Crypto News for The Rest of Us

Big week in cryptocurrencies, decided to do a round-up for non-technical people. Enjoy.

ICOs and Regulations

Just in 2017, ICOs have raised $2.7B and 18 have raised more than $100M, while 120 have raised up to $50M. In the past five months, ICOs have raised more than $350M each. To put that in context, ICOs raised 32% as much as Series A startups in the last quarter alone. link

ICOs are hot, hot, hot, but … what about regulations?

During Singapore’s FinTech Festival, the Singapore government revealed their new ICO regulations. Unlike China, Hong Kong, Vietnam and South Korea that outright banned ICOs, Singapore’s central bank: the Monetary Authority of Singapore (MAS) published a document to clarify SG’s ICO standards. 12

Meanwhile Japan, the US and EU are still in ‘discussion’ mode with the SEC issuing warnings, sending alarm bells to those looking to jump on the ICO train. 12 (There was even a discussion of ICO purchases being entitled to a refund by law? America is so adorable.)

Reading through the Monetary Authority of Singapore’s 13 page document, the terms are a bit fluffy and serves more as a guide than regulations of what specifically defines as an ICO. Lots of loopholes and workarounds are still possible but the report’s objective is to prevent scams and “combating money laundering and terrorism financing”. (Sure, good luck with that. But how about understanding the technology first, before layering rules?)

What you need to know about SG’s definitions of when ICOs are or aren’t securities:

  • ICO trading platforms require vetting and a license issued by MAS
  • some digital currency issued during ICO campaigns (or what are called ‘shit coins’ — alt coins aside from the well known ones like Bitcoin BTC, Bitcoin Cash BTH, Ethereum ETH — that are super minor) may possess characteristics of ‘normal’ currency and must publish a regulation-compliant investment prospectus and register it with the central bank.
  • there are exceptions to the rule including: if the ICO does not exceed S$5M within a 12 month period, offer is made to institutional investors only, and the offer is made to accredited investors under SG’s prescribed investor class.

These discussions of regulations by the big guys is an indicator of normalizing cryptocurrency, but I can’t help but think of how the promise of cryptocurrency are how 1. transactions happen collaboratively 2. secure because they are backed by technology and 3. without central points telling people what to do and how to do it (and without all the fees).

In other crypto news:

Notable Partnerships, Movements in Regulatory Systems, Alliances

  • AMEX announces partnership with Ripple, a crypto payment’s platform
  • MasterCard finally jumps on the blockchain payment bandwagon filing a patent in the U.S. for their platform link
  • KPMG joins the Wall Street Blockchain Alliance — a 501(c)(6) non-profit trade association. link
  • 20 global banks and financial institutions join Singapore and Hong Kong’s blockchain based network — no clear indicators of the implications yet link

Products and Services

  • VISA in partnership with the blockchain startup Chain, rolled out B2B blockchain payments. VISA is already partnered with U.S.-based Commerce Bank, South Korea’s Shinhan Bank, the Union Bank of Philippines and the United Overseas Bank, based in Singapore. link
  • Square’s Cash app is testing a feature to buy and sell bitcoin (only for U.S. users) link

Reports for PowerPoints

  • Deloitte scoured GitHub and published a report from the data so we don’t have to. The report is long and nerdy but there are some handy charts on there in case any of you MBAs need it for a PowerPoint 🤗 Find the report here.

PS: I’m playing around with a newsletter, not ready to announce yet but you can sign up here: https://tinyletter.com/highinnovationAny and all feedback, questions, and thoughts are welcome — simply reply to the newsletter or tweet me. Big shout-out to Jeff H., Jon Russell,Daryl S., and Dave McClure for invaluable insights and help.

ICO: Enough is Enough

Emergency. Emergency. We interrupt the crypto primer series for a special post on ICOs.

I decided to write intros to crypto, starting with “Why Bitcoin is Important” and “An Explanation of Blockchain for Non-Technical People” because I believe in the technology but more so, think when it’s normalized, it can change the world.

As I was drafting my next post on Smart Contracts and the Promise of Ethereum, I got ping’d for the thousandth time with a barrage of questions about Bitcoin and ICOs.

I am so sick and tired of repeating the cookie cutter response I have memorized, I decided to write it.

The explanation usually goes like this:

Hey. Remember the ICO Paris Hilton endorsed? Well it turns out, the company is run by a piece of shit who kicked the crap out of his girlfriend 117 times and was sentenced to a year in jail. He is also fighting four lawsuits and super radioactive in the tech community, no one wants anything to do with him. Paris Hilton found out what she was backing after she promoted him and distanced herself right away. Do you want to be known as a person who was duped like Paris Hilton?

Okay, okay, so Paris Hilton may be as smart as a box of rocks.

What about DJ Khaled’s endorsement? Remember that? Turns out, the founders of that ICO were accused of multiple charges of fraud, have outstanding bills, payments, and what have you. Just seriously not so… straight peeps and they recently resigned. You wanna end up like Khaled?

I’m sorry — well not really — but right now, you (you = my friend, acquaintance, etc.) are as knowledgable about ICOs as Paris Hilton and DJ Khaled.

So if you don’t know who and what you’re investing in, most ICOs are sketch level fucking bajillion and it goes without saying: You’re better off staying far, far, away until you understand what ICOs are.

Usually, the frankness wakes people up but I find myself getting more and more impatient when explaining ICOs. So I’m doing what every nerd does: Blog about it. (And to anyone I may have offended or angered, I’m sorry. It’s not you, it’s me. Really.)

Long legit explanation:

In short, an ICO (initial coin offering) is like a project on Kickstart built on the blockchain where a product or service is backed by the community versus investors. An ICO is not like an IPO, since ICOs are not regulated and due diligence best practices change rapidly since there isn’t an entity or regulatory party telling entrepreneurs what to do and how to do it.

Loose outline of how a company/startup typically launches an ICO

  1. publish a comprehensive white paper on what they are offering, how it will work, how they will make money, why people who back the project should invest, and the background of the founding team.
  2. find an ICO platform to launch the campaign
  3. tap into a network of high profile or influential figures, get them to back your project, and if you’re lucky, they will market when the general public can put money into backing the project
  4. market, market, market. Founders start Slack and Telegram groups to engage the community of potential backers. They publish posts on blogs and Medium. And of course, social media marketing on Facebook, Twitter, et al.

Now that we covered the basics of ICOs, some data points.

While looking through ICO stat sites like 1, 2, 3, I came across this post (in Japanese). This random guy in Japan plugged in all the numbers into an Excel so I didn’t have to, which I’m translating into English so you don’t have to. (You’re welcome.)

This guy took a sample of 48 ICOs with the following conditions:

  • ICO launched between 2014–2017 and listed on ICO stat sites
  • projects that didn’t use an ICO platform since data of products launched on platforms aren’t as easily trackable
  • projects that don’t require software or hardware development

Of the 48, he found projects to be bucketed in four categories:

  1. working product: at the time of the ICO there is a product and users
  2. beta: βversion of product is released; no users
  3. alpha: only a pro-type, not ready for beta release
  4. no product: just a white paper and a community, nothing to show (not even a prototype. Yikes.)

He lists several findings (YoY product delivery comparison, amounts raised, thoughts on why ICO products can not be delivered on time, etc.) but the one finding that raised the alarm bells was this one.

Of the 48 ICOs

Working product: 3 (6.25%)

Beta product: 7 (14.58%)

Alpha product: 11 (22.92%)

No product: 27 (56.25%)

Uhhhhhhhhhhh. 56.3% don’t have product on delivery? That’s insane. Where is the KickFailure equivalent site of ICOs? And I wonder if someone is keeping track of these people who fail to deliver. Just because ICOs aren’t regulated, it doesn’t mean individuals shouldn’t be held accountable.

Even more worrisome, is looking at the track record and seeing evidence such as this:

15 ICOs in a day and a half? What. The. Fuck.

Now I am a believer of blockchain. I champion Bitcoin, Ethereum, Litecoin, Monero, and a few others I’m closely monitoring. I am a fan of ICOs in theory and in time, cautiously optimistic that ICOs will help move crypto forward. But right now? Hedge your bets elsewhere; there are plenty of investment opportunities in cryptocurrency once you understand the basics.

A very rich man once said:

Risk comes from not knowing what you’re doing.”

That rich man is Warren Buffett. Warren Buffett is worth $80B USD so I think he knows what he’s talking about so for God’s sake, before talking about investing in an ICO or buying Bitcoin: please, please, please educate yourselves.

Thank you for reading this very long rant. The End.