Gecko gets its crypto groove on

with ICO compliance tool and looming ICO. The promise of blockchain has been undermined and the shine taken from cryptocurrencies by questionable initial coin offerings (ICOs) and highly publicised spates of crypto-jacking and coin fraud. But now, a new tool from Irish start-up Gecko Governance could bring them back to the fold in terms of the accountability and the transparency that blockchain is meant

to be all about.

‘The current lack of governance standards within the ICO market is a barrier to the continued growth of the global blockchain ecosystem’
^{– SHANE BRETT}

Gecko has developed a new platform called Gecko Crypto1, which will address the issues of accountability and transparency within the ICO market by allowing companies to manage ICO projects before, during and after the capital raising period. Not only will this ensure continuous compliance with national and international regulation, it will also allow ICOs to be better vetted by investors while providing an independent audit trail for regulators.

Gecko plots its own ICO

Gecko – a previous Siliconrepublic.com Start-up of the Week that is backed by Cosimo Ventures and counts Grant Thornton among its clients – is also planning to embark on its own ICO in the coming months. “2017 saw over $6.8bn raised through token sales, showcasing an incredible potential to finance ambitious products and start-ups,” said Gecko co-founder and CEO Shane Brett.

“However, the current lack of governance standards within the ICO market is a barrier to the continued growth of the global blockchain ecosystem and may even become a point of failure. “Gecko aims to bring transparency, accountability and reliability to the ICO market, facilitating its maturation into a scalable and secure industry in which to do business,” Brett added. The Gecko Crypto1 platform recently received approval from the Isle of Man Financial Services Authority for use by companies and organisations conducting token sales.

“This is a wonderful moment for Gecko as we move in a new direction, bringing the same level of accountability and transparency to the ICO market as we have been providing to the funds compliance industry for years,” Brett continued. “Our ICO will not only allow us to effectively scale our platform to address the requirements of the global blockchain ecosystem, but gives us the opportunity to showcase the best practices which Gecko will bring to the fore in the international token market.”

Article Produced By
John Kennedy

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com

https://www.siliconrepublic.com/start-ups/gecko-ico-regulatory-compliance-tool

David https://markethive.com/david-ogden

Inside the Meteoric Rise of ICOs

Initial Coin Offerings ("ICOs") have quickly grown

to account for more startup funding in blockchain-based companies than all of Venture Capital. Nearly $2.3 billion has been raised to date in ICOs, with the large majority of that taking place in the first half of 2017. In 2015 there was a smaller market for ICOs, where a million dollar sale was a rarity. Only a few of the most visible projects were raising sums in the millions.

Then in 2016 the DAO raised over $150M in a few days, though it was later plagued with security issues and determined to be in violation of securities laws by the SEC. However, the size and speed of the funds raised for the DAO helped bring further attention to ICOs as a sale/funding model. Fast forward to 2017 and we’ve seen a meteoric rise in the amount of funding raised monthly in ICOs. April was $103M. May $232M. June hit $462M. July $574M.

How ICOs Work

Rather than looking to traditional angel or venture investors to place capital as an equity investment, companies developing new blockchain-based products and services have turned to the cryptocurrency community to crowdsource the purchase and usage of their token in an ICO. ICOs are similar in some ways to a crowdfunding campaign, but instead of offering a copy of a product like on Kickstarter, or shares of equity in a startup like on Crowdfunder, what is being offered are digital “tokens.” This process of selling new cryptocurrency tokens in an ICO results in funding received via cryptocurrency, most commonly in Bitcoin or Ether.

But there's more to it…

Utility Tokens

Most ICOs being done today aren't intended to be securities offerings, as they don't offer equity or ownership in the underlying company the way traditional angel or venture investments do. Rather, a large majority of ICOs are intended as “utility tokens" which allow buyers of the token to access and pay for usage of a blockchain-based software service.

One example of a utility token in use today is the Ether token, as it relates to the Ethereum computing platform. Ethereum is the blockchain-based platform where the large majority of the current ICO’s have been developed. When using the Ethereum network, there are costs associated with the processing of blockchain-based transactions. These costs are paid in the form of the tokens used on Ethereum, called Ether. These transaction fees paid in Ether are called "gas" in the Ethereum network. In this way, the Ether token provides access to, and payment for, the computing and transactional functions of Ethereum. But beyond its transactional usage, Ether is also a cryptocurrency that is bought, sold, and traded on the open markets.

And while some tokens may not be considered a securities offering (utility tokens), the recent SEC release put out in July warned investors about the potential for fraud with ICOs as unregulated sales. Specifically, the release outlined details of the SEC investigation into the DAO which raised over $150M in its own ICO, and reiterated its ongoing concerns that some ICOs may constitute securities offerings, like the DAO, while not being treated as such. No formal new rulings or restrictions on ICOs have been issued recently by the SEC, though China recently banned ICOs altogether.

Are Securities Tokens The New Equity Crowdfunding?

In contrast to utility tokens, some ICOs are already being done as registered securities offerings.  One example is longtime Bitcoin and cryptocurrency investor and entrepreneur Brock Pierce, who sees a bright future in ICOs with registered securities – meaning they may include equity or some form of an investment return in connection with the tokens sold in the offering. Pierce is arguably a pioneer of the ICO space as an investor in Mastercoin, the first ICO, in 2013. More recently, his venture capital firm Blockchain Capital did the first ever ICO for a token as a security (BCAP token), selling participation in their venture capital fund as a liquid cryptocurrency.

As we saw with the JOBS Act and equity crowdfunding laws, broader regulation can help open up a new market while protecting investors with regulated processes. But regulations can also introduce overly-burdensome requirements that hamper innovation and capital formation, as has seemed to be the case with the weak adoption by startups of Title III of the JOBS Act.

What’s Driving the Growth of ICOs

With an understanding of what ICOs are, and an overview of how they work, there is still the question of what’s behind their incredible growth. Here are several of the likely contributors to the growth of this market, along with thoughts on each from leaders in the cryptocurrency and venture investing space…

1. The Massive increase in the Value of Cryptocurrencies

The market capitalization of all Cryptocurrency has risen from $7 billion in January of 2016 to over $130 billion as of now in September 2017. Bitcoin has appreciated nearly 30X since September of 2013 ($135 USD per Bitcoin), reaching over $4,000 per Bitcoin in September of 2017. In part, this is due to Bitcoin’s role as the most widely known, used, and accepted cryptocurrency for payments. Ether has appreciated more than 100X since August of 2015 ($2.83 USD), reaching over $300 in September of 2017. In part, this has been due to Ether’s role as the core utility token of Ethereum – the most widely used blockchain-based computing platform for ICO’s / token sales.

The early cryptocurrency buyers and holders have experienced massive gains and are now sitting on hundreds of millions, or even billions, in cryptocurrency value. ICOs are a way for some of these early cryptocurrency holders to diversify their holdings using the cryptocurrency itself, without taking their money out into fiat currency (offline bank-based dollars). Sam Englebardt, Managing Director of Private Investments at Galaxy Investment Partners, the family office of billionaire and large cryptocurrency investor Mike Novogratz, said…

“It would be naive not to acknowledge that there’s something very bubbly about what’s going on here with ICOs, but it’s also the easy answer. While bubbles are sometimes fueled by nothing more than pure speculative mania and greed, most are actually rooted in something very real. Railroads were that way. The internet was obviously like that; the excitement was built on a legitimately transformative innovation and, when the dust settled, that innovation ultimately met and exceeded the initial speculators’ wildest expectations.

I think the same is true with the blockchain — the underlying potential of the blockchain to touch and disrupt so many different aspects of our lives, on a global scale, is becoming apparent. Ideas spread fast these days and crowdfunding did a lot of the groundwork to make those ideas actionable. It can’t go up like this forever, but I’d say we have a long way to go before we hit the top."

2. The Power of Blockchain, Tokenization, and Decentralization

In the last year we’ve seen an incredible move by startups and founders towards use of blockchain technology and tokenized models. Rather than building new products on centralized architectures and database structures, an incredible wave of new development and innovation is happening on blockchain technology to kick off new decentralized services and models. There’s a deep technical community running full speed towards a blockchain-based future, with experienced technology company founders jumping in to the fray with blockchain. A majority of the ICOs you’re seeing today are for new companies, who are yet to launch their products to the market.

That said, with the tremendous interest and adoption from leading technologists and founders, it’s no surprise that we’re also starting to see a growing list of more traditional VC investors putting money into decentralized applications and blockchain-based approaches to traditional and existing businesses. We’re also starting to see the ICO and tokenization model start to catch up with more mature and established companies. Erick Miller, CEO of CoinCircle and investor at his venture capital firm Hyperspeed Ventures, said…

“The invention of true peer-to-peer digital money was first just an experiment that has grown into a revolution. This digital money, which pairs blockchain technology with cryptocurrency, enables an unprecedented transformation in how we store and transmit value. We are now in the next phase of the experiment and it is one of the most simple but incredibly fundamental paradigm shifts in the history of currency. Today, we have peer-to-peer programmable money, decentralized protocols utilizing their own coins, and coins that execute unstoppable decentralized logic all creating an entirely new economic system. I believe what is happening in the space today will bring about an era of new technological connectivity.”

3. Token Sale ROI

Another reason for the rise in ICOs are the incredible returns that some tokens have provided to early buyers. For example, here are some top ICO performers according to ICOstats.com (as of September 22nd, 2017):

Ethereum: 84,720% ROI since ICO – Stratis: 54,038% ROI since ICO – Augur: 2,720% ROI values since ICO

With this, it’s incredibly important to understand that price appreciation of a token in the short term might have little, if any, bearing on the medium and long-term sustainability of the token and the underlying company or project for which the token was created.

Cooper Maruyama the founder of ICOstats.com shared…

“I think there’s sort of a snowball effect kicked off by the success of Bitcoin and Ether. I think people see this all under the umbrella of “crypto” and want to be in on the next thing that will bring large returns. So they throw ETH/BTC at new tokens – which ideologically falls under that same umbrella of “crypto” – with the expectation of the same returns. Whether that will be the case is yet to be seen, but according to the data, buying more ETH on the same day of each ICO has seen better returns over time."

4. Token Sales As Community Acquisition

Great ICOs aren't just for the money. New services that leverage blockchain technology and incorporate token-based models do so to use tokens as a mechanism for the exchange of information and value within their product. Which is why, the more buyers and holders of a token, the greater the potential for the usage of the token, and thus demand. In this way, a token sale represents a new model of crowdsourcing or crowdfunding, where the line between buyers and customers are blurred.

As an example, imagine if 1,000 new participants sign up and buy tokens in an ICO. This not only provides funding for futher development and expansion, it also jumpstarts the underlying service with a community of users as token holders. One example of this was the Bancor ICO, which took in over $153M at the time, while the sale also resulted in thousands of token-buyers. These early and first buyers of the Bancor token are the most likely future users and adopters of the core protocol and services that Bancor provides.

"We had one of the largest bounty programs in history with thousands of active participants working towards the success of the token launch, directly through our software's alpha demo," Galia Benartzi, CoFounder and VP of Business Development at Bancor explained.

"While we ourselves were a small team, we had ambassadors all over the world translating, explaining and creating great content about the Bancor protocol. These contributors remain more motivated than ever to see the project succeed, as they own a piece of the open source network via their tokens. Rather than paying marketing or PR firms, we can share these resources directly with end-users in a distributed and still orchestrated way. The reach is a step function larger and also feels much more authentically aligned. This is inline with blockchain's promise to decentralize every aspect of business, including growth itself."

What’s Next In The Market

The majority of ICOs launched to date have been for relatively new and upstart companies with little or no existing growth or revenue. However, we’re starting to see ICOs come to market from more established VC-backed companies who are tokenizing their businesses. One example is Unikrn and their UnikoinGold token sale, the first token sale backed by Mark Cuban. The company is a post-Series A and VC-backed company, and a leader in the esports industry with a growing online community.

"We won’t be taking the funds from our sale and trying build something from scratch, hoping to attract users and get adoption,” said Rahul Sood CEO of Unikrn in his Medium post about UnikoinGold. "This isn’t an investment; it’s a purchase of a product that we developed that has utility on our platform and ours users love and demand. We already have users and adoption, and now the UnikoinGold token will unlock even more functionality and value for our community.”

Expect more mature startups and large existing businesses to continue to explore the ICO space. With serious tech Founders and deep pocketed VCs and Crypto investors moving full-steam ahead, Blockchain and tokenization is emerging as one of the most powerful new technological and economic movements we’ve seen since the birth of the Internet. The hype and the astronomical returns can't last forever, but the underlying innovations are transformative and here to stay.

Article Produced By
Chance Barnett

Entrepreneur, Investor, Adventurer. CoFounder CoinCircle. Founder & Chairman, Crowdfunder. Catalyst in equity crowdfunding legislation & JOBS Act.

https://www.forbes.com/sites/chancebarnett/2017/09/23/inside-the-meteoric-rise-of-icos/#49be45075670

David https://markethive.com/david-ogden

The Moscow Exchange Prepares Infrastructure to Conduct ICOs

The Moscow Exchange (MOEX) is preparing infrastructure

that will allow companies to conduct initial coin offerings (ICOs), which it expects to launch this year, Reuters reported June 8. The exchange is reportedly working on the development of basic infrastructure for companies to participate in ICOs and publish token sale data. According to Moscow Exchange CEO Alexander Afanasiev, the exchange will not list tokens, but provide information about the responsibilities of token issuers, in addition to descriptions of certain tokens and ICOs to investors.

He added:

“Right now we’re looking at this from the point of view of fiat currencies, because cryptocurrencies don’t have the status of a legally protected asset. If they obtain that status, we will place them in our system as well.”

Additionally, the exchange is looking to issue futures contracts for ICOs, provided there is sufficient demand from investors. Afanasiev said that currently the exchange is conducting marketing research on potential interest in the products and what type futures specification it might be. The Moscow Exchange is the main liquidity and price discovery center for Russian financial instruments. It trades in equities, bonds, derivatives, currencies, money market instruments, and commodities, with a total trading volume around $1.1 trillion, as of May 2018.

In May, the Russian State Duma approved the first reading of new laws regulating the cryptocurrency industry. The laws define cryptocurrencies and tokens as property, and lay out specifications for interacting with crypto and blockchain-related technologies. Sberbank CIB, the investment banking arm of major Russian bank Sberbank, and the National Settlement Depository, which is part of the Moscow Stock Exchange Group, announced plans to pilot the country’s first official ICO last month. The possible launch of the project is scheduled for the end of summer 2018.

Article Produced By
Ana Alexandre

https://cointelegraph.com/news/the-moscow-exchange-prepares-infrastructure-to-conduct-icos

David https://markethive.com/david-ogden

What Initial Coin Offerings Are, and Why VC Firms Care

The venture capital industry is beginning to take a good, hard look

at a new financial instrument coming out of the bitcoin community — Initial Coin Offerings, or ICOs. Also known as “token sales,” this new fundraising phenomenon is being fueled by a convergence of blockchain technology, new wealth, clever entrepreneurs, and crypto-investors who are backing blockchain-fueled ideas. ICOs present both benefits and disadvantages, as well as threats and opportunities, to the traditional venture capital business model.

Here’s how an ICO typically works: A new cryptocurrency is created on a protocol such as Counterparty, Ethereum, or Openledger, and a value is arbitrarily determined by the startup team behind the ICO based on what they think the network is worth at its current stage. Then, via price dynamics determined by market supply and demand, the value is settled on by the network of participants, rather than by a central authority or government.

Venture capitalists, who generally have been standoffish to the ICO phenomenon, are now becoming more interested in it for a number of reasons. One is profits — cryptocurrency investors made some massive returns in 2016, with cryptocurrencies from Blockchain startups Monero and NEM both seeing 2,000% increases in value. For example, the cryptocurrency used for the Ethereum network, called Ether, saw its value double in just a few days in March 2017. Yes, in three days, people who invested in Ether doubled their investment. Those investors can opt to cash out to a fiat-backed currency, or wait for the cryptocurrency to continue to rise (or fall). Volatility is a two-way street. While the price of Ether has been rising, Bitcoin has dropped 20% to $1,000 dollars from a record $1,290 on March 3, 2017.

The second reason VCs are becoming more interested in ICOs is because of the liquidity of cryptocurrencies. Rather than tying up vast amounts of funds in a unicorn startup and waiting for the long play — an IPO or an acquisition — investors can see gains more quickly, and can pull profits out more easily, via ICOs. They simply need to convert their cryptocurrency profits into Bitcoin or Ether on any of the cryptocurrency exchanges that carry it, and then it’s easily converted to fiat currency via online services such as Coinsbank or Coinbase.

What traditional investors don’t like about any of this is the regulatory uncertainty; the high valuations and over-capitalization; the lack of control over financials, strategy, and operations; and the lack of business use-cases. And like any industry, the ICO arena has had its fair share of outright scams, pump and dumps, and blatant Ponzi schemes. However, much of the criminal activity is now being mitigated by self-organized, crowdsourced due diligence in the community, as well as by external parties such as Smith and Crown, a research group focused on cryptofinance, and ICO Rating, a ratings agency that issues independent analytical research on blockchain-based companies. At least one VC firm is moving into cryptocurrencies. Blockchain Capital is set to raise its third fund via a digital token offering in the first-ever liquidity-enhanced venture capital fund (where people can invest without locking their money up for years on end) via a digital token called BCAP.

ICOs are the Wild West of financing — they sit in a grey zone where the U.S. Securities and Exchange Commission (SEC) and many other regulatory bodies are still investigating them. The main problem is, though, that most ICO’s don’t actually offer equity in start-up ventures; instead, they only offer discounts on cryptocurrencies before they hit the exchanges. Therefore, they don’t fit into the current definition of a security, and are technically outside of traditional legal frameworks. Secondly, they are global instruments — not national ones — and they are funded using bitcoin, ether and other cryptocurrencies that are not controlled by any central authority or bank. Anyone can invest, and they can even do so pseudo-anonymously (it’s not impossible to find out who people are, but it’s not easy, either). Currently, there’s no Anti-Money Laundering (AML) law or Know Your Customer (KYC) framework, though some companies are working on that. One example is Tokenmarket, a marketplace for tokens, digital assets and blockchain-based investing, that has teamed up with the Stock Market of Gibraltar to offer KYC- and AML-compliant ICOs.

Detractors of these new funding schemes scream for structure and protection, point out the scams, demand more control, and say that without equity, investors don’t have enough skin in the game. Meanwhile, proponents retort that there’s a real need for freedom to invest outside the accredited system, which sees the wealthy getting wealthier. They argue that the door needs to close on the domination of Sand Hill Road in Silicon Valley and other VCs and investors in the tech industry who have been making massive returns on the backs of entrepreneurs for far too long.

How Blockchain Works

Here are five basic principles underlying the technology.

1. Distributed Database

Each party on a blockchain has access to the entire database and its complete history. No single party controls the data or the information. Every party can verify the records of its transaction partners directly, without an intermediary.

2. Peer-to-Peer Transmission

Communication occurs directly between peers instead of through a central node. Each node stores and forwards information to all other nodes.

3. Transparency with Pseudonymity

Every transaction and its associated value are visible to anyone with access to the system. Each node, or user, on a blockchain has a unique 30-plus-character alphanumeric address that identifies it. Users can choose to remain anonymous or provide proof of their identity to others. Transactions occur between blockchain addresses.

4. Irreversibility of Records

Once a transaction is entered in the database and the accounts are updated, the records cannot be altered, because they’re linked to every transaction record that came before them (hence the term “chain”). Various computational algorithms and approaches are deployed to ensure that the recording on the database is permanent, chronologically ordered, and available to all others on the network.

5. Computational Logic

The digital nature of the ledger means that blockchain transactions can be tied to computational logic and in essence programmed. So users can set up algorithms and rules that automatically trigger transactions between nodes.

For blockchain startups, ICOs are a win-win — they allow startups to raise funds without having equity stakeholders breathing down their necks on spending, prioritizing financial returns over the general good of the product or service itself. And there are many in the blockchain community who feel that ICOs are a long-awaited solution for non-profit foundations that want to build open-source software to raise capital. Non-profits usually hold about 10-20% of the total cryptocurrency they issue; as Ethereum did in their ICO in 2014, with 20% going to the development fund and the remaining going to the Ethereum Foundation. This is so they have a vested interest in building more value, as well as having reserves for growth in the future. (As of March 2017, the market capitalization of the ether token was more than $4 billion.)

The market cap for bitcoin is now close to $20 billion, and half of that is allegedly owned by less than one thousand people, who are called “bitcoin whales.” Many of them are in China, but there are also hedge funds and bitcoin investment funds who hold massive amounts of bitcoin. Most made their money early on by buying or mining bitcoin when it was still under $10 (in the early days of 2011-2013). It’s now worth approximately $1,120 per bitcoin. These “bitcoin whales” are currently the ones who make or break many of the ICOs. Some of the enormous profits they have made in bitcoin are being channeled back into innovation, as many of them seek to diversify holdings, as well as support the ecosystem in general.

More than $270 million has been raised in ICOs since 2013, according to Smith and Crown (not including the $150 million raised in The DAO scandal, which was returned to investors). Since 2013, there’s been about $2 billion invested in blockchain and bitcoin startups from the VC community. ICOs are becoming more and more popular for startups seeking to get out of self-funding, bootstrapping starvation mode and avoid being locked in by venture capitalists, watching their own equity drown in a sea of financing rounds. ICOs are dominating the overall crowdfunding charts in terms of funds raised, with half of the top 20 raises coming from the crypto-community. In a recent conversation, MIT scientist and author John Clippinger described the vast potential of this new movement to me

as such:

One way of thinking about a crypto-asset is as a security in a startup, which begins with a $10 million valuation and becomes a $10 billion dollar entity. Instead of stock splits, the founding crypto-asset gets denominated in smaller and smaller units; in this case 1,000 to one. Here, everyone in the network is an equity holder who has an incentive to increase the value of the network. All of this depends upon how well the initial crypto-asset and its governance contract are designed and protected. In this instance, good governance, e.g. oversight, yields predictability, security, and effectiveness, which in turn creates value for all token holders.

Just as venture capitalists are taking a hard look at this new phenomenon, so should we all. It’s not just about the money that can be made; it’s also about funding blockchain projects and, in the near future, other startups and even networks, as Clippinger noted. We now have a way to easily fund open source software, housed under foundations rather than corporations, that can truly drive faster innovation. Right now, blockchain technology is at the stage where the internet was in 1992, and it’s opening up a wealth of new possibilities that have the promise to add value to numerous industries, including finance, health, education, music, art, government, and more.

Article Produced By
Richard Kastelein

David https://markethive.com/david-ogden