Token Offerings - The Good the Bad and the Ugly

Token Offerings - The Good the Bad and the Ugly

Since the advent of Bitcoin the world has seen the launch of a plethora of cryptocurrencies. Some good but sadly many bad and ugly. During the 1970’s and 80’s a flick through any of the mainstream Rich Lists showed that most new wealth was at that time created in the world of property. A scan of the same Rich Lists today would show that that the world has moved from property (no pun intended) into tech and, more recently, into cryptocurrencies.

Whilst many people have made substantial gains from cryptocurrencies many have lost considerable sums. The potential for gains has not been missed by the cybercriminal community. This has led to a large number of fraudulent token offerings with fraudsters relying on a person’s FOMO, sucking them in with promises that will never be honoured.

Fraudulent schemes are many and varied. Some Token offerings have turned out to be totally fictitious (an estimated 15% are just copies of more legitimate Token Offerings). Some scams are just old-fashioned Ponzi schemes whilst others claim to take advantage of price differences making huge profits from arbitrage. Scams have also included celebrity endorsements (commonly without the celebrity knowing anything about it). With a smiling celebrity helping create trust that all is legitimate and wholesome so you should buy in.

During 2018 around 1,000 coin/token offerings collapsed! Whilst the majority were fraudulent, of those that were not most were in no way pinned to any original ideas or products.

For a legitimate tech start up this makes the matter of raising funds for development even more difficult. Historically, businesses with solid product initiatives would approach Venture Capital (VC) companies for funding. However, the high cost of this finance (measured in equity relinquishment) usually meant that by the time the venture had moved its minimum viable product anywhere close to market the controlling interest was probably held by the VC. This in turn places the VC’s financial imperatives at the controls rather than the originating vision. Utility Token Offerings provide the tech start-up with a finance option that leaves them in control.

So how do you separate the good from the bad and the ugly? Due diligence checks, the more thorough the better! A legitimate company will not mind answering awkward and probing questions. Start with looking at company personnel – if you cannot find out who they are its probably because they don’t want you to. See where they are based – check they are actually there. Contact them directly and try to speak to someone.

If that all stacks up take a look at the project they are trying to finance. Does the product/service they are developing stand up to financial viability checks ie. Can you see a use for it and can you ever see it making money? If the answer to either part of that question is no then it may be best to leave it alone. However, if after this level of scrutiny you are still interested take a close look at how the company sees its cryptocurrency operating.

In the case of Utility Tokens are they to be the currency of choice within a developing community. Also, are they to have a company assigned value ie. Will they be accepted in payment by the issuing company in exchange for the goods/services that the company is providing. If they are this will help the Token establish a minimum future value.

Once in possession of all this information you will have a good idea regarding the level of integrity of the company behind the cryptocurrency being considered and be well placed to make an informed decision as to whether or not buying in is the right decision for you.

Life at Chainlify began with an idea involving developing a Blockchain as a Service Platform. Our Platform will open the market to developers with limited blockchain experience. This in turn will allow the number of blockchain related projects to proliferate. Projects will feed into all areas of the web-based world not just cryptocurrencies, and will also release the shackles currently stifling the growth of the Internet of Things which McKinsey’s estimate will be worth US$11.1 trillion by 2025. Chainlify’s decision to issue a Utility Token (CFY) was, after much contemplation, considered the optimum method of funding development of our Blockchain as a Service Platform. In addition to funding development, we believe that participants in the various sections of the Chainlify community/marketplace will benefit considerably from using CFY primarily by way of discounts and expedited services. P2P Token usage, along with the acceptance of the Token in payment by the company will feed back into the marketplace further underwriting its value.

We believe the transparency of our operation at Chainlify means that answers to all due diligence enquiries are dealt with comfortably. We believe our Platform and associated Blockchain Developer Toolbox stand up to any level of scrutiny. That said, our strongest belief is that any Utility based cryptocurrency should, first and foremost, be product focussed and product led as is CFY.

By Glyn Craig on 17 September, 2019

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