What to do with your ICO Funds

What to do with your ICO Funds

Among the considerations when planning the launch of your ICO

is where your target raise figure should be set. Too many startups do not approach this question with enough thoroughness, instead of establishing a fairly arbitrary figure that leaves them either over-leveraged or high and dry when it comes time to pay operating costs.

The Rhyme and Reason of Setting a Target Raise Figure

Whittling down a target raise amount that is both justified and sensible should be a levelheaded process. Those motivated by greed or grandiose visions of what their post-ICO operations will look like are liable to set their target too high. Buyers and investors must feel that they are getting strong value for the money they put forth in exchange for a token, regardless of whether it is a security or a utility token. Establishing a soft cap and correlating target raise figure that does not reflect the company’s value is unlikely to attract the token buyers necessary to get the project off the ground.

Conversely, being too conservative in setting the fundraising target for an ICO is futile. Failing to raise the sum that will be necessary to fulfil daily operating costs defeats the purpose for which the ICO was established. In other words, taking restraint to an extreme can be just as harmful as showing not enough restraint. For these reasons, thoughtfully outlining your future costs and nailing down a vision that is neither grandiose nor spartan is a must before launching an ICO.

What is the Purpose of Your ICO?

Have a clear vision of what the purpose of your ICO is. Remember, it shouldn’t be to pay yourself or to renovate the company’s office space unless that is going to lead to a tangible payoff in terms of token value. Making the difficult decisions regarding what ventures are worth funding via an ICO — perhaps it’s marketing, advertising, strategic expansion/relocation, strengthening a blockchain, improving functionality, or something else — is an initial step toward setting a sensible target fundraising goal.

Establishing the Hard Cap

The hard cap, the term for the dollar amount needed to completely launch your project, should be seen as a first-phase investment, considering that setting this figure too high can scare off potential buyers. However, the hard cap represents the figure you will need to deliver an ideal version of the project, so giving yourself some leeway for expenses is important. Setting this figure appropriately requires detailed foresight into the various costs that will be required to complete the project, and complete it right.

Establishing the Soft Cap

The soft cap represents the minimum amount of fundraising that will need to be raised from the ICO in order for the most basic acceptable version of your project to be delivered. Far from ideal, you must still set your soft cap in a range that is high enough to deliver the Minimum Viable Product (MVP) without cutting critical features or compromising the integrity of the project. However, this figure must also be set reasonably low as to be attractive to investors seeking a good deal.

How to Proceed Post-ICO

Again, it’s important to note that the hard and soft caps are determined by what you plan to do with your ICO funds. Justifying the fundraising to potential investors by convincing them that you won’t be using their money to take upper management on a cruise, but instead will use it in a way that effectively grows the company, is critical to establishing trust and attracting buyers. So establish how you’ll use those funds before you begin establishing targets, and then once you have those funds, do as you say. Trustworthy companies are able to establish more funding rounds in the future, so it’s important to remain within the parameters of the project at hand so that you can set yourself up for even more success.

Article Produced By

Adrian Guttridge

Beyond the ICO Part 2: Regulation Breeds Specialization

Beyond the ICO Part 2: Regulation Breeds Specialization

Fraudulent ICOs have stolen billions in investor capital,

damaging market sentiment and capturing negative attention from strong-handed regulators around the world. There’s no doubt that the shape of ICOs is changing–but what role will regulators play in the future development of the ICO model? As market participants begin to adapt to exit scams, a set of de facto requirements have emerged that ICOs must follow to succeed—rules that government regulators have begun to adopt while a legal scaffold is quickly constructed around the out-of-control ICO industry. In this three-part series, CryptoSlate will assess the current state of the ICO ecosystem, analyze the regulatory shift that is making the “traditional” ICO model untenable and take a look beyond the ICO at the future of a decentralized capital generation.

The ICO is Dead. Long Live the ICO

The hand that will drive the final nail into the coffin of the traditional ICO model is directly attached to the arm of regulation. Upcoming regulatory changes to the definition of what constitutes a security will see scores of the ICO ecosystem fall to the tyranny of financial watchdogs–which is, in some cases, necessary. The core appeal of the ICO model, which democratizes access to growth capital, is how it opens up participation in the market of ideas to anyone, anywhere–free from restrictions such as the U.S. SEC’s limitation on pre-IPO sales to “accredited investors.” A small oversight, however, is arguably necessary to safeguard the interests of ICO investors.

ICO regulation hinges on the separation of the sale of utility tokens, which provide investors with access to future products or services, and security tokens, which represent ownership of an asset, with functionally equivalent to equity or debt. The SEC’s position on ICOs, however, appears to place all tokens sold in ICOs in the latter category and, therefore, under the jurisdiction of the SEC.

As expressed by SEC Chairman Jay Clayton in April:

“I believe every ICO I’ve seen is a security”

Regulators are Stepping in—and Why That’s a Good Thing

If the SEC does not step in to “stop the fraudsters,” states Clayton, there is a serious risk that the regulatory response to fraudulent platforms will be so severe that they will restrict the capacity of the entire crypto asset class. The SEC, it appears, will no longer tolerate the “wild west” environment of the ICO ecosystem. While the SEC has recently softened its stance on ICOs, it’s clear that the classification and regulation of ICOs are soon to change. At the Yahoo Finance All Market Summit: Crypto in San Francisco, June 14, the SEC’s corporate finance division head, William Hinman, admitted that it’s possible for a token sold as a security offering, as defined by the SEC,

to be reclassified:

“Can a digital asset originally sold in a securities offering eventually be sold in something other than a security? How about cases when there’s no longer a company? I believe in those cases answer is a qualified yes.”

According to SEC, cryptocurrencies that lack a centralized governing body and operate in a similar manner to commodities like Ethereum or Bitcoin are definitely not securities. Tokens sold in crowdsales that function as investments, however, unequivocally are. If a decentralized blockchain-based growth capital generation is to continue to thrive, a paradigm shift in the structure and execution of ICOs is essential.

Article Produced By
Sam Town

About Sam

Samuel is a freelance journalist, digital nomad, and crypto enthusiast based out of Bangkok, Thailand. As an avid observer of the rapidly evolving blockchain ecosystem he specializes in the FinTech sector, and when not writing explores the technological landscape of Southeast Asia.

https://cryptoslate.com/beyond-the-ico-part-2-regulation-breeds-specialization/

Beyond the ICO Part 1: Adapt or Die

Beyond the ICO Part 1: Adapt or Die

The intoxicating, late 2017 cryptocurrency market run-up fired blockchain technology

and digital currencies directly into the nucleus of the global financial ecosystem–demanding the attention of regulators, speculators and innovators. The culmination of the blockchain led to the widespread realization that virtually everything could be decentralized including the creation and funding of blockchain platforms themselves.

Thus, the year of the initial coin offering (ICO) was born, catalyzing a gold rush of ICOs that cumulatively generated more than $5.6 billion, an exponential increase over the mere $240 million raised the year prior. A loose regulatory environment paired with quixotic market sentiment led to a frenzy of token sales, spawning more than 900 individual offerings that ranged from highly successful to outright scams.

In this three-part series, CryptoSlate will assess the current state of the ICO ecosystem, analyze the regulatory shift that is making the “traditional” ICO model untenable and take a look beyond the ICO at the future of a decentralized capital generation.

The End of the ‘Wild West’

The rapid development of blockchain-based crowdfunding has resulted in a series of successful platforms such as NEO, Storj and even Ethereum; however, the speed in which ICOs propelled into the international crypto market has made it nearly impossible for regulators to create nuanced, regulatory frameworks that are able to protect investors from scammers and fraudsters. The total lack of oversight within the ICO ecosystem has resulted in swift and furious action from regulatory bodies around the world, and with research hinting toward prolific fraud in the ICO market, countries like China and South Korea have completely banned ICOs. However, despite regulatory crackdowns and dwindling investor trust, ICOs have already generated $6.3 billion in 2018.

Statistics released by TokenData, however, reveal that 46 percent of the ICOs launched in 2017 have failed–suffering from economic asphyxiation, exit scams or condemned to development hell. With the SEC hinting toward further crackdowns on the ICO model, it’s becoming apparent that the window of opportunity in which entrepreneurs are able to generate hundreds of millions in unregulated startup capital is rapidly drawing to a close.

Exit Scams Keep Happening

Data published in July by ICO advisory firm SATIS Group also reveals high levels of fraud present in the ICO industry. In addition, the Wall Street Journal has previously reported statistics that indicate up to 20 percent of all ICOs are fraudulent in nature; however, STATIS maintains that nearly 80 percent of ICOs can be classified as “scams.” In 2018 alone, the cryptocurrency community has been rocked by a score of ICO exit scams that have separated investors from more than half a billion dollars in invested capital. For example, the Vietnamese cryptocurrency platform Modern Tech launched an ICO called “Pincoin” that defrauded investors of nearly $660 million in April.

More recently, the ACChain project allegedly executed an exit scam, vacating offices and taking off with more than $60 million in investor capital. With investors warier than ever before, and regulators poised to take drastic action, the ICO model as it existed in 2017 is dying. However, the future of decentralized startup capital generation is, indeed, bright. In part two of CryptoSlate’s “Beyond the ICO” series, we’ll examine the regulatory response to the ICO crisis and how regulators plan to address growing concerns regarding unregulated crowdfunding events.

Article Produced By
Sam Town

About Sam

Samuel is a freelance journalist, digital nomad, and crypto enthusiast based out of Bangkok, Thailand. As an avid observer of the rapidly evolving blockchain ecosystem he specializes in the FinTech sector, and when not writing explores the technological landscape of Southeast Asia.

https://cryptoslate.com/beyond-the-ico-part-1-adapt-or-die/

Study: ICO Market Doubled Since Last Year, Shows Increased Institutional Investment

Study: ICO Market Doubled Since Last Year, Shows Increased Institutional Investment

The Initial Coin Offering (ICO) market has more than doubled in a year

according to ICORating’s ICO market report for the the second quarter of 2018, published August 8. ICORating is an independent rating agency that conducts independent analytical research evaluating ICOs and the ICO market. According to the report, ICOs in 2018 have already raised over $11 billion in investments, a figure which it purports is ten times larger than the sum of investments from ICOs in Q1-2 2017. ICORating reports that in Q2 2018, 827 projects raised over $8 billion in funding, compared to $3.3 billion in Q1 2018, representing a 151 percent increase overall. The report notes:

“Funds raised by EOS project account for most of this increase, they have collected $4,197,956,135 for a year-long ICO.” Per ICORating, Europe has become a leader, launching 46 percent of all projects, while North America is leading in investment, collecting 64.67 percent of attracted funding. The reports adds: “Asia-based projects showed an increase in funds raised (+20%), but a decrease in the number of projects launched (–40%).” Institutional capital in ICO markets has increased, while the report notes a “continued decline in the number of retail investors.” According to the study, this results in an environment in which project requirements increase, while the amount of funds raised during ICOs increasingly becomes dependent on “how well projects cooperate with investment funds.”

The top 10 industries by funds raised were led by financial services, blockchain infrastructure, and banking and payments, which collectively represent over $1 billion in raised assets. Financial services led all other industries both in the amount of funds attracted, and the number of projects. In July, analysts associated with the Crypto Finance Conference revealed that the “most favorable” countries for ICOs were the U.S., Switzerland, and Singapore. Researchers based the rankings on publicly available data of the top 100 ICOs by country in terms of funds raised and ranked them by number of projects launched.

Article Produced By
Max Yakubowski

Max Yakubowski has a Ph.D. in Linguistics and Anthropology, with a focus in innovative technology and its cultural and social influence. He joins Cointelegraph after working as a freelance copywriter and blogger.

https://cointelegraph.com/news/study-ico-market-doubled-since-last-year-shows-increased-institutional-investment

A $153 million ICO in action

A $153 million ICO in action

One of the largest-ever ICOs was a project known as Bancor

which raised $153 million in around three hours. The digital coin issued is called the Bancor network token (BNT) and it was built on the Ethereum platform. A key aspect of Ethereum is the so-called smart contract functionality. Smart contracts are contracts that automatically execute when certain conditions are met from all interested parties. The automation can help to speed the process up, ensuring no mistakes along the way.

Bancor is creating a product that rivals cryptocurrency exchanges based on smart contracts. An exchange matches buyers and sellers and essentially acts as a middleman. But, Bancor’s network allows users to convert one cryptocurrency into another with low conversion costs and without fears of low liquidity. It automatically balances supply and demand and works out the correct conversion price of one coin into another.

It does this through what it calls “smart tokens” which can be generated through the Bancor network. These smart tokens or digital coins hold one or more other cryptocurrencies in reserve which means that it can always be traded. For example, if there was a digital coin that only had a few thousand users, it would be difficult to trade as there would not be a large pool of people wanting to buy and sell it. But if that digital token had a popular and large reserve cryptocurrency like ether then there would always be liquidity to trade. But ICOs are not flawless. As a result of the large demand for BNT, the Ethereum network became congested during the coin offering last year, leading to delays for buyers. CNBC spoke to Galia Benartzi, the co-founder of Bancor, and asked her about the ICO process and the company’s ambitions .

Why was an ICO the right route to go down?

At Bancor we believe the term ICO is actually a misnomer because it implies a similarity to an IPO. ICOs, or as we prefer to call them "Token Generation Events" (TGEs), are fundamentally different than IPOs in that an IPO is conducted by a mature company with a live product and revenue, while a TGE represents the birth of a new currency which powers a network.

We decided to launch a TGE because we had a design for a promising token — BNT, which could connect many tokens into a network — the Bancor Network — and make them instantly interchangeable, without needing to match buyers and sellers, without relying on volume or market makers, and without fees or barriers to listing. During the TGE, more than 10,000 users contributed to the project by purchasing BNT. These 10,000 BNT holders instantly seeded the network in a way that no traditional launch would have been able to do. This momentum is essential for a network's growth and a TGE allowed us to create alignment with early adopters in a way that increases the network's chance of success.

What have you learned along the process?

The industry has matured a great deal since Bancor held its TGE in June, 2017 and yet still has a tremendous way to go. We are learning more every day than ever seemed possible, as seemingly disparate fields from economics, history, psychology, system design, network effects, finance, law, ethics, sustainability and others converge in the blockchain space. Some of the main learnings are actually in areas that the Bancor Protocol aims to shed light on. For example, in today's ecosystem, one of the main jobs of a token issuer is to plan for its liquidity, via costly exchange listings and market makers. We hope that in the future, token creator's will be able to focus on their networks, products and users, when liquidity is fair and free for all.

Where are you in the development of the network?

We are aiming to make cryptocurrencies accessible to a wide array of users, including those who are brand new to crypto. To this end, we launched the Bancor Wallet which allows users to log in from any mobile device or social messaging account (Telegram, WeChat, Messenger or SMS) and instantly buy and sell more than 100 tokens, without having to be matched in an exchange to a buyer or seller.

What will your tokens be used for?

All tokens on the Bancor Network hold an amount of BNT (Bancor’s Network Token) in their smart contracts. This links together each token in the Bancor Network, allowing tokens to be instantly interchangeable for one another at continuously calculated rates. As users buy BNT (or any token in the Bancor Network), it increases the liquidity of each token in relation to the others, creating more predictable and efficient token conversions for all users of the network. BNT is the hub network token for a decentralized global liquidity network that allows anyone to launch a viable currency with continuous liquidity based on its actual usage.

Article Produced By
CNBC

https://www.cnbc.com/2018/07/13/initial-coin-offering-ico-what-are-they-how-do-they-work.html

ICOs Legality, scams and dangers

ICOs Legality, scams and dangers

With any new technology, particularly where large amounts of money is involved,

there will be scrutiny from regulators and scams. ICOs have seen both. But the new nature of these digital token issuances has meant that the regulatory landscape globally is fragmented with each country looking at ICOs in different ways.

Are ICOs legal?

The short answer: it depends where you are. It’ll be hard to go through every single country in the world, but let’s look at the major markets. China, which was once a prolific market for cryptocurrencies, has come down hard on the industry. Last year, the People's Bank of China declared ICOs as illegal, warning people of the risks involved in investing in them. Shortly after, South Korea followed, banning raising money through virtual currencies. In the United States, there are no specific regulations for ICOs, but depending on how the digital coin is classed, it may fall under the jurisdiction of the Securities and Exchange Commission (SEC). The regulator is in charge of overseeing trading in various financial products. If the SEC deems that a coin is a “security,” then the company behind it may have to register with the regulator.

The SEC has been very vocal however on warning people about the dangers of investing in ICOs. “As with any other type of potential investment, if a promoter guarantees returns, if an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost,” the SEC says on its website. The watchdog also issued a warning last year to celebrities who endorse ICOs saying that they may need to disclose information about the relationship with the company if the digital coin is deemed to be a security.

Elsewhere, in Europe, the European Securities and Markets Authority (ESMA) released guidance on ICOs last year. The regulator said that ICOs that qualify as financial instruments could fall under the relevant laws to do with anti-money laundering or investment legislati Some countries are attempting to actually create new rules in order to bring ICOs into the regulatory fold. For example, the government in Malta recently approved three new bills related to cryptocurrencies and blockchain technology. One of those new laws aims to bring a regulatory regime to ICOs.

Similarly, in Abu Dhabi, the capital of the United Arab Emirates, the regulator has published guidelines on launching ICOs. Under the guidelines, companies wishing to execute an ICO must approach the Financial Services Regulatory Authority to see whether it will fall under the body's regulation. Companies will also have to publish a prospectus, just like a firm would for an initial public offering (IPO) on the stock market. Any market intermediaries, or secondary market operators dealing with ICOs must be approved by the FSRA.

“If you put a regulator’s lens on, regulators are saying ‘oh my gosh there is a concentration of crypto capital that is in these ICOs, these people aren’t in the financial system, what is happening to the money’,” Lawrence Wintermeyer, a principal at advisory business Capstone, told CNBC. “There is a huge concern retail people might be exposed to this.” Many countries are looking into how to regulate ICOs but there’s clearly a disparity around the world. The lack of regulation however is a factor behind major scams — one of the biggest issues right now with ICOs.

Scams and dangers

Investing in ICOs is risky business for a number of reasons. Often people are putting money into products that don’t exist yet. While this may not sound too dissimilar to say very early stage investing in other start-ups, the people placing bets on ICOs are usually unsophisticated investors. These projects have high failure rates too. Already, hundreds of coins are dead, meaning the projects behind them were scams, a joke or didn’t materialize. Dead Coins is a website that lists all the cryptocurrencies that fall into those categories. So far, it has identified just over 800 digital tokens that it considers dead. These coins are worthless and trade at less than 1 cent.

And because of the lack of regulation, scams are rife in the industry. One example uncovered by CNBC earlier this year was a project called Giza which claimed to be developing a super-secure device that would allow people to store cryptocurrencies. Scammers in this case managed to raise more than $2 million in an ICO, and eventually run off with the funds without delivering any product. A bad actor or actors used a fake LinkedIn profile and copied pictures from another user's Instagram to create a false persona — and successfully drew more than 1,000 investors into the ICO project.“Are there fraudulent projects? Yes. Are there ill conceived sales that have not thought through potential regulatory issues? Yes. Are there poor projects that will ultimately fail? Naturally.”

Investors are still trying to get their money back but because of the lack of regulation, there is very little consumer protection in the space. Another high-profile scam involved a company called Centra Tech Inc. It was an ICO backed by champion boxer Floyd Mayweather. The U.S. Securities and Exchange Commission (SEC) charged the founders with carrying out a fraudulent ICO. Even successful ICOs have their problems. Bancor, whose coin offering we detailed above, suffered a security breach that saw $13.5 million worth of digital tokens stolen. Many experts in the field however have predicted that ICOs are here to stay and that they will become professional.

“Are there fraudulent projects? Yes. Are there ill-conceived sales that have not thought through potential regulatory issues? Yes. Are there poor projects that will ultimately fail? Naturally. However, amongst these there are many, many deeply innovative projects amongst which a handful will be gamechangers,” Richard Muirhead, founding partner at Fabric Ventures, an investment fund focused on blockchain projects, told CNBC. “If 2017 was the year of ICO hype, then 2018-2020 will be the years of decentralized networks development which will be focused on shipping working code and building communities.”

Article Produced By
CNBS

https://www.cnbc.com/2018/07/13/initial-coin-offering-ico-what-are-they-how-do-they-work.html

Telegram Tech Promised In ICO Vulnerable to Attack, Researchers Say

Telegram Tech Promised In ICO Vulnerable to Attack, Researchers Say

With $1.7 billion in the bank following its initial coin offering (ICO),

Telegram has released its first crypto-friendly feature – but security researchers are skeptical. As detailed in a blog post published today, Virgil Security, a U.S.-based startup, has identified several weaknesses in the new identity verification app, called Passport. While the company praised Telegram for publishing the application's API as open source, allowing the code to be checked by other experts, Virgil Security detailed two problems with the app: how it encrypts data and how it protects stored data. "Their commitment to openness gives security practitioners the opportunity to review their implementation and, ideally, help improve it," Virgil Security's Alexey Ermishkin wrote on the company's blog,

adding:

"Unfortunately Passport's security disappoints in several key ways."

Telegram has never publicly announced or verified the existence of its billion-dollar ICO. But as documents started to leak earlier this year, it became clear that the company, more widely known for its chat app, aimed to compete with many of the services – from filesharing to encrypted browsing – that crypto startups had already proposed.

Plus, it wanted to bring blockchain-based payments to the Telegram chat app, which in recent years has become popular among the crypto community. Payments and identity verification go hand-in-hand, making Passport a natural early offering from the company. Plus, disrupting the digital ID incumbents like Equifax, which keep data in centralized databases vulnerable to breach and abuse, has long been a shared goal of the cryptocurrency community, so it's is a fitting place for Telegram to start.

In its blog post about the new product, Telegram promises that "your identity documents and personal data will be stored in the Telegram cloud using end-to-end encryption. It is encrypted with a password that only you know, so Telegram has no access to the data you store in your Telegram passport." It goes on to promise that, eventually, this data will be stored in a decentralized fashion, Identity was one of the components of the ambitious blockchain-based system that Telegram promised in its ICO technical whitepaper. But from the looks of Virgil Security's findings, Telegram needs to go back to the drawing board.

Brute force

Virgil Security's chief critique of Passport's security is the way it encrypts its passwords. In announcing Passport, Telegram released a considerable amount of information about how the system works. In particular, Virgil Security focuses on the fact that Telegram uses SHA-512 to hash passwords. "It's 2018 and one top-level GPU can brute-force check about 1.5 billion SHA-512 hashes per second," they write.

It goes on to estimate that with enough computers, these passwords could be busted for anywhere from $135 to $5 each, depending on the strength of the passwords users chose. However, before an attacker could begin its attack, it would need to first breach Telegram itself, as Virgil acknowledges.

"To access the password hashes, the attack would have to be internal to Telegram. The ways that could happen are numerous — insider threat, spearphish, one rogue USB stick, etc," Virgil Security co-founder Dmitry Dain told CoinDesk. And if lots of users begin using and in turn loading this data into Telegram's Passport, it will make the company a very attractive target. Telegram has long been criticized for taking its own approach to cryptography, rather than relying on established standards. That said, Telegram's model has not been known to have been broken so far.

Unsigned data

The other danger to users Virgil Security critiques is a bit more nuanced: the fact that the data uploaded to Passport isn't signed. By cryptographically signing data (an integral part of blockchain architecture broadly), users can quickly verify the data was loaded there by the person who claimed to have loaded it and it hasn't been changed. Without a cryptographic signature, an attacker could change some part of the data and no one would know.

The Virgil Security post argues:

"Now, when people see 'end-to-end encrypted,' they believe that their data will safely be sent to a third party without worries of it being decrypted or tampered with. Unfortunately, Passport users will have a false sense of confidence."

Yet, with Virgil Security's critiques and the newness of the product, it should be relatively simple for Telegram to harden its security (Virgil Security is one provider of end-to-end encryption). Telegram did not immediately reply to a request for comment.

Article Produced By
Brady Dale

Brady Dale is a reporter who has previously written for Fortune, Technical.ly Brooklyn, Next City and Motherboard, among others. He grew up in Kansas and lives in Brooklyn.

https://www.coindesk.com/telegrams-post-ico-id-app-vulnerable-to-attack-researchers-say/

Curbing the Menace of ICO Fraud in the Cryptocurrency Industry

Curbing the Menace of ICO Fraud in the Cryptocurrency Industry

to the cryptocurrency industry. More than 81 percent of all ICOs are fraud. Most investors and enthusiast are unaware of these pump and dump schemes. Due to it unregulated nature, most of these ICOs successfully swindle individuals get away with it.

The Emergence of Cryptocurrency Research Centers

In recent times, specialized cryptocurrency research centers have been established. These centers were created to analyze cryptocurrency market conditions and information which analysts provide. Such analysts must have had experience working with large securities companies and private equity fund firms. The primary objective of these centers is to help individuals better understand the dynamic cryptocurrency market from an investor’s view. ICOs have continued to be plagued by these frauds, and these special centers are in place to curb the disease amid a regulatory vacuum.

Notable Strides Made So Far

Chain Partners Inc., South Korea’s first blockchain company builder, announced on July 29 that it was hiring employees for its research center. Cryptocurrency analysts who have five-year work experience in the investment banking industry stand a better a chance being hired by the company.  The Chain Partners Research Center is headed by Han Dae-hoon, the former analyst at SK Securities Co. and Shinhan Investment Corp.

The center is taking important steps, as it already presented a cryptocurrency index for the first time in Korea. Apart from this, a daily report analyzing the cryptocurrency market home and abroad is published. Another important step the Korean research center is trying to take is developing an index like the KOSPI 200. This can show the price trend and transaction data of major cryptocurrencies, like Bitcoin and Ethereum. China Partners is not the only center willing to have an index. Bloomberg, together with US fund industry legend, Michael Novogratz, created Bloomberg Galaxy Crypto Index (BGCI). The BGCI also bases its calculations based on cryptocurrencies with the most market capitalizations and transactions, including Bitcoin, Ethereum, and Ripple.

Regularizing the Cryptocurrency Research Center Scene

Another company which recently launched its own research center, is Coinone, South Korea’s third-largest cryptocurrency exchange. The primary goal of the center is to present a premium standard for cryptocurrency analysis. Like Chain Partners Research Center, it also releases a report on cryptocurrency analysis and weekly market conditions. Streami Inc. is not left out, as it recently received an ISO/IEC270001 information security certificated by the International Organization for Standardization. The company which runs cryptocurrency exchange, Gopax, is gearing towards providing Cryptopic that contains essential information on crypto investment.

Binance, one of the largest digital currency exchanges by market capitalization, is set to launch an application app called Binance Info. The company is test running the app by recruiting pre-users before the official release. According to a Binance official, Binance Info would provide information on about 1,200 coins and industry news.

Article Produced By
Osato Avan-Nomayo

https://ethereumworldnews.com/curbing-the-menace-of-ico-fraud-in-the-cryptocurrency-industry/

WTF is an ICO?

WTF is an ICO?

It wasn’t very long ago that bitcoin felt nascent,

laughable and small. In the ensuing years, bitcoin has matured, become far less risible and grown massively. Underscoring bitcoin’s maturation, the currency set new price records this week as the value of a single coin crossed the $2,000 threshold. Since bitcoin was announced in 2009, and certainly since I first wrote about it in 2013, the ecosystem of cryptocurrencies has exploded.

Cryptocurrencies have expanded since the days bitcoin shared some of the media’s spotlight with litecoin and the silly-by-design dogecoin. It was a time when Mt. Gox ruled, cupcake shops could become media darlings by accepting the digital currency and pizza was a critical bitcoin-pricing metric. Now, there are dozens of cryptocurrencies worth eight figures, and the birth pace of new entrants is accelerating.

In that particular milieu of freshly launched coins is a newly famous transaction type we need to understand called the “Initial Coin Offering” or ICO. An ICO is akin to an IPO, but in temporal reverse (sort of). Although confusing, it has recently acquired prominence as a favored way to launch a new cryptocurrency. But as is typical of nascent cryptoproducts, there are legal questions and unethical players in the mix. So let’s explore what an ICO is in the current cryptocurrency market.

ICO basics

An ICO is a fundraising tool that trades future cryptocoins in exchange for cryptocurrencies of immediate, liquid value. You give the ICO bitcoin or ethereum, and you get some of Billy’s New Super Great Coin or the infamous CrunchCoin. The Financial Times calls ICOs “unregulated issuances of cryptocoins where investors can raise money in bitcoin or other [cryptocurrencies],” which is accurate, especially if you underline the word “unregulated.” We’ll get to that in a moment. Sticking close to the older financial publications, The Economist also took a look at the financing mechanism, describing what you buy in an ICO in

the following fashion:

ICO “coins” are essentially digital coupons, tokens issued on an indelible distributed ledger, or blockchain, of the kind that underpins bitcoin, a crypto-currency. That means they can easily be traded, although unlike shares they do not confer ownership rights. […] Investors hope that successful projects will cause tokens’ value to rise.

The referenced value increase is critical to understanding the appeal of ICOs. These are not transactions of love. They are investments made in hopes of quick, strong returns. Notably, not all ICOs are for cryptos that will maintain their own blockchain. According to the crypto-focused Smith + Crown research group, some ICOs are actually “launching ‘meta-tokens’ built on Ethereum, Bitcoin, NXT or others.”

After all, why not.

So ICOs can be coins on top of coins funded by the transfer of other cryptos to accounts in the hunt for what’s next. That might sound crazy, but it’s hot times in the crypto world. And that heat is keeping ICOs bubbling. The same Economist piece, published in April of 2017, notes: “[n]early $250m has already been invested in [ICOs], of which $107m alone has flowed in this year,” a metric that it attributes to the aforementioned Smith + Crown. That is a lot of money, making ICOs large in terms of their sheer dollar-scale. It’s therefore not hard to understand why more traditional business publications are paying attention. Following the money is their jam. In short: ICOs are the new funding slingshot by which nascent cryptos are flung into the world.

Thieves, lies and laws

As with any boom, there are bad actors to be found in the land of ICOs. Given bitcoin and the larger cryptocurrency world’s deep tradition of enduring bad behavior, it is not a surprise that ICOs are attracting humans of base intent. ICO fraud and skullduggery is common enough that a quick search yields heart-melting headlines like “Ver Backed Qtum Founder Ran Previous ICO Scam,”  “To everyone that bought into the Matchpool ICO, it looks like it was maybe a scam…,” and “A Digital Currency Scam is Misusing the Rothschild Family Name.” All of the articles are from this year to date. In the world of ICOs, fraud is never hard to find. Add in regular sums of incompetence that any new venture could fall prey to, and ICOs feel a bit Old West.

Laws

But what about regulation, you reasonably protest. Surely that must exist to protect consumers? Returning to Smith + Crown, skirting usual rules concerning fundraising is nearly normal in the realm of ICOs — at least partially explaining why guard rails in crypto offerings may remain

a homegrown affair:

Most ICOs today are marketed as ‘software presale tokens’ akin to giving early access to an online game to early supporters. In order to try to avoid legal requirements that come with any form of a security sale, many ICOs today use language such as ‘crowdsale’ or ‘donation’ instead of ICOs.

So regulation is out of the mix for now. There is an argument to be made that a dearth of regulatory oversight is actually good, as it allows the ICO market to iterate and innovate quickly. It is a reasonable(ish) argument and likely technically correct, but that doesn’t mitigate the potential for unsophisticated investors to be preyed upon. Caveat emptor and moral hazard are fine arguments in favor of no rules regarding ICOs and cryptos, but if the market wants to keep growing, it will need to do more to attract consistently larger pools of capital.

Bubble me this

Is there a chance that ICOs will slow? Of course, but the forces behind them run a bit deeper than we might have first guessed. CryptoHustle makes the related point in a recent article that “ICO mania is likely due to early Ethereum adopters making serious returns after the last bull run.” Etherum’s run has certainly been staggering. If it is fueling the ICO craze, we could be in for a long cycle.

Regardless, the point doesn’t mean that cryptomarkets are as they should be. That ICOs would eventually get ahead of themselves and bubble like so many young technology niches was predicted at least since last October. How long the good times will last isn’t obvious. But the correction will come, as always, and when it does, we’ll see which cryptos have a real shot.

Take this away

The cryptocurrency market is hot once again. And while it continues to set new records, a host of altcoins will demand its slice of the market. Should you buy into an ICO? Only if you have a massive appetite for risk, zero fear of losing your capital and are willing to take a flying chance on an idea that could flop. Then again, crowdfunding has similar risks and seems perfectly healthy. Your call.

Article Produced By
Alex Wilhelm

Alex Wilhelm is Crunchbase's Editor in Chief. He previously worked for The Next Web, TechCrunch, and Mattermark. Alex enjoys long walks on twitter boards, espresso, and responsive keyboards.

https://techcrunch.com/2017/05/23/wtf-is-an-ico/

What Is an ICO?

What Is an ICO?

An Initial Coin Offering,

also commonly referred to as an ICO, is a fundraising mechanism in which new projects sell their underlying crypto tokens in exchange for bitcoin and ether. It’s somewhat similar to an Initial Public Offering (IPO) in which investors purchase shares of a company.

ICOs are a relatively new phenomenon but have quickly become a dominant topic of discussion within the blockchain community. Many view ICO projects as unregulated securities that allow founders to raise an unjustified amount of capital, while others argue it is an innovation in the traditional venture-funding model. The U.S. Securities and Exchange Commission (SEC) has recently reached a decision regarding the status of tokens issued in the infamous DAO ICO which has forced many projects and investors to re-examine the funding models of many ICOs. The most important criteria to consider is whether or not the token passes the Howey test. If it does, it must be treated as a security and is subject to certain restrictions imposed by the SEC.

ICOs are easy to structure because of technologies like the ERC20 Token Standard, which abstracts a lot of the development process necessary to create a new cryptographic asset. Most ICOs work by having investors send funds (usually bitcoin or ether) to a smart contract that stores the funds and distributes an equivalent value in the new token at a later point in time.

There are few, if any, restrictions on who can participate in an ICO, assuming that the token is not, in fact, a security. And since you’re taking money from a global pool of investors, the sums raised in ICOs can be astronomical. A fundamental issue with ICOs is the fact that most of them raise money pre-product. This makes the investment extremely speculative and risky. The counter argument is that this fundraising style is particularly useful (even necessary) in order to incentivize protocol development. Before we get into a discussion over the merits of ICOs, it is important to have some historical context for how the trend started.

History of ICOs

Several projects used a crowdsale model to try and fund their development work in 2013. Ripple pre-mined 1 billion XRP tokens and sold them to willing investors in exchange for fiat currencies or bitcoin. Ethereum raised a little over $18 million in early 2014 — the largest ICO ever completed at that time. The DAO was the first attempt at fundraising for a new token on Ethereum. It promised to create a decentralized organization that would fund other blockchain projects, but it was unique in that governance decisions would be made by the token holders themselves. While the DAO was successful in terms of raising money — over $150 million — an unknown attacker was able to drain millions from the organization because of technical vulnerabilities. The Ethereum Foundation decided the best course of action was to move forward with a hard fork, allowing them to claw back the stolen funds.

Although the first attempt to fund a token safely on the Ethereum platform failed, blockchain developers realized that using Ethereum to launch a token was still much easier than pursuing seed rounds through the usual venture capital model. Specifically, the ERC20 standard makes it easy for developers to create their own cryptographic tokens on the Ethereum blockchain. Some argue that crowdfunding projects might be Ethereum’s “killer application” given the sheer size and frequency of ICOs. Never before have pre-product startups been able to raise this much money and in this little time. Aragon raised around $25 million in just 15 minutes, Basic Attention Token raised $35 million in only 30 seconds, and Status.im raised $270 million in a few hours. With few regulations and such ease of use, this ICO climate has come under scrutiny from many in the community as well as various regulatory bodies around the world.

Are ICOs Legal?

The short answer is maybe. Legally, ICOs have existed in an extremely gray area because arguments can be made both for and against the fact that they’re just new, unregulated financial assets. The SEC’s recent decision, however, has since managed to clear up some of that gray area. In some cases, the token is simply a utility token, meaning it gives the owner access to a specific protocol or network; thus it may not be classified as a financial security. On the other hand, if the token is an equity token, meaning that it’s only purpose is to appreciate in value, then it looks a lot more like a security.

While many individuals purchase tokens to access the underlying platform at some future point in time, it’s difficult to refute the idea that most token purchases are for speculative investment purposes. This is easy to ascertain given the valuation figures for many projects that have yet to release a commercial product. The SEC decision may have provided some clarity to the status of utility vs security tokens; however, there are still plenty of room for testing the boundaries of legalities. For now, and until further regulatory limits are imposed, entrepreneurs will continue to take advantage of this new phenomenon.

Article Produced By
Bitcoin Magazine

https://bitcoinmagazine.com/guides/what-ico/