Category: ICOs

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Should you go for utility or security token for your ICO project?

Categories Blockchain, Cryptocurrency, ICOs, Tokens, Utility Tokens, Security Tokens, Securities

Should you go for utility or security token for your ICO project?

In 2017, the traditional method of startup fundraising (using VC methodology) was completely revolutionized. A boom in the launching of ICOs saw literally hundreds of companies turning their attention to the blockchain and creating a digital currency born in the form of an invest-able token. This manner of crowdfunding which has seen unprecedented levels of increased popularity has found its wings clipped by regulators and authorities who have picked up on a few worrying issues. Authorities such as the SEC have taken an in-depth look at the tokens being produced by ICOs and have decided that the majority of them could be classified as a security.

This classification does not, however, apply to all tokens and some that are being developed off the blockchain can be considered as utility tokens.

There are, of course, more than two types of token such as equity, work, share-like, and asset-backed but it is important to focus on the two types – the utility and the security. By understanding the difference between these two types of token each ICO can choose a more suitable regulatory pathway.

Securities token

By the end of July 2017, the SEC dealt a big blow to the ICO world by declaring that DAO (Decentralized Autonomous Organization) tokens were securities and were therefore subject to federal securities laws. It was never the intention of token creators for them to be considered as securities but as the companies that issue these tokens, often increase in value over time, the token begins to perform as a security.

The Chairman of SEC, Jay Clayton added that “Prospective purchasers are being sold on the potential for tokens to increase in value, with the ability to lock in those increases by reselling the tokens on a secondary market or to otherwise profit from the tokens based on the efforts of others. These are key hallmarks of a security and a securities offering.”

But to decide whether a token should be classed as a security, one can put it through the Howey Test. The test seeks to find if a token has the following attributes; does it offer the chance to invest money and then to share in the profits of an enterprise managed and partly owned by respondents, and does the scheme involve investing money in a common enterprise with profits that come only from the efforts of others. As most ICO tokens fall into these categories, as such they fall under the jurisdiction of the US federal law.

Utility Tokens

The other popular type of token is a utility token and it serves a role where security tokens are resulting from the company receiving unwanted attention from securities regulators. In short, a utility token can be defined as representing future access to a company’s product or service. The defining feature of a utility token is that it is not designed as an investment, but rather as an IOU (I owe you) of sorts for future use. If utility tokens are structured properly, this means that they cannot be considered as a security token and therefore cannot be governed by federal laws.

There are already some very successful utility tokens on the market such as the ones issued through Civic. Civic has created 1 billion utility tokens that offer access to identity verification services in a decentralized and token-based system. These tokens each represent a unit of account for the Civic network and the more the network grows, the more utility the token is worth.

Out of 226 ICOs, only 20 of the tokens issued are actually used for the running of the applicable networks and are therefore utility tokens. Another example of a company that uses utility tokens is Storj. These tokens allow the holder to use space on their network and the token crowd-sale  raised over half a million dollars in 2015.

Shawn Wilkinson explains:

“For many companies, utility appears to be an afterthought, but for a token to be successfully adopted into the community, it is the most critical component. With the amount of tokens on the market today, and new ones being launched every day, it’s clear there is a bubble, though the size of it might be debatable. When the market slows, the tokens that have no utility will ultimately not have any value at all.”

Another way of explaining how a utility token works is by describing it as a coupon for the company and the services that it provides. For example, a retailer accepting pre-orders of a video game that has not yet been released. This kind of token differs from the usual ICO token that most people are used to and whilst it cannot be applied to every company, it is perfect for some. There have already been instances where utility tokens have replaced the role of a security token and have therefore allowed the blockchain solution to fulfill its primary goal – an example being Filecoin which raised an impressive $52 million.

Utility over Security

Whilst on paper, choosing a utility token over a security token might seem easy enough, there is more to it than that. If a company is unable to find a place in any categorization for their token, then it will become a securities token but if the token can be placed in them, it makes sense no avoid it being a security and having to negate a regulatory minefield. The first step is to decide whether it is fungible or non-fungible.

Utility fungible and non-fungible tokens

These are tokens that can be interchanged for another token. The fact that it is fungible means that the goods, service, token, or asset is interchanged with another that has an equal value. Gold is often considered as an example of a fungible asset as one ounce of gold, whether in coin, ingots, or dust form is still worth the same amount of money.

A voter token is another example of a situation where both blockchain and tokens can be utilized without the need for a native security-style token. These governance tokens allow those that are using the network to vote and a utility token is sufficient for this purpose. Similarly, membership tokens are also considered to be fungible utility tokens due to the fact that the token is only being used to access the platform and utilize the services.

A non-fungible token is one that is used to determine the ownership of a token or digital asset, such as CryptoKitties. A number of ICOs clearly fit into the above categories rather than that of a non-fungible securities token, so why have many decided on a native securities-style token which leads to regulatory pressure?

The definition and beyond

The very definition of security token and utility token were created before the advance of the blockchain era. Founder of Fusion and creator of QTUM Dejun Qian states that tokens are still a really new idea and they are something that should be defined on a case by case basis.

“The reason people try to figure out if token is a security or a utility is because people are thinking which laws the token needs to be compliant with. When people say that the token is a utility, it means that the token is designed and embedded in the Blockchain infrastructure. Naturally, it can then serve as a very important part in the Blockchain. It is very creative and can then also provide a lot of different opportunities for the Blockchain.”

According to Qian, we should move past the security vs utility point of view: “On the other side, there is the token which is regarded as a security. We have current laws covering the securities industry, and there are a lot of things we need to comply with, so people think about it in a similar way. I think we need to put more effort on the utility side, and even something else far beyond only security vs. utility. Because from my perspective, tokens are neither security or utility, it is a new thing and we cannot put a new thing in an existing framework, to determine what it is.”

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Artists bringing virtual currencies to life

Categories Blockchain, Cryptocurrency, ICOs, Technology, Bitcoin, Tokens, Market, Art

Artists bringing Virtual Currencies to life

Many artists globally, are starting to look at cryptocurrency as inspiration for their work, hoping that it will help increase the popularity of the industry.

Crypto – Art

‘Stealing the Contents of This Wallet Is a Crime’ by Kevin Abosch’s is a well-known example of Crypto – Art. The leader piece was part of ‘I AM A COIN’, the project during which Abosch created 10 million ERC-20 ‘IAMA’ coins.

Many of his and similar pieces sold out quickly and at high prices. Robert Indiana, the artist who created ‘LOVE cryptograffiti’, recently sold one of his serigraphs. His revolutionary art was bought by crypto-connoisseur Mike Novogratz at an auction for $8,000.

Meanwhile, another cryptograffiti was sold at a separate auction for the value of $33,000, and was named the ‘Terrible Store of Value’. This work was intended as a response to JP Morgan’s Jamie Dimon statement ‘Bitcoin is a terrible store of value’ in January 2014.

Later on, several auctions were organised during HODL in May 2018, where a painting by Terry Cook was sold as well. Terry, a well-known UK-based painter works only with cryptocurrency symbols. He believes that it is ‘natural that art and blockchain technology intersect’.

Cryptocurrency Graffiti

Whilst some art pieces connected to cryptocurrency are being sold at high prices, a lot of artists choose to show their talent for free. Last February an Instagram user posted a work of graffiti showing Bitcoin bringing power to the people. This work was also seen as a threat to the existing banking system.

At this moment, it seems that this art is getting its own admirers as well. Pascal ‘PBOY’ Boyart has received more than $1,000 in digital currency from fans after painting QR codes on his street murals. This code invited admirers to send him BTC. Currently, Boyart is part of an upcoming artists’ celebration paying homage to Bitcoins’ 10th birthday.

E&S Group is a leading corporate & law firm offering various services with regards to ICOs. Feel free to contact us directly on +356 20103020 or by email at [email protected] to find out how E&S can help you in ‘making things happen’.

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E&S Group debunk some of the most common DLT myths

Categories Blockchain, Cryptocurrency, ICOs, E&S Group, Technology

E&S Group debunk some of the most common DLT myths

The blockchain revolution is well underway but with so much uncertainty and ‘fake news’ circulating, it can be difficult to distinguish fact from fiction. At E&S Group, we pride ourselves at being at the forefront in the sector, so who better to set the record straight on some of the most common blockchain myths, than our director, Karl Schranz?

“Blockchain, Bitcoin, and DLT are all the same thing”

Whilst they are all related, this is just not true and in fact blockchain, Bitcoin and distributed ledger technology are all completely different things. Blockchain is a type of DLT, but not all DLTs are blockchain and we need to remember this before using the terms interchangeably as they can have very different meanings. As for Bitcoin, it is a cryptocurrency that runs on a DLT, in this case, the Bitcoin blockchain. So in other words, Bitcoin runs on a blockchain, which in turn is a type of DLT.

“Blockchain is just for criminals”

To deny any illicit activity on the blockchain would be a simple denial of facts, but this does not mean we should discard it completely. Crimes and illegal activities are conducted with fiat currency every day and we don’t outlaw it, instead, we make tougher regulations surrounding it and its use and we supervise it more closely. This is what needs to happen with blockchain, remember it is still a new technology and we need to regulate it in an evolutionary manner, as the technology continues to develop. Blockchains are used for countless legitimate, legal, and necessary tasks, the same as everything else.

“Blockchain is the cure for everything”

Whilst we have only just begun to scratch the surface of blockchain’s capabilities as they are vast, it would be overambitious to say that it can solve all of humanities problems. The technology is at its infancy, and like the internet, it will take a good few years to really establish itself. Furthermore, its purpose may continue to evolve over time. Whilst it cannot solve every problem in the business world, it does seem that it has a huge amount of use cases – some proven, some still yet to be proven – but I honestly believe we are seeing the start of something really important with blockchain and the possibilities it will bring.

“Blockchain is totally unhackable”

This is something I see bandied about quite a lot “blockchain is totally immutable and impenetrable to hackers” and this is not strictly true. The truth is that blockchains could fall victim to colluded attacks where one or more individuals with over 50% of mining power have the ability to cheat the network into accepting unlawful or nefarious transactions. Thankfully, the chances of this happening are very slim as it would require an almost impossible amount of computing power. Whatever technology emerges, someone somewhere is going to try to hack it, and whilst blockchain is more secure than many other things, we need to always bear in mind that nothing is completely hack-proof.

“Blockchains are all open”

There are two types of blockchain; public blockchains that are open to all, and private blockchains that are permission-based and are often controlled by a central authority or individual. This means that permission blockchains cannot be considered as completely decentralised, and some would argue if they are even really blockchains at all. A true blockchain is one that is a completely open source, open to all, and where all decisions are made based on consensus and community-backed voting.

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$1 Trillion of VC investments to become liquid through tokenisation

Categories Cryptocurrency, ICOs, Tokenomics, Tokens, Investment, Cryptoeconomics, Venture Capital

$1 Trillion of VC investments to become liquid through tokenisation

Institutional and large capital investors are increasingly looking at the crypto market as a way of finding new investment opportunities, as well as solving issues they are facing in traditional markets.

Take venture funds for example; investors have to commit their investments to sit in a startup for between 3-7 years, and an estimated $1 trillion is currently held in such a manner, with no room for movement. This results in a situation where profitability is reduced as well as the overall efficiency of their holding. Of course, if the project is successful, the investor is set to receive excess profit but there is never a guarantee of the project meeting the yield expectations, let alone getting back the funds that were invested in it.

Venture capitalists are always treading a fine line because if the project fails they lose everything they invested, but just the fact that they are investing for long periods of time means that they miss out on other opportunities to generate revenue.

A study was conducted by Cambridge Associates that looked at the performance of 27,000 venture startups over the last 20 years. It was found that the amount of venture projects that returned less or the actual amount of invested capital never exceeded 60%. So let us consider that out of the $1 trillion of investments, 60% will return the amount invested in seven years, this could take $600 billion away from the global economy.

The tokenisation of venture projects could offer a solution to issues surrounding liquidity, as well as reducing the risk of investors and making VC assets more attractive. Security tokens can offer investors a range of financial right such as dividends, equity, a share in profits, voting rights, and buy-back rights. These transactions can be completed over the blockchain and crypto investors would be able to gain access via depositories or wallets that are registered in a decentralised ledger.

This development of tokenised venture assets is already well under way and one company, VNX Exchange in collaboration with ADDCAPITAL are planning to issue tokens for $20 to finance venture products. They will also be used to create high yield projects, allow early venture capital withdrawal, and greatly expand the range of qualified venture investors that have the possibility of investing.

It is believed that such new dynamics would have an extremely positive impact on the development of startups, change the culture of investing and fundraising for entrepreneurs, and significantly boost the global economy.

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Why our world needs tokenomics?

Categories Economy, Blockchain, Cryptocurrency, Regulatory, ICOs, Technology, Trading, Tokenomics, Tokens, Market, Market Cap, Cryptoeconomics

Why our world needs tokenomics?

There is no doubt that blockchain technology is going to pay a pretty big part in our future. Blockchain has the capacity to unlock a previously untapped economy of trust and it also has the potential to completely revolutionise many sectors from finance to healthcare and everything in between. But before it can reach its full potential, there is one extremely important thing missing: an established and well thought out theory of tokenomics.

Moving forward with blockchain technology and its implementation will require a significant increase in the advancement of tokenomics analysis. We are currently in the midst of a truly unchartered territory – governments and regulatory authorities don’t have a clue what is happening and even those involved directly in the industry are lacking clarity and certainty. Whilst the concept of tokenomics has been around for centuries, there is not much knowledge on artificial economies such as the of crypto world. One way that token economies can be analysed more closely is through the use of agent-based modelling, but there is still a lot of work to do.

Why study token economics?

Firstly, because tokenomics is extremely important. With the advent of blockchain technology, we are seeing more and more startups move towards using market business models. These models facilitate the incentivisation of users to make them more proactive in their day to day life. For example, a government could incentivise users to pay their taxes over the blockchain network. A retail company could offer discounts if clients use the blockchain to make their payments. Knowing and understanding how best to create and promote rewards through a particular economy requires a proper understanding of tokenomics models.

Also, token economies can also fall foul of all the problems that traditional economies have. For example, inflation, volatility, and crashes are all issues that can affect the long-term viability of a blockchain based business. Token economies do make it possible, however, to automatically collect data on transactions which can then be used to calculate metrics such as the total traded volume or the velocity. The tokenomics research community has a lot of work to do when it comes to being able to utilize the unique opportunities that are offered by the blockchain. By doing this they will be able to better understand how to solve some of the presented challenges.

The issue of token pricing

Some of the other issues that are at the forefront of the challenges faced by the sector include understanding token pricing. There is no definitive answer on how tokens should be priced, or how many should be issued. There is also much work needed when it comes to the equation of exchange that is used to help derive valuations for cryptocurrencies, some of which can be used to provide a better understanding of token pricing for ICOs. The problem is that at the moment, there is no proper model around this topic and until there is, the sector will struggle to find its feet.

Long-term viability

Many ICOs that have been launched made use of a model where tokens are disposed of as they are used up. This means that as the number of tokens decreases, supply becomes limited and the price goes up. Whilst this is attractive to investors and speculators, it doesn’t give much information or hope for the long-term viability of the token.

Controlling speculation

Unfounded speculation has caused untold amounts of damage to the crypto-economy, but it can also be one of the driving force behind the popularity surge of cryptocurrencies. Speculating and trading are not bad things per se, rather it is when they get out of control and result in market crashes similar to the one that we saw in January. Control needs to be exerted so that speculation is allowed, but does not wield power that can see a market decimated in days.

The economics of the future

Blockchain is not going anywhere anytime soon and it is becoming clearer that it is set to become an integral part of our lives. ICOs have raised an astonishing $6.5bn to date, but without a proper tokenomics model, many are sadly destined to fail. As ICOs mature, the same is required by tokenomics and understanding topics such as the ones mentioned above is an integral part of blockchains long-term success.

 

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A Half Year Report on virtual currencies in 2018

Categories Blockchain, Cryptocurrency, Regulatory, ICOs, Malta, ICO Legal Service, Law, The Blockchain Island, DLT Regulation, Smart Contracts, E&S Group, Technology, Trading, Cryptocurrency Exchange, Tokenomics, Regulation, Tokens, Binance, Utility Tokens, Security Tokens, DLT

A Half Year Report on virtual currencies in 2018

2018 has been an interesting year for crypto with colossal crashes, much-needed market adjustments, and of course, the emergence of a large number of new tokens and cryptocurrencies. Along with significant advances in regulation and legal frameworks that seek to understand, support, and protect those stakeholders operating within this new industry, there is no doubt that the rest of 2018 is going to be just as, if not more exciting as the previous six months.

Mid-January Market Crash

If you were holding Bitcoin in December 2017, you probably couldn’t believe your luck. As the value of a single Bitcoin headed towards $20k, a mad rush to invest ensued and predictions on where the price may head reached stratospheric new heights. Then on January 16th 2018, Bitcoin investors woke up to a nasty shock. The value of their coins had dropped by 15% and this news had a knock-on effect on the value of all other altcoins, causing a huge slump in the value of the market. The excitement and hype that had surrounded cryptocurrencies just a few days before, disappeared just like the profits of those who invested in it.

As prices continued to fall, investors started to panic. They started selling their coins in an effort to nip their losses in the bud and the moniker “Black Tuesday” was coined. Some crypto-coins saw losses of up to 40% and it seemed like many naysayers predictions were coming true and that the bubble had finally burst. Some voices remained steadfastly optimistic however and maintained that price slumps were common in all markets, not just the crypto one. After such an exponential increase in value, it was naturally expected that the market would correct itself because after every meteoric rise comes to a reverse-swing of the pendulum that needs to be ridden out – January was exactly that. As prices are now more stable it is hoped that they will increase at a steady rate, signalling a new era of market stability and maturity.

TRON Makes a Name for Itself

Since January of this year, TRON has experienced a steady increase in value. Despite a few issues, mainly caused by the crypto price-crash, it seemed to have found its niche which suggests a bright future for both the platform and its cryptocurrency.

TRON is a decentralised, blockchain-based, protocol project that functions as a content distribution platform for the digital entertainment industry. Whilst the platform itself is yet to go live the TRX coin is gaining significant traction.

Created by Justin Sun in 2017, the concept behind it is to establish a global network of free entertainment content which allows creators to publish, store and distribute their own content without the need for an intermediary. Whilst its value per coin was only $0.30 in January, it is expected to hit $1 by the end of 2018.

Its main selling point is that it is not just another cryptocurrency. It has a platform that solves a problem and offers functionality to a range of users and publishers. Over the last year, TRON has increased in value by 1.39% making it one of the top crypto coins in terms of growth, making it one to keep your eye on as we progress through 2018.

The Unexpected Rise of Litecoin

Many have dismissed Litecoin as “the poor man’s Bitcoin” but despite this, its popularity has increased drastically over the past few months. It was initially launched via an open-source client on GitHub in 2011, a sort of spin-off of the original Bitcoin Core client, but it offered much lower block generation times, a higher number of coins, a modified GUI, and a different hashing algorithm.

In 2013 it experienced a big surge in value and by May 2017 it had secured a spot as one of the Top 5 global cryptocurrencies in terms of its market cap. Now accepted by a wide range of online retailers, its adoption is increasing and many are seeing it as a better alternative to the rather bloated and over-inflated Bitcoin.

12 and even 6 months ago, blockchain was not something that was widely understood but as we progress to the end of 2018, it is expected that we will see a dramatic uptake of blockchain integration across a diverse range of sectors. Following in the footsteps of IBM, Microsoft, and Maersk, even smaller SMEs are likely to be interested in harnessing its potential.

Litecoin is predicted to peak at a value of over $600 per coin by the end of 2018 and there is no doubt that it has huge potential. Negating many of the issues that are faced by Bitcoin users, it presents a practical, simplified and completely viable alternative to the crypto-giant.

Malta Takes the Lead in Industry Regulation

In the last 12 months, it has seen cryptocurrency, blockchain and ICOs negate a minefield of regulatory and legal issues. Problems around its classification, AML and KYC regulations, and the reluctance of many banking institutions to support the burgeoning technology has resulted in many setbacks for the crypto world but that is all set to change.

The island of Malta has long been a hub for digital technologies and it is well known for its iGaming, Finserv and Fintech industries that when combined, account for around half of the country`s GDP. Then, in March 2018 the Government announced the drafting of three new bills that would seek to provide legal and regulatory clarification on DLT, crypto, and ICOs. These bills are the Virtual Financial Assets Bill which would provide a regulatory framework for ICOs and virtual currencies, the Malta Digital Innovation Authority Bill and the Technology Arrangements and Services Bill which will oversee companies that operate within the market, as well as providing a much-needed guidance and clarification.

This makes Malta the first jurisdiction in the EU, and the world to create a comprehensive legal framework that not only protects all stakeholders including operators and investors, but also supports the growth and development of the industry. By ensuring explicit legal clarification as well as adherence to AML and KYC regulations. This means that the industry will receive a much-needed confidence boost and will help to increase the  level of public trust in this new market sector.

Binance Relocates to Malta

As a result of Malta’s decision to support cryptocurrencies and related industries, an exciting announcement came just a few days later. Binance is the largest cryptocurrency exchange in the world and commands 10% of the global trading volume as well as having a market capitalistion of $1.3billion at the time of writing. Its founder Changpeng Zhao started Binance in July 2017 and in just a couple of short months, it has grown to be the market leader.

Following the introduction of restrictive laws in Japan and China regarding cryptocurrencies and exchanges, Binance was on the look out for a more welcoming and flexible home. On March 23rd, Binance announced their move to Malta and the crypto community rejoiced. Such a vote of confidence is a big deal for the small EU country and it is expected that such a move will encourage many other companies and startups to follow suit.

The Blockchain Boom

This time last year, most people had heard of the blockchain but only in the context of it being intrinsically linked to Bitcoin. Now, the technology has broken away from just monetary uses and has earned a lot of attention for its potential. In the last few months, more and more use cases have come to prominence at blockchain has found uses in industries such as logistics, healthcare, politics, real estate, and even crypto-powered beer vending machines. It has also been tipped to completely revolutionize the way we vote, as well as provide microloans to SMEs in developing countries and to solve the energy crisis in third world countries.

 

E&S Group is a leading corporate & law firm offering various services with regards to ICOs. Feel free to contact us directly on +356 20103020 or by email at [email protected] to find out how E&S can help you in ‘making things happen’.

For more information click the link.

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How crypto will run the venture capital show in the near future

Categories Blockchain, Cryptocurrency, ICOs, Tokens, Utility Tokens, Security Tokens, Ethereum, Exchanges, Venture Capital

How crypto will run the venture capital show in the near future

A future is being predicted by global venture capitalists is a future that will be run by cryptocurrencies and tokens. This future, however, needs a lot of work done before it can be truly realised. Regulations must be put in place, lines must be drawn, and steps must be taken to ensure that both coins and tokens are not categorised as securities.

Andreessen Horowitz, a venture capital firm is taking a leading position when it comes to spearheading these efforts. They have already formed a collaborative group consisting of lawyers and investors which has met with the SEC earlier in the year. If cryptocurrencies are going to be treated in the same way as securities it could significantly affect their value and this is something that must not happen. This group of stakeholders included Union Square Ventures and representatives from legal firms such as Perkins Coie, McDermott Will & Emery and Cooley along with Andreessen Horowitz, and its main goal is to create a crypto-investment fund.

The search for a safe harbour

The New York Times reported that regulators are looking for a “safe harbour” for some cryptocurrencies.

“We are seeing a watershed moment in which many firms in the digital asset community who may have been ignorant of the law — or poorly informed — are now coming to terms with the fact that they are subject to regulators,” lawyer Richard Levin claims.

Various entrepreneurs that have been involved in ICO processes have stated that as cryptocurrencies and tokens are being used as a means of payment, they should not be categorised as a security. The Chairman of the SEC, Jay Clayton believes the opposite to be right and states that every token must be registered as such.

If a cryptocurrency is to be treated as a security, there will be considerable paperwork involved and they will only be able to be traded on regulated exchanges. Bitcoins are produced on a daily basis and are not sourced from ICOs, unlike Ethereum which is solely responsible for all Ethers produced as a virtual currency. Lawyers from Andreessen Horowitz want Ethereum to be considered in the same way that Bitcoin is as the former has now been decentralised.

Union Square Ventures partner and venture capitalist, Fred Wilson has described the situation as a clear indication that crypto and tokens are still not fully understood. On the other side of the coin, the Coinbase CTO Balaji S. Srinivasan has noted that leaders such as Christine Lagarde and Larry Summers admit that these currencies deserve some merit and recognition.

The value of the token economy

This is where a staunch critic of Bitcoin, Warren Buffet just doesn’t get it. Wilson further explains that the value of the token economy lies on the token itself and not on the cash flow. Srinivasan envisages a future where entrepreneurs can create their own currencies:

“Blockchain is turning everybody into a venture capitalist. The internet will become the world’s biggest stock market. Where basically anyone in the world can put…money into crypto,” he added.

The safe harbour that is so sought after by lawyers would consist of three things: regulatory certainty, tokens not being categorised as a security, and clear ICO regulations in the future. Under the proposals, a token would only be able to be considered as a security if it meets some of the following criteria: a limitation of promotion, mandatory disclosure, detailed sales terms, token supply, and no equity rights involved.

 

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Decentralised technology is enjoying its first day at school

Categories Blockchain, Cryptocurrency, ICOs, European Commission, European Parliament, University, Technology, Ethereum

Decentralised technology is enjoying its first day at school

When we hear the word ‘blockchain’ most of us associate it with cryptocurrencies. Whilst this may be true to some extent, the real potential of blockchain far exceeds just transfers of value. Over the last 18 months, many more use cases for blockchain have been discovered and it seems to be gaining a foothold in a range of industries.

But when it comes to the education sector, blockchain has taken some time to find its feet and to even conceptualize, let alone become functional. Over the last couple of months, a handful of universities have started issuing degrees on the blockchain, but this is not even scratching the surface of its potential.

This could be for a couple of reasons – firstly, educational leaders and institutions have a reputation for being slow to adapt to new technology and secondly, learning is still a quintessentially human experience. But despite this, it seems that finally as we enter the last quarter of 2018, blockchain is enjoying its first day at school.

The sudden increase in interest of blockchain in education is due to the realization of some core issues.

Firstly, issuing transcripts and accessing records of academic achievement is an extremely labour intensive process and impossible to access any time and any place. Couple this with increased mobility and on-going and life-long learning and you find yourself in a situation where the necessity for having access to complete, multi-jurisdictional, and instantly accessible qualification records is a necessity. These needs are well served by blockchain technology and in the last couple of months, around 100 educational institutes have taken steps towards integrating such a system into their operations.

Now it seems that institutions within most EU states are looking at Ethereum-based blockchains to help them set up efficient and immutable record keeping systems that can be accessed on a permission-based basis. This system will be especially useful in countries where there are issues with certification and qualification fraud.

The promise for blockchain in the academic world is real and it is picking up some serious momentum as 2018 comes to a close – it is not a matter of its possibility to happen, but rather the timelines of its implementation.

 

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Token design for Digital Crowdfunding Campaign

Categories Blockchain, Cryptocurrency, ICOs, Technology, Tokenomics, Tokens, Cryptoeconomics

Token design for Digital Crowdfunding Campaign

One of the key concepts behind an Initial Coin Offering (ICO) is to use the blockchain as a way of bringing together a decentralised and self-contained mini investment economy. The token that is created and “sold” as a part of the ICO is the key access point into this ecosystem and removes any need for a third-party middleman. When it comes to designing a functional token, it is the most important part of the new system as this alone will decide the flow of payments and rewards to anyone that uses the system.

Cryptoeconomics

When developing an ICO, first of all, the creator must determine the cryptoeconomics that is behind the token. This should include the maximum number of tokens that will be created, the value of each token (usually based on BTC or ETH), any discounts for purchasing it early, and how the token will be distributed to backers, founders, developers, and other users. Consideration and careful planning must also be given to marketing, legal, and security processes and strategies.

The key to determining the tokenomics behind an ICO should begin with estimating the size of the digital ecosystem as well as exactly how users and contributors will engage the system. One should also consider the number of transitions that are expected to be made and enough tokens should be issued to not only run the core system but to allow system growth over time.

Creating a digital ecosystem

The token can and should be optimised to the full for a range of different goals. For example, whilst most ICOs issue tokens that allow the building of the system and running it on a basic level, creators should take a much longer view and price the value to facilitate an increase in the usage of the platform. One could also price the token to encourage developers to create a digital ecosystem that exists around the ICO.

It can be difficult to develop a plan for the entire life of the blockchain system, as predicting the future has never been an easy task. Due to this fact, many developers consider issuing another type of token at a later date that can provide users with a higher level of access to the digital ecosystem as it matures past a certain point.

Developers also have the option to create different types of token for the ICO which can give unique benefits to users. As the system continues to grow, new applications and higher value benefits can become available.

 

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Contact us directly on +356 20103020 or by email at [email protected] to find out more.

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The digital crowdfunding campaigns sink – the popularity of security tokens surges

Categories Blockchain, Cryptocurrency, ICOs, Utility Tokens, Security Tokens, STO, DLT

The digital crowdfunding campaigns sink – the popularity of security tokens surges

After a regulatory crackdown on digital crowdfunding campaigns, the value of the international ICO market has dropped significantly. As a result, investors are being driven towards a new type of crypto investment vehicle; security tokens.

ICO fever decreases

At the end of 2017 and the beginning of 2018, the popularity of ICOs reached an all-time high, but with many investors left disappointed with an increasing number of ICO failures, this interest began to drop. Claims were unsubstantiated, pricing was unrealistic, and some just disappeared with clients and investors money  to be never seen again. Global ICO funding has decreased massively due to confusion around the stances of global regulators, with many being shut down due to offering tokens that were categorized as a security.

The problem with investing in an ICO is that it can be difficult to know what type of ICO token is being used; is it a utility or security token? A utility token is a tool, not an investment, whereas a security token is an investment in a specific project or company. If a particular token can be considered as a token under securities laws, then it will find itself subjected to a range of specific rules and criteria as specified by various regulatory agencies.

The US and Security Tokens

In the US, a recent ruling by a District Court Judge stated that ICO offerings fall under securities laws and that as such, unless the token on offer is without a doubt a utility token, it must be considered as a security token.

The ruling was the result of a case brought against Maksim Zaxlavskiy who had offered and ICO to investors with the promise that the tokens were backed by diamonds and real estate. The federal prosecution deemed that this meant the tokens were a security and that Zaslavskiy had offered investors a totally unregulated securities product.

The judge noted:

“Congress’ purpose in enacting the securities laws was to regulate investments, in whatever form they are made and by whatever name they are called…”

It seems now that regulated security products will become the next big thing for crypto investors, in part due to their regulatory compliance and the big potential for gains.

CEO of Desico, Laimonas Norekika, who is also about to offer retail investors the chance to invest in registered security products said:

“Tokenized securities are bridging the gap between traditional financial markets and crypto markets because they are aligned with everyone’s interest. Regulators want to protect the investors, investors want their assets tradable, and crowds from all over the world want to invest in the most promising startups at an early stage.”

Anthony Pompliano, the founder of Morgan Creek Digital Assets also stated that he believes that security tokens should be considered as digital assets and as such should be subject to federal regulations.

If you have any questions in relation to ICOs, please contact us on [email protected]

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