The Golem anthropomorphic figure
The Golem deal beckons us to revisit the ICO market. Our recent coverage can be found in IPO or ICO or IEO (briefing on Colored Coins) and Transparency missing from the suppliers of Capital to Fintechs.
Golem’s ICO is over. It raised 820,000 ETH (roughly $8.6 million) in a couple hours.
Golem is backed by the Ethereum blockchain and is a platform that aims to become a decentralized hub to create global marketplace for computation.
The Golem Network Token (GNT) was created through this ICO and is the medium of exchange between “buyers” and “sellers” on the Golem hub. So, those engaging on the platform (developers creating software, providers supplying infrastructure and “requesters” ordering computing resources) will trade GNTs.
Golem is the third largest ICO deal. In the ICO market, any deal above $1mil is considered large. Not many people are aware that the ICO market has facilitated around $220mil in capital raised over the past three years. The really large deals are, Ethereum who raised $18.5mil during its ICO and the DAO with a wopping $180mil (a tragic example).
Access to capital has and will be a business essential. The IPO market was traditionally gated by the investment banks and is being disrupted by Fintechs like Angel List, Syndicate Room, OurCrowd etc.
Crowdfunding, transparency in the syndication process, cross border deal facilitation, are ingredients of the underway disruption that are leading to access to capital without being listed on an exchange (i.e. public markets) and to improved liquidity in these private shares.
So where does the ICO (Initial Coin Offering) disruption fit in to this? The basic facts and distinctions are:
- ICOs are one way of crowdfunding.
- ICOs offer a cheap, transparent share ownership process.
- ICOs can be thought of as a derivative of a bitcoin or other digital currencies, because in the process the company issuing shares is creating an Altcoin typically with its name but not necessarily that is a colored, smaller part of the bitcoin (which has 100,000,000 satoshis and therefore, could be divided in that many pieces). The small denomination will also help liquidity.
- ICOs are a way to access global capital simultaneously; whereas traditional capital raising starts in one regulatory jurisdiction and thereafter, may choose to also list in another exchange. ICOs seem more like the FX market that trades internationally, rather than the equity markets.
- ICOs can and are launched from very early stages of business development. They are a cheap, effective way to participate in early stage ventures.
- ICOs can and will benefit from the liquidity traction of the underlying digital currency from which it is created.
Open issues relate to whether (actually not discussed that much):
- ICOs are legitimate and how they could be regulated?
- Are they an investment or a speculative trading asset?
- Will they remain confined to facilitating funding of techie types of companies?
The ICO ecosystem
The Fintech ecosystem is building up to track, analyze and service the ICO market.
Smith + Crown, is the place for news, research, and analysis of cryptocurrencies, blockchains, cryptofinance, distributed autonomous corporations..
It offers a dedicated page to monitor past ICO deals and those upcoming.
ICOstart is a new marketplace (i.e. exchange in old parlance) to issue and trade the Altcoins from these ICOs.
ICOO is another new place to go, to track pre-launch crowdfunding ICO deals and to be able to trade them immediately thereafter, on the Open Ledger platform. This is a company created by CCEDK in collaboration with Openledger. CCEDK is the Danish bitcoin exchange that closed in May and relaunched in July, more as a hub for crowdfunding, issuance of assets, escrow accounts.
Daily Fintech will continue monitoring the space and reporting.
Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Efi Pylarinou is a Digital Wealth Management thought leader.
I am skeptical of the trading aspect of token shares of start up firms where most news are hype and not substantiated by market activity in the short run. The high volatility of these trades can cause harm for the long term prospects of these firms even if they use these issues to raise much needed capital.