols and projects—have spent most of their time or at least part of their time in Zürich,  located just outside of Zug. In turn, this has created a very strong ecosystem. For instance, if you look at all the numbers of funding ICOs, a small country like Switzerland is quite ahead of the curve, which is unique, Bernegger told me.

And in comparison to places like Silicon Valley - which is known for being a leader in digital innovation - Switzerland as a whole stands out as a small country, yet key player for blockchain, DLT and cryptocurrency. According to Bernegger, Silicon Valley is lagging behind towns like Zug largely due to strict regulations and legal uncertainties .

In general, Switzerland has a very liberal and direct democratic political system that is quite decentralized, Bernegger said. This is one of the reasons that the Swiss  government embraces blockchain technology. They understand how a decentralized network works. And as a liberal state that is open for entrepreneurship and prosperity, we’d rather endorse new technology than protect the status quo.

Andrea-Franco Stöhr, the CEO of Switzerland's Crypto Finance Conference (CFC) and head of the legal team at Crypto Real Estate AG, agrees with Bernegger that regulations are holding Silicon Valley and other regions in America back from being leaders in the blockchain space. In particular, Stöhr points out this could be a result of the 2007-2008 financial crisis, which was primarily caused by deregulation in the financial industry.

In America, anything tied to banking has been subject to additional regulation following the financial crisis, Stöhr said. This is why I think it’s far more challenging to do anything that is somehow related to banking services. And that’s definitely one of the reasons why the whole cryptocurrency development didn’t really happen to the same extent that it could have in Silicon Valley thus far, he explained.

Considering that Silicon Valley has become home to significant innovations, the tech capital hasn’t been as open as Switzerland in terms of blockchain, cryptocurrency and DLT. The Security and Exchange Commission (SEC) has kept an even closer eye on cryptocurrencies following Bitcoin’s surge in December of 2017. 

Currently, the SEC is declaring all ICOs as securities and therefore are subject to strict regulations.Lessons Silicon Valley Can Learn From ZugYet when all is said and done, Bernegger believes that there are 3 lessons that Silicon Valley can really learn from the Swiss in order to catch up with Zug’s blockchain advancements. 

First, Bernegger notes that Switzerland already has a decentralized government system in place, so naturally Swiss entrepreneurs and investors believe in the idea behind blockchain. For instance, the blockchain-based voting system trial demonstrates how the Swiss government continues to look towards DLT for advancements.

As Zug Mayor, Dolfi Müller, stated in a press release following the blockchain-based voting system trial, “Decentralized e-voting, data sovereignty and transparency are highest for the voters because of their individual comprehensibility.

"Secondly, Bernegger credits the small, yet culturally diverse population of Switzerland - which consists of about 8 million inhabitants - for influencing new, technological ideas. 

And lastly, Bernegger notes that Switzerland is a very small market, encouraging entrepreneurs and investors here to think globally from day one.“If you completely ignore the potential and underlying technology of cryptocurrency, which can disrupt the existing economic system, you’ll miss some of the biggest future trends,” Bernegger warns.

the legal and regulatory actions in Switzerland have further fueled Zug as the world’s “crypto valley.”Silicon Valley is lagging behind towns like Zug largely due to strict regulations and legal uncertaintiesIn order to help influence regions like Silicon Valley to come up with new ways for adopting blockchain, cryptocurrency and DLT, Bernegger and other Swiss investor are hosting Switzerland's next Crypto Finance Conference (CFC) in Half Moon Bay, located just outside of the San Francisco Bay Area.

The previous CFC event was held last May at the exclusive Swiss ski resort, St. Moritz, and was attended by Federal Councillor and Head of the Federal Department of Economic Affairs, Education and Research of Switzerland, Johann N. Schneider-Ammann, along with high-level investors and entrepreneurs, all of whom the CFC board members had to personally approve to be invited.

It was also during this conference where the “crypto nation” statement was officially announced.This year’s conference will focus on bringing innovation to the U.S. market, as Bernegger remains optimistic and believes that cryptocurrency and blockchain developments will soon come to Silicon Valley and other tech hot spots, like Berlin and London.“

Ultimately I think it’s the regulation behind these regions that will define if new cryptocurrencies and blockchain technology can really succeed.

As long as you have a very “crypto-unfriendly” political mindset, it’s difficult as an entrepreneur to create a real big company. We hope to change this,” said Bernegger.You can follow Rachel Wolfson on Twitter and LinkedIn to stay up to date on the latest cryptocurrency happenings.

France’s “Monsieur Bitcoin” Jean-Pierre Landau released an initial report into cryptocurrency July 5, claiming it was “neither desirable nor necessary” to regulate the technology.

Government official and academic Landau consciously compares “technological” and “financial” innovation in the report, which runs to over one hundred pages. Some of the conclusions may come as a surprise to industry commentators, Landau arguing that over-regulation of cryptocurrency would constitute a “three-pronged danger.”

“Direct regulation is not desirable as it would oblige us to define, classify and therefore constrict objects which are essentially fluid and still unidentified,” he wrote in a summary section on cryptocurrency. The report continues:

“The danger is three-pronged: that of freezing the rapid evolution of technology in legislation, that of failing to grasp the real nature of the object we intend to regulate and that of pushing innovation towards regulatory avoidance. On the contrary, regulation should be technologically neutral, and in order to become so, address the actors and not the products themselves.”

Elsewhere, Landau advocates “minimal principles of transparency, integrity and robustness” for cryptocurrency exchanges, something which European lawmakers are reportedly considering as part of what is known as a ‘Euro-Bitlicense.

The report further contains several instances where financial and technological innovation are differentiated, Landau adopting a cautious tone.“We must dissociate technological innovation –– which we should encourage and stimulate –– from monetary and financial innovation, which should be considered with care,” he wrote, continuing:

“In the current phase, the correct approach would be to let cryptocurrencies - and the innovations they bring - develop in the virtual realm that they occupy, but in parallel we need to avoid and confine any contagion.”

Landau received a cold reception when he became head of a governmental cryptocurrency working group in January due to previously likening Bitcoin (BTC) to the 17th c. Tulip Mania

To help developers at new blockchain startups, and at companies seeking to start using blockchain, IBM has developed the IBM Blockchain Platform Starter Plan to help them build blockchain proof-of-concepts quickly and affordably.

It offers an end-to-end blockchain development experience: a secure test environment, a suite of education tools and modules and one-click network provisioning. It is built on the open source Hyperledger Fabric.



IBM logo.  (Photo by Chesnot/Getty Images)

More than 2,000 developers and tens of thousands of transaction blocks used the Starter Plan in a three-month test environment, said Jerry Cuomo, vice president of blockchain technology at IBM.

The Starter Plan is for enterprises -- whether startups, large corporations or government agencies -- that want to understand and use blockchain technology, Cuomo said.

It is designed to make the technology disappear so developers can focus on their ideas rather than how to operate a test network.

“Starter is to provide the developers and test environment with single click deployment to enable an aspiring blockchain developer to get started,” he said. “When we put it out there as a beta in March of this year we saw very quick and significant adoption.

We had over 2000 smart contract contributors, developers building contracts on the platform and deploying smart contracts of every variety imaginable,” he added.

The Starter Plan attracted some companies he describes as “born on the blockchain” including Road Launch for logistics, Mediaocean, which automates and tracks digital ad buys, and Global Debt Registry, which helps institutional investors and warehouse lenders manage risk, improve efficiency and pricing in the credit markets by providing solutions that ensure the integrity of a loan asset.

“The Starter Plan is a great place to start because it offers low cost and high value, with the tools we provide on top of open source,” Cuomo said.

For now the plan runs on the IBM cloud although he suggested it may be available on other clouds in the future. Continue to page 2 on Forbes here: https://www.forbes.com/sites/tomgroenfeldt/2018/06/28/ibm-launches-starter-kit-for-blockchain-develo...

 FEATUREBrady Dale    May 20, 2018 at 15:00 UTC  |  Updated  May 21, 2018 at 12:27 UTC

ICO issuers are starting to look to jurisdictions outside the U.S. to set up shop.In an environment of regulatory uncertainty, where the U.S.

Securities and Exchange Commission (SEC) has begun investigating ICOs and the industry surrounding the capital raising technology but has yet to make a formal decision of how it will regulate crypto tokens, issuers and other stakeholders are finding other jurisdictions a better bet for launching their projects.

And no other place during Blockchain Week was the topic hotter than at Token Summit III (the original event took place a year ago) on May 27 in New York City.

Both on stage and off, startup founders, attorneys and investors had strong opinions about how far to go in an environment where enforcement agencies know how easy the market boom for the tokens makes it for malicious actors to spin up a fake company and bilk millions of dollars out of unwitting buyers.

That boom packed venues in New York City throughout Blockchain Week."The reason there's a thousand people here, it's not blockchain technology," Jason Fang of Sora Ventures told CoinDesk, saying he's been going to blockchain events for years and it was all the same faces until the initial coin offering (ICO) boom.

"The difference is money. The difference is speculation."But not everyone felt that hype meant rushing headlong would be the right approach.For instance, Paypal's original chief operating officer and now an investor in Craft Ventures, which incubated and backed the security token platform Harbor, David Sacks spoke to how getting compliance right led cryptocurrency exchange Coinbase to be "the first really successful company in the space.

"He wasn't the only one. Throughout the day, different speakers returned to the question of regulation, and from the stage it began to become clear that the rest of the world isn't nearly as complicated as the U.S.

This is perhaps unsurprising - as the world's biggest economy it also has the most rules. Regulators in the U.S. would much rather err on the side of caution, even if that means curtailing some of the excitement.

Laws in the U.S. are based around the Roaring '20s, which led to the Great Depression, Lowell Ness of Perkins Coie explained during a panel on regulation,saying:

"Literally the securities law is intended to exclude the moms and pops from too risky investment."

But other parts of the world take a more open-minded, if not lax, approach and that's luring some ICO issuers overseas.

'ICO tourism'

For instance, representatives from Switzerland, Lichtenstein and Gibraltar spoke to the crowd, both assuring listeners that their nations took an extremely responsible approach without quite the aggressive fretting of U.S. rule-makers.

Speaking for his home country of Switzerland, Andreas Glarner of MME said:

"It's not our task as a regulator to tell people which way they want to lose their money."

Yet judging investments is one thing and willfully manipulating people is another.He added, "If the project is fraudulent we're going to prosecute it.

"Representatives from Lichtenstein argued that the small country has a large enough regulatory staff to work with companies it hosts and help them build businesses that are still within its regulatory framework.

Meanwhile, representatives from Gibraltar said that its regulators have done the work to build rules from the ground up that specifically fit the new world of cryptocurrency and blockchain.

Meanwhile, attorneys in the U.S. sound frustrated, but hopeful. Several who have been working with the SEC spoke on a panel about where the country is at in terms of defining rules for the industry."What we're doing primarily is educating the SEC on what blockchain is," Nancy Wojtas, a former SEC staffer now with Cooley LLP, said.

"I think there was just a misunderstanding by them to what cryptocurrency is all about. They hear 'cryptocurrency' and they think 'fraud.'"Ness from Perkins Coie was more hopeful, forecasting forthcoming clarity.

"Now we have a position where there's going to be bright lines," he said. "Full functionality [of a platform] is a very hard bright line to draw. Full decentralization is a bit easier.

"Bloq's Matthew Roszak has also been working through Token Alliance, a Washington DC-based initiative of the Chamber of Digital Commerce, to guide the SEC so that they make decisions that will allow the technology to thrive in the States.

"The last thing I want to do is spend time with regulators, three-letter agencies. I want to build, invest and innovate," he said, noting that he's doing it, though, because he believes it's important.

Wojtas cut through the optimism, again though, stating that entrepreneurs in the space will likely have an uphill battle for some time.She said:

"Being involved in an investigation is like living in hell without dying."

She continued, warning founders about the price of hiring attorneys to answer questions and respond to regulator requests, "You will be spending between $100,000 and $300,000 per month."As such, Sebastian Bürgel of Switzerland's Validity Labs said of companies visiting countries trying to figure out where to domicile (even if its staff doesn't actually work from the country):

"I see what I would call ICO tourism."

Startups' thoughts

At Token Summit III, the room was filled with about two-thirds startups and one-third investors.The startups, including those domiciled in places like Hong Kong and Singapore - attractive places after China's central bank banned crypto token sales - spoke to how they viewed the regulatory environment throughout the world.

Lea Bauer, director of operations at Centrifuge, a startup building a decentralized enterprise resource planning platform, told CoinDesk that her firm is talking to lots of lawyers in the U.S. or Europe before it decides where to land.

Centrifuge envisions a token for services on the platform. And while it wants to execute a good legal plan, it won't wait for absolute certainty.Bauer explained:

"If we wait too long, that gives us complications on the product side, whereas if we move too early that gives us trouble on the legal side."

Kain Warwick, with the Australia-based stablecoin project, Havven, told CoinDesk, "I genuinely don't believe the regulators want to impede what's happening.

"But he also added that risk in his home country "is far less than it is from the SEC," he said.

While geographies seemed a main concern for many ICO issuers, it isn't the only kind of distance that could lower risk. Time could also serve an issuer.Founder of crypto loanmaking platform, ETHLend, Stani Kulechov, told CoinDesk that it did its sale last fall.

"Back then, when we did the ICO, the regulatory uncertainty was pretty vague," he said.

However, his company is based in Switzerland, where the rules are clear enough that the company isn't concerned. Additionally, the fact that it had a working app before doing any fundraising adds to Kulechov's confidence.Just to be sure, though, "We don't accept US customers," he said.

Jae Kwon of Cosmos said similar things of stage, telling the crowd he's glad the company did its token fundraiser before all the ICO hype started."There's too much money piling in," he said. And if you bring in too much money, "they can always sue you, especially in the United States.

"Leonard Frankel, CEO of ClanPlay, an existing gaming company, which is building the Good Game token, in order for gamers to earn money for playing, has a very complicated plan to get both the tax and legal structures he desires.

An Israeli company, Frankel plans to actually launch his tokens out of Gibraltar but then transfer them to Israel and sell them from his home country, so that the company will pay its taxes there.

Erik Buschbaum, CMO of Rlay, a protocol to validate information, said his company is based in Berlin but domiciled in Gibraltar, which works for them by and large.Still, he said, "We have investors right now, Kryptonite1, and they advised us not to do a public sale because of regulatory risk.

"All this said, it's clear the ICO industry is reeling somewhat from both the unclear guidelines throughout the world and the thought that regulators could create rules that make their businesses illegal at some point.Speaking to the fear many have of U.S. regulators, MME's Thomas Linder said:

"The U.S. needs to learn that in a globalized, decentralized economy, they are not the center of the universe anymore."

Token Summit III image (Nancy Wojtas of Cooley, Lowell Ness of Perkins Coie, Lilya Tessler of McDermott, Will & Emory, William Mougayar and Brad Burnham of USV, who is speaking), via Brady Dale of CoinDesk

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Tim Enneking, Robert Brauer & Andrew Kang  



Tim Enneking is managing director at Crypto Asset Management. Robert Brauer and Andrew Kang are members of the Crypto Asset Management ICO Analysis team. The number of initial coin offerings (ICOs) is growing rapidly, having raised an astounding $5.6 billion in 2017 alone.

More outrageous is that, by most estimates, over half of the ICOs launched in 2017 have already failed.In addition to the hundreds of ICOs being launched every month, our management company Crypto Asset Management (CAM), also receives around a dozen emails per day from new companies planning on launching crypto tokens to raise capital.

CAM, through the various funds and share classes it manages, invests in less than one out of every 100 ICOs that comes across its desk.Out of absolute necessity, we have developed an analytical framework for ICOs, which CAM applies to every such opportunity it evaluates.

In this article we explain what we call The Seven Pillars Of ICO Investing™, which we've rigorously crafted over several years of investing in crypto and other assets.

Pillar #1: Team

The critical element which we are searching for is an experienced team, ideally with a strong track record in developing and launching blockchain technology. In addition, the team should have experience in the market it is targeting. A team that is not only competent, but capable of developing, completing and/or expanding the project is paramount to its success.A couple of additional issues to consider are:

• Does the team have a vesting token schedule that will properly incentivize it?
• Do the advisors have the right experience and are they actively engaged?
• Does the project have any notable financial backers? (VCs, other hedge funds, etc.)

Pillar #2: Idea

Without a compelling, realistic and timely idea for a blockchain-based enterprise, the investment will almost certainly fail.A few of the key things we look for are:

• Total addressable market: How large is the opportunity? We want as large of a market as possible (See: ethereum, filecoin).
• Product-market fit: Does the business address an urgent problem? (0x, ChainLink)
• Unique value proposition: What facets of the technology enable it to stand out from the competition? How much competition is there (Wax)? Ideally, the token has proprietary technology, and as little competition as possible (Orchid Protocol).

There is clearly an interrelationship between Pillars 1 and 2. However, if we had to choose between them, we would clearly rather invest in an "A" team working on a "B" idea than a "B" team working on an "A" idea.A talented group of people are the lifeblood of any business, and crypto is no different.

Pillar #3: Execution

In the cut-throat business world we live in, the only thing that matters is results. A brilliant idea and great team are nice, but execution is everything. Is there a working prototype or does your idea only exist in a nebulously written white paper?

We prefer to invest in a product that already exists to some degree (Presearch, Basic Attention Token, Superbloom, FunFair), whether in the crypto space or analogously in the fiat space (Wax). Finally, we look for some sort of proof that the company will be able to hit future milestones.

Pillar #4: Legal/Regulatory

This pillar is essential given the current and growing regulatory uncertainty in the industry. Almost every week, there is news of a governmental agency in one country or another taking regulatory action or making a new statement around ICO governance. Of course, almost as often, there is news of a different country considering crypto-favorable legislation.

Comprehensive regulation in many marketplaces is on the horizon and it is imperative to ensure that ICOs vigilantly navigate the landscape to the best of their abilities. The threshold issue is jurisdiction: in what country is or will the ICO company be incorporated and the ICO executed?

This determines the rules that will apply to the company's actions and the ICO. Depending on the approach taken, we may apply the somewhat arcane rules of the Howey test (in the US or if US investors are targeted or allowed to invest), KYC/AML principles (which are essentially universal) and applicable securities law.

Pillar #5: Tokenization

A significant number of the ICOs we analyze do not actually need the blockchain, tokenization or a public sale of their tokens to be successful. When this is an issue, it is usually the last - public sale - which is not necessary. (NASDAQ's settlement system is an excellent example of where tokenization is a brilliant idea but a public market would be superfluous, or even counterproductive.)

Also, they are sometimes glorified apps that could be built without creating a specific token, despite how much "utility" the founders may claim their token provides. With the enormous amount of value exchanging hands over the blockchain and the prospect of getting "free" money without giving up any equity, it's not hard to imagine why many industrious entrepreneurs try to identify any possible reason to launch an ICO.

That being said, one of the crucial things that every investment we make must have is a legitimate reason for "tokenizing" their business, and for creating a public market for that token (OmiseGo, Icon, Raiden Network, Cosmos).

Pillar #6: ICO Structure

Similar to traditional venture capital investing, the financial underpinnings of the deal ultimately determine the decision to invest. The characteristics of an ICO can have important implications on the expected upside of the token.This can be split out into two categories - ICO mechanics and ICO deal structure.

• ICO Mechanics - Historically, ICOs with a lower hard cap tend to outperform ICOs with massive hard caps. While it is important that the parent companies be well funded and have sufficient runway to work with, ICOs need to have a convincing plan for use of proceeds as the potential upside decreases in proportion to the amount raised. The precise metric here is valuation of the token economy - a derivation of the hard cap. Both the valuation in light of circulating tokens at launch and the valuation upon release of all tokens are factors that we consider.
• ICO Deal Structure - The deal should be structured in a way so that investors are not at a disadvantageous position to the market.These are a few of our considerations:
• 
  
• 
  
  • Distribution: The team should have a compelling structure for the distribution of tokens, fair allocation among team/advisors and investors, programs for market uptake, etc.
  • Distribution Schedule: Given the fast-moving pace of the crypto market, the distribution schedule should not massively favor specific parties. While long distribution periods can be considered acceptable for high-potential ICOs, individual liquidity preferences should be considered.
  • Discounts: Discounts are ubiquitous in the ICO environment, so examining the discount levels given to different tranches allows investors to understand where they stand in relation to other stakeholders.
  • Equity Stakes: At Crypto Asset Management, we like to be part of the growth of the company and investing directly into the equity of a company allows us to play a greater role in that development. In the world of token sales and short-term liquidity, people often forget that the value proposition of a company can be just as great or even greater than the token ecosystem it is developing.
• 
  

Pillar #7: Price Drivers

Even if we believe a team is able to create a great product that incorporates a token with an imperative use case, this does not necessarily mean that we will want to hold the token or invest in the ICO. A token must additionally have a mechanism to drive price appreciation.

A token with constant supply without any incentive to hold, will not be subject to buying pressure which significantly outweighs selling pressure over the long run (Votes).

This is underpinned by the concept of price risk, in which individuals will lean towards reducing their exposure to price volatility in favor of fiat or a form of stable currency. (Kyle Samani has written an in-depth piece on this velocity problem here.)A few of the price drivers we look for include:

• Network Volume: In almost every instance the value of a token increases as the number of transactions on the blockchain increases (bitcoin, ethereum). This is one of the most basic, yet influential, indicators of demand, and is also the reason we invest primarily in protocols rather than dapps.
• Market Leadership: We look to invest only in tokens that are clear market leaders, or have the potential to be in the near future. Usually, these tokens have a distinct and growing unique advantage over their competition (Practical VR).
• Incentives to Hold: There is a clear reason why a user would rather hold than spend the token, which can be related specifically to speculated price increases or other non-monetary rewards (Presearch, PROPS). We won't invest in a token that's only purpose is a medium of exchange.
• Supply Changes: This can include limiting inflation, meaning the token supply does not dilute the value of all tokens over time, or token burning, where the supply of tokens in the system decreases over time (Binance Coin, Iconomi).
• Profit Sharing: Part of the value that is extracted from the system is given back to the token holders (Augur, NEO, Neon Exchange, Ethorse).
• Staking: Having users of a network to lock up their tokens either for network consensus or as a requirement in certain processes. (Bee Network, Open Platform, NuCypher, Video Coin).
• Sufficient Liquidity: If the project isn't proactive about getting listed on multiple exchanges, preferably top-tier exchanges, we will likely not make an investment.

Please note that, as a general rule, we are not in favor of asset-backed tokens as an investment vehicle at this time. There are no real drivers of price formation after an initial, relatively small boost for convenience (Sandcoin, OneGram) and the opportunity cost is consequently too high (there are far greater returns elsewhere).Importantly, the effect of implementing strong incentives to hold is multiplicative.

Not only will the price increase be driven by the inherent tokenomics design, but also by speculation directly related to the implementation of these drivers. Despite the incredible number of fly-by-night operations in the world of ICOs, it is certain that token generation events are here to stay.

Such events are completely transforming the traditional venture capital industry and, for savvy investors, are creating fortunes literally overnight. For unsophisticated or undisciplined investors, ICOs are a minefield that should probably be avoided.

However, for those who perform proper due diligence, the odds increase for realizing breathtaking returns on your investments.This article is an abbreviated summary of our process for investing in ICOs.

Here at Crypto Asset Management, we've also developed more in-depth tools, such as our innovative 64-point ICO Scorecard and a more traditional Private Equity Due Diligence Checklist.

Stack of coins via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Discover more insights from Coindesk here: https://www.coindesk.com/seven-pillars-ico-investing/

Brady Dale   


 Apr 11, 2018 at 12:45 UTC  |  Updated  Apr 12, 2018 at 04:08 UTCThe average crypto enthusiast isn't likely to get their hands on grams - Telegram's crypto token - anytime soon.While half of the ambitious $1.2 billion the messaging giant hoped to raise was supposed to come from an ICO open to public investors, recent SEC filings confirm Telegram has already raised $1.7 billion from two private sales.

Now, sources with knowledge of the deal believe the company is likely to scrap its public sale altogether.The reason? Raising money from the public could be way more trouble than it's worth.For one, Telegram's blockchain, called the Telegram Open Network (TON), hasn't been built yet. (To be clear, no one has received any grams.) As such, Telegram is selling what basically amounts to IOUs for future grams under the Simple Agreement for Future Tokens (SAFT) framework.


That means - as displayed by the company's SEC filings - the company is selling a security, which cannot be sold to non-accredited investors (except under some exemptions)."The regulatory environment is in a weird place with most teams having more questions than answers," said Anthony Pompliano, a general partner at Morgan Creek Capital Blockchain.

"If teams can raise their capital goals in private sales, they'll continue to do so until there is less ambiguity in regulations."This appears to be what Telegram is doing, although it's been tough to tell exactly what the founders are thinking since they've said nothing about the ICO or TON, both of which the white paper details will help facilitate a network of faster payments, file-sharing, decentralized privacy, domain registration and more.Telegram did not respond to a request for comment.Pompliano told CoinDesk:

"The goal of fundraising is to gain access to capital to allow a team to build a product and company. It appears Telegram has already achieved their goal so there would be no reason to conduct a public sale."

Tech first

This is especially cogent as it relates to the amount of work a legal public sale would entail.For one, Telegram would have to go through a know-your-customer and anti-money laundering verification process to be able to sell to everyday investors.

For private, known investors that have been identified plenty of times for investment purposes, the verification work is less cumbersome, but for a store cashier who is investing for the first time, it's more challenging to prove they are who they say they are.

And it just has to do it so many more times. This would be no small lift and may not be attractive to a company that already has plenty of money.

Plus, there's already a secondary market for grams whereby small investors are buying the crypto tokens from whales that got into the private sales, according to Alexander Borodich, an alum of the Mail.ru Group, one of Russia's largest tech companies, and an angel investor passed on the opportunity to invest in Telegram's ICO.As such, he said it's unclear whether a legit public sale will happen.

The TON technical white paper describes an ongoing token sale that will continue intermittently well into the future. That phase may be a sort of public sale, but one that won't begin until the protocol launches.And according to Sid Kalla of the Turing Advisory Group, building the product before selling to the public would be that smart thing for Telegram to do.He told CoinDesk:

"The private sales were raised at around the top of the market euphoria. For a public valuation to reach back to those levels, the crypto community would need to see something concrete."

Public opinion

Which is another reason Telegram may discard it's public sale for some time - so it doesn't have to deal with thousands of people's unsolicited opinions.

When a company decides to do a public sale, it introduces complexity into its public relations.That's why large, publicly traded companies devote whole departments to investor relations, said Stephen Palley of the law firm Anderson Kill.

And that's something young startups may not have bandwidth to manage, he said."In this twilight world of ICO crowdfunding, you have a company that's brand new, it's a startup ... You suddenly have thousands -- tens of thousands -- of people who feel like they are stakeholders," Palley continued, adding:

"Do you really want to manage all those people?"

While Telegram is five years old, it's still a relatively small company that's so far bootstrapped development of its messaging platform from the founders' own pockets, which suggests it doesn't have experience in investor relations.

Kalla agreed, telling CoinDesk, "Since Telegram is trying to solve several hard technological problems (like sharding, say) there may be inevitable delays and setbacks. The private investors are likely more used to such things than the public at large."

As much as possible

That said, not everyone agrees that Telegram will scrap its public sale so soon."I see no motivation for Telegram to call off their public sale," Joe DiPasquale, CEO of the crypto fund-of-funds BitBull Capital, wrote CoinDesk via a spokesperson. "They seem dead set on raising as much capital as possible ... Considering they're targeting the mass adoption of their user base, I can't imagine them estranging the masses by canceling the public sale.

"Although, it would help if Telegram offered some insight into when and where this sale would be launched, since crypto enthusiasts keep getting bilked out of money by Telegram-focused phishing attacks.DiPasquale's sentiment isn't the prevailing one, though.

Even if Telegram needs more money to build, it doesn't seem like it's having trouble soliciting from experienced investors through private sales.Borodich for one predicts that Telegram will raise more money - to boost the total to $2.5 billion - through another private sale before the end of the year.

Another source concurred.Having said that, because there's been a pullback in the cryptocurrency hype, Kalla said, investors would likely want a lower price point for allocations of grams.And as such, he said:

"The only reason I see a public token sale making sense if there is investor demand or pressure or any contractual obligation for liquidity."

Telegram image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

The following opinion piece is an early analysis of the legal aspects of the recently released ICO guidelines.The Swiss are smart.  They have always been with money. In last 20 years, Switzerland has progressively lost its appeal as the former secret banking centre of the world.  

This has dramatically changed the landscape among Swiss professionals – mainly lawyers and fiduciaries – which have progressively lost clients and businesses and had to look for new areas of opportunities.

And now they have been the fastest and smartest in jumping at this new business opportunity.  And this time the potential is really immense for the Confederation.

World Premiere for ICO´s

ICO`s, ITO´s or TGE´s, call it whatever you want, are the future of fundraising.  And the Swiss financial authority (FINMA) on 16th of February 2018, was the first regulator to officially issuefairly detailed ICO guidelines to help clarify if and how the current Swiss laws will apply to ICO´s. As a lawyer, I must say that I am positively impressed.

Due to the recent crescendo of hysteria, critics and plainly alarming statements on the part of Central Bankers, regulators and financial prominent people vs. ICO´s, Bitcoin & Co, I was fearing that a regulatory nightmare scenario would have rapidly ensued for the sector.

Luckily, the Swiss move sets an important precedent for regulators worldwide.  Either follow the Swiss smart lead and improve their regulatory framework – thereby making compliance for ICO´s less burdensome and therefore a more attractive environment for ICO issuers, or go the other way and make it more burdensome than the Swiss and consequently shot yourself in the foot just like they did in NY with the infamous BitLicense.

 Then, say forever goodbye to the most promising business sector of the future.I am optimistic that the countries that will soon follow the Swiss move – likely Gibraltar and possibly Canada, London, Singapore, Estonia and even Spain – will do the smart thing and start a race to the top rather than to the bottom, therefore making it easier for start-ups to go the ICO route.

This is also a huge opportunity for Europe if the EU regulators will be smart enough to improve the path set by the Swiss.  If not, if they decide to do like the Americans, then I am sure that London will grab the opportunity to do the smart thing and attract very good business.

After all, London is ideally positioned – after Brexit – to offer EU start-ups some generous incentives (also on the taxation side) to move there and steal precious business from the EU and its sclerotic bureaucracy.

The Brits have all the infrastructure (just like the Swiss) to become one of the leading ICO hubs in the world. It would be a pity to lose this opportunity.

The FINMA guidelinesNow, without getting too much into the legalities of it, let’s see in simple terms what the Swiss new guidelines say. I will keep it short to five main points.

First of all there is no need for new regulations. Existing regulations are sufficient to regulate even recent creations such as tokens/coins or cryptocurrencies. This is known by legal practitioners as Analogia legis – a fundamental principle shared by all civil law jurisdictions – whereby the interpretation of existing laws can be extended to new cases if they are analogous. Therefore FINMA correctly classifies tokens/coins and cryptocurrencies in very practical terms based on their use and the rights attached to them. Then they decide if and when existing Securities´ Laws and AML (Anti Money Laundering) Regulations will apply.Based on current experience, fundamentally 4 types of tokens/coins have been classified: payment tokens (i.e. cryptocurrencies), utility tokens, asset tokens and hybrid tokens.
(i) payment tokens are not securities – therefore all the burdensome compliance with securities laws is excluded – but because they are a means of payment, then AML (Anti Money Laundering) regulations apply;(ii) utility tokens are to be looked into more carefully.

Generally, they are not to be considered securities if they grant the right to a digital use or to a digital service.  In addition, the investor must be able to use the token already at the time of the ICO. This means that all the infrastructure of the issuer – that allows the tokens to be spent – must be already fully operational at the time of the ICO.

However, if the token has even partially the characteristics of an “investment”, then it will be treated as a security. Because they are not considered a means of payment, AML does not apply.(iii) asset tokens are always considered securities and will fall within the burdensome application of Swiss Securities´ Laws (i.e. a prospectus is necessary, etc).  

However, because they are not considered a means of payment, AML does not apply.(iv) Hybrid tokens will have to be evaluated on a case to case basis.

• All the above applies only to tokens which already exist at the time of the ICO. Whichever token will be issued post-ICO is to be considered a security.  Therefore the procedure known as ICO pre-sale or pre-financing shall be avoided if you do not want to fall within the application of Securities Law.
• FINMA also provides a well-detailed Questionnaire which is to be completed by the ICO issuer to request FINMA´s opinion on the prospective ICO.  A fee will be due as well.
• Finally, AML compliance can be easily fulfilled by hiring the services of a Swiss financial intermediary which will ensure compliance with AML laws on behalf of the ICO issuer.

Clearly, with the growing flow of ICO´s, FINMA will provide vital clarifications and interpretation to the guidelines and an interesting framework of practical ICO cases will soon develop, which will be a very useful precedent for practitioners and regulators worldwide.

All in all, a positive and balanced approach which no doubt will bring very good business in Switzerland.

Well done the Swiss.

About the Author:  

Andrea Bianconi is an international business Lawyer with over two decades experience, a scholar of Austrian Economics, Monetary History and Geopolitics, a believer in the future of Blockchain based technologies and an active member of Berlin’s Blockchain Hub, a legal consultant to Blockchain businesses, an investor himself and online trader with interest in commodities, precious metals, currencies, Tech stocks and Cryptos.  https://www.linkedin.com/in/andrea-bianconi-blockchain-law/

Featured image from Shutterstock.Follow us on Telegram.


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Samburaj is the Editor for CCN, among the earliest and foremost publications covering blockchain, cryptocurrency and financial technology news. He has authored over 1,500 articles for CCN and is invested in Bitcoin. Email: [email protected]

Discover more from CCN here: https://www.ccn.com/switzerland-settles-as-the-worlds-leading-ico-hub/

In a filing with the Securities and Exchange Commission, KODAKCoin indicated its intent to raise up to $176.5 million in an initial coin offering.

The Reg D 506c filing also indicated that KODAKCoin will be using a SAFT structure or a Simple Agreement for Future Tokens. Kodak has partnered with Wenn Digital on the crypto-based project.




In January of 2018, Kodak announced its intent to enter the cryptocurrency world with its bespoke KODAKCoin . The idea is to use Blockchain technology to allow photographers to manage their work via a digital ledger of rights ownership.

The KODAKOne platform is expected to allow photographers to license their work within the platform thus generating revenue from their creative work.

Following the announcement of the ICO, tZero, the first ATS to enter the cryptocurrency exchange space, said the KODAKCoin will trade on its forthcoming digital assets exchange.

This most recent filing with the SEC is in contrast to the initial Reg D document that listed a far smaller amount for the raise.  The filing released today clearly states the offer is for “Rights to be issued KODAKCoin under Simple Agreements for Future Tokens (“SAFTs”), and 



the KODAKCoin issuable thereunder.” Total amount sold to date is still indicated at zero but this could be due to indications of intent being tallied.

The KODAK One site states that in light of the regulatory scrutiny of ICOs, they are taking all necessary measures to ensure KODAKCoin ICO complies with all applicable securities laws. The offering is receiving the assistance of Pickwick Capital Partners, LLC. 


Have a crowdfunding offering you'd like to share? Submit an offering for consideration using our Submit a Tip form and we may share it on our site!

Are ICO's "Securities Offerings" and are Coins "Securities?"

The SEC is now saying that pretty much all ICO's are securities offerings (and therefore all coins are securities), and subject to their rules and regulations. Are they right, or is that an over-reach? Most industry participants argue that while some ICO's are indeed securities offerings, others are utility tokens and not a security.

What's a "utility token"? 

If you give people money on, say, Kickstarter or GoFundMe (as I have done several times), you don't expect stock in a company, you aren't making a loan, and you don't consider it an investment. You give money to someone, and in return they promise to give you a t-shirt, movie pass, potato salad, thank you letter or something else.

Kickstarter sends you an email confirming this promise of a reward.Now, imagine if instead of a contract or .pdf agreement they sent you a digital token (aka "Coin"). That doesn't in itself make it a security. Nor does the fact that Kickstarter charged the "issuer" fees for marketing, sales and funds processing.

And if you want to sell the right to that t-shirt to someone else who wants it, then there really isn't anything prohibiting you from doing so.Without question there are ICO's, and the coins they issue, that don't constitute "securities".

Though I think the SEC is arguably justified in over-reacting a bit as there has been a substantial amount of fraud and theft in this new, evolving market...but those problems don't directly mean that any particular ICO or token does fall under their purview.

When does a token become a security? 

In 1946 the Supreme Court set forth some rules on this, which is referred to as the "Howey Test". This essentially says that if the contract is being offered to a wide group of people, who are purchasing it as an investment, and the purchasers do so with the hope of financial returns or gains which are driven not by themselves but by the work of others (e.g. by the future work of the company raising funds and issuing the contract), then it's a security and subject to the various Acts and the SEC.


However, even if an investment contract doesn't hit on all of the aspects of the Howey Test, the laws and regulations are very broad and the SEC has tremendous latitude in its ability to designate something as a security. Additionally, each state has its own securities "Blue Sky" laws, which have to be taken into consideration.

Here's an example of how this gets dicey. Let's say a company buys a Ferrari, and they offer people the ability to buy the right to drive it 1 hour per month. It's offered to many people, who have no management control over the vehicle. It's not any type of ownership in the car, nor is it a loan that has to be repaid. It is what it is, the right to drive the car an hour a month ("utility").

Let's say that instead of giving you a paper contract for your hour, they put the contract on the blockchain and issue you a token. That doesn't in itself, in my opinion, make it a security. And let's say things change in your life, such as you moved somewhere that's too far to make it practical to drive the car every month, so you want to sell that right to someone else.

That doesn't make it a security either. You, and others, are buying it for the utility it represents.However, what if you weren't really buying it for the utility? Instead, what if you and everyone else view this as an investment and hope the value of that hour appreciates considerably so you can sell it for a profit?

And what if the issuer (or their sales & marketing representative) is promoting this not as "you get to drive my car for an hour a month" but as "you get a token/coin that is freely and easily tradable, is limited in quantity, and you have the chance to make a lot of money!

"? And what if they further take steps to reinforce this by listing the token on an exchange, and/or by their sales and marketing tactics? I think the SEC is going to say that it's now a security and not just a utility token.

Can Retail/Non-Accredited Investors Put Money in ICO's?

In utility-token ICO's? Sure, just as with Kickstarter or GoFundMe there is nothing preventing anyone from contributing money in exchange for some reward or promise of products or services.

In securities ICO's? Only if the ICO is conducted pursuant to either Reg CF or Reg A (or via a registration statement such as an S-1). Of course, this presents a problem as Reg CF is limited to just over $1M and has very low per-investor caps, Reg A costs around $100,000 in upfront costs to get through legal, accounting and regulatory review and has a $50M cap, and a full registration statement can easily cost $500,000 or more.

Can People Buy Coins in an ICO and Then Sell Them on an Exchange for a Profit (Or Loss)?

Sure. There are no federal restrictions on anyone's ability to resell their non-securities utility tokens. However, if the coin is a security, then its subject to securities rules on both the initial sale AND the secondary markets. For Reg D securities, investors must be accredited and are subject to Rule 144, so they can't sell for at least a year.

For Reg CF securities, non-accredited investors can't sell for a year except to an accredited investor.

For Reg A and other types of registered securities then yes, they can sell those whenever they want.Keep in mind that if the coin represents equity in a company then the issuer is subject to restrictions on total number of shareholders they can have, which can represent an insurmountable problem given the anonymity of the blockchain (and no, the blockchain does not count as a single "shareholder of record" in my opinion, as its not a "person", though I expect some people will passionately argue this point).

Are Exchanges Legal?

I think the problem here is the word "exchange". When regulators hear that, they feel it's subject to regulation. But Craigs List, eBay, Amazon, StubHub and other "marketplaces" exist to make it easy for people to sell stuff that isn't subject to SEC regulations.

I think some crypto exchanges, if they exist only to make it easy for holders of utility tokens to list and buy/sell, and they aren't fostering market-making, are doing themselves a disservice to use the word "exchange"; not that it's illegal or wrong to use that word, but because it raises regulatory red flags and puts the marketplace/exchange directly in the crosshairs.


Now, if the coins are securities then exchanges located or operating in this country are required to be registered with the SEC. Period. To my knowledge, only tZero and Templum are on top of this, and I've read that some other exchanges are also working on filing or have filed as either an ATS or a securities exchange (e.g. Bittrex, Coinbase).


Non-registered securities exchanges are conducting business illegally. Check out Howard Mark's (StartEngine CEO) article about this by clicking here.State Blue Sky: If the exchange is operating as an ATS, the securities listed on it are not exempt from state blue sky regulations.


This means that issuers have to apply and get approval in order for a states residents to buy their securities on the ATS. Mergent is recommended extensively by OTC Markets to help clear state blue sky in 39 states, but doesn't include many big ones such as NY or CA. Thus issuers will need to have their lawyers file for Mergent as well as all the other states; that is, providing Mergent supports crypto (I have no idea).


On the other hand, if the exchange is just that, a full-fledged registered US securities exchange and not just an ATS (like NASDAQ or NYSE vs OTC), then the securities listed on it are exempt from state blue sky restrictions. For more detail, though a little dated at 5 years old, see the SecondMarket Blue Sky Report on the SEC's website.

So, Then What's the Difference Between a Securities ICO and a Stock or Bond Offering?

Nothing. A company ("issuer") wants to raise money. They create an offering pursuant to securities regulations (A, D, CF, S, etc) and carefully prepare required & compliant disclosures.

They convince investors, who hope for financial gain, to sign subscription agreements and send money via ACH, wire, check, credit-card, or crypto (e.g. Bitcoin). As soon as the offering meets the minimum (if it has one), then the issuer takes the cash and gives investors a coin (aka "token") just like they would a stock certificate or bond note.

What Does This Mean?

It means that securities ICO's are no different than any other securities offering. No different than selling shares of stock or selling debt/bonds. They have the exact same regulations, the exact same processes, the exact same limitations on who can buy (and how much), and the exact same secondary trading restrictions. Welcome to the securities industry everyone.

Investor Bonus - SAR's and the IRS!

Anyone buying securities using coins (Bitcoin, Ethereum, etc) instead of sending $, unless those coins are coming from an account at a regulated financial institution, gets named in a "Suspicious Activity Alert" (SAR), which is sent to the US Treasury. Guess who the Treasury has tasked with reviewing SAR's? Yep, the IRS.


Why is this? Imagine if you walked in with a bag full of cash. The person receiving it has no idea where you got it, it's untraceable. For all they know, you might have gotten it from a terrorist, from a money-launderer, or from unreported income streams.

So, government regulations require a SAR to be filed on the person who brought the cash. It doesn't mean it's illegal, it's just a flag to the IRS that they may want to investigate or audit that person. Currently, every type of crypto-coin is, like cash, untraceable. Thus, a SAR has to be filed on everyone using it in investing or in commerce.

Except and unless the coins come from an account at a regulated financial institution, then just as with cash sent via wire, check, ACH or credit card, the receiving party can rely on the fact that the sending financial institution has met its KYC and AML obligations and thus a SAR doesn't need to be filed.

So this is fairly easy to avoid by holding your crypto in an account/wallet at a financial institution (which includes brokerage firms and trust company's) where they are responsible for all regulatory and other aspects of custody.

Naturally, Prime Trust, just like all financial institutions, has to file SAR's on people who send crypto into escrow or custody, unless it's sent to us from another financial institution. 

And guess what, so should issuers. 


If a company takes the stance of "screw that, I'll just have crypto sent to us directly instead of through the escrow agent, bank custodian, money transmitter or (now-regulated) exchange" and it turns out that some of the funds were from the aforementioned bad persons, the fallout (and penalties) from regulators will be significant and certainly not worth the effort to avoid (or evade) the issue.

Conclusion

I remain optimistic about the future for the next generation of crypto, as well as for businesses doing innovative things with blockchain technology. Prime Trust and FundAmerica will continue to take cautious steps to support this industry.

But we must all proceed with a heightened awareness of regulatory obligations, both for investor protection and for the very survival of this nascent industry.

DISCLOSURE: 

The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

To read our full disclosure, please go to: http://www.equities.com/disclaimer

In fact, in 2017, startups raised a massive $5.6 billion from ICO’s. With so much money being raised through ICO’s, more and more companies are turning to them to get funding.

Obtaining funding through ICO’s is also attractive because ICO’s do not have anywhere near as many regulatory hoops to jump through, compared to IPO’s.

There were 435 successful ICO’s in 2017, and there could be even more in 2018. However, with so many companies launching ICO’s, there is a real question of which platform is the best for launching an ICO.

Two blockchains that have emerged as being ideal for ICO’s are Stellar Lumens (XLM) and Ethereum (ETH).

The Stellar vs. Ethereum Debate

Right now, Ethereum is the second largest cryptocurrency in the world by overall market cap. This is largely because Ethereum has built a name for itself as being excellent for launching ICO’s. Ethereum’s smart contract capabilities are very appealing to many companies launching ICO’s.

However, despite the fact that Ethereum has become well-known for ICO’s, Stellar is steadily becoming known as an excellent alternative to Ethereum.

Stellar Lumens is currently priced at about 27 cents. There are several key reasons why Stellar is gaining ground on Ethereum in terms of being a go-to platform for ICO launches. The first is speed. Stellar is much, much faster than Ethereum.

Given the fact that cryptocurrency prices are very volatile, being able to make transactions quickly is crucial for traders of cryptocurrencies. The average settlement time for Stellar transactions is five seconds. For Ethereum, it is 3.5 minutes.

This gives Stellar a tremendous advantage over Ethereum.Stellar is also cheaper. In fact, to make 100,000 transactions with Stellar, it only costs one cent. This is largely because Stellar as a built-in exchange, and therefore no fees are required to be paid to third party exchanges for transactions. Ethereum transactions are significantly more expensive.

The fact that Stellar has its own built-in exchange which is extremely fast and incredibly cheap means that ICO companies can start having their coins exchanged on day – 1, as soon as they launch.

Does Ethereum have any advantages?

Yes, Ethereum does have several key advantages over Stellar. One of the primary advantages of Ethereum over Stellar for ICO’s is that Ethereum is already well-established as the go-to platform for ICO’s and has been successfully launching ICO’s for a good amount of time now.

Ethereum is also the second largest cryptocurrency by overall market cap, which gives it distinct clout and a higher level of brand awareness than Stellar.

Stellar only broke into the top ten cryptocurrencies by market cap in January 2018.

So, Ethereum is way ahead in terms of consumer awareness and popularity. Also, Ethereum offers the so-called “Turing-complete smart contracts.” These contracts allow businesses to set up a wide variety of smart contracts which can be very complicated.

However, despite the fact that Ethereum allows for Turing complete smart contracts, most ICO’s do not require Turing complete smart contracts, and thus can be run on the Stellar network.

Also, there are some security risks associated with Turing complete smart contracts which simply do not apply to contracts which are not Turing complete. So, the argument can be made that ICO’s on the Stellar network are less vulnerable to security breaches as well.

Conclusion

Essentially, Ethereum is better for ICO’s that require complicated smart contracts which are Turing complete. However, for ICO’s that do not require these types of contracts, Stellar could be a much better option.

Stellar is not only faster and cheaper, but it is not reliant on third party exchanges. This is because it has its own built-in exchange which is extremely effective and efficient.

Stellar may currently lack the brand recognition of Ethereum, but if it continues to rack up ICO’s, as it has been doing recently, then this could soon change.

Ethereum could soon start to face real competition from Stellar. If Ethereum is going to continue to stay way out ahead of Stellar for ICO’s, then lower transaction fees and faster settlement times may be required. These are two of the key advantages that Stellar has over it at the moment.

• In an "airdrop," makers of a new digital token give it out for free to some owners of existing coins. 
• "In certain ways people are getting free lottery tickets," says Matthew Roszak, co-founder of Bloq.
• William Mougayar, blockchain investor, says airdrops are being misused. "Sadly, airdrops are the new spam mail or coupons junk mail."

Kate Rooney | Evelyn Cheng




Want free cryptocurrency? Look out for 'airdrops' in 2018  2:49 PM ET Tue, 6 March 2018 | 01:09


Digital currency developers are trying a new tack for marketing and encouraging mass adoption: "airdropping" free cryptocurrencies into people's accounts.The meaning of airdrop in the cryptocurrency world has little to do with an iPhone.

 In this case, a group of people starting a new digital currency decide to give these newly minted tokens to holders of an existing coins like bitcoin or ethereum, for free. "In certain ways people are getting free lottery tickets," said Matthew Roszak, co-founder of enterprise blockchain-technology company Bloq. "There will be a tsunami of airdrops this year." 


Earlier this month, holders of the cryptocurrency neo were selected to receive another digital coin called ontology, for free. The token is supposed to give holders voting rights for a platform that focuses on identity verification and data services. Ontology began trading on Hong Kong-based exchange Binanceon Wednesday, according to a release.

Three other teams — including developers behind a Wikipedia-like site called Everipedia, similar to the ethereum's Callisto Network, and a smart-contract system called United Bitcoin — are also planning airdrops, according to Fundstrat Global Advisors. But given the price surges and mania around cryptocurrencies, it isn't clear why anyone seeking a profit would give away these out these new coins.Here are a few reasons more digital coin developers are pursuing airdrops: 

1. Promotion

Digital coin developers are using the airdrop method to promote new projects instead of "spending money on billboards and T-shirts," said Roszak, who is also chairman of the Chamber of Digital Commerce. The ontology airdrop said it would distribute 20 million coins, or about 10 percent of its tokens, to neo holders.

Both coins were created by the Chinese company OnChain. For every one neo, investors could get 0.2 ontology tokens, according to the Neo Council, an advisory group.In order to implement an airdrop, the maker of a new coin can look up and offer all of the holders of one cryptocurrency, such as bitcoin, a chance to receive the up-and-coming token for free. 

The coin isn't necessarily automatically distributed, but users can opt in to participate in the airdrop."We're seeing it through [digital token sales] and smaller start-ups that are trying to get traction right away," said Shone Anstey, executive chairman, president and co-founder of Blockchain Intelligence Group.The overall trend of being able to get some new digital coins for free through public blockchains "shows the great utility of the public networks," Anstey said.

2. Mass adoption

Cryptocurrency enthusiasts often tout the technology's transformational power that will come once there is widespread use. But despite growing interest in digital coins, adoption remains a fraction of the population. Airdrops try to address this issue. "I think we'll see airdrops as an increasingly sophisticated approach to customer acquisition," said Spencer Bogart, partner at San Francisco-based Blockchain Capital."Slipping money into someone's pocket is a powerful way to get their attention," Bogart said, adding that the airdrop process could spur mass adoption of a new cryptocurrency better than an initial coin offering. 

ICOs are sales of new digital tokens to raise funds for projects based on blockchain technology.

By owning a token, investors potentially get access to a platform such as a cloud storage system, and may benefit from the token's price gains. ICOs have raised about $7 billion to date, according to Autonomous Next.But it can be a challenge for an ICO to reach enough potential investors. In the five months through November, less than a third of ICOs reached their fundraising targets, according to TokenData."When you give something to someone for free they will pay a little more attention than if you ask them to sign up," said Erik Voorhees, CEO of ShapeShift, a platform for trading digital tokens.

"Imagine if Walmart could put some kind of asset into everyone's bank account in the U.S."Another potential benefit of airdrops is less regulatory uncertainty than an initial coin offering. China has officially banned the token sales, while the U.S. Securities and Exchange Commission has stepped up its efforts to stamp out fraudulent ICOs. Many cryptocurrency companies have received subpoenas or information requests from the SEC, CNBC reported last week.

3. Price

Developers may also have an incentive to use airdrops as a way to drive up the price for an existing coin. The demand for that original cryptocurrency could go up as investors buy it just to be a part of an upcoming airdrop.

That's similar to how many investors piled into bitcoin ahead of its split into bitcoin and bitcoin cash last summer, in order to benefit from a similar method of giving investors new coins called a "fork."In a Feb. 22 report, Fundstrat Global Advisors highlighted upcoming forks or airdrops in cryptocurrencies such as neo, ethereum classic, zclassic and litecoin. 

"We think these upcoming forks and airdrops may be a short-term reason to focus on these tokens," the report said. The firm's analysis also found that between the beginning of January and the end of February, five coins posted double digit returns relative to bitcoin.However, their data did show that four other coins with upcoming airdrops or forks underperformed bitcoin. 

The airdrop phenomenon is also still "fairly fringe" and "won't affect the price," said Blockchain Intelligence Group's Anstey.Other analysts are also skeptical that the trend helps boost public awareness. "Airdrops are being misused and abused, to the point where they are starting to lose their intended effect," William Mougayar, blockchain investor and author of "The Business Blockchain," said in an email.

"The more scammy and over-promoted ICOs will tend to send airdrops liberally without a proper user opt-in authorization," Mougayar said. "Sadly, airdrops are the new spam mail or coupons junk mail. They are hit and miss on benefits."

https://www.cnbc.com/2018/03/12/want-free-cryptocurrency-airdrops-is-coming.html

The explosion of interest in bitcoin in 2017 has caught investors’ attention, even though many initial offerings of digital currencies have been “complete scams.”So, how do you tell the good currencies from the bad?

And what’s the broader purpose of blockchain, the technology that makes bitcoin and other cryptocurrencies possible?

“To me, blockchain is two very different things,” Chain CEO Adam Ludwin said on the latest episode of Too Embarrassed to Ask. “On the one hand — it’s a very simple technical answer — it’s a new type of data structure, just a way to store data. That’s one extreme, and that’s true.

At the other extreme, in a much more conceptual sense, it is a new internet counterculture. It’s both of those things.

”Ludwin’s company helps financial institutions track existing assets using blockchain and connect to emerging cryptocurrency networks, including bitcoin.

The key difference between those crypto networks and traditional financial institutions is that there is no central authority, like a bank or a government, storing and guarding everyone’s money — hence the countercultural appeal.

“The best way to understand cryptocurrency is that it’s a new asset class,” he said. “Every other asset class doesn’t exist for its own self, it’s serving other forms of organization.

Think of equities as an asset class, they support companies; think of government bonds, they support government borrowing; think of real estate, [it supports] property owners.”“Cryptocurrencies are no different,” he added.

“They’re enabling some higher form of organization, and what that is is basically decentralized software. Cryptocurrencies enable decentralized applications.”You can listen to the new podcast on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.


On the new podcast, Ludwin explained that bitcoin is different from other blockchain assets because it is actually three things, simultaneously:

• People who ‘mine’ bitcoin are providing the computing power to process financial transactions on behalf of the entire network: “They don’t do it out of the goodness of their heart, they’re getting paid,” he said.
• Transferring bitcoins (or fractions of them) to others means incurring fees, which also take the form of fractions of bitcoins: “It’s like the postage stamp that you would put on the envelope,” Ludwin said. By contrast, the blockchain payments product Stellar is designed to only address transfer fees: “What’s in the envelope isn’t that [the postage] — it can be, but usually it’s not.”
• And, of course, there’s one last thing bitcoin is that makes it valuable: “It’s the thing you’re sending on the network!” Ludwin said. “It’s the store of value that you’re sending.”

Have questions about cryptocurrencies, blockchain or anything else that you want us to address in a future episode?

Tweet them to @Recode with the hashtag #TooEmbarrassed, or email them to [email protected].

Be sure to follow @LaurenGoode, @KaraSwisher and @Recode to be alerted when we’re looking for questions about a specific topic.If you like this show, you should also check out our other podcasts:

• Recode Decode, hosted by Kara Swisher, is a weekly show featuring in-depth interviews with the movers and shakers in tech and media every Monday. You can subscribe on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.
• Recode Media with Peter Kafka features no-nonsense conversations with the smartest and most interesting people in the media world, with new episodes every Thursday. Use these links to subscribe on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.
• And finally, Recode Replay has all the audio from our live events, such as the Code Conference, Code Media and the Code Commerce Series. Subscribe today on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.

If you like what we’re doing, please write a review on Apple Podcasts — and if you don’t, just tweet-strafe Kara and Lauren.

Tune in next Friday for another episode of Too Embarrassed to Ask! https://www.recode.net/2018/3/9/17099426/bitcoin-blockchain-ico-crypto-token-faq-adam-ludwin-chain-k...

Telegram is going to hold a second pre-sale for its blockbuster initial coin offering, according to a report by The Verge.The messaging app company could raise as much as $1.6 billion before even opening up to the public.But some cryptocurrency hedge funds are sitting the sale out because of its high valuation and long lock-up period.Telegram's eye-popping initial coin offering just keeps getting bigger. Business Insider first reported that the messaging app operator, which is a darling of the crypto world, was trying to raise $600 million in a private sale before its public initial coin offering.

The company ended up raising $850 million, according to crypto watcher Jon Russell at TechCrunch. Now it's planning another pre-sale, according to a report by The Verge. Here are the important details from the report (emphasis ours): "This week, investors got an email explaining that Telegram is doing another private presale four sources with knowledge of the deal told The Verge. 

The exact amount to be raised is still being determined, according to sources, but two other sources said Telegram is estimating it will be around the same size as the first round, which would bring the total raised to over $1.6 billion before the ICO even opens up to the general public." 


The company is set to use the funds raised from the ICO - which is kind of like a crypto-twist on the initial public offering process - to build a protocol to rival the Ethereum platform. The so-called TON (Telegram Open Network) will "host a new generation of cryptocurrencies and decentralized applications," according to a white paper reviewed by Business Insider.

There's a lock-up for the ICO, meaning investors won't receive their TON tokens, or Grams, until December 2018, at the earliest. The company doesn't expect those tokens to be listed on a major exchange until 2019. That lock-up is one reason why cryptocurrency hedge funds are staying away from the red-hot deal. "It's a high risk, high reward gamble," Joe DiPasquale, the founder of crypto fund of funds BitBull Capital, which is close to overseeing $20 million in capital, told Business Insider in an interview.

"And the risk of having money locked up for almost a year until launch, and up to 18 months after that launch - I've personally made the decision to sit on the sidelines." DiPasquale also expressed concern about the valuation of the ICO. "It values them at about $1 billion," he said. "Think about how many crypto assets that are over a billion, about 26." Not to mention, the crypto market has been on a big retreat since the beginning of the year.

The entire market for digital coins is 50% lower than where it was at the beginning of 2018, according to CoinMarketCap data. Sean Keegan, the chief executive of Digital Asset Strategies, told Business Insider that lock-up and valuation are part of why he isn't getting in on the action, but he also has concerns about a big target on the company's back: the Russian government. "Even though the firm is based in Dubai, the Russian government has been trying to go after their data," Keegan said. 

As noted by Bloomberg, the messaging app, which was founded by Russian-native Pavel Durov, has been a target of the Kremlin. In September, Bloomberg reported Russia's main intelligence agency told the company "it is obliged under Russian law passed last year to hand over keys allowing the government to decrypt any communications transmitted over it." 

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When China banned ICOs last September, Asian trading activity shifted to Japanese exchanges. So far, Japanese regulators have been taking a hands-off approach to both cryptocurrency trading and ICOs -- and while these two things are frequently grouped together, they are very different.


Cryptocurrencies are already becoming and an important part of the economic landscape, but ICOs will prove to be a short-lived fad with most ICO tokens worthless. This is not a radical prediction. Blockchain technology does not change fundamental economics, and all tokens are not created equal.


Tokens with intrinsic utility will increase in value, while those whose purpose is to extract value from a business will lose their value.  Almost all ICOs are of the later type.


The two best known, and most valuable, tokens are Bitcoin and Ethereum. Both of these have novel, intrinsic utility.  Bitcoin enabled rapid, pseudo-anonymous transfer of value without a controlling middleman and Ethereum’s smart contracts enable simple payment agreements to be documented in and enforced by software not under the control of either party.


More On Forbes: How Will ICO Bans Impact Cryptocurrencies?


Both of these tokens represented significant advances to the state of the art and introduced utility that was not practical without them. Furthermore, this utility was enabled solely by the tokens themselves and not tied to the fortunes of any particular company or group of companies.


Bitcoin’s ecosystem expanded as both illicit and legitimate transactions were attracted to the system. And while Ethereum’s smart contracts show a lot potential, demand and ecosystem growth have been primarily fueled by the fact that Ethereum enables ICOs.In both cases, since few practical alternatives exist, the price and demand for the tokens grew as their ecosystems grew.


Most ICO startups, however, are not creating new utility, but grafting cryptocurrency onto an existing business model, and the value of these tokens are tied directly to the success of these firms.


Business ranging from electricity retailing, to crowdfunding, to credit cards, to venture capital funds are using ICOs to raise funds. The CEOs I’ve spoken to seem to sincerely believe in their vision, and that their token holders will see substantial returns.But they are wrong.


More On Forbes: ICOs: A Gold Mine Or Fool's Gold?


The future value of these tokens comes not from enabling a new utility with few practical alternatives, but by siphoning cash from operations. ICO startups usually structure their business so that tokens must be purchased in order to do business with the startup.


The theory being that the demand for tokens will expand as their business grows, and 1% to 5% of corporate cashflow will be diverted to token holders. With the founders usually holding between 20% and 30% of those tokens.


Unlike Bitcoin and Etherium however, ICO startups are not creating new utility,  but entering existing markets with established competition, and they will be at a significant competitive disadvantage to firms that do not have to pay out 5% of their total sales.


Competitive advantage or millstone?Although ICO startups often tout blockchain as a competitive advantage, these tokens will be a millstone around their necks once they begin operations. The more generous the token payments, the larger the operational handicap.


Since the tokens themselves do not offer intrinsic utility, their value comes directly from operating margins.Even in those cases where the blockchain improves operational efficiency, ICO companies will be at a disadvantage to startups paying out less or nothing at all and will be driven out of business. Once that happens, the tokens will be worthless.


In reality, ICO tokens are similar to dividends and should be valued as such. However, valuing these tokens using something like discounted cash flow is a horrifying exercise. 


Valuations often imply billions of dollars in annual sales. That’s pretty ambitious for companies that, for the most part, do not have functional products or significant industry experience. Perhaps the most egregious use of ICOs are the firms using them to raise funds for venture investment.


As is typical with most ICOs, the founders retain up to 30% of the tokens and tend to have little domain experience. While blockchain has the potential to both streamline dividend payments and helps shareholders assert their rights, that’s not what’s happening here. ICO investors are simply blinded by blockchain and paying a 30% load for a fund run by an unproven team.


Terrible investmentsTechnical handwaving does not change economics, and most ICOs are simply terrible investments.But it’s even worse than that. Corporate equity and debt come with specific and enforceable legal rights. Tokens do not.


While most whitepapers explain what the startup “plans” to do, the firm is under no legal obligation to follow those plans, and the pseudo-anonymous nature of cryptocurrencies will probably make legal claims difficult to enforce in practice.The ultimate investor outrage, however, will occur when everything goes right.


If against all odds, an ICO startup succeeds and begins generating the billions in sales required to make their tokens worth millions, nothing will prevent the firm from keeping those millions for itself. Unlike Bitcoin or Etherium, which have intrinsic utility, most ICO tokens are simply a mechanism the startup uses to transact business, and they are free to change that mechanism.


There are few legal or technical hurdles that would prevent a startup, or more likely an acquiring company, from creating a new wholly-owned token, seamlessly migrating their customers to it, and leaving existing token-holders holding worthless tokens.


In the long term, I think we will see thousands of successful, domain-specific cryptocurrencies, but the ones that win out will be those that provide the lowest-cost infrastructure, not those that promise the highest returns.


There are clearly speculative profits to be made in buying tokens at or before ICO and selling them before the company begins operations and real-world economics take effect, but in the long run, the value of almost all of these tokens will be driven to zero.


I'm a Tokyo-based founder, consultant, author, and teacher and host the Disrupting Japan podcast. I also teach corporate innovation at NYU's Shinagawa campus.

Discover more articles from Forbes here: https://www.forbes.com/sites/tromero/2018/01/09/why-your-ico-investment-is-going-to-zero/#34c15b1639...


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Sure, you could fund-raise via VCs and angel investors. But how about an initial coin offering, instead, a strategy that is new and super-cool?




NEXT ARTICLE

An Exciting Option for Startups to Raise Money: Ever Hear of an ICO?



Andrew Medal • Contributor

Startups are always on the lookout for good opportunities. For many, this means raising money through an initial coin offering (ICO), as opposed to the more traditional venture capital route. In the simplest terms, an ICO is a fund-raising means in which a company releases its own digital currency in exchange, typically, for ethereum or bitcoin.


The point is to attract investors looking for the next big cryptocurrency score.


Related: An Exciting Option for Startups to Raise Money: Ever Hear of an ICO?With this trend picking up steam, your startup might be wise to investigate whether an ICO would be right for you.


Some considerations are in order One is that individual investors are growing tired of initial public offerings (IPOs). Sure, there's plenty of opportunity to make money that way, but it's nothing like the excitement surrounding a hyped-up ICO.


With hundreds of millions of dollars spent on ICOs over the past few months, there is no slowdown in sight. In fact, because more startups are considering the benefits of an ICO, don't be surprised if 2018 is even bigger in this area than 2017 was (and that's saying a lot).


Here is what your startup needs to know about ICOs.

1. They represent a different approach (so get in the right frame of mind).
In the past, raising funds was all about pitching your idea to venture capitalists. This opportunity still exists, but it's no longer the only game in town.As a different approach, wrap your head around the idea that an ICO could be the best way to obtain the cash you need to realize your goals. Maybe you're the founder of a technology startup that develops super-cool iPhone apps.


Once you realize that you need to raise funds, to hire new talent or kick-start your marketing efforts, you'll realize that it's time to consider your options.VC firms and angel investors are worth a shot, of course, but an ICO may be you best strategy.


 However, I'm not here to tell you that it's easy to succeed with an ICO, which can be every bit as challenging as securing venture capital; but you do have more control over the process.Tip: 


A variety of tools, such as DropDeck, are available, to aggregate and rate funding opportunities, whether you're an investor, ICO or SME. DropDeck, in particular, uses artificial intelligence to rate companies for investors choosing where to invest.


"Everyone wants to fund promising companies," DropDeck's CEO Alon Vo said in a press release published on Bitcoin.com.


Related: 4 Pros and Cons of Investing in a New Cryptocurrencies


"DropDeck wants to remove the barriers that keep average funders away from the greatest opportunities," Vo continued. "There are a lot of existing platforms for you to do that, but we want to build your favorite one.


" The difference between DropDeck and its competitors, the CEO claimed, is that his company is using sophisticated algorithms and artificial intelligence to sort through the companies for you.

2. Competition is fierce.
Remember: There's more to success with an ICO than meets the eye. You can't assume that investors will flock to your ICO. Instead, your success (or failure) is directly tied to your marketing.


Still, some ICOs have been quite successful: The total amount of money raised via ICOs each month, according to a CNBC.com special report, is in excess of $100 million. This means two things: Individuals are willing to invest, and investors have options.While this surge means that ICOs are receiving more media attention, it also means that competition for investor support will only increase.


Companies that want to distinguish themselves among the saturated ICO playing field have to educate themselves on best practices and execute at a level that is as mature as that of companies vying for IPOs.


Matt McGraw is founder and CEO of Dispatch Labs, a blockchain protocol (blockchain being the technology that underlies cryptocurrencies); his company set to initiate its own ICO in early 2018.


In a call to me, McGraw said he believes that professional execution will be the key to ICO success going forward."Going into 2018, we have larger enterprises jumping on the ICO train, so the market for mindshare is oversubscribed -- at least in relation to the sophistication of ICO execution," McGraw said. "Up to now, many ICO projects simply haven't been very professionally executed.


We see more sophisticated and professional ICO advisory firms, PR firms and financial firms as the key differentiator for a successful ICO going forward."I also recently chatted with Nadav Dakner, founder and CEO of InboundJunction, a marketing firm for startups and blockchain projects, for my podcast (In The Trenches with Andrew Medal).


Dakner said he believes that because the competition is tough, and the market is getting extremely saturated, companies contemplating an ICO need a lot of budget to stand out; they also need to employ growth-hacking tactics and a lot of creativity.


"We have advised and helped the marketing and business development of many ICOs in 2017, and one thing we've noticed about projects that succeed is the integrated marketing approach," Dakner said.Because there are literally hundreds or even thousands of ICOs that launch every month, you will hear only of the good ones.


A combination of PR, ICO listing websites, YouTube reviews and perhaps a TV interview or two is a good start, but not enough. A solid advisory team and some entrepreneurial background among your founders are the elements that will truly convey to investors a sense of trust that you can build a company. Apart from that, there are no shortcuts.


ICOs need to first grow a huge Telegram community (a social-chat tool that most crypto companies use to communicate) over several months, invest in a great-looking website and video and understand that there are no shortcuts.


The easy days of just putting out a white paper explaining your project's technical aspects and the composition of your team are over. You must now establish a real use case for the token you intend to promote and the blockchain technology that will fuel it.

3. Communication is key.
No two companies or investors are the same, and an ICO is no exception. This is what makes effective communication just as important as your marketing strategy. The way you communicate with investors is essential to your success. Have you outlined the details of your ICO, such as the technical information that investors are sure to mull over before making a final decision?


How about your vision for the future, including where you see your company moving to in the next year?


"We communicate with hundreds of ICOs that want to list themselves on our website and community," Alex Buelau CEO of CoinSchedule told me. "Based on what we see, teams that have a very clear and well-defined road map and a not-too-heavy marketing white paper do well. It's also extremely important to have an attractive one pager [description] and website, because people buy with their eyes."


A clear marketing message puts you in a good light with investors. They want to see a clearly defined company strategy, and possibly a serious lock-up on token bonus for the founders, to create ithe sense that the company is in it for the long haul.


Alternately, a cloudy message can lead to your business (and ICO) being overlooked, in favor of the (heavy) competition.

Related: Watch Out for These Cryptocurrency Scams


The upshot? If your startup has hopes of raising funds without following the "same old" traditional path, an initial coin offering is an idea to consider.


This is a new way of funding a company, with many entrepreneurs taking notice. This year, 2018, is set up to be the year of cryptocurrency and ICOs, so now's the time to learn as much as you can.

If you have enjoyed reading and learning from this article, find even more on Entrepreneur here: https://www.entrepreneur.com/article/307147


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Share your blockchain page with your employer, colleagues and friends. It demonstrates your professional awareness and competency of this revolutionary paradigm called the blockchain changing our world. It's free if you are a consumer user to curate on BC. Just Create your Account here in less than 3 mins! 

Or Click " Create Account " above in the upper right corner. Instructions how to curate your blockchain page from information you discover on BC, is sent in your email after you sign up, so read it. It takes only a few minutes to curate your blockchain page. You can then track and share all the content you love or care about to enhance your knowledge of the blockchain and cryptocurrencies in general.

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Going forward, you may also be entitled to free cryptocurrency tokens through airdrops with our partners and our own utility tokens. You may also get unique offers and discounts at any time in the future, once you are a user on our BC platform. 

Blockchain is the Internet of Value... 
you need to start participating today and be part of it!

Confideal is a smart contract builder, which makes creating and enforcing smart contracts as easy as it gets. Smart contracts are programs that record the terms of an agreement using blockchain and automate the steps of its fulfillment.

There are many benefits that smart contracts bring over traditional contract law. Smart contracts help make transactions faster, better and safer. Since blockchain cuts out any middlemen smart contracts can reduce a number of transaction costs associated with contracting.

Despite the obvious benefits, it is not easy to create and implement smart contracts without having the technical knowhow of the underlying blockchain. Organizations have to hire smart contract experts and coders to create their own smart contracts.

Confideal is a visual smart contract builder that makes creating, managing and enforcing smart contracts as easy as never. Confideal enables users with no coding skills to create an enforceable, self-executing and secure digital agreement powered by Ethereum for all types of transactions. In-built arbitration module allows to resolve disputes in the Confideal environment picking the top rated arbiters without any need to reveal your personal data.

Confideal already has an alpha version of the product, we have tried it and yes, it is very easy to create smart contracts!




There are many projects which are easing the process of building smart contracts. Etherpartyand Blockcat are well known projects which have raised significant funds.


However the ease of building smart contracts is not the only value proposition that Confideal brings.

Confideal provides an option to resolve disputes without leaving the platform. The platform allows third parties: law firms, lawyers and mediators to settle disputes between users. These are highly qualified specialists that have the necessary skills and knowledge to work as arbitrators on the platform. They are motivated by the arbitrator’s’ fee which is paid for resolving a dispute up to 10% of the contract’s sum.

Disputes can arise in any type of trades so it is important to have mechanisms in place to manage arbitration. In case of disputes, the transacting parties have to approach third party arbitrators who are unfamiliar with the smart contracts and their specifics.


By providing easy arbitration solutions, Confideal is creating an ecosystem which will streamline the process of creating and fulfilling agreements. This usecase is especially important for large transactions (B2B) and international trades.

Token

CDL (Confideal) – the internal cryptocurrency of Confideal platform. It is based on the
Ethereum blockchain and is the main payment method used by the counterparties.

As of now Ether and CDL can be used to conduct payments between two parties on the platform. A transaction fees of 1% is charged for transactions through the platform using Ether. The transaction fees is waived off if two parties conduct their transaction in CDL.

Confideal will convert the commission fees which they receive into other ERC-20 tokens to create a commission pool. CDL token holders can convert their CDLs into other ERC-20 tokens at a 33.33% discount of the ongoing conversion rate.

The ICO begins on 2nd November. A hardcap of $21 million is set for the crowdraise. The total CDL supply is 100 million with 74% of them being distributed in the ICO.

10% of the tokens will be kept for the team. Of the funds raised, 30% will be used for product development and maintenance, 25% for business development, 15% for marketing, and the rest for legal and operations.

There is a 25% bonus for the first 5% Ether collected during the ICO, 12% for upto 25% Ether collected. You can check out the details here.

The Team

Confideal team is 16 member strong. CEO and founder Petr Belousov has worked in finance based positions for multiple organizations since 2010.

The CEO has been working full time on Confideal since mid 2016. Cofounder Andrei Baibaratsky has cofounded 3 other organizations in the past and seems to be quite entrepreneurial.

An interesting thing about Confideal is that there are a 11 advisers supporting the project!

Yes, thats a big number for an ICO. They include founders of ICOpromo.com, cryptopay.com, qiwi blockchain technologies along with a couple of law based consultants.

A dedicated team of 15+ members and a long list of advisers always adds to the credibility of the project.

Verdict

The core idea of Confideal is not unique, but considering the exponential growth that smart contracts are expected to achieve, there will be plenty of room for many companies which offer similar products. Confideal differentiates itself by supporting inbuilt arbitration functionality.

This system will add immense value for larger organizations which transact globally with significantly large amounts. The alpha version gives us the confidence about the team’s ability to successfully create the product.

That being said, during this initial blockchain adaption phase, high competition will definitely have some impact.

The project’s core value proposition of arbitration is critical for larger B2B based global transactions and not for smaller retail transactions. However blockchain’s adoption has not yet reached a scale where large global transactions are conducted over it.

Significant marketing and PR efforts will be needed to convince businesses about the product’s usage.

Risks

• As mentioned above, many companies are offering similar products.The core differentiator of inbuilt arbitration does not hold much value for retail and smaller transfers where the competition is high. -3
• The project scores low on the “hype” factor. If sufficient funds are not raised in the crowdsale, it would be difficult to compete with someone like Etherparty which raised $33 million in their ICO.-2
• Confideal supports only Ethereum based smart contracts. Going ahead, Ethereum might get disrupted by some other blockchain. -1

Growth Potential

• There is a huge market waiting for companies like Confideal to explore. Usecases of the project can be found in almost every industry. +5
• The marketcap at the time of the listing will be less than $30 million. There is some room for growth in terms of valuations. +4
• We have tested the alpha version of the product and it works really well. The test version is open for anyone to come and evaluate. In contrast Etherparty’s test version is available on an invite only basis. +2

Disposition

We arrive at a score of +5 out of 10 for Confideal. The score seems valid after weighing in all the pros and cons associated with the business.

Investment Details

The ICO begins on 2nd November. Investors from the US, Canada and Singapore are not allowed to participate. You can join the whitelist here.

Hacked provides analysis on several ICO's. Discover them here: https://hacked.com/ico-analysis-confideal/