The Hard Truth About ICOs

Clare
Senior Consultant
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Posted on April 29, 2018

In Episode 4, we explore new crowdfunding mechanisms made possible by the advent of blockchain technology and smart contracts called Initial Coin Offerings (ICOs) and Initial Token Offerings (ITOs).

We speak to the leaders of two regulated platforms that seek to employ this new mechanism to help entrepreneurs in Canada and how they’re playing by the rules amid all the hype. We also speak to  a blockchain-based social media network who used their tokens to sponsor a Canadian athlete.

Our guests on this week’s episode are:

-Christopher Kramer, President and CEO, OneName Global

-Adrian Rosenbusch, Chief Visionary Officer, OneName Global

-Peter-Paul Van Hoeken, President and CEO, FrontFundr

-Alan Wunsche, CEO and Chief Token Officer, Token Funder (exerpt below)

Views expressed do not necessarily represent those of Navigator or its affiliates. 

A portion of our discussion with Alan Wunsche is transcribed below. Subscribe here to have the Navigator’s latest insights delivered right to your inbox.

Clare: I guess this is one of the harder questions out there almost as hard as asking you know what is blockchain. But today we’re going to be talking about inital token offerings and I’m wondering if you could in the very simplest of terms explain what that might be for listeners.

Alan:  So in order to understand initial token offerings what we should do is take a quick step back to what happened in 2017. Most your listeners will probably be very familiar with the initial coin offering craze and hype cycle that that happened throughout 2017. Many projects spun up with the intent of essentially exchanging your base currency such as Bitcoin and Ethereum for example and exchanging your crypto currency for one of their new project crypto currencies. So many of these new crypto currencies where we’re called coins on on their platforms, on these projects platforms. So what we have is essentially a new mechanism for projects around the world getting funded through cryptocurrency and this this whole initial coin offering craze took off.

Now tokens are the more generic term, tokens are the more, are the term that we actually  in the Ethereum space and there’s a standard around an Ethereum token that these projects we’re using and it’s the more it’s the more generic term because not everything ends up being a coin. So initial token offerings now is going to be and is the the next evolution of the initial coin offerings and what that will mean is a creation of an entirely new asset class because as these tokens don’t need to represent coins per say or as some call them utility tokens or utility coins for platforms they can now represent real world assets and real world value. As we all talk about it in the industry blockchain allows us to transfer value from from peer to peer and then and Bitcoin basically was the first transfer value and it was meant to be digital cash. Now we’re able to very frictionlessly and rather easily through the blockchain and securely I should add be able to transfer value that could represent shares in a business, shares in areal asset, shares in a royalty stream, many different applications. So these are not coins anymore. These are tokens and that’s where our marketplace will evolve to.

Clare: That’s interesting because I often heard those terms used interchangeably so it’s good to have that sort of differentiation in our listeners minds. As I understand it your company TokenFunder is Ontario’s first regulated blockchain venture funding platform. Can you tell us a little bit about it and what exactly that means for the market.

Alan: Definitely and by venture funding we come back around to one of the one of the initial use cases here, allowing for new projects and new businesses to take advantage of this very frictionless funding mechanism. So we were starting there as one of our first applications. It’s not the only application but as a platform, and we are the development phase of the platform, we’re currently in the token offering phase. So the the story is or are the backdrop and the story goes like this, the the coin offering craze is going on and we see that with my background, I mean you mentioned that I’m a chartered accountant, chartered professional accountant and I’ve worked in the capital market space for a long time, you can just imagine how how the regulatory environment is going to evolve and to allow this space to mature. So I envisioned and those those around me, we envision how frankly this can’t be unregulated and be sustainable going forward. There’s reasons for that which we’ll get into I’m sure and other questions that you have. The fact that we’re regulated what we did was we started working with the Ontario Securities Commission as soon as they came up with their launch pad and we brought in a new idea and that was that we would apply this token offering model to allow for all kinds of start ups in mainstream ventures to take advantage of this technology.

Now the first step in this is to launch our own initial token offering and that is a regulated security financial instrument. So by being a regulated security we’re in the process of developing a regulated platform but the regulated side of this is that we actually have, we’ve got real disclosure beyond white papers that that provide you with vision. We’ve got disclosure, we’ve got credit, we’ve got audited financial statements, we’ve got an offering memorandum, and this is how the industry in terms of creating a new asset class will emerge will emerge in ways that allow investors to feel more safe and to kind of understand what they’re buying and the nature of the regulated aspect is really that we’re accountable to the to the regulator to do as we say we were going to do and if anything even if investors have questions or concerns they know how to get a hold of us and you know we’re not in some other country asking for their crypto.

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