Business Remodeling

After the COVID-19 pandemic, business startups may have to restructure their business plans to remain viable in the market.  While doing so, it is important to note that the pandemic has left the economy in a bad state and majority of people, including your customers, are facing tough economic times and may therefore not be able to afford your services or products at the previous prices.

Though lowering the prices would work, it could be difficult for you to just slash the market price of your products/services because you will still need to cover your production cost. To achieve a balance, you may have to restructure your business model to include ways of reducing your production cost that will enable you to avail quality products and services at a price that your customers can afford.

Some of the technics may include automation of the production processes to reduce the cost of labour. In addition to the Internet of Things (IoT) and Artificial Intelligence (AI), blockchain technology could also come in handy.

Branding

Being unique and giving your customers a unique selling proposition would certainly place you at the hearts of your customers.

You should concentrate more on your customers’ experience. You could achieve this by getting the right e-Commerce platform to position your startup firmly in the marketplace.

Reconsider the target audience

Probably, before the pandemic struck, you had targeted a wide audience. However, with the current situation, there could be reduced feedback from your audience, which may require you to narrow down your target audience. That way, you shall also be able to make your services/products more innovative and unique for the specific target audience.

Consider crowdfunding

For blockchain-based fintech startups, crowdfunding could help.

However, this will require a balanced approach. Conducting an ICO, STO or IEO could be a great way to raise funds, but it may not be as successful as before the pandemic struck especially with the current economic conditions.

Nonetheless, if your startup shows great prospects of growth, investors may still be interested in investing in it. However, to avoid frustrations you might consider lowering the target while ensuring that the raised amount is sufficient to fund the development of your startup’s project.

Legal assessment of a project is one of the most important factors that dictate the success of an ICO, IEO or STO. In the past few months, we have seen various blockchain project receive penalties and some even being forced to close down due to issues with the law.

BitClave, for example, will have to pay back the $25 million it raised in its ICO back in 2017 after the U.S. Securities and Exchange Commission (SEC) said that the ICO was unregistered. Meta 1 Coin will also have to refund $9 million after a court ruled in favour of the SEC, which argued that the initial coin offering (ICO) was fraudulent. Telegram, on the other hand, had to completely throw in the towel on its TON blockchain project after issues with SEC about its ICO.

To avoid falling into the same trap with your blockchain project, it would be wise to seek a competent legal advisor to handle the legal assessment of your project.

As in the above case scenarios, legal issues could jeopardize the whole project. If a case is filed against the way you raised your capital, you could end up being forced to refund the money. This would throw you back to the drawing board to try and find sources of funds to run the project. However, this time, things could prove to be hard since it would be hard for investors to trust you again and you would be forced to abandon the entire project altogether just like Telegram did.

What to expect from good ICO/IEO/STO legal advisor

  1. Whitepaper assessment

Since the whitepaper acts as the main source of information about your blockchain project. The legal advisor should ensure that it contains all the required legal documentation. Of essence, the whitepaper should contain legal disclaimers and the terms of sale for the tokens.

The legal advisor should help in drafting the legal disclaimer to ensure that all the risks and restrictions (e.g. restriction of investors from certain countries) are included.

Again, the terms of the token sale should be clearly stated to ensure that investors make informed decisions.

Another issue that has been a source of conflict, especially between the SEC and blockchain startups, is the token and funds distribution. This information should be laid out bare for investors to see.

  1. Review of the adopted token model for the IEO/STO/ICO

By reviewing the token model used for the ICO, STO or IEO, the legal advisor shall be able to verify the compliance of the token issuance with the laws and regulations and also give remedies in case of any arising issues.

Security tokens have different regulations compared to the utility tokens and this is the main thing that a legal advisor looks at. If the project uses a utility token or a security token, does it comply with the laws set in place in the regions where it expects its investors to come from?

  1. Aspects of the KYC/AML to be used

Know Your Customer (KYC) and Anti Money Laundering (AML) are some of the basic requirements for blockchain/cryptocurrencies around the world. Therefore, the legal advisor gives guidance on the model that should be adopted and also works closely with any of the involved third parties.

  1. Legal audit of the Project internal processes and documentation

A good legal advisor will also do an audit of the internal processes of the project behind the ICO, IEO or STO to ensure that everything complies with any existing local regulations.

The audit could also include an audit of the smart contracts to ensure that they are executed exactly as the whitepaper and website stipulate.

  1. Evaluation of Tax compliance and the company structure

The legal advisor also helps with accounting, bookkeeping, insurances, tax declarations and domiciliation services among other things through the network of its partners.

Depending on the country, companies dealing with digital tokens are taxed differently depending on the type of tokens they involve themselves with. In Singapore for example, there was a recent update on the Digital Tokens Tax Guidelines.

These ensure that the company remains in good books with the authorities within the country where it is registered.

  1. STO prospectus

Where a legal prospectus is required like in Taiwan, Switzerland and the European Union, the legal advisor helps in preparing it to ensure that it meets all the legal requirements.

  1. Commercial agreements

The legal advisors help in drafting terms and conditions, token sale agreements and any other commercial agreements like the Memorandum of Understanding, the Advisory Agreement, the Financing agreement, etc.

When Initial Coin Offering (ICO) was unveiled, blockchain startups and fintech companies were rushing to make use of the new crowdsourcing technique due to its simplicity in raising capital for projects. 2017 specifically was a very successful year for ICOs and the world witnessed some of the best ICOs to date. The total amount of funds that were raised in 2017 was close to $6 billion up from about $200 million raised in 2016.

However, not all the projects that used ICOs turned out to be successful and some also turned to be scams since ICOs are not regulated in most parts of the world. At the moment, only a couple of countries like Singapore, France, and Germany have come up with ICOs regulations to make them safe for investors.

Having said that, ICOs are still a viable option for raising capital for your blockchain project. In this article, we shall review some of the successful blockchain projects that started by raising capital through ICOs. You can still leverage ICOs and pull out such successful projects amidst the regulatory issues facing ICOs.

However, you will have to put more effort into the project development by putting together the best team for the job. Again you will want to ensure that you comply with any regulatory laws in the region where you investors come from to avoid court cases like those that hit BLOCK.ONE and Telegram ICOs.

The list below was developed taking into account the Returns on Investment (ROI) for each of the projects and also by how much the blockchain project has been adopted across the globe.

10 most successful ICOs

  1. Ethereum

Ethereum ICO was conducted in August 2014, making it the second blockchain project to leverage ICO to raise capital, after Mastercoin ICO conducted in July 2013. At the end of the ICO, Ethereum raised a staggering $16,000,000.

Today, Ethereum is a force to reckon with in the cryptocurrency and blockchain world. The blockchain network completely revolutionized the world of cryptocurrency by enabling blockchain networks to do more than just offering payment services. Ethereum introduced smart contracts which have been the cornerstone of every other blockchain use case.

Ethereum was developed as an open-source distributed ledger platform that enabled its users to create and deploy decentralized applications (Dapps) and also apply and use smart contracts. It introduced the ERC-20 token standard that offered other blockchain developers a basis for creating their crypto coins; most altcoins use the ERC-20 standard to create their tokens.

Ethereum is by far one of the most successive blockchain network second to Bitcoin. Currently, the ETH, which is Ethereum crypto coin, trades at $207.75 USD. Towards the end of 2017 and beginning of 2018, ETH was trading at over $1200 USD.

  1. IOTA

IOTA ICO was conducted towards the end of 2015 and was one of the first blockchain projects to use ICO to raise capital. A single IOTA token was going for 0.00000133 BTC, which translated to less than $0.001 at the time. The ICO was able to raise $590,000.

IOTA blockchain holds lots of prospective use cases since it merged Internet of things (IoT) technology and blockchain technology. The project developers envisioned a future where different ‘things’ using the internet would be able to communicate with each other using blockchain technology.

IOTA stands out as the only blockchain technology that doesn’t rely on blockchain fully for its transactions. It uses another system known as The Tangle to verify transactions as they are being made. This way IOTA has been able to dodge the scalability problem affecting most blockchain networks.

IOTA has been adopted across various industries across the world. For example, Taipei signed an agreement with IOTA Foundation for its Taipei smart city project. Also, a Netherlands company called Elaadnl dealing with smart charging has succeeded in developing the first working prototype using IOTA. The list keeps on growing as more and more industries fall to IOTA’s technology.

At the moment, one IOTA token is trading at 0.00002073 BTC.

  1. DigixDAO

The DigixDAO ICO was the first crowd sale to be conducted on Ethereum. It was conducted in March 2016 and it raised $5.5 million.

DigixDAO is one of the main Decentralized Autonomous Organizations (DAOs) developed on the Ethereum network.  DAOs are normally new business structures that have no bosses but rather all decision affecting the networks are made through proposals and voting.

One of the main features of the DigixDAO blockchain is that it has two crypto coins; the DGD and DGX.

The DGD tokens were the ones that were issued during the ICO. During the ICO, a single DGD token was going for $4.2000 USD.

Contrary to most other ICOs, buyers of DAO tokens hold the rights to vote in the proposals submitted to the DAO.

The main objective of DigixDAO is to create a stable cryptocurrency that is backed by real gold bars. According to the DigixDAO, the token that is backed by the gold bars is the DGX. The gold is stored in a custodian vault in Singapore that can hold up to 30 tons of gold. The gold goes through a Proof of Asset protocol, where its existence is verified through the Ethereum blockchain.

Currently, the DGD token is going for $39.98 USD.

  1. NXT

The official announcement of NXT ICO was made in Sep 2013 on BitcoinTalk forum.

The NXT blockchain is viewed as a descendant of the Bitcoin blockchain and it was developed to solve some of the issues affecting Bitcoin. Some of the issues that NXT promised to fix was shifting the mining algorithm to proof-of-stake and also resolve the issue of bloated blockchain.

The ICO which was conducted on the BitcoinTalk forum platform raised $16,800 in Bitcoin. At the time of the ICO, the value of NXT token was $0.0000168. However, at the moment the token’s value is above $0.01.

Besides the fact that the NXT is tradable on most crypto exchanges, the NXT blockchain is now fully operational and blockchain developers use it to develop decentralized applications. It also has an asset exchange platform, the Nxt Asset Exchange, and a messaging system.

  1. NEO

NEO ICO was conducted in September 2016 and it raised $5,050,000. During the ICO, a single NEO token was going for $0.032.

NEO blockchain is often referred to as the Chinese version of Ethereum. It offers smart contracts and on top of that provides digitized assets, identification decentralized commerce. The developers saw a future where blockchain would be used to represent legal proof-of-ownership for the broader society rather than the cryptocurrency community alone.

Today, NEO is traded on most crypto exchanges and currently trades at over $9.87. Towards the end of 2017 and early 2018, NEO was trading at over $120.

  1. Stratis

The Stratis ICO was conducted from August 2016 to January 2018. It was raised $610,000 by selling a single STRAT token for $0.007.

Stratis blockchain is a project that was developed to offer end-to-end solutions for the development, testing and deployment of Blockchain-based applications for the businesses worldwide. Its main aim was to make it easy for blockchain developers to develop blockchain networks that address whatever problem that is faced in the business sector.

The project has become quite a success since it ended up with a platform that is fully compatible with the C# and .NET programming languages, which are common among coders. One of its best use cases was when Microsoft added it as a Blockchain-as-a-service (BaaS) to its Azure cloud service. Stratis has become a darling for enterprises that use Microsoft products and looking to incorporate blockchain technology.

Currently, the Stratis (STRAT) goes for over $0.30. It reached its all-time high at the start of 2018 when it was going for $21.21.

  1. Ark

Ark ICO was conducted from November to December 2016 raising $22,000,000 USD. During the ICO, a single ARK was valued at $0.1 USD.

The Ark blockchain project was developed to create a platform that could link different blockchain into one network of use cases. In so doing, users of different blockchains could transact. Besides, Ark provides an open-source code and blockchain creation tools to enable users to leverage blockchain technology.

Ark has won a number of partnerships with different firms including Ledger, Atomic Wallet, Exodus, Changelly, and Spend among others.

Currently, the Ark token is trading at over $0.21.

  1. Lisk

Lisk ICO was conducted in March 2016 raising $6,472,497 USD. During the ICO, a single Lisk (LSK) was going for $ 0.07647059.

Lisk was the first modular blockchain that has the main chain that hosts the LSK coin with other side chains, which are personal blockchain networks attached to the main chain. The side chains are built and tailored using Lisk tools.

Most importantly, the developers of the side chains are allowed to hold their own ICOs. And most importantly Lisk allows developers to use JAVA programming language to develop the side chains.

Besides, several Ethereum players have also invested in this blockchain project.

Currently, the Lisk (LSK) is trading at above $1.11.

  1. QTUM

QTUM ICO was conducted in March 2017 and raised $15.6 million. During the ICO, a single QTUM was going for $0.3.

QTUM is a blockchain network that aimed at bridging Bitcoin with Ethereum’s smart contracts. By this, QTUM hoped to open up more use cases for smart contracts, especially for businesses.

Different business can leverage the tools, templates and smart contracts provided by the QTUM blockchain to enable them to build and deploy the smart contract.

Currently, the QTUM token is trading at above $1.5 USD.

  1. Spectrecoin

Spectrecoin ICO was conducted from November 2016 to January 2017 and raised $15,427. During the ICO, one Spectrecoin (XSPEC) was going for $0.00081.

Spectrecoin platform combines blockchain and tokenized ring signature scheme to add a layer of privacy and anonymity in transactions. By using the ring signature mechanism, any member of the network can append a signature on any transaction and it, therefore, becomes hard to trace the specific person that signed a transaction.

Besides the ring signature, Spectrecoin uses the Tor network to increase privacy within the network. All the nodes in the Spectrecoin blockchain communicate with each other through the Tor network. Therefore, contrary to most blockchains, the transactions carried out within the Spectrecoin go through a number of “middlemen” to make the transactions untraceable.

Currently, the Spectrecoin (XSPEC) is going for over $0.12, which is quite an appreciation from its ICO price.

Conclusion

The above blockchain networks are just examples of the best performing ICOs. There are other blockchain projects like Brave, OmiseGo, Ox, waves, Cardano, ChainLink, and Golem among many others that have used ICO to raise capital for the projects.

Although investors are currently shying away from ICOs due to lack of proper regulations, some countries have already come up with laws governing the ICOs or means of making the ICOs safer, like in the case of the German’s rICO.

If you are in countries where there are rules that have been put in place, you should ensure that you comply with all of them. For instance, if you are from France, you could apply for a VISA from the AMF to have your ICO whitelisted, which would certainly attract investors since they would be sure it is not a scam.

In the USA, the SEC requires you to disclose information about your project to ensure that investors make informed decisions. You may also be required to disclose how the collected funds were distributed, which would certainly instil confidence in your investors.

Failure to comply with regulations may land you into trouble hampering the success of your blockchain project like what was witnessed in the case of Telegram’s TON or the court cases that BLOCK.ONE is facing.

 

Blockchain technology is revolutionizing every aspect of our lives. Besides the impact of blockchain technology on Governments, financial institutions, and conglomerates, blockchain technology has also proved to be a game changer when it comes to the way small Fintech startups raise capital. Startups can now conduct Initial coin Offerings (ICOs) among other methods to raise funds for their projects.

However, for an ICO to be successful, the development team has to diligently choose the blockchain protocol upon which their project’s token will be built on. This is mainly because the functionality of the token will greatly be influenced by the chosen blockchain protocol.

Besides, there are other blockchain technology use cases that the startups can benefit from the blockchain protocol they choose to use. Some of the most profound use cases include asset management through asset digitization, decentralized finance, global trade & commerce, and payments.

Advantages of using blockchain technology

  1. Ability to streamline and automate executions. The use of smart contracts, for example, has made it possible for businesses to eliminate intermediaries and thus streamlining business processes and allowing real-time clearing and settlements.
  2. Increased security during transactions. The fact that the data stored on blockchain networks is immutable transactions tamper-proof and thus authentic.
  3. Ability to develop and deploy permissioned blockchain networks that have a shared business logic and customizable governance.
  4. Ability to digitize assets. This is what has made it possible for startups to conduct online crowd funding through methods such as ICOs.

Most used blockchain protocols for creating ICO tokens

1.    Ethereum

Ethereum is an open-source, public Blockchain distributed computing platform that features smart contract functionality. It was the first such blockchain platform to be developed and it has paved the way for the development of many other blockchain networks that are based on its blockchain architecture.

Ethereum was the first blockchain protocol to prove that blockchain was not only meant for the creation of cryptocurrencies for payments as its predecessor, Bitcoin.

Ethereum provides a platform for blockchain developers to develop decentralized applications. The decentralized applications developed on Ethereum are usually accessible from anywhere in the world. Also its ERC-20 token standard has earned itself a reputation when it comes to the development of cryptocurrency tokens. Actually, most of the altcoins use Ethereum’s ERC-20 token standard.

The token used for conducting transactions within the Ethereum network is called Ether (ETH) and it is normally generated by the platform as a reward for mining nodes the performed computations.

Some of the notable features of Ethereum apart from the smart contracts include the Ethereum Virtual Machine (EVM) that executes scripts through a network of public nodes throughout the world and Gas, which is its internal transaction pricing mechanism.

Ethereum use cases largely revolve around smart contracts and dApps.

Pros of Ethereum enterprise use cases
  • Ethereum supports the development of decentralized applications (dApps). Therefore business enterprises can use the platform to write customized blockchain codes that whose performance is oriented towards the specific business enterprise.
  • Ethereum has a very promising use case in decentralized finance (DeFi). Enterprises can use Ethereum’s smart contracts to issue or go for smart contract powered loans. Developers can also use the smart contracts to mint stable coins as in the case with the MakerDAO project. Smart contracts can also be used in creating decentralized exchanges.
  • Ethereum has proved to be of great use when it comes to tokenizing real-world assets. One of Ethereum’s use cases in line with this is the PolyMath, which has embarked on the creation of a revolutionizing platform for creating security tokens.
  • The decentralized nature of Ethereum and the decentralized applications developed on it make it impossible for hacking attacks.
  • Ethereum’s smart contracts have completely revolutionized the way transactions are made. Instead of writing paper agreements, the transaction agreements can now be recorded in a computer code. In so doing, it has eliminated the need for intermediaries, and parties can now transact directly.
Cons of Ethereum enterprise use cases
  • Though Ethereum’s smart contracts can be easily used in generating digital identities. It has proven to be extremely difficult for governments or regulatory authorities to check the authenticity of digital identities.
  • Ethereum was designed to work through the proof-of-work (PoW) consensus mechanism, which makes it less scalable compared to other blockchain networks. And although there are plans to switch the consensus mechanism from PoW to PoS, the process is not that easy.

2.      Stellar

Stellar is a decentralized open-source blockchain network that allows cross border transactions by converting the currencies to digital representations. The network uses a cryptocurrency token known as Stellar Lumen to facilitate transactions within the network.

Some of Stellar’s uses cases involve its integration into Vumi, an open-source messaging platform, enabling Vumi to use cellphone talk time as airtime. Stellar also was integrated into Oradian’s banking platform to enable the bank top to add microfinance institutions in Nigeria.

Stellar has also partnered with several banks including Deloitte, IBM, KlickEX to facilitate cross border transactions.

Pros of Stellar enterprise use cases
  • The stellar network makes cross border transactions cheaper since it eliminates the need for intermediaries. It only costs an average of 1/100,000 of a penny per transaction.
  • Stellar also makes the cross border transactions to be faster compared to the use of traditional means. Stellar can easily achieve 10,000 transactions per second with an average on-chain settlement time of 5 Seconds.
  • Digital currencies developed using Stellar can be traded on StellarX, which is Stellar’s decentralized exchange platform.
  • Stellar has smart contract functionality and users can be developed and executed smart contracts.
  • With Stellar, there are no limits. Businesses can transact any amount at any time to whatever location.
  • Stellar has the necessary documentation, tooling, and support to help enterprises get their project quickly.
Cons of Stellar enterprise use cases
  • All Stellar accounts are required to have a certain minimum balance of lumens.
  • Stellar’s smart contract is not as developed as those of Ethereum blockchain.

3.      Binance Smart Chain (BSC)

Binance smart chain (BSC) is a blockchain-based platform launched by Binance that shall enable developers to issue new cryptocurrencies as well as ICO coins. The platform supports smart contracts and decentralized applications (dApps).

The Binance smart chain shall run parallel to the current Binance Chain blockchain.

Binance smart chain gives Binance Company its blockchain rather than depending on Ethereum.

Pros of Binance smart chain enterprise use cases
  • Enterprises can easily create customized blockchain networks for use in their businesses.
  • Just like Ethereum, Binance smart chain has smart contract functionality which can be of great help in business transactions.
  • Binance smart chain enables developers to come up with their cryptocurrency tokens that can also be used for Initial Coin Offerings.
  • Binance smart chains also make it easier for the cryptocurrency coins developed to be listed on Binance exchange.
Cons of Binance smart chain enterprise use cases
  • The binance smart chain features a delegated proof-of-stake (DPoS) system of governance, which is prone to centralization. Centralization would stifle creativity among dApp developers.

4.      Tron

Tron protocol is a blockchain network that provides a decentralized virtual machine that can execute a program through the network of public nodes within the network. TRON TRX is the cryptocurrency token used within the Tron network.

There are several use cases for Tron, key among them being the ability to use TRX as a payment system. Websites like travala.com have incorporated TRX as a mode of payment already.

Another use case for Tron was the partnership with BitTorrent, enabling it to use a token called BTT, which is a Tron based digital coin.

TRX has also found lots of use in the world of online gaming.

Pros of Tron enterprise use cases
  • Transactions within the Tron network are free.
  • The transaction speed is relatively high since the system can conduct 2000 transactions per second.
  • It allows dApps developers to easily develop applications (dApps) that are custom made according to the requirements of the enterprise and deploy them.
  • The TPS is much more improved in Tron thus giving Tron a high throughput.
  • Tron also has high scalability and it gives developers a wider variety of ways to deploy their applications.
Cons of Tron enterprise use cases
  • Tron’s whitepaper suggests quite a lengthy development timeline that suggests that we may not be seeing the real application of TRON come to life soon. That leaves Tron users with only one choice of buying TRX and trading it on exchanges or using it as a payment option.

5.      Cardano

Cardano is an open-source decentralized public blockchain network that features smart contract functionality. It was built to improve the financial system.

Some of the renown Cardano use cases include the GRNET, released in 2018 for checking student diplomas, the New York Ledger Accelerator (SOSV) and Traxia, released in 2018 for converting invoices into smart contracts so that they can be sold as short-term assets,

Pros of Cardano enterprise use cases
  • It allows the use of smart contracts and provides blockchain developers with a network to develop and deploy dApps.
  • Cardano has proved to be flexible, secure, and scalable for enterprises. This is mainly due to the use of the Proof-of-Stake consensus mechanism.
  • Cardano integrates a wide range of digital coins without the use of an intermediary.
  • It also combines regulation and privacy.
  • It is one of the few blockchain networks that go through a third party audit, thus making it highly transparent.
  • Cardano blockchain network is made up of two layers, the Cardano settlement and ledger processing transactions layer and the Cardano computation layer that supports smart contracts and provides users with a platform for building DApps. This makes it less prone to the disruptions brought about by soft and hard forks.
  • There is a middle layer made up of side chains that connects the two main layers. This makes Cardano more scalable.
Cons of Cardano enterprise use cases
  • Cardano introduces its programming language called Plutus and developers could have a hard time trying to learn the new programming language to be able to develop dApps on the platform.

Every business has a business model, which is the overall architecture of how the business orchestrates its day to day operations to create, deliver and capture value. For a business to become a success, the business model they are using must address certain elements, which include:

  • Value proposition – refers to the services and products that the company/business produces.
  • Value capture – describes how the business makes money by showing cost and revenue structures
  • Value creation – describes how processes and activities are carried out, and how resources are used in the business
  • Value delivery – refers to the process of identifying the target customers

Business models, however, differ depending on the industry, which can either be traditional based or internet-based. Traditional based businesses are primarily concerned with producing tangible products and improving their supply chains. On the other hand, internet-based businesses focus on operating digital services/products and do all they can to find value for the digital services/products

However, both traditional based and internet-based models thrive well when business transactions are fast and secure and fully transparent. And the only technology that can offer these features is the blockchain technology.

Blockchain technology

Blockchain is a decentralized digital ledger that supports fast, secure and fully transparent transactions. Though it has mainly been recognized through cryptocurrencies, which are the digital currencies used in transacting within the blockchain networks, it also has other real-life applications.

Blockchain technology applications span from Agriculture, healthcare, cloud storage, logistics, real estate, education, public transport, and food and beverages among many others. Different blockchain startups have come up with different blockchain-based solutions and business models for almost every sector around the globe.

As a result, blockchain technology has become appealing to economies around the world since it offers immutability, security and also eliminates the need for third-party intermediaries/middlemen. This is prompting governments across the globe to work against the clock to ensure that there are proper regulations set in place to govern the blockchain industry to allow it to flourish in this digital age.

Basic blockchain working principle

Blockchain networks are purely decentralized. Therefore, they work on a Person-to-person (P2P) governance model. As such, the effect of external pressures is greatly reduced.

Furthermore, blockchain networks use Distributed Ledger Technology (DLT) to facilitate and record transactions and thus ensuring that the transactions are secure.

Lastly, blockchain networks require the creation of a token for use as a mode of payment during transactions within the network. These tokens are then assigned real-life value by linking them to fiat currencies.

For instance, a company could create a blockchain network called ‘Busses’ and create a token called ‘BUSS’ that will be used for transactions within the blockchain system. One ‘BUSS’ token could be equal to $0.5 at the start (when it is first introduced to users). As the adoption of this token rises and the ‘Busses blockchain’ network continues becoming popular, the value of ‘BUSS’ could increase.

Blockchain governance framework

Blockchain technology is rapidly revamping the traditional regulation models to make them more cost-effective, relevant and accessible to businesses. Most importantly blockchain has fostered the creation of consensus algorithms which makes decision making in DTL more efficient.

Blockchain governance promotes the use of a decentralized governance framework across different business sectors. As a result, this makes it easy for businesses to access the Interconnected Trusted Network of Loyal Customers.

Nevertheless, the decentralized blockchain applications must look for ways in which they can complement the roles that the central authorities were playing in governing the different industry sectors.

Application of blockchain technology in businesses

Blockchain technology has greatly transformed the way businesses carry on with their day to day activities. There are four predominant domains/fields where blockchain has found lots of applications.

Financial sector

The first is the financial services sector, especially touching on bank transfers, accounting, and auditing. Traditionally, these sectors involved the use of so many intermediaries. However, several blockchain solutions that eliminate the need for intermediaries and thus reduced transaction costs have been invented.  Furthermore, there are blockchain solutions that allow for cross-border transactions without having to account for currency exchange fees as would be the norm with using the traditional models that depend on the fiat currencies.

Supply chain sector

Second is the supply chain sector. This has thrived to become the most successful non-financial blockchain application across the globe. The architecture of blockchain networks allows users/members to identify and track the possession of a certain item throughout the supply chain. Since the data fed into the blockchain network is immutable, cases of fraud are eliminated. It also reduces redundancy where every stakeholder would be required to update their database. The integration of IoT and blockchain has also allowed industries to be able to track various aspects of products on transit to ensure that the standards are not compromised. For example, a company dealing with the distribution of meat can install thermometers into the refrigerators being used to ferry the meat and integrate the feedback from those thermometers into a blockchain network for real-time tracking of the temperatures to ensure that the meat remains well refrigerated.

Market sector

Companies or businesses depend on trusted third parties such as Google, Amazon, Uber, Alibaba, among others to provide the platforms where transactions can be done. Blockchain networks eliminate the need of these third parties by introducing nodes throughout their systems that make it possible for individual members to transact directly without the need for an intermediary.

Social welfare

Through the use of smart contracts, blockchain users/members can manage the outcomes and also automate the process of concluding contracts. If a blockchain user enters into a smart contract, the funds can be held in an escrow account and released once the contract is marked as complete. This ensures that the customer feels safe and it also eliminates scams.

If the contract is not carried out according to the laid out specifications, the customer has all the rights of terminating the contract and he/she is guaranteed of getting his/her money back.

Impact of blockchain technology on business models

Business models have a lot to benefit from the blockchain technology. The most significant advantages of employing blockchain-based business models include:

  1. Reduced costs, which is attained by eliminating intermediaries.
  2. Increased transaction rates.
  3. Reduced redundancy and need for record-keeping since blockchain automatically stores immutable data.
  4. Enhanced traceability and verification of information.
  5. Blockchain also offers alternative approaches to how assets are authenticated.
  6. The transactions performed through a blockchain network are secure since they are protected by a layer of cryptographic encryption.
  7. Blockchain supports distributed autonomous organizations (DAOs), which makes it possible to eliminate the need for intermediaries since DAOs don’t rely on not central governments and they are operated by members through the use of smart contracts.
  8. Blockchain-based models make it possible to use cryptography and asset tokenization, which is the current trend. This further makes it easy to conduct fundraising. Contrary to using the traditional shares markets to raise capital, a business can easily raise funds through methods such as Initial Coin Offerings (ICOs), Initial Exchange Offerings (IEOs) and Security Token Offerings (STOs).

Singapore has positioned itself as a financial hub not only in South East Asia but also in the whole world. Besides, it has also become a global crypto hub.

Most blockchain companies prefer registering their projects in Singapore due to the favorable cryptocurrency ecosystem there. As a result, Singapore has become home to some of the most innovative projects; the likes of CitiOS, and GeTS, among many other blockchain projects being implemented in almost every sector in Singapore.

The main reason why blockchain technology has thrived so much in Singapore is because the country has been able to maintain a reliably supportive regulatory environment for emerging technologies such as blockchain. The World Bank has ranked Singapore in the top three countries with Ease of Doing Business Index for over a decade. The government gives grants to companies to encourage them to adopt new emerging businesses and it also launched the Smart Nation Initiative in 2014 that aims at creating solutions that will transform the country using big data, networks and Infocomm technologies.

The Monetary Authority of Singapore (MAS) also created a regulatory sandbox for financial Institutions to experiment with Fintech solutions. The sandbox relaxes some regulations for the industry.

Also, as some countries like China and South Korea limit the use of blockchain-based fundraising methods like Initial Coins (ICOs), Initial Exchange Offerings (IEOs) and Security Token Offerings STOs), Singapore has literary encouraged the industry to grow. This has made it possible for startups to easily fund their blockchain projects, which in turn offer solutions to some of the needs that Singapore and the world at whole may have.

IEOs in Singapore

In 2019, Singapore played host to over 28 IEOs out of the about 100 IEOs that were conducted globally. This positioned Singapore as a global leader in IEOs. The second country, the United States of America, only played host to about 11 IEOs. China hosted 9 IEOs, the United Kingdom hosted 7, South Korea Hosted 4, the Cayman Islands hosted 3, Estonia hosted 3, Estonia hosted 3, Switzerland hosted 3, Germany hosted 2 and Malta hosted 2.

The 28 IEOs that were conducted within Singapore’s boundaries raised over $188 million, which is quite a large amount for a single country. This success is greatly attributed to the fact that several cryptocurrency exchanges like Binance are finding their way into Singapore. Besides, Singapore has its cryptocurrency exchange the Huobi Global that has an IEO Launchpad by the name Huobi Prime.

And out of the total amount that was raised through IEOs, over 50% of that amount was raised through the top five cryptocurrency exchanges that include Huobi and Binance among the likes of Gate.io, Okex, and Bittrex.

2020 Projection

The IEO industry in 2020 kicked off with a boom with Biki.com crypto exchange, a Singapore-based exchange joined the league of IEO issuers by announcing its first IEO in February.

With the emergence of new IEO exchange launchpads based in Singapore, and the rush by some of the most renowned exchanges to gain access to the Singaporean market, we could see an even higher number of IEOs being raised in Singapore in 2020 compared to 2019.

Launching a successful Initial Exchange Offering (IEO) is simple if done correctly.

Initial Exchange Offering mode of fundraising was invented after Initial Coin Offerings (ICOs) proved to be hectic to regulate, and thus becoming a playfield for scammers. The IEOs, however, retained the basic framework of the ICOs but placing the process of the token issuance/sale on the hands of cryptocurrency exchange platforms. That is why IEOs are sometimes referred to as ICOs that are issued on cryptocurrency exchanges.

Although IEOs were intended to solve the issue of safety with the ICOs, IEOs ended up introducing lots of other advantages for the token issuers. Some of these advantages include:

  • Trust

An IEO instills trust into your potential investors. The token crowdsale is conducted through a cryptocurrency exchange and investors/ users believe that the exchange properly vets any token issuer before agreeing to sell the tokens to its users. Besides, exchanges are in business and if they allow a scam project to conduct an IEO thought their platform, it could greatly harm their reputation; therefore they have to be vigilant in cross-checking the projects behind the IEO.

A good example of how careful exchanges are when listing IEOs is the recent case where Bittrex, one of the most famous crypto exchanges in the world, canceled the RAID IEO after suspicion of fraudulent activities following the termination of a partnership between OP.GG. (a data analytics company) and RAID.

Therefore, if your IEO gets listed on an exchange, investors will have some trust that your project is not a scam and it could become a success in the future.

  • Security

When issuing an IEO, you do not have to worry about managing the AML/KYC since the crypto exchange handles all that.

  • Easy

Once you have accomplished the hard part of creating a token, doing the tokenomics, and writing the white paper, the rest is left to the exchanges.

Also, you do not require to conduct a lot of marketing and roadshows compared to the ICOs, since the exchange where the IEO is listed already has some users who will get interested in your IEO.

  • Token Listing

There is nothing more precious than to see your project’s token listed on a crypto exchange for trading. It is a painful reality that quite a number of projects that have conducted token crowdsale struggle to have their tokens listed on exchanges.

However, for an IEO the token is easily listed on the same exchange where the IEO was issued since the exchange had already vetted the project before.

Examples of successful IEOs that have been conducted

The first projects that conducted taken crowdsale through IEOs were Bread and GIFTO, which conducted their IEOs in 2017 just after IEO was invented.

IEOs then embarked on a journey to fame that culminated in 2019, during which a number of projects carried out very successful IEOs within record-breaking timeframes.

Some of these projects include:

Steps to launching your successive IEO

Hitting the anticipated target with your IEO is the dream of every blockchain startup or company that launches an IEO. However, to do that, you have to follow through all the necessary steps.

We shall go through the entire process of launching an IEO step by step.

1.      Work on your blockchain project

Remember you are raising funds for your project. Therefore, you have to have a concrete blockchain project that at least seeks to solve a particular problem.

Also, your project should be viable with the prospects of being implemented in the foreseeable near future. A good project idea should include a progressive business model, the use of breakthrough technologies and also have a strong team of experts.

2.      Token Economics (Tokenomics)

This is a very critical step and you should hire experts to do this for you.

Most exchanges prefer issuing utility tokens to get off the hook of being required to apply for the strict regulations that go with issuing security tokens. As a matter of fact, most of the exchanges will require a legal opinion that concludes that the token is a utility token. Therefore, you should ensure that the token that you create for your project is a utility token.

However, if you prefer to create a security token, you should be ready to look for a securities exchange that is registered and authorized to conduct the sale of security tokens. You should also be ready to adhere to the strict rules that go with issuing securities.

3.      Whitepaper

The whitepaper explains your blockchain project, the tokenomics of your project and how you intend to distribute the funds collected through the IEO within the project. Therefore, you should hire a professional to draft and write the whitepaper for you.

Some of the most important parts of a whitepaper are:

  • Legal disclaimer
  • An executive summary of your project
  • The problem statement
  • Overview of the project
  • Description, use cases, advantages and usefulness of the created product/technology
  • Financial model of the project
  • Market analysis
  • Token economics (Tokenomics)
  • Roadmap
  • Team members
  • Partners

The whitepaper should demonstrate to the potential investors why they should invest in the project by purchasing the tokens being issued through the IEO.

The team members should also be well listed alongside their qualifications and contact information.

4.      Marketing

To reach as many prospective investors as possible, you should embark on good marketing strategies. Also, the stronger your project is the high the chances that you will get a strong exchange to launch your IEO.

Some of the marketing strategies that you could employ include:

  • Social media marketing – LinkedIn, Facebook page, Twitter, Telegram chats, and Medium.
  • Community management – You should work at generating as much hype as possible around the project on different forums. Some of the best platforms to use include Reddit threads, Bitcointalk threads, Medium, and Telegram chats, so on.
  • Press Releases – these should work at explaining the advantages of your project and also creating awareness of the coming IEO.

5.      Finding the right cryptocurrency exchange for the IEO Launch

Once the project, tokenomics, and whitepaper are done, you will have to diligently choose the cryptocurrency exchange platform to use for your IEO.

When choosing an exchange, you should consider whether the exchange is registered to operate in your country or region. Regulated exchanges always hold the front seat in the hearts of cryptocurrency investors. Therefore, launching your IEO on a registered exchange is an added advantage. You also avoid the risk of getting your IEO interrupted by legal case battles.

You should also do a background check to find out about its reputation; whether it has been involved in irregularities in the past and if any, how it resolved them.

Some of the cryptocurrency exchanges that are known to conduct IEOs are:

  • Binance
  • Huobi Prime
  • Bittrex
  • BitMax
  • KuCoin
  • Liquid
  • IDAX
  • CoinBene
  • Latoken
  • OKEx
  • Exmarkets
  • ProBit

Once you identify the cryptocurrency exchange where you want your IEO launched, you should approach the exchange’s listing team. The listing teams of most of the exchanges are can be approached through their agencies or partners.

The conditions set by the listing teams vary from one exchange to the other and you should be keen to identify what is required for the exchange you have chosen. For instance, different exchanges ask for different fees; to some, it could be a percentage of the amount received from the token sale while in others it is a standard listing fee while others ask for both.

The listing team will also require enough information about your project. Therefore, they are going to review the entire project to understand the current stage of the project development, the readiness of the token for the sale, the team and the potential of the project to succeed.

Most importantly, exchanges require a legal opinion on your token.

Legal opinion

The legal opinion is a legally abiding document that concludes that the token of your project is a utility token. Different exchanges have different requirements for the legal opinions and you should enquire about what your specific exchange requires from you.

To get a legal opinion, you should contact a legal company that is recommended or trusted by the exchange that you chose. The legal company will then take you through the necessary legal procedure.

Once you are cleared by the legal company, the IEO goes ahead and launches your IEO.

However, it is important to note that the exchange can still cancel the IEO before the set start date in case they realize some anomalies.

Post IEO launching

IEOs generally take a short duration of time to hit the target amounts. Some IEOs have less than 1 minute in the past to sell out.

So, after holding a successful IEO, you should concentrate on ensuring that your project achieves the objectives you have highlighted in the whitepaper following the developed roadmap. Hitting the milestones on the Roadmap gives investors hope that your project is headed for success.

You should also embark on ensuring that the collected funds are distributed as stated in the whitepaper so that they can go into the proper use in the project.

Access to capital is essential for Fintech companies looking to embark on rapid growth. However, the available traditional fundraising methods have lots of drawbacks that hinder Fintech companies from realizing their full potential.

Most of the traditional fundraising methods rely on middlemen, who end up making the process too expensive. Also, the process involves a lot of paperwork, which ends up slowing down the whole process.

The rapid evolution being witnessed in the cryptocurrency and blockchain arena has stepped up the efforts of removing intermediaries from most business transactions. The invention of blockchain-based fundraising methods like Security Token Offerings (STOs) has completely revolutionized the way fintech startups and companies engage their customers in raising funds.

Security Token Offerings have stood out among the blockchain-based fundraising methods and offered great competition to methods such as the Initial public offerings which are quite expensive due to reliance on middlemen.

Security Token Offerings within the Fintech industry

Security Token Offerings (STOs) issue security tokens, which are digital financial products that experts and analysts believe could replace the way everything is conducted in the future. Despite being secure and highly liquid (making them easier to buy and sell), they have also provided a better opportunity for transparency and oversight among investors, businesses and regulators.

Security tokens have provided an avenue for digitizing almost anything in the world. A host of industries, among them the real estate industry, and the capital markets, among many others, have seized the opportunity by tokenizing their assets and offering them as security tokens.

Security tokens can easily be offered through smart contracts or STOs.

While STOs allow the Fintech startups and companies to net serious investors, the investors also benefit since the STOs makes it easier for them to monitor the performance of their portfolios. STOs are also easily regulated since the security tokens have an added layer that makes them able to comply with regulations.

Investors who purchase security tokens through STOs are entitled to a given stake, voting entitlements or dividends in the company.

Some of the STOs that have stolen the show recently include that of AssetBlock, a real estate investment firm that has embarked on tokenizing about $60 million worth of exclusive hotels in partnership with a luxury hotel asset manager, for investors to cash in.

There is also another case in Manchester, UK, where a luxury residential development it tokenizing about $25 million worth of assets on Tezos blockchain, with a plan to tokenize over $600 million real estate within the United Kingdom.

Comparing STOs to other blockchain-based fundraising methods

STOs are among several other models for fundraising blockchain projects, among them Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs). Among the three, STOs have stood out after gaining prominence following the regulatory issues facing ICOs.

Initially, ICOs were the go-to fundraising option since they were very simple to orchestrate and required no regulations at all. However, scammers noticed the loophole and started issuing fake ICOs to milk vulnerable investors, thus making investors keep off from them or at least be very careful when participating in one.

The fall away of ICOs saw the invention of the IEOs, which are safer compared to the ICOs. However, most IEOs do not offer security tokens due to the strict restriction that goes with offering security tokens. In the US for example, if an IEO offers security tokens, the IEO should be issued through a registered/regulated securities exchange and the company behind the IEO should disclose adequate information about its business, the token sale as well as the terms of the token sale.

Therefore, though IEOs solved the issue of safety with ICOs, it hasn’t been able to attend to the need of the evolving trend among most Fintech companies to use security tokens instead of using utility tokens. Security tokens are best issued through STOs.

As a result, Fintech companies and startups are opting to run STOs even though they are more involving compared to the ICOs and IEOs. And since the STO landscape is persistently evolving, companies are forced to constantly conduct in-depth market research to thoroughly understand the anticipations of their target audience.

 

Initial Exchange Offerings (IEOs), which were introduced following the decline of Initial Coin Offerings (ICOs) popularity among blockchain startups and investors, have gone on to become a force to reckon with within the blockchain crowdfunding industry. IEOs are said to be more trustworthy compared to the ICOs.

IEOs are much safer compared to the ICOs and at the same time much easier to run compared to the STOs, which are the safest.

Some of the things that make IEOs a darling among blockchain token issuers and investors are:

  1. Trust

The fact that IEOs are issued on exchanges brings a sense of centralization in IEOs. This in return has brought trust among investors since they see exchanges as secure platforms due to the regulations that they have to adhere to offer their services.

  1. Efficient token listing after the token sale

Contrary to the ICOs where the issuers (the team behind the blockchain project) would be responsible for approaching exchanges to have their tokens listed, Tokens issued through IEOS are easily listed by the same exchange that issued them.

Therefore, investors are guaranteed that it shall not take long before they start selling the purchased tokens on the exchange.

  1. Ease of raising funds

Since IEOs are issued through exchanges that already have registered users, the IEO issuers are guaranteed that they shall get a vast customer base without much advertising as is the case with ICOs.

Also, the IEO issuers do not have to worry about things like AML/KYC. The exchange platform issuing the tokens takes care of that.

  1. Speed of sale

We cannot forget to mention that due to the large influx of ready investors in exchanges, IEOs take a very short time to hit their targets. There have been cases where it has only taken a few seconds for the target to be hit.

  1. Protection from regulatory consequences

Contrary to ICOs where the startups or companies behind the ICOs are the ones responsible for the legal obligations of the token issuing, Exchange platforms have well organized legal frameworks that deal with the legal consequences of the IEO.

However, there are some legal compliances that the startup or company behind the IEO should adhere to and it at times requires the help of an IEO consultancy or advisory firm to maneuver these regulations. Some exchanges go the extra mile of providing legal advice to startups.

Initial Exchange Offerings (IEOs) regulations

Having evolved from ICOs, which have no provision for legal compliance, IEOs still face the challenge of fitting in the various legal provisions within the various state regulatory authorities.

Of essence, the Team behind an IEO must work diligently to ensure that they developed the right kind of a token. In most cases, IEOs are not after security tokens unless the development team ants the token to be a security token. Therefore, the development team must work within the given regulations to ensure that the token that they develop does not fall under securities. To do so, it is advisable to consult with a reputable IEO advisory firm like Gravitas International so that they can guide you through the legal handles within your country and region. Besides passing the legal handles within your locality, it will also be paramount to adhere to the legal obligations within the countries or regions within which your target audience is.

In some countries like the USA, if the token being issued falls under securities, then the startup or team behind the IEO must look for a securities exchange to list the IEO. Besides, the startup or company behind the IEO shall be subjected to the registration requirements of offerings that fall under the securities laws. If the tokens are securities, the company or startup shall be required to make some important disclosures about its business, the terms of token offering, itself and also about the digital asset it is offering.

If the token does not fall under securities, the startup or company offering the IEO only has to look for a registered exchange where the IEO can be issued. In countries like the USA, such exchanges are normally registered as brokers and must be registered with the SEC and be members of FINRA.

Regulation authorities in different countries, including the SEC in the US, are doing all they can to ensure that they keep up with the rapidly evolving digital asset industry. One of the recent developments, the Initial Exchange Offering (IEO), has been gathering a lot of momentum since its invention.

IEOs are similar to the Initial Coin Offering (ICO). They are initial offerings of tokens by startups or companies that seek to raise capital.

IEOs evolved from the ICOs. The only thing that the IEOs have done is taking the coin offering process to cryptocurrency exchanges where the exchanges offer the coins/tokens on behalf of the startups or companies. In exchange, the companies or startups behind the IEO pay a small fee to the exchange platform.

IEO issuers have taunted IEOs to be highly secure by arguing that the IEOs are thoroughly vetted by the exchanges before being allowed to run on their platforms. However, the US Security Exchange Commission (SEC) issued a warning in January 2020 saying that some of the exchanges issuing IEOs are not registered with it and yet they are enticing investors with the propaganda that the IEOs they are offering are secure.

Though IEOs are known to be among the most secure coin offerings that investors can invest in, unregulated exchanges are taking that advantage to give investors false promises of high returns. Investors should be wary that IEOs can be conducted in violation of the federal securities laws making them lack most of the investor protections that are associated with the registered exchanges.

As such, there are certain issues that both IEO issuers and investors should take into account when issuing and investing in IEOs in the USA. These include:

Is the IEO offering security tokens?

Since IEOs are built on top of the ICO framework, they mostly do not deal with securities. However, the startup or company issuing the IEO should be well advised by its legal advisors to ensure the tokens they are issuing do not fall under securities (that is if they do not want to issue securities).

However, there is still a probability that an IEO could involve the sale/offering of security tokens. In so doing, the IEO becomes subject to the registration requirements that apply to offerings that fall under the federal securities laws.

If the IEO is a securities offering, the company or startup offering the IEO should among other things provide important disclosures about its project/business, the digital asset being offered and the terms of the offering.

On this issue, IEO issuers could approach IEO advisory firms for directions on how to best formulate the IEO.

Is the platform issuing the IEO a securities exchange?

If the IEO issues security tokens, the exchange platform on which the IEO is being run should be registered with the SEC as a securities exchange. Or alternatively, the exchange should have applied to operate under exemptions; for instance, it could apply to operate as an alternative trading system (ATS).

The regulations that govern the registered national securities exchanges and ATS are aimed at protecting investors from fraudulent or manipulative trading practices that exchanges may indulge in.

If the exchange offering the IEO is a broker, is it registered with the SEC?

Most trading platforms opt to operate as brokers rather than securities exchanges.

The exchanges operating as brokers in the US are required to register with the SEC as members of the Financial Industry Regulatory Authority (FINRA), an independent, non-governmental organization that comes up with and imposes the rules governing registered brokers and broker-dealer firms in the US. Additionally, they should only run IEOs that issue utility tokens but not security tokens.

FINRA members are subject to regulatory requirements that aim at safeguarding investors by ensuring that the brokers and broker-dealer firms act in a manner consistent with SEC’s customer protection standards.