Daily Fintech

Briefing on Colored Coins, tokenised assets and the future of the ICO market

ICOs are all the rage. Yet Token is a better word to describe where we are moving to, which is to “tokenise” all assets so that they can be traded online. So we may hear more about ITOs rather than ICOs. Or not. A lot is invested in the ICO name, so ITO may not take off as a name. 

Regardless of name, the way an asset is tokenised matters. That is where a briefing on Colored Coins matters.

First, ignore all the noise on the line about ICOs (scammy or disruptive or both at the same time?) and focus on the problem that ICOs are fixing.

If it is broke, do fix it

A regulated Stock Market is how the market of connecting entrepreneurs and investors works today. The old saw is if it ain’t broke, don’t fix it. The corollary is if it is broke, do fix it.  Here are the 4 big flaws with these legacy Stock Markets: 

This post, earlier this week by Efi, describes how things went wrong at traditional regulated stock exchanges.

Why Microsoft did an IPO

They did not need to raise money – they were already profitable. They wanted liquidity and price discovery so that they could motivate employees with stock. That is the function of a public market. Any public market 2.0 initiative (such as ICO) has to bear that in mind. Investors want to buy shares of profitable business. Uber’s $66 billion valuation in private markets is being questioned because investors cannot figure out how they still lose money after having got to such scale. Then consider a bootstrapped business such as Microsoft at their IPO 25 years ago or a Mittlestand company in Germany. As an investor, which do you prefer to own? That is what the Innovation Capital business should be serving and is not.

In short, the big value in an ICO is instant liquidity. That is only one word but it is a game-changer. It is why ICOs are serving a real purpose and why they are here to stay. It is why ICOs are not simply Crowdfunding.

Colored Coins 101 for business people

Part of our mission at Daily Fintech is to demystify jargon that obfuscates. We translate Fin for Tech and Tech for Fin. In this case we are translating Tech for Fin. There is so much innovation around Blockchain that it is hard for business executives to keep up to date. Our job is to find the stuff that matters and bring it to your attention.

We think Colored Coins is an important development in the Blockchain world. We will parse the tag line on their front page to explain why: 

The Open Source Protocol for Creating Digital Assets On The Bitcoin Blockchain

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Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge platform.

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