My heart and thoughts go out to all those impacted by Harvey. If you haven’t donated to any relief efforts yet, please do so.
Now, to the newsletter:
Topic of the Week: ICOs and Buried Treasure?
We are exploring launching an ICO for a new project. Before we dive into the details of our project, here’s a quick primer on ICOs.
Initial Coin Offerings (“ICOs”) are a means of crowdfunding via the use of cryptocurrency. While many of the more successful ICOs are for blockchain-related technologies, anyone can attempt to raise capital for any project via an ICO. Check out CoinSchedule for a list of ICOs currently in process and coming up.
ICOs are largely unregulated. Only recently has the SEC deemed certain ICO offerings as securities, meaning they must adhere to federal security laws. See this press release.
Instead of stocks, in exchange for cryptocurrency, investors receive “tokens.” Tokens entitle owners to some future economic benefit tied to the project or business.
The economic benefit can be anything. Some ICOs offer access to new products, new currency used in an exclusive marketplace, or a share in future profits. In a more obscure example, a recent ICO was offering movie producer credits for low-budget action movies. I can’t make this up.
After the ICO is over, the tokens trade on exchanges.
Today, there are almost 1,000 unique digital assets, with over $1.5B in ICOs completed year-to-date.
Project Buried Treasure
Let’s dive into our proposed project. I’m hoping for active participation from readers in helping us promote this ICO.
The project is called Buried Treasure. We are offering 10k Treasure Tokens at a price of .026 Ether per token. FYI – That’s the equivalent of ~$10 per token or $100k in total funding.
Buried Treasure is a new Ethereum smart-contracts governed ecosystem that applies Blockchain technologies to the enormous Beanie Baby investment industry, giving greater access to global investment in Beanie Babies, lowering barriers to entry and increasing market liquidity.
No longer will Beanie Babies be the ugly stepchild of garage sales, we want to empower all investors to receive full value for their animal shaped, bean-filled sacks of cloth.
We anticipate this project costing $75k in development and $25k for administrative costs and expensive wine.
What’s in it for our investors?
Treasure Tokens will be the currency for the Beanie Baby Marketplace and can be used to purchase Beanie Babies. The tokens will also trade on an exchange after ICO.
Because we are offering a limited supply of tokens, investors who didn’t get in at ICO will likely pay a higher price than you did for the token. We expect the tokens to appreciate in value over time as our project grows.
Let’s Get Real
Fine, we aren’t launching an ICO. Let me get to the point.
If you replace “Beanie Baby” with any other market, you have the recipe for a multi-million dollar ICO right now.
It’s simple. Many ICO investors believe the value of tokens will rise and someone else will always be willing to pay more in the future. Ask the folks who bought into the multi-billion beanie baby bubble how that mentality turned out for them.
I’ve read plenty of arguments that investors can evaluate ICOs to make smart investment decisions. From my perspective, this is true, only if you can do the following:
First, you must conclude that the ROI opportunity for the project is higher than the opportunity of holding the baseline currency you are exchanging (i.e., Bitcoin, Ether, etc.).
Second, you must determine that the tokens are priced appropriately to reflect both the future market opportunity for the associated project and the appropriate discount rate to compensate you for taking on risk.
If you can do those two t hings, you are no longer speculating. You are making a calculated investment decision.
To everyone investing in ICOs – may the odds be ever in your favor.
Note: Despite my negativity regarding the current ICO landscape, I’m a firm believer that cryptocurrency will continue to gain popularity and fundamentally change the way we transact with each other. It’s not going away, but it will likely go through more growing pains.