Initial coin offering is a new fundraising approach, where companies or individuals sell their own proprietary blockchain tokens, rather than stocks or bonds. There have been many ICO’s in the past, but the market is at a stage now where there is serious mass interest in ICO’s, and therefore regulatory hurdles and enforcement will increase. Many analysts think ICO’s are overpriced and, as a result, ICO’s are highly regulated, including the ROC regulator.
Trustbridge’s ICO model
Our ICO model is based on a smart contract and token mechanism. Our investors fund the TrustBridge foundation, which owns the smart contracts on the TrustBridge platform, and the reward for this investment is an ERC20 token that entitles investors to 30% of all transactions executed on the TrustBridge platform. We believe this provides a highly liquid method of exchange for investor risk, including volatility. This results in a high threshold for entry, and provides significant liquidity. In addition to a 30% reward, investors also receive free mining credit to “mint” their own tokens on the platform.
ICO investment opportunity
Bitcoin, Ethereum and other digital currencies are highly volatile and extremely illiquid. This has many large investors worried about whether to invest in cryptocurrencies, but with Initial coin offering (ICO) technology (rather than traditional crowdfunding) it is possible to fund a project using cryptocurrency, and receive a stream of payments in an escrow account based on trading in the underlying token that they are buying (or selling).
Any investor with access to an exchange that trades crypto-assets, such as Localbitcoins, can buy and sell crypto-assets, and do this in less than five seconds. Investing in cryptocurrencies can be bought and sold through automated trading bots, as well as simple exchanges with human operators. In these scenarios, the digital asset is perfectly liquid, just like traditional stocks, and can easily be bought and sold in larger volumes, making investment in cryptocurrency very easily achievable.
Our ICO model enables the raising of the funds for a project that would not otherwise be possible without traditional fundraising methods.
Detailed regulatory requirements
In a traditional equity offering, the basic requirements are that a company file a prospectus and state securities laws require an IPO process. In addition, firms must register with a government agency. In contrast, ICOs can be structured in various ways, including through smart contracts that are stored on a blockchain. At the core of our platform are these smart contracts, which are globally transferrable and permanent. We believe that the final approval process is almost always highly regulated, but that many ICOs can take years to get the process started.
We have spent several months working with legal advisors to ensure that our ICO platform follows all the appropriate rules and requirements, including all anti-money laundering (AML) and KYC (Know Your Customer) procedures, and all privacy and data protection regulations. This will take several months to finalize. It will be implemented in the first quarter of 2018.
Value of a coin
A coin is the most fundamental unit of account in the Blockchain ecosystem. It is a stable base currency which can be moved by everyone to and from anywhere in the world. The base value of a coin is determined by the market demand for the coins.
For example, as a token for security, a token would be the property of a company, with no value of its own. For instance, this could be coins issued by a bank to investors to protect the bank from financial shocks, with each coin secured by a wire transfer to the bank.
In contrast, a coin has a value, and can be held for a fixed period of time (up to 30 years for Tether tokens) with 1 Bitcoin being worth around $5,000 USD, which makes Bitcoin a fairly expensive medium of exchange for international payments.
Smart contracts are the future
Smart contracts, and specifically Ethereum, are the future of the decentralised economy. Smart contracts allow users to execute transactions without the need for human involvement or a central authority to validate them.
When you buy a coin in an ICO, you are in effect sending an Ethereum smart contract that is legally enforceable, which represents a “use-value” for the coin.
When a project issues its own coin, or sets a base value for its currency, it can then make payments into a wallet controlled by the user, or directly to another wallet.