How often did you see glitzy ICO whitepapers vowing to take you to the promise land? Have you ever wondered what it would take financially to get there and by the end of the journey what your reward will be? I bet you did.
Yet this information in nowhere to be found in your typical ICO whitepaper. The proponents might say it is a brand new world and standard financial metrics do not apply. Perhaps, it is valid assessment for something like Bitcoin and Ethereum, which takes the power of the minting press away from Central Banks and quite literally gives it to the people.
The rest of ICOs are based off yes virtual, yes digital, but very real economy. All the gambling, betting, money/token exchange and media platforms have counterparts in the form of already established business with which they would eventually have to compete in order to grow. Arguably, it is ICOs single most important mission to court customers of existing business and pull them into the crypto currency ecosystem, if we want this new brand world to come to fruition.
And therein lies the question. How all the glitzy ICOs are going to persuade the customers to switch? What would be the incentives, which would make such proposition enticing for all the stakeholders (customers, backers, developers) concerned?
ICOs that pose such question and answer it at the outset do well, but it takes a measured and disciplined approach towards assessment of where the value is created and how it will be shared.
Take for example this very platform – Steemit. On the face of it, it is yet another Reddit clone, but while others have floundered it flourished. Many would say that the Steemit success is attributable to accretion of user-generated value back to the user, i.e the author gets his share for writing good content, the curator for discovering it. Which is true and is the key founding bedrock of decentralised organisation, equivalent to proof of work.
However, I would argue that the success of Steemit as a platform (as measured by monthly average users) is in the intentional and well-calculated incentives to suck both authors and readers out of traditional social media into the crypto currency world.
Let’s do a quick rundown of an author contemplating on writing on Steemit:
- Is it a hard switch from reddit, medium, fb? No, the author can even recycle her posts published on the other platforms and not being bogged done by platform rules and regulations.
- Will it cost her time and money to get her content promoted? Not as much as the other platforms, as readers are incentivised (read paid) to discover the content.
- Will she grow her readership via the platform? Yes, as similar to the 2. The readers are incentivised to come to the platform and be engaged.
- Will she be paid? Yes.
As one can see, the incentives are aligned for the author to not only write on the Platform, but also promote Steemit on her other social media and drawing more people of traditional media onto the Platform. You can do the same rundown on the incentives for the reader with similar results.
All this is because somebody on the development team with a measuring tape asked a question on how to make, grow and split the pie. That involved most assuredly some number crunching and valuation.
The visible outcome of such exercise is presented to the public in form of the Steemit tokens that uniquely cater the needs of various stakeholders:
Are you an author or a reader that just wants to be paid? STEEM token is for you.
For long-term investor seeing potential in the Platform there is Steem Power, which pays for proof of Stake, essentially a script dividend.
For liquidity providers (and insuring Steemit relevance in the crypto currency trading), there are Steem Dollars to play with, real world equivalent of closed-end fund.
However, it is only the tip of the iceberg. Untold are the numbers underlying the projected growth rates per authors, readers, estimated payouts to the stakeholders (for example why the stated 0.19% dilution rate on STEEM per day and 9:1 conversation rate on Steem Power?) and ultimately the implied valuation of the Platform that formed their total financial picture of the pie and the value proposition to each stakeholder.
This realisation along with numerical acumen and financial engineering allowed them to package the benefits of decentralised organisation into enticing market offer. The offer, which eventually drove the success Steemit as a platform and notwithstanding the novelty of crypto currencies per se that is being aggressively marketed in ICOs.
So next time you see an ICO, ask a simple question of how they are going to snatch the users from existing businesses?
If you want to see one such ICO, check out Litmus ICO at Litmus.ltd, it is live now and contains financial breakdowns and implied valuation! ( I am an affiliated with the company)