FBI Outline Key Features of Scam ICOs Warns Investors to Be Vigilant

FBI Outline Key Features of Scam ICOs, Warns Investors to Be Vigilant

                

The United States Federal Bureau of Investigation (FBI)

has outlined what it believes to be the consistent threads running through fraudulent initial coin offering (ICO) schemes. The Bureau’s perspective was shared in an interview with Netherlands-based financial news site the Paypers on Feb. 19. According to the FBI, the key strategies of scam offerings include misrepresentations of their directors’ professional experience, an engineered false impression of how much traction the ICO has garnered in the industry, and unrealistic promises of prospective

returns on tokens:

“Like any investment product, rates of return can never be guaranteed and if it sounds too good to be true, it probably is.”

The FBI warned investors to conduct due diligence on any scheme and the individuals behind it, and to be on the lookout for entities that appear to be exclusively internet-based, where a physical address or contact is hard or impossible to come by. The Bureau also suggested investors should be aware of which jurisdiction the offering is registered in — if at all — and to which laws and regulations it therefore falls subject to.   

The public can avail itself of the Financial Industry Regulatory Authority’s BrokerCheck system to verify the identities and registration status of entities, the FBI advised. Given that even well-known cryptocurrencies and products may carry heightened risks of volatility due to the nascent stature of the industry, the FBI advised prospective investors to only invest what they can afford to lose.

In regard to legitimate business operators of platforms such as virtual currency exchanges or cryptocurrency ATMs, the FBI noted that both the Financial Crimes Enforcement Network and multiple Federal District Courts have deemed such entities as subject to registration requirements. Failure to duly register is thus reportedly deemed to be in violation of federal money transmitting laws.

Looking ahead to the future, the FBI echoed the U.S. Securities and Exchange Commission (SEC)’s stance that a vast swathe of token offerings should be classified as securities and that, given the increasing proliferation of such assets — with many industry members anticipating a security token offering trend — investors should be wary of the heightened risks of fraud. As previously reported, the FBI accounted for the highest number of law enforcement information requests sent to Erik Voorhees’ Switzerland-based cryptocurrency exchange ShapeShift last year.

In June 2018, the Bureau revealed it had 130 ongoing crypto-related cases, with dark web drug sales a particular concern. It nonetheless characterized the sector as accounting for merely “a small sliver” of the FBI’s activities overall. Last year, the SEC attempted to educate investors by creating a mock ICO website that lured visitors with a “too good to be true investment opportunity.” The site employed the red flags the agency claimed to have identified in the majority of fraudulent ICOs, and redirected those who attempted to purchase the ersatz tokens to an educationally-oriented page on the SEC’s site.

Article Produced By
Marie Huillet

Marie Huillet is an independent filmmaker, with a background in journalism and publishing. Nomadic by nature, she’s lived in five different countries this decade. She’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives.

https://cointelegraph.com/news/ethereums-vitalik-buterin-discloses-non-eth-crypto-holdings-and-other-revenue-sources

Beyond the ICO: Evolution Versus Revolution

Beyond the ICO: Evolution Versus Revolution

               

The ICO model will soon be rendered redundant

by a series of new token offering models focusing on security, transparency, and regulatory compliance. An explosion of token offering innovation is underway, with several new models emerging as prime contenders for the title of the “ICO of the future.” In this three-part series, we’ll assess the current state of the ICO ecosystem, analyze the regulatory shift making the “traditional” ICO model untenable, and take a look beyond the ICO at the future of decentralized capital generation.

In our previous Beyond the ICO article, we examined the ICO market and regulatory response to the ongoing issue of ICO fraud. Regulators are playing a critical role in the creation of a new token offering model that allows innovative startups to access capital in a decentralized manner, but what shape will the future ICO take?

The Future of the ICO

The immunological regulatory response to the threat presented by the traditional ICO model will inevitably result in change, but regulation isn’t the only environmental factor shaping the evolution of ICOs. Community self-regulation will heavily influence the morphology of future ICOs as the crypto market adapts to fraud within the ICO market and eliminates less efficient models in a Darwinian manner. The ICO model will fracture into separate models that fill different niches within the blockchain ecosystem; security token offerings and DAICOs.

Security token offerings address the core issue presented by bringing capital markets onto the blockchain. Instead of working against existing securities laws, a security token offering, or STO, works with them — the most obvious solution to the looming threat of regulatory action. Instead of attempting to camouflage what is arguably a securities offering as a utility token, STOs deliver regulatory certainty as well as investor confidence

While STOs aim to adapt to the impending fallout of an extinction-level threat, the DAICO model — proposed by Vitalik Buterin — is less concerned with regulation, and more focused on minimizing the inherent risk and complexity of ICOs. By fusing the concept of a decentralized autonomous organization and an ICO, the DAICO model allows development teams to publish a smart contract that launches in “contribution mode.” A DAICO establishes the funding process as a smart contract that governs the contribution of ether to a project and the specifics of a sale, as well as allowing token holders to vote on the rate of funding delivered to the development team, or even put a contract into “withdraw mode” as

outlined by Buterin:

“Voters start off by giving the development team a reasonable and not-too-high monthly budget, and raise it over time as the team demonstrates its ability to competently execute with its existing budget. If the voters are very unhappy with the development team’s progress, they can always vote to shut the DAICO down entirely and get their money back.”

The ICO Model is Here to Stay — But Not as We Know it

Both the DAICO and STO models address the major obstacles that ICOs face in the near future, but the evolving crypto industry may eliminate the ICO as a launchpad for new blockchain-based platforms altogether. UK-based technology advisory and investment firm GP Bullhound predicts the end of the ICO model as the go-to capital generation method for blockchain entrepreneurs, stating that 2018 will see airdrops become new normal for token distribution. With venture capital stepping in at a pre-ICO stage, airdrops will function as a preferable option to traditional ICO models in order to maximize network effects.

While the ICO as it exists today may be gone tomorrow, the blockchain brings evolution, not revolution. Regardless of regulatory posturing, decentralized growth capital generation will exist as long as decentralized currencies exist and are used to exchange value. Ultimately, the ICO is identical to the underlying technology that drives it — regardless of the shape it takes in future, it’s here to stay.

Article Produced By
Sam Town

Blockchain Writer at CryptoSlate

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-3-evolution-versus-revolution/

 

Without Regulation ICOs Unlikely to Disrupt Venture Capital According to OECD

Without Regulation ICOs Unlikely to Disrupt Venture Capital According to OECD

             

In its January report, the Organisation for Economic

Co-Operation and Development (OECD) explained some of the intricacies of ICOs in modern finance. Although ICOs still offer advantages for startups, it comes at a steep cost. The organization concluded that ICOs can’t be properly harnessed until there is regulatory consensus internationally and it is unlikely to replace venture capital for mainstream seed financing.

OECD’s Stance on ICOs

The Organisation for Economic Co-operation and Development was founded in 1961 to stimulate economic progress and world trade. Today, the organization is comprised of 36 member countries including the United States, much of the European Union, Korea, and other major economies. Like most regulatory agencies, the OECD asserts that ICOs, in their current form,

are risky:

“ICOs in their current shape and form carry important risks for SME [small and medium enterprise] issuers and investors subscribing to token offerings.”

At face value, an ICO seems like an excellent way to raise funding. Thousands of businesses which otherwise would have never formed have been able to raise hundreds of millions using these offerings. Yet, to some extent, ICOs can be a trap. Keeping issuers accountable, properly structuring token economics, and evolving definitions for “utility” and “security” token have stunted many companies post-ICO. In extreme cases, the Securities Exchange Commission has even compelled companies that have conducted ICOs to return funds to investors via recision. Considering the age of the industry, there are still a lot of unanswered questions. The OECD does provide some answers, but even these come with a lot of footnotes and exceptions.

Grin as a Case Study

One highly anticipated project in the cryptocurrency space is Grin. The privacy-centric cryptocurrency gained the attention of Peter Thiel and several crypto-minded venture funds, including Primitive Ventures, Iterative Capital, and BlockCypher. With no ICO, no pre-mine, and some innovative privacy attributes, Grin has some features the crypto-community appears to value. In his proof of work newsletter, Erik Meltzer, a partner at Primitive Ventures,

stated:

“Unlike Bitcoin, which was so maligned and ignored at launch that Satoshi had to mine by himself on a single Intel CPU for most of 2009, there is (by our conservative estimates) 100 million dollars of mostly VC money invested into special-purpose investment vehicles to mine Grin.”

One interesting feature of Grin is “MimbleWimble,” a feature that purportedly hides information related to cryptocurrency transactions. Some have heralded the feature as a “cure” to Bitcoin’s privacy and scalability issues, but the feature has seen limited implementation outside of Grin. In a video explainer, crypto evangelist Andreas Antonopoulos said that MimbleWimble allows users to “have a much smaller, more private blockchain.” The innovation hides the amounts being transacted, the identities of the transactors, as well as verifies the state of the blockchain without storing all transactions. Allegedly, these are all features that Bitcoin has struggled with.

Grin has been compared a number of times to Bitcoin but implemented in such a way that’s more “fair,” according to advocates on Twitter. Prominent Bitcoin developer Jameson Lopp Tweeted his appreciation for the project on Jan. 15, 2019, saying that “there are no sketchy incentives skewed towards the creators, it’s actually innovating, and it’s a pretty cypherpunk project.” These questions of fairness are a matter of tokenomics (token economics). The monetary policy surrounding a cryptocurrency defines its use within the ecosystem and has a large impact on a coin’s price.

OECD on Pre-Mines and Tiered ICOs

The OECD offers some insights into this aspect of token offerings. The policy group asserts that “private sales of tokens ahead of ICOs raise a number of issues,” and “not having ‘skin-in-the-game’ is a source of potential conflicts.” Pre-ICO rounds that offer discounted tokens, but aren’t adjusted for risk compared to those sold during the main ICO, are primarily occupied by what the OECD labels “insiders.” The funds raised by insiders during this period are typically used to pay for marketing and advisory costs needed to establish the project in the first place.

Founders who manage to cover these costs often “carry no personal financial risk in the transaction besides reputation risk,” states OECD. The international agency underlined the importance of having “skin-in-the-game” as this accountability prevents conflicts such as pump and dump schemes. In the context of traditional startups and small businesses, cryptocurrency entrepreneurs need only pay for marketing expenses and advisory fees. Moreover, the absence of a mandatory lock-up period often tempts startup leaders to leave after they’ve raised the cash, rather than build out a working product.

ICOs Compared to IPOs

Initial public offerings (IPOs) for traditional stocks share few similarities with ICOs, other than that they are both fundraising methods. In the case of an IPO, investors interested in buying shares in a company are betting on a former track record of performance. There is a history of “both operational and financial performance,” explains the OECD, offering much more information than what is possible in an ICO. IPOs also tend to be much longer events, with planning for an offering lasting three times as long compared to an ICO, according to the OECD. With these features in mind, ICOs are more akin to venture

capital-style fundraising:

“IPOs follow series A-D financing or are used as an exit after venture capital funding, while ICOs look for seed/early stage financing, similar to seed financing (or perhaps series A round).”

If IPOs are a bet on a business’ forecasted success, then an ICO is a bet on turning an idea into reality. Unlike ICOs, venture capitalists (VCs) can meet with startups, get acquainted with the founding team, and then decide whether to provide funding. However, VCs still run into ‘problems’ of liquidity. For ICOs, as soon as a token is listed, a secondary market becomes available that makes “cashing out” easy. Such ease is tempting for

crypto founders:

“Academic research suggests that ICOs are preferred for projects with a high risk of failure and right-skewed payoff distribution, given that in case of some retention of ICO proceeds by the entrepreneur, the payoff for the entrepreneur is positive even when the project fails.”

ICOs Unlikely to Replace Venture Capital

Establishing a clear alignment of interest between token holders and founders is one of the largest impediments to ICOs succeeding. As the report claims, the OECD anticipates that the only way to harness ICOs is through international regulatory consensus. This, however, is easier said than done. At the end of the report, the OECD compiled all high-profile regulatory responses worldwide. Such a compilation emphasizes the complexity of “safeguarding” investors in each jurisdiction.

The FMA, the financial authority in Austria, suggested that ICOs require a license to help protect investors. Meanwhile, Thai authorities have simply outlined the benefits and risks associated with the fundraising technique, with few rules on how the practice should actually be regulated.

China and Korea have both outright banned ICOs, with the latter citing “serious concern about the fact that the current market funds are being pushed into a non-productive speculative direction.” ICOs were once lauded as a potential way to disrupt VC financing. Yet, at the present moment, the lack of accountability for issuers has left the space rife with scams and ill-conceived projects. With this in mind, the OECD concludes their report with the importance of a

quality use case:

“It [seems] inappropriate to consider ICOs as a potential ‘mainstream’ financing mechanism for SMEs whose projects are not enabled by DLTs and which would not benefit from network effects.”

By extension, the OECD suggests that it might make sense for projects enabled by distributed ledger technology to raise funds via ICO. Yet, this brings about a whole host of other issues around which projects should use blockchain technology instead of conventional databases. Again, it seems like international decision-makers are leaving more questions than answers.

Article Produced By
Liam Kelly

 

Blockchain Writer at CryptoSlate Berlin, Germany

https://cryptoslate.com/without-regulation-ico-unlikely-disrupt-venture-capital-oecd/

 

ICOs Produce Slow Start to 2019

ICOs Produce Slow Start to 2019
   

During the first two weeks of 2019,

initial coin offerings (ICOs) raised roughly $90 million, according to data published by Icobench. Of the total funds raised this year so far, $80.2 million can be attributed to the Chelle Coin ICO.

Slow Start to 2019 for Initial Coin Offerings

47 ICOs launched during the first week of January, bringing the total number of ongoing initial coin offerings to 424. Despite the large number of ongoing ICOs, only $6 million was collectively raised between Jan. 1 and Jan. 7, comprising the smallest combined weekly total raised by ICOs since 2017. During the second week of January, the total raised by initial coin offerings jumped substantially after Chelle Coin, an ICO for an “investment platform backed by performing North American True Estate,” generated $80.2 million from Canadian investors. Excluding Chelle Coin, the combined total raised by ICOs between Jan. 7 and Jan. 15 was $3 million.

ICOs Post Steep Decline in Fundraising During Second Half of 2018

The slow start to 2019 follows a significant decline in the average performance of initial coin offerings during the final six months of 2018. After averaging a monthly total of $1.45 billion collectively during the first half of 2018, the combined monthly average raise by ICOs fell by 65 percent to just $500 million in the second half of the year. Additionally, the combined total raised by initial coin offerings fell short of 2017’s monthly average of roughly $850 million for the entire second half of last year.

The average sum raised by each individual ICO also fell by more than 50 percent year-over-year, dropping from $24.4 million in 2017 to nearly $11 million in 2018. Despite the decline in the average performance of ICOs, the collective total raised by ICOs increased last year, with 413 offerings raising $10.06 billion in 2017 versus 1,012 offerings raising $11.59 billion in 2018.

Singapore Comprises Leading Nation for ICO Fundraising During 2018

Nearly $1.54 billion was raised by Singapore-based ICOs during last year, equating to 13 percent of the fundraising total. The total was raised from 275 offerings, making Singapore the second most popular destination for ICO issuers. While the United States hosted the largest number of ICOs during 2018, the 288 U.S.-based offerings accounted for $1.22 billion in raised funds last year, or 11 percent of the global total. The United Kingdom ranked third by collective total raised and number of ICOs, with 222 offerings generating $945 million.

The Cayman Islands hosted the fourth largest total raised by the ninth largest number of offerings, with $917 million raised by just 56 offerings. Switzerland ranked fifth by combined fundraising and number of ICOs, hosting 136 offerings that generated $845 million. These five countries accounted for 47 percent of the combined global sum raised by ICOs in 2018.

Article Produced By
Samuel Haig

Samuel Haig is a journalist who has been completely obsessed with bitcoin and cryptocurrency since 2012. Samuel lives in Tasmania, Australia, where he attended the University of Tasmania and majored in Political Science, and Journalism, Media & Communications. Samuel has written about the dialectics of decentralization, and is also a musician and kangaroo riding enthusiast.

https://news.bitcoin.com/icos-slow-start-2019/

MIT Professor: Blockchain Can Allow for More Inclusive Borderless EconomyICOs Raised 160 Million in First Half of January Report Says

MIT Professor: Blockchain Can Allow for More Inclusive, Borderless Economy

  

Blockchain can allow for the creation of a borderless economy,

Massachusetts Institute of Technology (MIT) professor Silvio Micali claimed in a interview on Bloomberg’s Daybreak Asia, Jan. 21. Speaking on the show, Micali outlined three major properties of blockchain systems that must function simultaneously to enable a more inclusive and borderless economy — security, decentralization and scalability. According to MIT’s Ford Professor of Engineering, until recently, only two of those three basic properties could have been achieved simultaneously at any time.

When asked about scalability in particular, Micali stressed that a decentralized system really needs superior technology to provide the same level of participation and confidence that is enjoyed by centralized systems. When asked about security breaches in blockchain systems, Micali stated that centralized systems are far more vulnerable to hacking attempts, pointing to the frequency of security and privacy breaches that repeatedly take place among centralized institution of various sorts. The professor expressed optimism about blockchain in terms of security, noting the level of security built into the concept of

a trustless system:

“Only a true decentralized system, where the power is really so spread that is going to be essentially practically impossible to attack them all and when you don’t need to trust this or that particular node, is going to bring actually the security we really need and deserve.”

Recently, a group of major United States universities, including MIT, Stanford University and the University of California, Berkeley, announced the launch of Unit-e, a cryptocurrency project touted as a “globally scalable decentralized payments network.” Earlier in January, MIT Technology Review issued an article claiming that 2019 will become the year when blockchain technology finally becomes normalized.

Article Produced By
Helen Partz

Helen is passionate about learning languages, cultures and the Internet. She has years of experience working at international online advertising projects. Growing interested in Bitcoin and cryptocurrencies in late 2017, she joined Cointelegraph as a writer.

https://cointelegraph.com/news/71-million-user-volunteer-platform-to-launch-blockchain-based-dapp

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ICOs Raised $160 Million in First Half of January, Report Says

  

Initial coin offerings (ICOs) completed

in the first half of January have raised around $160 million. The figure was provided in a report by ICO rating service ICObench shared with Cointelegraph on Jan. 18. ICOs completed by Jan. 15 have managed to raise about 33 percent of the combined amount raised in the previous month of December. Half of that sum was secured by just one project, the report notes. According to ICObench, the number of fundraisers that are set to take place in January is more than 150, a figure similar to the past seven months, excluding December.

In January, the combined hard cap — the maximum amount of money that a project can secure from investors during an ICO — amounts to more than $4 billion. As per the report, three fundraisers out of the five largest this month have reached or almost reached their hard caps. ICObench also reported that the number of ICO listings has continued to decline in January, suggesting that the phenomenon is losing its popularity. In terms of amount of funds raised, Canada has been leading during the first half of the month, with a combined figure of $80 million. However, when it comes to the actual number of projects, the United States ranked first.

ICO statistics by country in the first half of January 2019.

On Jan. 16, major crypto exchange BitMEX released a report claiming that ICO teams have lost 54 percent of value of the initial $24 billion worth of tokens allocated to themselves due to the decline in coin prices.

Article Produced By
Helen Partz

Helen is passionate about learning languages, cultures and the Internet. She has years of experience working at international online advertising projects. Growing interested in Bitcoin and cryptocurrencies in late 2017, she joined Cointelegraph as a writer.

https://cointelegraph.com/news/icos-raised-160-million-in-first-half-of-january-report-says

What’s Difference Between ICO Tokens and Cryptocurrency Coins?

What’s Difference Between ICO Tokens and Cryptocurrency Coins?

Cryptocurrencies such as Bitcoin are becoming

increasingly more mainstream every day, but the terminology that surrounds them can be confusing even to seasoned crypto veterans, let alone newcomers.Interested in investing in Bitcoins or other Altcoins? Here’s how we buy Bitcoin and Ethers. You will receive $10 of FREE BITCOIN when you buy or sell over $100 worth of any digital currency.

A lot has changed since an unknown person or group of people under the name Satoshi Nakamoto released Bitcoin, the first decentralized cryptocurrency in the world, in 2009. According to CoinMarketCap, there are now almost 1,500 cryptocurrencies, the total market capitalization of the entire crypto market is over $700 billion, and the daily trading volume exceeds $30 billion on a regular basis. To understand how we got to where we are today, and what the difference between ICO tokens and cryptocurrency coins is, we need to start with the basics.

What Is a Cryptocurrency?

The term “cryptocurrency” consists of two words: crypto and currency. Even though you may not be able to define it, you already know what a currency is because you use it almost every day as a medium of exchange for goods and services. Investopedia defines a currency as “a generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy.”

The word “crypto” is short for “cryptography,” which is the practice of using various protocols to secure communication in the presence of third parties. Modern cryptography is synonymous with encryption, the process of encoding information in such a way that only authorized parties can access it. Put together, a cryptocurrency can be defined as a medium of exchange that uses cryptography to secure its transactions.

Cryptocurrency Coins and Tokens

While there were other media of exchange that used cryptography to secure transactions before 2009, Bitcoin was the first one to also be decentralized, meaning that it’s not controlled by any single central authority. The decentralized nature of Bitcoin comes from its use of the blockchain technology, which is a distributed public ledger that records bitcoin transactions in a growing list of records, called blocks. Each block of transactions is cryptographically linked to the previous block, making blockchains resistant to data modification.

Because the blockchain technology was such a novel concept when Satoshi Nakamoto implemented it as a core Bitcoin component in 2009, many other cryptocurrencies were soon derived from Bitcoin, including Litecoin, Darkcoin, Quark, Yacoin, Novacoin, or BitBlock, just to name a few. Collectively, these Bitcoin derivatives are sometimes called Bitcoin clones. What they have in common is the fact that they are all derived from Bitcoin and are meant to be used as media of exchange. Apart from cryptocurrency coins that have been derived directly from Bitcoin, there are also so-called altcoins. An altcoin is an alternative blockchain project that exists in addition to Bitcoin and its blockchain.

By far the best-known altcoin is Ethereum, which is an open-source, public, blockchain-based distributed computing platform featuring smart contract functionality. Because Ethereum’s purpose isn’t to serve as a means of exchange, it doesn’t issue any cryptocurrency coins. Instead, Ethereum issues value tokens called “ether.” Compared to cryptocurrency coins, tokens offer wider functionality, often being used to access various features of the platform that provides them. In the case of Ethereum, ether is used to pay for transaction fees and computational services on the Ethereum network. But because tokens hold value, they can also be used the same way as single-purpose cryptocurrency coins can: to purchase goods and services.

ICO Tokens

An ICO is “an unregulated means by which funds are raised for a new cryptocurrency venture. An Initial Coin Offering (ICO) is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks,” as explained by Investopedia. During an ICO, tokens are sold to early backers of the project in exchange for legal tender or other cryptocurrencies, usually Ethereum or Bitcoin.

For example, during its September 2017 token offering, the Filecoin ICO raised over $257 million by selling its FIL tokens in exchange for ether to fund the development of its decentralized network for digital storage through which users can effectively rent out their spare capacity. Most ICO tokens don’t exist on a separate blockchain. Instead, startups take advantage of the blockchain technology to build their own projects and DAPPS (decentralized applications) through smart contracts on Ethereum’s blockchain.

“Think of Ethereum like the Internet and all the DAPPS as websites that run in it. There is something really interesting about these DAPPS, they are all decentralized and not owned by an individual, they are owned by people. The way that happens is usually by a crowd-sale called the ‘ICO.’ Basically, you buy certain tokens of that DAPP in exchange for your ether,” explains Ameer Rosic. The main difference between cryptocurrency coins/tokens and ICO tokens is that disruption on the network that hosts ICO tokens doesn’t affect just the network itself, but also the ICO tokens hosted on it. Bitcoin clones and all other altcoins, on the other hand, are completely independent.

Summary

Cryptocurrency coins are media of exchange that use cryptography to secure transactions. Value tokens are used by blockchain-based projects that don’t strive to serve as digital currency for a multitude of different purposes. For example, the blockchain-based distributed computing platform Ethereum uses its value token, called ether, to compensate participant nodes for computations performed. ICO tokens are issued during a crowd-sale, and they depend on another platform, such as Ethereum. In practice, the terms described in this article are often used haphazardly and interchangeably. So, even if you don’t use the most appropriate term, the chances are that you will be understood without any problems.

Article Produced By
David

https://thedroidguy.com/2018/05/whats-difference-ico-tokens-cryptocurrency-coins-1079421

All About Security Tokens Landscape With The Founder Of Polymath

All About Security Tokens Landscape, With The Founder Of Polymath

Security tokens are an intriguing development,

that function as a bridge between blockchain networks and legacy financial assets. Following the rapid and blessed decline of the ICO, security tokens – particularly the security token offering (STO) – have started gathering momentum among financial institutions, service providers and regulators.

To understand STO's betters, I recently sat with Trevor Koverko, founder of Polymath who offers a look at the current state, and future, of security tokens. In 2017, Trevor wanted to tokenize a private equity fund he was running, but found it hard to do for an existing financial security, especially on the technical and legal side. This drove him to launch a security token launchpad for himself and other STO projects. He grew to raise around 60 million USD in funding.

YV: Can you provide some context on the ST-20 security token standard, for the audience that may be unfamiliar with what exactly a security token is and how they function?

TK: If you look at how important the standardisation of ERC-20 was for Ethereum, it's clear that security tokens similarly need a common set of functions that we all agree upon. Even the NYSE had to standardize its tech stack before it could truly scale. Built into the ST20 standard are transfer restrictions such that only authorized individuals can buy, sell, and hold the token. There are features that restrict trading for a defined period of time, or that limit the number of shares any one individual can hold.

YV: What do you view as the current stage of the security token market?

TK: I believed STO's would overtake ICO's, but didn't expect adoption to happen so fast. 

The infrastructure needed to support things like institutional-grade custody, licensed security token exchanges, and regulatory clarity is progressing faster than I could have imagined. Many players are creating tools for this ecosystem. 2019 is on pace to be a pivotal year for security tokens.

YV: What can security tokens add to financial assets?

TK: One of several things that security tokens bring to the table, is that they unlock liquidity. LP shares, startup equity and even fine art are all typically illiquid assets. STO's have the potential to unlock this value. They can make small, private non-liquid securities more accessible for everyone.

The technology is open and transparent, so international trading becomes trivial. It’s open 24/7. It’s the concept of a global, national agnostic market that never closes. It’s faster and cheaper to make trades. It’s the idea that security tokens are programmable, whereas many legacy stocks are not. You can command security tokens to do things like automating corporate governance, proxy voting and dividends — all perfectly documented on the immutable blockchain

YV: What regulatory progress is being made with security tokens?

TK: STO's are simply securities. They live in an upgraded format than a traditional security, but they are still a security.  

We are fortunate that financial securities have very clear definitions, with enormous bodies of case law and precedents behind them, that tell us what the SEC considers a security. So, you have to follow all the registration forms, secondary trading rules, and for most offering types, investors need to be accredited. The beauty of the blockchain is that code can automate a lot of those rules.

YV: Is there a specific financial asset that you think will initially emerge from the rest with STO's?

TK: We are very bullish on the ownership of funds tokenizing – think LP shares, REIT units and so on. I’m seeing many people choose real estate as a first mover, and I tend to agree.

However, I like to take inspiration from other decentralized projects that have reached scale -for example with Ethereum. I noticed the team didn’t choose which vertices to attack first – instead they opened it up for the world, and let the market decide how to use it. It was community driven. Like Ethereum, we are going to see a lot of small companies that need the money, or struggle to raise capital traditionally turn to STO. But once bigger, well-funded projects see the possible benefits of tokenization, they won’t be far behind.

YV: Ethereum is also very developer-driven. How can more developers be drawn into the STO market?

TK: An active and engaged community of developers isn't just important for decentralized projects, it literally is the project.  

That is what made Ethereum an unstoppable force, the 30k plus of volunteer crypto engineers that self-organized within dozens of meetups globally. Without an army of talented, open-source developers, it hard to make consistent progress in this rapidly evolving ecosystem. It's important to incentivize for-profit developers to build products on top of your platform.

They are expensive and elusive compared to other professions, and the 2017 bull market certainly did cause some dislocation in terms of scarcity of talent and salary expectations. However, 2018 caused the crypto labor market to clear and now is a great time to be aggressive building a deep technical bench of senior engineers.

YV: How do you view the role of broker-dealers, and other service providers, evolving in the STO market?

TK: The thing about security tokens is that it’s not necessarily anything new. Securities laws have an enormous amount of precedents and established case law to guide issuers. Security tokens aren’t looking to skirt regulations; they are looking to embrace and follow regulations in this new environment.

KYC, AML, accreditation attestations, secondary trading restrictions, broker-dealers – these are all things we had to think about during the architecture phase of our company. While security tokens offer hope for the crypto market, is it important to do your own consideration before investing or participating in any type of funding, especially in the crypto market.

Article Produced By
Yoav Vilner Contributor


Crypto & Blockchain.. A serial startup mentor and CEO. Veteran blockchain advisor.

https://www.forbes.com/sites/yoavvilner/2019/01/17/all-about-security-tokens-landscape-with-the-founder-of-polymath/#23b823e860f0

Crypto Winter Isn’t Fatal For All Picks and Shovels’ Makers

Crypto Winter Isn't Fatal For All ‘Picks and Shovels’ Makers

  

Executives say key infrastrucute is continuing to be built
Dropping equity valuations also attractive buying opportunity

The crypto winter that’s seen major digital assets crash by as much as 90 percent hasn’t been bad for all of the firms building infrastructure or investors looking to pick up equity in projects that dropped appreciably. "This is the most productive phase we’ve ever been in," said Konstantin Richter, chief executive officer of Blockdaemon, a firm that creates and hosts the computer nodes that make up blockchain networks. That’s because various efforts in the space need to deliver on their ambitions and are turning to firms like Blockdaemon for help. "Projects now need to show their colors. The time is up of raising a lot of money and talking a lot of talk," Richter said at a panel discussion hosted at the Los Angeles bureau of Bloomberg News.

After seeing cryptocurrency prices soar to records in late 2017 and early 2018 — Bitcoin peaked near $20,000 and Ether traded over $1,300 — the market had a disastrous time last year. Bitcoin is down about 80 percent with Ether having dropped about 90 percent. Investors and the public appear to have major concerns about what blockchain technology can actually deliver in the real world after hearing promises of its transformational potential.

 

"The skepticism is warranted in many ways because this technology is nascent and untested at an industrial scale," said Adam Jiwan, CEO of Spring Labs, which is using blockchain technology to build a decentralized credit-reporting system. He said the shakeout has been good for picking up employees who have seen their funding dry up or been cut loose from development firms. "Our hope is this presents us with a great opportunity to recruit talent," he said during the discussion.

The rise and fall of digital currencies validated the approach at Maco.la, a Los Angeles based investment, advisory and recruiting firm, said co-founder and principal advisor Sheri Kaiserman. That’s because the firm decided at inception last year to make equity investments rather than buying initial coin offerings, she said.

"We felt like the best way to make money is to buy the infrastructure companies — the picks and shovels — that are helping build the foundation," she said. "They are coming down in valuation, which is the best part of the crypto winter for us," Kaiserman said. Maco.la is looking to invest in projects that avoid the repetitious work being done in the space at the moment as well as ones that have a high likelihood of being acquired, she said. "That’s why we focus on ones where we think Microsoft might be interested or that Google might be interested."

Blockchain, originally developed as the ledger technology that powers Bitcoin, is promising for corporations, if they can figure out how to use it. Proponents predict billions of dollars in savings by handling data and transactions more efficiently and rapidly. Yet most corporate efforts are still in early development or testing. Still, depending on when a blockchain startup raised funding, it could still have plenty of money to spend on development, Richter said. "There are projects that are so well funded they’ll last for years," he said. Any ICO that went before the summer of 2017, for example, may have been able to buy Bitcoin at $600 compared to its current value of about $3,600, he said.

Health Care

Kaiserman said blockchain has the potential to radically change how global payments are made, specifically remittance payments when you factor in that Western Union charges 8 percent to 10 percent to send money compared with "a nominal cost" of Bitcoin transactions. There is also the chance to use it to give 1.1 billion people a digital identity around the world who currently lack a documented existence. Her favorite use is in health care, she said.

"I would love to be able to go to a doctor and the knowledge of my insurance is on the blockchain" so that "the insurance company knows that’s a covered diagnosis and there’s no need for reconciliation because we’re all sharing this one ledger," she said. Spring Labs is advised by former Federal Deposit Insurance Corp. Chair Shelia Bair and former Goldman Sachs president and Trump administration chief economic advisor Gary Cohn. The firm avoided an ICO because they thought it would hurt adoption and risked regulatory scrutiny, Jiwan said. It’s working closely with regulators like the Securities and Exchange Commission to understand how to transition from a firm backed by equity to issuing a token that would be used on its network, he said.

In November, the SEC announced its first civil penalties against two crypto companies for allegedly violating securities offering registration rules with their ICOs. Both Airfox and Paragon Coin Inc. will need to pay $250,000 in penalties and register the digital tokens they sold through their ICOs as securities to resolve the matters against them, the SEC said Nov. 16. A few weeks later, commission Chairman Jay Clayton said cryptocurrency entrepreneurs should get their “act together” and register their initial coin offerings with the SEC if they want to avoid problems down the road. "There’s some important issues in terms of straddling the transition from security tokens to utility tokens," Jiwan said. "The SEC’s primary concern is speculation ahead of actually delivering a functional technology, which, by the way, is reasonable," he said.

Article Produced By
Matthew Leising

https://www.bloomberg.com/news/articles/2019-01-16/crypto-winter-isn-t-fatal-for-all-picks-and-shovels-makers

BitMEX Research: ICO Tokens Allocated by Teams to Themselves Lost 54 of 24 Bln Value

BitMEX Research: ICO Tokens Allocated by Teams to Themselves Lost 54% of $24 Bln Value

  

The value of tokens that over a hundred of initial coin offering (ICO) teams have allocated to themselves has decreased by 54 percent from the initial figure of $24 billion. This was revealed in the latest research by cryptocurrency exchange BitMEX published Jan. 16. BitMEX has conducted a research of the ICO market in collaboration with analytics firm TokenAnalyst, looking into treasury balances of more than a hundred projects on the Ethereum (ETH) network. The analysis reportedly made use of machine learning techniques and was based on the interpretation of smart contract data and transaction patterns on the Ethereum blockchain.

According to the report, the combined value of all the tokens that the analyzed projects have allocated to their own teams, has gone down from $24.2 billion at the time of each individual token’s issuance to about $5 billion as of today. BitMEX cited the 2018 crypto bear market as one of the main reasons, along with $1.5 billion worth of transfers to external addresses,

further explaining:

“Based on current illiquid spot prices, the ICO teams still appear to own around US$5 billion of their own tokens, money they essentially got from nothing, depending on ones view. At the same time the teams may have realized gains of US$1.5 billion by selling tokens, based on coins leaving team address clusters.”

The report also highlighted that the historical combined peak value of the tokens controlled by the subject teams was more than $80 billion, using each coin’s individual price peak. The conclusion drawn by BitMEX and TokenAnalysits from their research is that the ICO market suffers from a lack of standards and transparency, especially in regards to allocating tokens to the founding teams. BitMEX noted that the analysis could be further complicated by the ability of ICO teams to mint, burn, buy, and sell their own tokens. As BitMEX found in November, at least 12 ICO projects, each of which has raised over $50 million via a token sale, have yet to launch. The company’s CEO Arthur Hayes commented back then:

Article Produced By
Ana Alexandre

Total change in her career took Anastasia into the world of analytics and business information as a researcher and translator in 2010. Some time later she got into FinTech, a dynamically developing segment at the intersection of the financial services and technology. Ana joined Cointelegraph in September 2017.

https://cointelegraph.com/news/bitmex-research-ico-tokens-allocated-by-teams-to-themselves-lost-54-of-24-bln-value

Binance’s ICO Platform Ready for Takeoff

Binance’s ICO Platform Ready for Takeoff

  

Binance will be holding initial coin offerings (ICOs)

on the firm’s token sale platform Launchpad nearly every month in 2019. TRON’s BitTorrent and Fetch.ai are two of the ICOs slated to be offered in 2019. Launchpad is Binance’s attempt to legitimize the cryptocurrency-based ICO method, which has had a checkered history since it rose to prominence in 2017. According to Binance’s Jan. 3rd announcement, companies that are offering ICOs on Launchpad undergo a selection process to ensure that they are compliant with applicable laws, have a legitimate business plan, and will be beneficial to the cryptocurrency ecosystem.

Binance’s CEO and founder, Changpeng Zhao, in a statement said:

“In 2019, Binance Launchpad will help launch projects serving the universal cryptocurrency ecosystem as a whole that benefits people around the world. Bringing on distinguished token sales to the Launchpad platform is part of our continuing efforts to create a more secure and open token launch environment, paving a healthier market in 2019 and beyond.”

Binance Launchpad is not available to users in the United States, China, South Korea, and a dozen other countries. The decision is likely motivated by the regulatory grey area around ICOs, which are still illegal in some jurisdictions.

First Offers Available in 2019

The peer-to-peer file sharing company BitTorrent was purchased by the blockchain startup TRON for $140 million in June of last year. With over 100 million monthly active users, it was one of the more high-profile acquisitions by a blockchain firm in 2018. TRON itself raised $70 million in its own ICO in the summer of 2017. The new BTT token will add a cryptocurrency element to the uTorrent software and allow users to pay for faster downloads.

The same day as the BitTorrent ICO was announced, Variety reported that the CEO of BitTorrent, Rogelio Choy, had left the company. This news has not been confirmed by BitTorrent or TRON. That same day, VentureBeat reported that Justin Sun was appointed as the CEO of BitTorrent. Choy has been CEO since 2017, and had previously served as CEO from 2012 to 2015. Unnamed sources told Variety that there had been a disagreement between Choy and the direction of BitTorrent, though this was denied by TRON.

Fetch.ai describes itself as a “decentralized digital representation of the world in which autonomous software agents perform useful economic work.” Per the firm, these agents will deliver data or provide services using “smart ledger technology” in exchange for Fetch Tokens, the network’s native cryptocurrency. Fetch.ai claims its technology has use cases in the hospitality, transportation, energy, and supply chain sectors. No timeline was given as to when the ICOs for BitTorrent and Fetch.ai ICOs will begin, with the Launchpad website only saying they are “coming soon.”

Popularity of ICOs Dropped Sharply in 2018

In making its announcement, Binance appears to be anticipating that ICOs will reverse the trend that began in the second half of 2018, which saw a rapidly declining pace of funding. According to a report entitled The State of the Token Market, released by venture capital firm Fabric Ventures last October, the amount of funds raised by ICOs fell dramatically as 2018 progressed. June through September saw $1.6 billion raised via ICOs, compared to nearly $10.6 billion in the first five months of the year.

While ICOs have been used by companies to raise billions of dollars, their future is in question. Since they have largely operated outside of existing laws regulating securities offerings. Moreover, they’ve been rife with opaque processes, questionable management practices, and even outright fraud. These factors and the lack of clear regulations in many countries have put ICOs in a legal gray area.

However, some countries, such as Malta (where Binance is based), Switzerland, and Thailand, have looked to bring ICOs in from the cold and encourage blockchain technology by streamlining regulations. 2018 also saw the emergence of the security token offering (STO) as a legally compliant alternative to the ICO, though the concept is still in developmental stages. With one of the world’s largest cryptocurrency exchanges legitimizing ICOs, the practice could experience a resurgence. Whether it will be accompanied by the widespread fraud and deception like was seen in 2017 is another question.

Article Produced By
Ian Edwards

Blockchain Writer at CryptoSlate

https://cryptoslate.com/binances-ico-platform-ready-for-takeoff/