Blockchain Development (v) block chain ICO: The driving force of Internet evolution

Blockchain Development (v) block chain ICO: The driving force of Internet evolution

Lihe October 8, 2016

Due to the non-tamper characteristics of blockchain, the Internet will evolve from centralized trust to centralized trust based on algorithms and data, with the joint efforts of many blockchain organizations and companies. As the centralized trust intermediary is gradually weakened and replaced, the way the Internet operates will be changed by the system represented by the blockchain. Therefore, blockchain is not only a technology, but also a story about the evolution of the Internet, although the story is still some distant, but it has been embryonic and preliminary development.

The blockchain ico, which is in line with the trend of de-centering, can make full use of the small amount of funds precipitated in the world, form a Mickle effect, and form a new way of self-centered autonomy, which greatly accelerates the speed of internet evolution. And ordinary netizens will be through the ICO into a new round of internet evolution, witness a new era of arrival!

First, what is ICO

The ICO full name initial Coin offering, a product of the digital currency and blockchain community, has so far not been formally defined, and is generally referred to as the original currency issue. ICO originates from the IPO (Initialpublic offering), "initial public Offering", which refers to the first public offering of a stock company to the public, and the ICO is very similar, except that the issue is not a stock but a digital coin, commonly referred to as token. By mid-September, the total financing of the blockchain in 2016 had reached $420 million, injecting a strong vitality into blockchain development. There are several features of the blockchain ICO:

1. Global investors can participate.

2. The entire process is transparent and impartial and cannot be tampered with.

3. Create a new form of corporate governance, namely, universal self-government. The holder of a decentralized global currency can decide whether a proposal is passed by voting, and the blockchain ensures that the process is fair and transparent.

List several examples of success to intuitively feel the ICO's charms:

Digix Project:

Digixglobal is a DAO (distributed autonomous organization) team in Singapore whose product nature is based on the Ethereum blockchain, the de-centralized Gold Exchange, which is endorsed by physical gold in tokens. Its token dgd the crowdfunding cost about 20 yuan, the price is up to 160 yuan (currently 90).

Ethereum Project:

The well-known intelligent contract platform, the etheric currency crowdfunding time cost more than 1 yuan, after the official operation, the price is up to 150 yuan (now 85 yuan).

Future currency (NXT) Project:

The NXT is the first blockchain to fully use POS based on the newly written crypto currency code. The project raised only 21 Bitcoins (about $6000 at the time), while the heyday of NXT was worth more than $100 million (now $10 million).

Risk Warning:

It is important to note that the high yield of blockchain projects is a high risk ! Because there is no legal jurisdiction and regulatory body, all investments are purely based on the credit of the project team and are therefore highly risky.      For example Goldenloaf project only spent one months on the team disappeared, nothing left, investors lost everything .

Second, the entrepreneurial team why not choose VC but ICO

Ordinary people will have doubts, since the Blockchain ICO project is very promising, why not choose VC (venture capital), but give ordinary netizens a chance? Is this a trap or a pie? In fact, the start-up team choose ICO is also based on their own favorable consideration.

First, the professional institutional investment is to look at the volume, if there is no volume, whether it is the seed round, pre-a or a round, the VC on the list of investment clauses (TERMSHEET) will be more dominant, leading to the start-up companies to give too much original shares, if the equity transfer is not good, and to the board of Directors, Will crack down on the founders ' focus on their own cause. Ethereum's platform and other blockchain projects offer the opportunity to focus on the service and the hub-and-go platform, to sell the future tokens directly to early-stage bullish and supportive projects, while the startup team and early supporters get ample cash flow without giving any shares or board seats.

Second, virtual currency financing increases with the user, the value of the virtual currency also appreciates. The more users, the higher the demand for the virtual currency, and the general token supply is fixed, the demand is greater than the supply, the price will rise, more easily than the dividend on the equity of the appreciation. And a start-up company, in the beginning of a few years is impossible to pay dividends, VC out of anticipation of future dividends, discount rate is very high, resulting in a low valuation of equity. While the virtual currency can be traded immediately after the issue, ICO investors are willing to pay a liquidity premium and the team can raise more money. Traditional investments need to lock in equity for years, and investment will and investment premiums will fall sharply.

Finally, the ICO investor is also the user, is the free promotion person, to the entrepreneurial team pressure also did not have the VC high. Because of the interests of disputes, VC to drive the founders out of the company a lot of examples. So from the perspective of the entrepreneurial team, ICO more favorable than the traditional VC, investors can also get high returns, is a win.

Iii. Classification of ICO

In general, ICO projects are divided into three categories: Application class, Platform class, underlying technology class.

1. Application class ico

Such projects are generally based on existing blockchain platforms, leveraging the platform's technology and ecosystem to develop applications that are directly facing ordinary consumers. such as the Digix project based on Ethereum.

2. Platform Class ico

Such projects generally make some improvements to existing blockchain technologies, form new blockchain platforms, and attempt to create new ecosystems on new platforms. For example, the new Turing complete blockchain platform Lisk project.

3. The underlying technology category ICO

Such projects generally propose a new technical improvement, which is applied to the existing blockchain platform for optimization and improvement purposes. For example, a distributed storage protocol project applied to Ethereum.

Iv. Classification of tokens

In general, ICO tokens can be divided into 3 types: application tokens, equity tokens, and creditor's rights tokens.

1. Apply Tokens

The first is called an app token (appcoin), or a user token. As the name implies, this token is used when the user needs to use a blockchain application. It's like spending a game coin in a game room. Therefore, the longer you use the application, the less tokens you have in your hand if you don't buy new tokens. The application token ico is the earliest and is currently the most ICO of the type of tokens. Bitcoin (BTC), which includes the Bitcoin network, is the application token for Ethereum's etheric currency (ETH).

Application tokens are similar to renminbi and US dollars, and are used as a trading medium in blockchain applications. Because of this, application tokens can be easily exchanged with other application tokens, such as Bitcoin, or central bank currency such as renminbi, USD, etc.

2. Equity Tokens

The second token, called the Equity token (Equity token). Equity tokens occur because, for a blockchain application, it can be owned by any company. So, who has such an application? This is all the holders of the equity tokens. Therefore, unlike the application tokens, the equity tokens are more similar to the shares of the company. Equity tokens are not reduced as users use the app. In contrast, holders of equity tokens receive dividends from the app's earnings. Therefore, the equity tokens are similar to holding shares in this blockchain application (note, not the company). Of course, the premise is that more and more users are using this application. Singapore's blockchain gold trading platform Digix is to apply crowdfunding by issuing an equity token called DGD.

In addition to receiving dividends, the holder of the equity token is the owner of the application. As a result, holders of equity tokens also have the right to vote on this application to determine the future of this application. For example, for Digixdao, its equity token DGD holders can propose new features to the app, or they can vote on other proposals.

3. Creditor's rights token

The third token, called the Creditor's rights tokens (debt token). The emergence of creditor's rights is mainly used to solve the problem of the lack of liquidity in the blockchain application, in essence, it is a truth for enterprises to issue debt. For example, when an application bursts into flames, it is crowded into a large number of new users. These new users will need to apply tokens (Appcoin) to use this app. At this point, however, most of the application tokens may be in the hands of the old user. This application is to avoid its application tokens (Appcoin) price fluctuations in the reason, but also prohibit the old users to sell a lot of their own hands of the application tokens (similar to the IPO non-stock ban). At this point, the app needs to borrow money temporarily to buy the app tokens to meet the needs of new users. Therefore, the creditor's rights token was born. It is similar to providing a short-term loan for the application. The holders of creditor's rights are like a kind of saving behavior, because they can get a certain interest return.

Debt tokens and equity tokens are different, equity tokens similar to the application of shares, as long as the application continues to develop, the value of equity tokens is also growing. There are not many applications for the issuance of debt tokens. Blockchain media platform Steemit is one of them. Their creditor's rights tokens Steem backed Dollar (SBD) can be redeemed for their app tokens Steem.

Of course, a blockchain application does not necessarily use only one token. For example, the Distributed File service Sia and the blockchain Gold Exchange Digix use dual tokens, which are application tokens and equity tokens. The specific use of that type of token depends on the needs of the blockchain application itself.

V. How to find an ICO

At present, there are many websites at home and abroad to summarize the ICO investment projects, convenient for investors to view, while in some of the more famous domestic and foreign blockchain community will also have a discussion of blockchain investment projects, investors by visiting these sites and the community to  about ICO.

Vi. process of ICO

At present, there are a plethora of blockchain crowdfunding projects, the general process of ICO is briefly introduced:

(a) Business Core model review

At the same time, the preparation of crowdfunding is often more than 10 projects, this time to look at the various projects of the introduction and white paper, detailed reading of the project's business model and tokens to investors return model, and related industries to investigate. Fortunately, due to the current domestic hot money, attracted international attention, so now ICO attaches great importance to the domestic market, there are generally Chinese white papers, the common inspection angle has the following:

1, to fully consider the technology forward-looking and innovative. Thanks to the new features of de-centering, the development path and direction of many applications are greatly expanded, and only the most creative projects can become the giants of the new era. For example, the Ethereum project, creatively proposed the implementation of intelligent contracts, so that the blockchain from 1.0 times into the 2.0 era.

2, to fully consider the feasibility of the technology. Because of the characteristics of the new technology, there are many difficulties can not be predicted, many of the history of entrepreneurship because the technology is too advanced to achieve the desired effect and failure, so carefully evaluate its feasibility.

3, to fully consider whether the business model to fully utilize the core advantages of the blockchain. Good projects should be closely related to the characteristics of the blockchain unique to the traditional industry has a disruptive effect, if only the blockchain as an auxiliary part, it is difficult to achieve the desired effect.

4, to fully consider the ecological characteristics of the platform. Bitcoin-and Ethereum-based projects benefit from a rich ecosystem of platforms, and the cost of re-architecting a new platform can be costly.

5, to fully consider the industry environment. Different industry market capacity is different, the industry threshold and competition is also different, blockchain is not omnipotent, to find the most suitable for blockchain application scenarios and industries.

(ii) Team visits

Team visits are important because the business model is good and is carried out by people. Team One is the strength of the mission team to form the core personnel, the core staff of technical experts and industry experts, the more powerful, the more easily the project success. The second is the scientific level of the group formation, there is no legal adviser, there is no industry consultant, there is no management committee and so on.

(iii) communicate directly with the team and discuss with other investors

The blockchain ICO gives the average netizen the opportunity to contact the core team directly, the general team will set up the official QQ group, the group in the country, create the slack channel in the foreign country, by the team member personally and the investor communication, the global investor can communicate with the team fully, boldly raises each kind of question, And listen to the opinions and ideas of other investors.

(iv) Participatory processes

Considering the high risk of the blockchain ICO, the funds are generally divided into several different projects to spread the risk. Specific participation methods, we must read the details of the project side, because each ICO specific mode of buying tokens vary widely, must abide by the official rules, otherwise easy to fail. Through a simulated a project, to illustrate the general process of the ICO, assuming that the project is an Ethereum application, scheduled for November 26 crowdfunding:

1. Redemption rules

A project officially accepts the aether investment, raise the capital to cap for $5.5 million, crowdfunding 500,000 Ethereum, the official will release the exchange rules of the aether and tokens as the following table, you can see the first hour at the beginning of the crowdfunding exchange rate is the highest, for 1 of the ether currency for 170 tokens, over time and gradually reduced.

time	Ethereum and token exchange ratio
Landing time (1 hours) /span>	170:1
11/26-12/02	150:1
12/03-12/09	133:1
12/10-12/16	117:1
12 /17-12/23	100:1

2. How to Buy

The official will deploy a dedicated token management intelligence contract that sets the number of caps, the rate of exchange, and other parameters of the crowdfunding, and automatically opens when the Ethereum block reaches a set value such as 2327212 at the height of November 26. Users can use mist, web wallets, and so on to send an ethereum with a disclaimer code to the smart contract to automatically receive the replacement currency. The user disclaimer code is a hex code obtained by reading the official disclaimer before crowdfunding opens.

3. Purchase process

Crowdfunding 2-3 months ago, the official release of the ICO statement, to determine the crowdfunding time; one months before the crowdfunding, the official through the website issued mist, Web wallet, such as the purchase of tokens of the tutorial; before 10-15 days, the official release of the test network of the token management smart contract address, users can test the crowdfunding function; 5-10 days before crowdfunding starts , the official release of the page to obtain the disclaimer code; 2-4 days before the crowdfunding, the official release of the token management smart contract address; Crowdfunding day, when the Ethereum block height reached the setpoint such as 2327212, the smart contract automatically opened, the project started crowdfunding.

After the crowdfunding is over, you can view your token holdings through Ethereum Tokens browser, address: https://etherscan.io/token/

[1] MAXMW: The new business model of blockchain-the http://www.8btc.com/ico-blockchain of the sale of tokens to the public

Blockchain Development (v) block chain ICO: The driving force of Internet evolution