ICO Token Rewards Policy Can Have Unintended Consequences, Pose Dilemma: Expert Blog

Token policy may have a strong impact on the price and usefulness of the token.

Expert Blog is Cointelegraph’s new series of articles by crypto industry leaders. It covers everything from Blockchain technology and cryptocurrencies to ICO regulation and investment analysis. If you want to become our guest author and get published on Cointelegraph, please send us an email at mike@cointelegraph.com.

Some cryptocurrency ventures promise prospective token holders rewards for acquiring and holding their cryptographic tokens while they simultaneously promote their cryptocurrency’s suitability for use in everyday commercial transactions. These cryptocurrency ventures double up on token use cases thinking that they are engineering a more valuable token: a token that is a form of currency that also rewards you for holding it. Instead, they create a token with conflicting fundamentals for unsuspecting participants in their ICO and potentially put their project in jeopardy.

Crowdfunding Competition

The problem is rooted in fundraising ventures issuing tokens that initially have no function or value. These rewards tokens are created purely to take advantage of the advances in crowdfunding provided by the Ethereum network and ERC-20 smart contracts.

Unlike cryptocurrency tokens that can immediately be used for something on a distributed network, rewards tokens are a purely speculative creation from their inception.

Token purchasers collectively assign value to rewards tokens based on their assessment of the possibility that the venture will make good on the promises in its white paper and online marketing materials. The dilemma surfaces as competitors, also fundraising, enter the marketplace. Since funds are scarce, these competitors need to signal that they are a better value to speculators.

For example, after the fundraising success of the first venture to promise a cryptocurrency debit card in a token sale, several competing cryptocurrency debit card projects followed suit. In order to differentiate their projects, each venture engineered more enticing rewards programs and appealing value propositions. Strategies included claiming to support over 8 different major cryptocurrencies to providing 0.2% rewards on card transactions.

Medium of Exchange

One competitor decided to establish relationships with real estate companies and obtained agreements requiring the customers of those realtors to transact business exclusively with their rewards token. In their white paper they guarantee that the rewards token will appreciate in value because of this scheme. However, they would need to continually invest in expanding the number of goods and services that use their token as an intermediary instrument, without financing benefits that mining affords proof-of-work networks like the Dash network.

In promoting the token as an intermediary instrument to facilitate the purchase, sale, or lease of real estate, the rewards token becomes a medium of exchange. However, the supply of rewards tokens is fixed. The supply is engineered this way so card transaction rewards are not diluted.

The venture guaranteed the token price increase, wagering that there would be increasing demand for the few houses that the token supply represents.

Unfortunately, it is a wager that assumes that the tokens provided sufficient incentive to change, perhaps intransigent, consumer behavior. For example, seniors are not likely to begin using cryptocurrencies to buy, sell, or lease property. It is too expensive a behavior change for consumers not in the young, male-dominated, tech savvy demographic that embrace cryptocurrencies. Instead the reverse is more likely. Demand for token-denominated houses will fall.

Even if adoption wasn’t an issue and demand was unaffected by the scheme, if the supply of real estate transacted using the rewards token decreases then the tokens become less valuable collectively. This scenario is very possible when demand for housing remains the same in the short term, but the cryptocurrency venture doesn’t have sufficient partner agreements in place to replenish the supply of units that have been purchased or leased. Under these conditions, the fixed supply of tokens represent an increasingly smaller supply of real estate, diminishing the collective value of the tokens.

Conflicting Strategies

Rewards tokens have different economic fundamentals. When a token offers rewards, there is an incentive to hold on to the token. The larger the expected reward, the higher the incentive to hold becomes. When many owners of the token decide to hold, the result is an appreciation in the price of the token. The reverse is also true. If many token holders decide to sell, there is a depreciation in the price of the token.

Assuming that the token purely represents the right to a portion of the future rewards provided by the venture, and is not used to buy and sell goods and services, its price would never be influenced by the supply of real estate.

When a venture decides that its rewards token should also support real estate transactions as a medium of exchange, it confounds its rewards strategy to a varying extent. The problem may be particularly acute if the marketplace for goods and services is relatively small in comparison to the expectations market for token rewards. Fluctuations in supply could have a disproportionate impact on token price.

Summary

Keep token policies simple. Imagine a world where Amazon’s stock could be used as a currency in the Amazon Marketplace. Moreover, imagine that it is also the only method of exchange permitted in the marketplace. Depending on expectations, a stockholder speculating on an increase in the value of the stock may not want to buy anything in the marketplace with their Amazon stock.

On aggregate, transactions in the Amazon Marketplace would drastically decrease if all stockholders held similar expectations to that individual stockholder. This dilemma is exactly what is created when projects simultaneously use a rewards token as a unit of exchange. Avoid it.

Munair Simpson

Munair Simpson is a business strategist and the principal researcher at Useful Coin Research. Munair lives in South Korea and enjoys teaching Capoeira when not obsessing about the future of finance. Munair graduated from the Wharton School with an MBA in Marketing.

Source: Coin Telegraph




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Disintermediating Digital Advertising: MAD Men Take Aim at Ad Men

Blockchain enables the elimination of middlemen by directly bringing together ad buyers and sellers.

The digital advertising space is one that was meant to revolutionise advertising away from the smoke filled offices of the 1950s, but instead it has become a breeding ground for greedy middlemen.

Advertisers and content publishers face a quagmire of convoluted proprietary placement platforms that are easily manipulated and inefficient. However, Blockchain technology is aiming disrupt this industry as it has many others.

Making the MAD network

MadHive has set its sights on trying to clean up the advertising space, eliminating all the inefficiencies and money-drains that hang out between the content publishers and advertisers. Within the MAD Network, there is no need for intermediaries, and no need for their easily swayed proprietary ad placement services.

Advertising technology hit a ceiling soon after it became popularized, once middle men had found their way to drain the advertising dollars between an ad’s conception and publication. Now, the MAD Network aims to change all this by providing a complete platform, broken up into different components, each of which serves to replace existing legacy systems within the ad tech supply chain

Walled gardens

One of the biggest issues in digital advertising is the software that automates the matching of advertisements with open publisher inventory. This is not as fair and equal as it sounds because these platforms, as they stand, operate in somewhat of a walled garden. Platform owners, as opposed to content publishers or even advertisers, have full control over all of the data and value being exchanged throughout the advertising supply chain.

Breakdown of the MAD network

Inside the MAD Network, solutions exist for payments, ad serving, ad exchanges and data management.

MADnet Books: The Blockchain-based payment rail that allows network participants to exchange value within the network is MADnet Books. It is not just for transactions, it adds in a high level of transparency, enables decentralization, and keeps a record of where all the dollars are being spent. The MAD Network will have its own token to facilitate this process, MADtoken, which forms an economy integral to the new advertising platform network.

MADnet Data: Within digital advertising there is a large amount of data that is transmitted and exchanged within an ad network. Formerly, this content would also have been snapped up and owned by the platforms, but these middlemen disappear with the entrance of a Blockchain. This important and valuable data now becomes a usable commodity rather than a valuable by product that is siphoned off by the owners.

Within the MAD Network, MADnet Data will enable advertisers and publishers to share data about ad performance and engagement directly with each other, in a secure, peer-to-peer fashion regulated by permissions and access control.

MADnet Core: Finally, there needs to be some matching of advertisers and publishers when it comes to getting advertisements in front of targeted audiences. MADnet Core is a new proof-of-real-work Blockchain that will decentralize both the ad serving and ad matching functions. This Blockchain layer will aim to provide complete transparency for ad matching events within the network.

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.

Source: Coin Telegraph




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SingularityNET Announces $36mln ICO Funding For AI Platform Expansion

Blockchain AI platform SingularityNET will launch an ICO Dec. 8, looking to raise $36 mln.

Pioneering Blockchain Artificial Intelligence (AI) marketplace SingularityNET has announced a $36 mln ICO to fund its expansion.

Announcing the fairly modest funding goal for the world’s first such AI marketplace, SingularityNET’s robotic ‘chief humanoid officer’ confirmed the 500 mln token event at its recent Web Summit in Lisbon, Portugal.

A combination of private and public sales will distribute the tokens, with the ICO concluding when all are sold or when the $36 mln figure has been reached.

Participants are required to register on a whitelist prior to the sale beginning Dec. 8.

“The exact amount of tokens available in the crowdsale depends on private sales, which have not yet been finalized,” an accompanying press release states.

SingularityNET has sparked considerable interest in its bid to open up the hitherto corporatized nature of AI development and services.

Investors in the project already include famous names from both inside and outside Blockchain, and the network itself is already used by over 50 companies including Cisco and Huawei, according to the company.

“…It’s hard to know what direction the evolution of AI is going to go. I think in the long term, which may just mean a few decades from now, AIs will have a much greater intelligence than human beings,” CEO Ben Goertzel told Cointelegraph in an interview last month.

Source: Coin Telegraph




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Letter From Supposed Confido Lawyer Promises ICO Investors Refund

Dubious letter from supposed lawyers of Confido shared a statement that the investors are likely to receive refunds.

Confido has recently released a statement on its website claiming that the money raised by the company in its initial coin offering (ICO) is being kept in a trust fund until further notice.

The authenticity of the said letter, along with its legal representative is still under question considering that the company’s whole social media accounts, along with its website, have been previously taken down.

In the said letter, the supposed legal representative claimed that the people behind the Confido project have no intention to scam the investors. However, the money raised in the ICO is not enough to advance the initiative, so its developers decided to shelve it for further assessment.

Part of the letter read:

“Our client emphasizes that Confido is not a scam and that there were never any intentions to disadvantage any investors. However, the project – despite the dreams of the developers – is not feasible within the scope of the results of the ICO. Therefore, our client decided to stop the development of Confido.”

Brief Confido profile

The project that was intended to disrupt the traditional escrow services and transactions. However, after raising almost $375,000 through an ICO on the platform called TokenLot, the company has suddenly disappeared online. All of the startup firm’s social media platforms like its website went completely dark.

An investigation by a news channel also showed that Confido’s alleged Chief Executive Officer (CEO), Joost van Doorn, has lied about his employment history. Based on the probe, Van Doorn was never an employee of the beverage firm PepsiCo and German online retailer Zalando as he previously claimed on the Confido website.

Promised refund

Based on the letter, the Confido investors may potentially have a chance to recover the money they invested in the ICO. It remains to be seen, however, if this will be the case in the next few weeks as there are also lots of doubts concerning the authenticity of the said letter.

Source: Coin Telegraph




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EOS To Talk DACs, Tokens and Blockchain-powered Conscious Culture At BlockShow Asia 2017

BlockShow Asia has announced partnership with EOS.IO, a Blockchain software platform, which provides infrastructure for Decentralized Applications development.

BlockShow Asia powered by Cointelegraph has proudly announced its partnership with EOS.IO, a Blockchain software platform, which provides scalable, flexible and usable infrastructure for Decentralized Applications development.

EOS.IO is the product of block.one, a worldwide-known publisher of Decentralized Autonomous Corporations (DACs).

“The block.one team has been working relentlessly to make EOS.IO the most advanced Blockchain software possible. While advancing the core software, we have also been working with a number of major players in the industry to migrate their platforms to make use of the EOS.IO software.”

Brendan Blumer, CEO at Block.One

The current EOS.IO roadmap includes single-threaded testing environment ready for December, followed by multi-threaded development taking place in 2018. Overcoming this roadmap goes on very active and successful so far – in particular, the team shared some news about the work on the parallel execution engine has begun eight months ahead of schedule and, according to their plans, it will be ready by June 2018. “The work required to make this happen includes a complete rewrite of chainbase, the underlying database technology behind Steem,” – explained the company.

Chatting with the block.one team, the BlockShow team was inspired by the fact that the company feels and shares the main motto of the conference: to become a window to the global Blockchain ecosystem for all those bright and innovative Blockchain-powered companies across the Far East. Talking about how important it is for the worldwide Blockchain scene, Brock Pierce from block.one shared his thoughts:

“Fundamentally, Blockchain is based on the idea of freedom of speech and giving power back to the individual. It’s about making change and making improvements. By bringing people together from around the globe with a shared vision of where this technology can go, we can build really powerful systems that can change the world.”

Moreover, EOS also shared their vision of how important it is to always stay in the middle of all the Blockchain networking and event activities, as well as support them:

“Conferences and meetups are the heart and soul of the Blockchain community. Conferences like BlockShow Asia create a space that allows people, no matter what their current level of Blockchain knowledge, the time to meet with others that may have a shared vision or philosophical view of the world and where this technology can go. It also gives industry leaders the chance to come together and lay the framework that will revolutionize the future of business. That is a very powerful thing.”

From their side EOS is preparing a pretty versatile – and pretty reach – program. Thus, in the morning of the first BlockShow Asia day, the guests will hear insight from its senior analyst, Joshua Lavin. On the second conference day, you will hear from Brock Pierce, partner at block.one and one of the most recognized personalities in the Crypto/Blockchain field. In his opening keynote, he will share his thoughts on cryptocurrency, Blockchain and Conscious Culture. Moreover, apart from these two full speeches, Pierce will also step up as a panelist for “Blockchain & the Token Economy” discussion on the second day of BlockShow.

This all is going to happen really soon, but meanwhile, the clocks are ticking the final days and hours before the epic BlockShow Asia 2017! So it’s now or never – go to the BlockShow Asia official website, look at our fabulous agenda and participants, and waste no time — just grab your ticket. We are sold out of more than 90 percent so far, so hurry up!

Source: Coin Telegraph




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