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 has become a booming industry and starting a blockchain startup would certainly be a great idea at the moment. Several blockchain projects ranging from crypto giants like Ethereum, Bitcoin, Stellar, CitiOS, and the like to smaller projects like Cosmos, Storj, Aragon, Augur and the like, have been started in the past years and they have registered tremendous growth. These projects serve as great indicators that blockchain technology adoption is on the rise and you can definitely grab the opportunity by starting your blockchain project/startup.

Nonetheless, for your blockchain project to pick, you will have to convince investors to invest in it. This is the hard part for most blockchain startups!

A good blockchain project is good, but it is not everything. The growth of blockchain projects is determined by how the public adopts it. You need investors to invest their money into the project! So how do you get the investors to recognize your blockchain project and invest in it? What do investors look for in a blockchain project? To attract investors to your blockchain startup, you have to tackle these questions. These questions should be addressed in the whitepaper, Press Releases (PRs) and other marketing strategies like social media platforms.

What investors look for

Below is a guide to some of the things that investors look at:

Clear problem statement and solution

This is the anchor of your blockchain startup and it cannot be over-emphasized enough. You have to clearly state the king of problem you intend to solve and how you intend to solve the problem.

Most importantly, this problem should be something that affects a large group of people to ensure large market growth. A niche problem focused on just a certain minority group of people will certainly attract a few customers, meaning its market growth will be limited.

Your solution to the problem must also be something workable. You should clearly show the investors that it is something that can be done.

Prove that you are better than any other solution in the market

If your projects stand out among your competitors, customers will prefer it to your competitors and that would translate to a higher chance of market growth.

Therefore you have to ensure that your solutions stand out. You also have to explain to the investors how it stands out.

Additionally, you have to take precautionary steps to ensure that your solutions remain ahead and that it is not replicated by other startups. Some of the best ways to do so are by applying for patents, copyrights and trademarks.

A competent team

A qualified team acts as proof to investors that the project will become a success. A project could look great on paper, but without the right team, it could remain just that. You need the right minds for the project to materialize.

That is why it is imperative to higher professionals for all the roles in your blockchain project. To show the investors that you got the best team, you should include the qualifications of each team member in his profile on your website and the whitepaper.

Growth potential

After, showing your potential investors what your startup does, what problem it intends to solve, how your project intends to solve the problem, and how your solution is better than other solutions currently in the market, you have to also show your investors how you shall reach the market and make money for them to also benefit if they invest with you.

Investors look for projects that have a stable marketplace that is full of consumers. Therefore, you will have to show them the group of people you are targeting as customers, how that market base will grow, and what will make them want to use your product. By doing so, you will prove to the investors that there is a potential stream of revenue that will ensure that their investments keep working for them.

Clear business model

Apart from solving a certain problem for the society, your blockchain startup should have a clear replicable business model that will instil confidence into the investors that your project will become a success.

Most importantly, your business model should be scalable and readily adaptive to ensure that it accommodates immerging markets.

Clearly Presented margins

It is always very important to realize that although investors decide to choose your blockchain project because they believe in it, they are also looking to make some extra money. Nobody would invest his/her money into something expecting zero returns.

One of the best way to prove to investors that your project is going to give them good returns is by clearly and professionally presenting the margins of your startup/project. Promising margins will certainly make investors interested in your blockchain project.

As the novel coronavirus ravages the world, killing thousands, almost everything tangible including paper cash has been classified as a medium of conducting the COVI-19. Physical money isn’t safe anymore. You cannot know who touched it; did they have the virus!

And as a result, governments have resulted in the use of electronic payment methods with countries like Kenya upping its use of mobile money transfers. Other countries like South Korea had temporarily removed cash from circulating while China had recalled its paper cash for sanitization using ultraviolet rays.

However, mobile money and some of the other electronic payment methods that are currently in use are dimmed to be slow and could not possibly be efficiently used to deliver government stimulus to households or businesses.

Besides, most of the traditional electronic money transfer methods like mobile money, PayPal, Neteller, and the like are still centralized and depend on traditional banking systems.

As the majority of the world’s population currently works from home, the world could be preparing for the next phase of a technological boom, and blockchain technology could be it.

Central Bank digital currencies

At the beginning of April this year, the Bank of International Settlements (BIS) researchers suggested that the current pandemic would accelerate the adoption of digital currencies and fuel the debate of central banks issuing digital currencies.

And as a matter of fact, several central banks have started looking at the possibility of issuing digital currencies to reduce the use of paper cash which they are being forced to recall back for cleaning or destroying.

China became the first country to announce that it is going to launch a central bank digital currency, with the four largest commercial banks there starting a test of the digital currency this month. The city of Suzhou even suggested it is going to give some of the digital Yuans to government employees in the coming month for use for transport.

In the US, the House democrats suggested a digital dollar in a draft bill for the recently signed stimuli package. According to the members of the congress, the digital dollar would be rolled out by the central bank and distribute money directly to businesses and households. In this way, the process of distributing the stimuli package would be faster and more efficient.

In Europe, the German government is proposing the use of Euro-tokens that could be used in providing consumption vouchers that are based on blockchain. France also launched the atrial phase for testing the integration of the digital euro in settlement procedures.

Cashless economy

Currently, the cashless economy does not necessarily mean a blockchain or cryptocurrency-based economy. Companies like Visa and Mastercard have long been in the market and they have helped promote the cashless economy for a while. Nevertheless, these companies are centralized, and cross border transactions are still expensive and time-consuming thus the need for better infrastructure and blockchain is the best shot at filling the gap.

Though governments have viewed cryptocurrencies as rivals to their centralized financial systems, it is just a matter of time before we witness a complete adoption of digital currencies in government institutions starting with the central banks.

The adoption of digital currencies will mean that government institutions like central banks will have to use blockchain technology to launch digital currencies.

According to WeeTracker media firm, African startups raised about $1.3 billion from venture capital funding in 2019, which is an improvement from the past years. Nevertheless, startups in Africa still face enormous challenges when it comes to funding projects due to a lack of liquidity.

Blockchain technology could step into the gap and help startups especially in the emerging tech hubs like Kenya, Nigeria, and South Africa to raise funds for their projects through blockchain-powered equity crowdfunding. Equity crowdfunding has helped revolutionize the way businesses raise funds from investors.

By adopting blockchain technology, startups do not have to go through the tedious process of getting their companies listed on the stock markets to sell their shares.

Why investors hesitate

In Africa, the ecosystem for doing business is still not that favourable for startups to achieve reasonable growth in a short time span. Most startups struggle to make ends meet due to factors like high taxes, which are common in many African countries. In some worst-case scenarios, some startups end up closing shops. This makes investors shy off from investing since they are not sure if they will live to get the returns.

Also, in Africa, secondary markets are scarce resulting in low market liquidity for investors to exit from investments. Venture capitals, for example, look for entrepreneurs that build sustainable businesses with promising exit opportunities. For a startup to win a venture capital investment, it has to have at least an IPO, merger, or some acquisitions, which are only possible if a startup achieves a certain level of growth.

To create the necessary liquidity, startups in Africa could adopt blockchain technology to enable them to tokenize their assets.

 How token-based financing increases market liquidity

By using blockchain, startups can create tokens (either utility or security tokens). They can then go ahead and sell the tokens through Initial Coin Offerings (ICOs), Initial Exchange Offerings (IEOs), or Security Token Offering (STOs) for the case of security tokens.

Investors will find it safer to invest in startups by buying tokens since the tokens are easily traded in exchanges where the liquidity is high. If an investor purchases some tokens from a startup, and the startup succeeds to get the tokens listed on a cryptocurrency exchange, then the investor can trade the tokens and make some profits. In most cases, the price at which the tokens are listed on the crypto exchanges is usually higher than the price of the tokens during the initial offerings.

Therefore, an investor could decide to exit the market immediately the tokens of the startup get listed on an exchange.

Besides, since a good amount of investment in Africa comes from outside Africa, token financing offers the best opportunity to tap into the external sources. Blockchains are usually decentralized and they allow cheap and fast cross broader transfer of funds. Therefore, investors from any corner of the world can easily purchase the tokens of a startup in Africa without necessarily having to travel to a specific country or sign huge volumes of paper agreements.

Examples of African startups that have reaped big from token financing

Below are some startups that have raised funds through token financing by conducting ICOs, IEOs, and STOs.

  1. Golix

Golix, a Zimbabwean crypto exchange that was started in 2014. In 2018 Golix conducted an ICO that raised $23 million by offering their GLX token.

  1. BlockBank

The UK’s BlockBank that acquired some stake in Kenyan Spire Bank. BlockBank was able to raise about 12.8 million in its pre-ICO conducted in 2018.

  1. Wala

Wala, the “zero-fee money app” South African startup that was able to raise $1.2 million through an ICO conducted in 2019.

  1. Mazzuma

Mazzuma, a Ghanaian startup that was raised over $45,000 in its third token sale phase after successfully conducting a pre-phase, first phase, and a second phase.

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).

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.

 

On 28th January 2020, Singapore enacted the Singapore Payment Service Act (PSA), creating a legal framework to govern payment systems and Payment service providers. Payment Service providers, including exchanges and platforms dealing with cryptocurrencies or digital payment token providers, must obtain licenses from the Monetary Authority of Singapore (MAS) to operate in Singapore.

The PSA will ensure that the FinTech industry, which is already well established in Singapore due to the favorable conditions, is streamlined.

Businesses categorized as payment services according to the PSA

According to the PSA, the following services are categorized as payment services:

  1. Account issuance services – These include businesses that offer services like issuance of payment accounts, or related to operations that required operating a payment account. This could include an e-wallet or a non-bank issued credit card.
  2. Domestic money transfer services – These include businesses that offer services that provide fund transfer services in Singapore. This could include payment kiosk or payment gateway services.
  3. Cross‑border money transfer services – These include businesses that offer services that provide for inbound and outbound fund transfer remittance services in Singapore.
  4. Merchant acquisition services – This applies where a service provider accepts and processes payment transactions for a merchant. This could include the operation of online payment gateways or the provision of point-of-sale terminals.
  5. E-money issuance services – These include businesses that offer services that allow for the issuance of e-money in Singapore so that users can pay merchants or transfer e-money to other individuals. Examples of e-money include money stored in e-wallets.
  6. Digital payment token services – These include businesses that offer services that provide for the buying or selling of digital payment tokens (e.g. cryptocurrencies), or provide a platform which facilitates the exchange of such digital payment tokens in Singapore.
  7. Money‑changing service – This applies to businesses that deal with the buying or selling of foreign currency notes in Singapore. This would include money changers that profit from the exchange of physical currency notes.

Licenses to apply for

To start a business that offers any of the above seven services, one must apply for one of the following licenses with the Monetary Authority of Singapore (MAS) depending on the scope of the business:

  1. Money-changing license – if the business intends to carry out money changing services only.
  2. Standard payment institution (SPI) license – if the business intends to offer payment services specified in the following thresholds (as stipulated under section 6 (5) of the Act):
      • Average monthly transactions of S$6m for two or more activity types
      • Average monthly transactions of S$3m for any activity type
      • Daily outstanding E-money float of S$5m
  1. Major payment institution license – if the business intends to offer payment services without being subject to the above-specified thresholds.

It is worth noting that even the already running businesses had to apply for new licenses or else be considered as operating illegally without any license and they can be charged with an offense.

Requirements for applying for a license

To apply for a PSI license, one must:

  1. Have a company registered in Singapore or overseas and have a permanent business place or registered office in Singapore.
  2. Have at least one executive director who is a permanent resident of Singapore or at least a Singapore citizen.
  3. Have at least one executive director who holds a Singapore Employment Pass.
  4. Have at least one non-executive director who is a permanent resident of Singapore or at least a Singapore citizen.
  5. Fulfill the prescribed operational and financial criteria.
  6. Have a minimum base capital of at least S$100,000.

In addition to the above-mentioned requirements, the MAS also takes into account other factors like the track record of the applicant, experience, qualifications, the ability to comply with the regulations under the PAS and also the financial condition of the applicant.

License application fee

All license applicants are required to pay a nonrefundable license application fee corresponding to the type of license they are applying for.

  1. Applying for a Money-Changing License costs S$500
  2. Applying for a Standard Payment Institution License costs S$1000 to S$5500 depending on the threshold.
  3. Applying for a Major Payment Institution License costs S$1500 to S$8000.

In addition to the application fee, the applicant must also be ready to pay an annual license fee plus other applicable fees depending on the chosen license.

Issues that can result in the cancelation of the license

License holders can lose their license if:

  • They do not start the stated business within 6 months upon receipt of the license.
  • They stop offering payment services for 6 months.
  • They do not make any payments within 6 months.
  • If the business no longer offers services related to the categories stated in the PSA.

PSA regulations governing controllers and directors of payment service providers

In addition to setting a new presence in Licensing of Payment services, the Payment Service Act (PSA) also sets some restrictions for the directors and controllers who intend to control at least 20% of the service provider businesses.

According to the PSA, a 20% controller in a service provider business is a single person or a person together with other associates that:

  • Owns at least 20% in shares of the company/businesses.
  • Can control at least 20% of the votes of the company/business.

However, to become a 20% controller of the company, the said individual must first apply with the MAS. Then, according to the guidelines of MAS, the authority can approve or reject the applications. Upon approval to become a 20% controller, the MAS may also impose other restrictions on the individual.

Reasons why MAS could refuse an application to become a 20% controller

  1. If the person has been earlier convicted of dishonesty and fraudulent offense in Singapore or elsewhere.
  2. If the person is declared bankrupt in Singapore or elsewhere.
  3. If there are complaints about the individual about unsettled debts.
  4. If the person has been a previous director of a financial institution that has been accused in court in Singapore or elsewhere and its license revoked.

Penalties for contravening the rules and restrictions on control over companies

PSA has set harsh penalties for individuals found contravening the rules set aside for the 20% controllers.

The penalties could include fines of between S$250 000 and S$25 000 per day or imprisonment for a term of up to 3 years for unlawful control of a payment service provider.

Need help with registering for a PSA license?

Gravitas International sister company, MT Chambers LLC, which is a leading Singaporean law firm with an international reach can assist you in the following:

  • Preparing and submitting a PSA license application to MAS to obtain the appropriate license to be allowed to operate in Singapore.
  • Drafting and/or updating current compliance policies and procedures, including AML/KYC procedures to meet new regulatory requirements.
  • Conducting ongoing compliance support that includes assisting with regulatory filings, conducting periodic monitoring and reviewing and amending internal controls.
  • Conducting an internal audit to review the Company’s preparedness to adhere to new PSA regulations.

The MT Chambers LLC is one of the 65 law firms that have been handpicked for a pilot phase program for the new Payment Services Act (PSA) known as the Singapore Academy of Law’s of Payment Regulatory Evaluation Program (PREP).

Fractional ownership through blockchain technology is the new haven for companies and startups looking to raise capital from investors in exchange for a stake in the companies/projects. Traditionally, companies and startups could only do so through the traditional shares market.

In the traditional shares market, shareholders have to undergo rigorous selling and buying procedures, which also involved lots of paperwork. Investors also have to invest the full minimum required amount to own at least one share of a company or startup.

But thanks to blockchain technology. Companies and startups can now digitize or tokenize assets and offer them as digitized securities also referred to as tokens, rather than as traditional shares. By doing so, people looking to own a stake in the companies/projects can now do so by purchasing the digitized securities, which are normally transferred through blockchain networks rather than through the traditional stock market platforms.

Fractional ownership

Fractional ownership refers to the ability of an investor to own a fraction of a company or startup asset. For this to happen, the asset must first be converted into a form that can be divided into fractions, which is normally possible through asset tokenization.

Traditional shares are normally offered as whole numbers without the possibility of breaking them into fractions. Therefore, investors can only purchase whole shares. For instance, an investor can purchase 1, 2, 3, 4, 5, etc. shares from a certain company, but cannot purchase 0.5, 0.3, 1.3, 1.5, etc. shares.

On the other hand, digitized assets are easily offered as fractions/decimals thus enabling fractional ownership.Investors can purchase 0.1, 0.5, 1.4, etc. digitized assets.

Contrary to the traditional shares market where investors are required to invest a minimum amount to purchase shares, security tokens can be offered as fractions or decimals, therefore, allowing fractional ownership.

Asset tokenization changes how asset ownership is managed and also automates the activities that come after investment.

Blockchain technology makes it possible to have instant, traceable and cryptographically secure distribution and transfer of the digitized assets (tokens) without the need for intermediary parties.

Besides, contrary to the traditional securities, tokens of the digitized assets are issued and settled on a blockchain network. Therefore, the transactions are instant and without the need of signing stock certificates. And this process is not time-bound; it can take place 24/7.

Advantages of using digitized assets (digital securities)

The digital assets can be offered through smart contracts or security token offerings (STOs), where the holders acquire fractional ownership of the company/project behind the tokens.

These digital securities can also be exchanged in secondary markets just like other cryptocurrencies. When an asset is digitized, shareholders can use smart contracts to promptly sell their securities on registered exchanges where there is high liquidity compared to the traditional shares market. This in return help in avoiding the long lockup period of capital that is witnessed in the traditional shares markets

The beauty of it is that companies and projects can basically tokenize any assets whenever the need arises.

Comparing traditional securities to digital securities

Traditional securities (shares) normally call for larger investments while digital securities (digitized assets) allow fractional ownership, which reduces the amount of the required investment.

Additionally, since traditional securities require large investments, access to significant funding can only be done by institutional investors while in digital securities, since there is fractional ownership, there is a large pool of investors which makes it easy to quickly access significant funding.

Secondly, in traditional securities, the capital is usually tied up, especially with private placements like the venture capitals. However, with the digital securities investors can sell the tokens at secondary markets where there is high liquidity.

Traditional securities are also too costly due to the high fee structures. But the digital securities have a low fee structure due to automation using blockchain technology.

 

Commercial real estate business in Japan is undergoing a radical revolutionization as tech companies come up with new innovative ways to make the industry more efficient and tech survey. These tech companies in collaboration with the real estate developers have devised ways of tokenizing real estates using security tokens.

Several companies in Japan among them Securitize, LIFULL, and Lead Real Estate, have announced the creation of real estate investment platforms that will allow the use of digital securities better known as security tokens.

In partnership with LIFULL, Securitize, which is a tokenization firm aims to promote real estate crowdfunding through blockchain technology and it is being sponsored by Nomura, MUFG and Sony Financial Ventures.

LIFULL, which is listed on the Tokyo Stock Exchange, provides real estate information services in Japan and it has 14 subsidiaries. LIFULL is the one that started the development of the real estate crowdfunding platform in partnership with BUIDL, which was later acquired by Securitize. In their trial version, they were able to reduce the costs of operation, improve the efficiency of divided payments and automate the distribution of the security tokens.

To their advantage, Securitize developed a tokenized securities compliance platform that makes it possible for the security tokens to be traded on secondary marketplaces.

Lead Real Estate, on the other hand, is already using blockchain with the help of Securitize to fund the construction of hotels and condominiums ahead of the Olympics 2020, which will be held in 2020.

What is Real estate tokenization?

Commercial real estate business is recognized to be among the most profitable businesses in the world. However, the traditional business model employed in real estate limits many investors from investing in the business since it requires a substantial amount of capital even though it is a viable investment option.

Thanks to blockchain technology through asset tokenization, the commercial real estate industry can now be tokenized.

Real estate tokenization refers to the practice of using tokens to represent real estate assets. The tokens can then be sold out or offered at a price to investors. By owning the real estate tokens, the investors respectively own a share of the real estate project and they are entitled to a share of the rental yield accordingly or profits originating from the sale of the assets.

Advantages of real estate tokenization

Blockchain is known to be an incontrovertible distributed ledger, whereby the data/information stored/recorded cannot be altered unless the whole network is brought down. As a result, it brings transparency, enhanced security, reduced costs of processes, traceability, and storage of immutable documents.

Of utmost importance to the real estate market is the ability of blockchain to allow the execution of transactions without the need for an intermediary. The transactions are only between the involved parties and they are stored in a ledger that holds the history of the transaction, the property involved or the asset involved and the title. Therefore, real estate tokenization eliminates the need for lawyers, brokers, and agents.

Tokenization also offers investors the ability to transact using digital currencies like Bitcoin and the like. This, in addition, is cheaper since the buyers bypass the fees that banks could have included.

Furthermore, the use of Escrow and smart contracts makes it easier and efficient to transfer title deeds upon payments.

Most importantly, real estate tokenization makes it easy for the common man to own a share of a real estate through crowd ownership. A person can invest a small amount of money by purchasing the minimum required amount of security tokens in real estate to become a shareholder of real estate. Also, the security tokens are more liquid and owners can trade them thus fostering growth-financing.

Below is a case study of a process done using blockchain technology without the use of middlemen or the need for an agent.