It is not an easy task to talk about ICOs (Initial Coin Offerings) in the middle of this hysteria generated by the community’s suspicions regarding the possibility that some influencers (or even smaller social accounts) could shill specific projects, for various reasons (it’s hard to resist profits, isn’t it?)!
I will not stop presenting the coins/projects I like, though, even if people could accuse me as well. In the end, I am just expressing my thoughts and convictions (even if I can be wrong, I admit) and I think that, whenever I find something valuable, you have the right to know that. It’s then your right (and duty) to judge what you read and decide if it’s right or wrong and if it’s worth your time and support.
I know that my previous articles were about some projects that were already well-known in the ICO space and people most probably had at least a vague idea/opinion about them. This time, I chose to talk about something different. It’s not about upcoming ICOs or some already launched coins. It’s rather about a solution to a real pain of the crypto-sphere… I am not trying to convince anyone around here, as I truly believe that people have the right to decide for themselves. I’ll just present some facts and my opinion about them and I’ll let you conclude if I am right or wrong.
DISCLAIMER: This is NOT financial advice!
The project that I want to cover is still in its early days. It’s not an ICO, even if it deals with what we today call ICOs. It’s not about quick wins, but about a healthier crypto landscape. It’s not about the money, but about the technology. It’s not only a solution, but also a new vision of doing things better. This being said, let’s talk about ETO (Earlybirds Token Offering), an ambitious idea, that could change the concept of an ICO forever. Just give me a minute of your time and we’ll see why!
What’s the problem, after all?
If there’s a solution for something, let’s firstly try to understand the initial context that led to its emergence and what problem does it precisely try to solve… I find it particularly important to explain you why do I think ETO is a real solution to one of the biggest problems of the crypto-sphere!
It is already obvious that the blockchain industry is growing at an accelerating pace and a month brings so many events, to fill a whole year in traditional industries. Some of the main factors that influence these events are the cryptocurrency exchanges and the various policies that shape the way this environment works.
To better understand what I mean, let’s take a specific example and see how the Chinese crypto landscape evolved recently. September of 2017 marked the introduction of some specific regulations in China, which led to plenty of ICOs raising their investments in private token sales. Binance became a world class exchange, with constantly increasingly volumes. The crypto-sphere was full of innovation and eager to conquer the world of finance. But, despite all of the above, the market turned bearish and the coins’ prices started to drop.
What’s the explanation for this?
To continue with the Chinese example, it seems that, despite the growing industry, a sense of chaos was also present and the regulations actually forced many domestic projects to relocate overseas. The media hype kept popular interest at a high level and, given the so many ICOs launched all over the world, people actually were even eager than before to contribute to those projects. What made things even worse was the lack of some reliable platforms that would allow people to securely participate to those new ICOs. This helped the “ICO agents” to prosper, as common people were not able to gain access to the new projects they looked for.
Even if people struggled with so many difficulties, the institutional investors considered this context as a potentially profitable one. There were some ICOs that had an excellent whitepaper, skilled advisors and successful seeding rounds/private sales, so the ICO space was perceived as a huge opportunity, even if there were enough shady projects or scams out there. Both common people and institutional investors contributed with huge amounts of money, sometimes even investing into virtually nothing.
Because the ICOs had their own troubles with various regulations worldwide, some of them decided to skip the public sales and rely only on institutional money. This drastically limited common people’s ability to invest in the best deals and there was no legitimate community consensus anymore.
Why is this important, you may ask?
Let’s consider a classic example: the Ethereum ICO. Even if the crypto-space was not as large back in 2014 as it is today, the team managed to secure the allocation from a large number of people, after a transparent long-term promotion and by proving the ability to address any challenge.
What was the result of this fundraising?
A large and strong community that was instrumental for its future success and mass adoption!
A project’s success should be measured and valued by its community consensus, so its ability to create a large community that shares the same values.
If this is missing, what’s left?
Without those values, the ICO landscape would be full of greedy actors, only eager to gain some nice profits from the weaker hands. In such cases, the main focus is not on the community anymore, but on the cryptocurrency exchanges.
These exchanges are vital for the crypto-sphere and they play therefore an influential role in this space. Exchanges like Mt. Gox, OKCoin, Binance or Huobi are big names in the industry. What people seem to be missing is that, even if the exchanges have their role in this space, the main focus should be on the blockchain technology: the public chains and the various decentralized applications (dApps) built upon them.
To continue with the Chinese example, the cryptocurrency exchanges became one of the easiest ways to secure the profits after the ICO stage. Once the projects managed to raise the desired amount of money from several big investors (that was easier and faster for those projects, we have to admit, as there was almost no investment required for marketing purposes), exchange listing became an imperative, for speculative purposes.
As not all the ICOs really have a viable roadmap in mind, some of them have no real intention whatsoever to develop a functional product, so they are more than aware that the tokens have a short term value. What for some ICOs is only a way to increase the total valuation of the project, could soon prove to be the only way for some others.
What consequences does the need for exchange listings have?
As in any case where there is high demand, the costs increase. As a result, running a cryptocurrency exchange soon proved to be very profitable in China. We are of course speaking only from a listing perspective, without considering the trading fees and so on.
This led to another big problem: the legit projects had to choose between using the funds for exchange listings or funding the project development.
Moreover, the exchanges would issue their own tokens, to maximize their profits even more. All of the above threatens to turn the blockchain industry into a cryptocurrency exchange industry. This would not be beneficial for the crypto-sphere, because technological advancement is a much healthier approach than trying to attract new investors to a tokens/coins volatile market.
The purpose
I think that one of the vital points in the blockchain industry (at least for the moment) should be to make sure that the best projects get the funding they need, in a transparent way, so everybody interested could participate. If we acknowledge that the technology is more important than some short term profits, then establishing a community consensus, based on the blockchain core values, is a must! As more and more people will join the community, the consensus will become stronger and the overall value will obviously increase.
The most widely used solution for project funding in the crypto-sphere up to this moment is the ICO structure, even if it has some flaws. For example, there were enough cases when the team changed the token metrics several times or did not reveal some aspects of the project that would have been crucial for the investors, before they had to take the decision to participate or not. What’s even worse, there is nothing that could stop the teams to change their initial plans and roadmap or even to abandon them.
There is clearly a need for a more reliable solution, since the ICO system proved its limitations… And this is where we start talking about a potential replacement solution that could solve the ICO flaws. If you don’t know anything about it already, I present you the ETO (Earlybirds Token Offering) concept, developed by James Gong and backed by Cybex.
The solution
What is ETO, after all?
ETO is basically a better way for the legit blockchain projects to raise the funds they need, via a decentralized exchange. As there is already an available platform for this, I will use it as an example, in order for my explanation and reasoning to be clearer.
As I have stated above, Cybex decentralized exchange already works as a supporting platform for ETO, allowing the interested projects to establish a broader community right from the funding stage and make sure they raise the required amount of money while doing so.
Why building a strong community is important?
We have already approached this topic above, but let’s tackle it now from a broader perspective! We all know that the projects that have no popular support will eventually fail, no matter the hype or marketing around them. Building such a community is not easy, and only the good projects will still be here in several years from now, precisely because people will ultimately understand which projects deserve their attention and support in the long run.
If you wonder what "Earlybirds" in the "Earlybirds Token Offering" stands for, this term refers to those community members that get themselves involved in the projects right from their early stages, so they should be rewarded for being supportive that early.
How can ETO accomplish this?
ETO is designed in such a way, so that it allows the projects to raise the required funds in several steps, depending on the percentage of the total funds they need at each specific development phase. By implementing such an approach, this new ICO system brings more transparency into the ICO world, making the crypto-sphere a safer place for investors.
This way, the projects can share a precise roadmap with the community (which includes the potential investors), with detailed expense expectations, so that people can understand when and why more funds are needed.
By being able to directly track projects' development and understand how and why things work in that specific way, the community will eventually support only the best and most promising ones in the long run and will not fall for weak or scam projects anymore.
The advantages are not only on the community side. Since the projects will have a rather step-by-step approach, they will be able (and pretty much incentivized) to carefully plan their development stages and really deliver, in order to be able to raise more funds, as they must firstly prove that the future roadmap is actually based on something already developed in the past.
There’s another detail that must be mentioned here: there are some countries (such as Switzerland and Japan), where ICOs have to spend the collected funds no later than 1 year, as otherwise those funds will be considered as profits and will be taxed accordingly. By implementing a phased fundraising, the ICOs will not have to cope with such issues anymore.
Another direct consequence of implementing the ETO standard will be that the new projects and their coins/tokens will no longer be subject to financial speculation, as the main incentive will be directly connected to project development, rather than pumping and dumping the released tokens, only because the projects are not able to actually develop what they promised. Given this fact, the projects that will actually deliver will generate competition and as we all know, competition leads to progress.
As I have already mentioned, there is a platform ready to offer an ETO-based solution. Cybex comes with several auditing options, so the potential investors could check at any time all the funds-related details directly on the blockchain (who invested, how much was raised, what are the funds used for, etc.). For implementing those options, Cybex uses a software and hardware multi-signature mechanism, so that the funds are safe and hack-proof. More than this, most of the major cryptocurrencies will be supported, so that people can contribute the way they like.
It is also worth mentioning that Cybex has already a team of around 50 developers, so this is a clear sign that this decentralized exchange is really serious when it comes to product development and achieving the short- and long-term goals. By deciding to implement the ETO approach to the current ICO landscape, Cybex proves an ambitious long-term vision and the will to help the crypto-sphere develop and become a more transparent and welcoming space for the newcomers.
By having a partnership with LongHash, it should be easier for Cybex to become more popular and sign some deals with important blockchain projects. If you are not already aware of this, LongHash served as an incubator for several good crypto-projects, including: Taraxa, MXC or everiToken. This proves that LongHash has both the capability and experience not only to help the new projects develop, but to also find the really good ones out of the many that try to succeed in this space.
Born from the will to improve the fundraising phase for the new projects, the ETO concept will most probably change the way we think about this. The change should obviously be a positive one, as the new projects will not only be able to raise the funds they need, but to also create a strong and involved community. Even if this can be achieved in a short period of time, running an ETO will have long-term benefits.
From the community perspective, since ETO rewards the Earlybirds, people will have their own incentive to support the good projects as early as possible. This will lead to a more educated community, as people will learn to distinguish the good projects from the shady ones. There is no other chance to find the best projects, other than becoming an educated investor.
Nobody knows how the fundraising landscape will look like in a year or five years from now. Maybe we will have the same ICO model as the most popular way to do it. One thing is certain, though: ETO introduces important improvements, so it should become more and more popular. I see no reason why it will not surpass the old model(s), as time goes by.
Transparency is simply such a valuable asset, that no one can ignore it anymore and Denise Morrison explained it in the best possible way:
“The single most important ingredient in the recipe for success is transparency, because transparency builds trust.”
Being able to put community consensus at the center of a blockchain project is simply golden! This is how it was right from the beginning and this is how it should be again! This way, the promising projects will be able to stay away from the investment funds that are interested only in quick wins and gain instead a wide community of people that are here for the technology. If this improvement is not something worth trying, I really don’t know what else could be!