ICO fundraising is still strong despite increased attention
on the part of regulating bodies and saturation of the market. Still, compared to an average seed round venture investment (even considering bias we get due to our dataset’s nature), amount raised stands quite high. This could easily be explained. Not only a bulk of investors are coming from the crypto world, with their understanding of it (or self-confidence) deep enough to invest in Blockchain-related projects more eagerly, but with “it is new Ethereum/Bitcoin” being a recurring theme in projects’ pitches.
All of the market participants were more enthusiastic about investing into “new economy” projects rather than into projects we could label as “traditional,” often with no apparent need for cryptocurrencies/Blockchain technology at all. As for fintech projects, this area has become quite naturally the first field for testing of Blockchain capability for real-world problems. According to research by The BB Fund, based on the data tokendata.io, more than $5.3 bln was raised via ICO in 2017 with $5.1 bln attracted for the last nine months. There were 1,331 analyzed and only projects raising over $1 mln were considered. According to the research, 60 percent of ICOs have been profitable so far: median return is 2x.
The categorization is quite subjective and is organized as follows:
“Blockchain” category represents all Blockchain infrastructure-related projects. “Cards & Payments” stands for a very broad category of projects, from merchant-serving payment processors to crypto wallets with built-in p2p transfers and other functions. “Decentralized Market” consists of projects, which usually relied in their description on familiar cliché “Decentralized XYZ” – ranging from services’ markets (shipment, logistics, taxi drives) to goods markets (real estate, electricity) and universal markets, aiming any type of good/service imaginable.
While the majority of these projects do not benefit from Blockchain, implement things already implemented and suffer from lack of resources, some of them seem interesting and could be able to survive and prosper. “Crypto Market” category includes any type of exchange or exchange-like vehicles dedicated to crypto. “ICO platform” may refer not only to such platforms but also to accelerators, startup clubs and any sort of a project, which claims it is developing an ecosystem of investors, teams and crypto enthusiasts.
“Identity Verification” and “Advertising” are broad categories, too, with the first one including projects with an emphasis on verification – from people’s identity to identity of food products and content. The second segment includes everything advertising-like – lead generation, promotion, brand influencers’ network. Among other categories we would like to specifically mention businesses referred to as being “commodity”-backed. This term, again, doesn’t always stand for a commodity in common sense (gold or zinc oxide), but also for any tangible real-world asset, which either used as a sort of collateral or may be handled as such.
This distribution not only reflects bigger interest toward Blockchain infrastructure/fintech projects but also higher costs of development of them due to bigger development workload (Blockchain), license and integration-attributed costs (fintech). While valuations and investment attracted are rarely substantiated, investors more willingly allocated larger amounts of money to projects with high capital costs. Also, we could observe sorrowful tendency of poorer-quality projects to originate in Decentralized Market/Betting segments, with seemingly no diversification and original ideas behind them in many cases.
ICO market may be hard to predict at times
A system of simultaneous linear equations describes price dynamics of crypto assets, whether they are more “traditional” coins or ICO-related newly issued tokens, pretty well. While overall demand for crypto assets is defined by endogenous factors (mostly news, investor sentiment and manipulation of “whales”), this being the main factor, defining the value of all crypto markets.
Even if you are not quite familiar with a concept of correlation, you could have already noted that most of the assets usually move in the same direction, every time with exception of a few. This is a phenomenon very familiar for stock market investors too, especially for those involved in trading assets on markets with a high level of political turbulence, for example. You could easily find dependency between the volume of ICO money raised in a given month and ETH price (which are assets mutually influencing each other)- for Bitcoin and Ethereum interdependence in prices is also very characteristic.
However, in the case of ICOs, it is difficult now to attract long-term investors by promising them return some moment in the future– there should be a plan on the startup side how to get to this future as fast as possible at a steady pace. While Blockchain, ICOs, tokenized economy brings completely new technologies and business models to the world, investment principles and basics remain the same: long-term play, serving the real market demand, addressing pains and wishes of people.
Recently Vitalik Buterin wrote:
“All crypto communities […] need to differentiate between getting hundreds of billions of dollars of digital paper wealth sloshing around and actually achieving something meaningful for society.”
ICO market gives a lot of opportunities for speculations and quick profits, especially due to early-stage “pre-sale” discounts and premiums, and only a few players are ready to play in a long-run. Your investment philosophy should be based specifically on a long-term strategy. The strategy being the development of technologies on the emerging and unbanked markets (Asia, Africa, LatAm), infrastructural implementations to enable and/or disrupt the traditional systems (including bank-as-a-service models and open banking principles) and convergence of crypto and traditional financial worlds, including Blockchain implementation by government bodies.
ICO market as a way of fundraising- promising projects as well as scammers
So far, we could observe several moves on the side of the industry, its main players incentivized and welcomed. They could allow for Blockchain-related technologies and companies to make a breakthrough and for investors to profit. Not only commodity sector, but also some advertising, payments and lending companies make their way into respective industries with the leverage of an ICO. Such as ETHLend (lending), Ripio (micro-lending), UTRUST (crypto payment gateway), BitClave (smart advertising and promotion) and NVB (native video advertising via vlogs and content discovery platform), to name a few recent examples.
For many of these companies, smart contracts and tokens are the only nuisance and it is highly doubtful they would make any use of Blockchain technology (or would be happy with something absolutely decentralized). Venture fund investors, family funds, banks and investment companies start to invest in Blockchain-related projects or Bitcoin funds. Anyway, it doesn’t matter, actually, as liquidity flows blazingly fast in comparison with many other ecosystems. USV, Y Combinator, Foundation Capital, Lux Capital, Winklevoss Capital, Jefferson River Capital LLC and Forsters LLP, Citi, JP Morgan and Goldman Sachs, Wells Fargo, Thomson Reuters, BoA, HSBC, Temasek Holdings etc. – it is hard to name all the family offices, venture funds and banks, which invested in companies developing Blockchain technologies and crypto.
While for those, who raised small and easily convertible sums via ICO fraudulent behavior and negligence it may seem a viable (even punishable by law) way, big players are forced to look for new ways of monetization, products and models, which could pay for all this (rather expensive) story. The biggest ones could probably become investors themselves (which would be bad for current token holders, but not so bad for the ecosystem as a whole), looking for projects to outsource the task of profit-making. This may seem crazy, but with so much money at stake and their future earning often tied to the buying power of their own tokens, companies are forced to look for ways of wealth creation like never before.
Article Produced By
Vladislav Solodkiy
Vladislav Solodkiy is a managing partner at Life.SREDA, Singapore-based fintech-VC, author of The First Fintech Bank’s Arrival book.
https://cointelegraph.com/news/why-market-players-are-enthusiastic-about-investing-in-new-economy-expert-blog
Blockchain and AI: Leading the Way to the Fourth Industrial Revolution Against the Odds
Human imagination and the strive to turn science fiction into science fact
goes back to ancient times, but has only truly begun to manifest itself in the last 50 years. Though mostly unseen by average users, artificial intelligence (AI) is already deeply embedded in the basic processes people have become accustomed to. Blockchain technology has come to the forefront in much the same way AI had, through a long development process full of trials, tribulations, ignorance and triumphs over skeptics and critics alike. The application potential for blockchain is no less extensive than it is for AI — and today, these technologies are more complementary than competitive in their natures. Both AI and blockchain work on the principle of analyzing vast amounts of data and solving the issues of specific industries. Just as AI found its applications in the fintech sector as a data aggregator and automated solution determiner, so began blockchain in its permeation into areas of application where its properties can be of most use.
Into the unknown
Society is now entering what is known as the Fourth Industrial Revolution. But unlike the first three, which were based on the application of machinery for streamlining of the means of mass production through digital information accessibility, the new wave of technological progress promises to be a revolution of automation, rather than an involvement of masses of people needed for maintaining industrial processes.
AI and blockchain may become the leaders of the Fourth Industrial Revolution, as they can allow artificial constructs and programs to perform a vast number of tasks that had previously required human labor and entailed high risks of error. According to a study carried out by researchers from PwC in 2018, 30 percent of jobs may become automated by the 2030s, with 44 percent of workers with a low level of education being at particular risk. At the same time, as the report showed that automation could help the United States’ gross domestic product (GDP) reach $15 trillion by 2030.
The background underpinning the modern world is big data, the factor uniting blockchain and AI in their applications. The modern world produces a staggering amount of information that needs to be processed. Since the information being produced is of an endless variety of topics, there is physically no human workforce capable of analyzing such vast amounts of data. The AI can analyze large amounts of data and blockchain can serve as the immutable foundation for securely storing the records for use by various industries, since the Fourth Industrial Revolution is more of a breakthrough in data analysis.
Complementing each other
By being able to continuously analyze data under a strict protocol required for achieving desired results, AI leads the way by allowing data to be properly stratified and shared. This essential attribute automates a mundane process and brings to the forefront one of the main qualities of AI in the form of efficiency. Blockchain, on the other hand, is the vital component that lends its characteristics to make sure the data is handled in an environment that is safe from external interference, as well as tampering of data ownership and sequence. This is what may complement AI and solve the problem of trust many people face. Take, for example, the recent scandal engulfing Facebook, when personal data from over 50 million social network users were harvested by Cambridge Analytica via an algorithm that targeted voters during the U.S. election. Paul Lee, co-founder and CEO of Mind AI, an AI-powered platform, believes that blockchain plays an essential role in the process of making data
management decentralized:
And although the use of AI to collect personal information has become the most common way to use this technology, blockchain can help change the reputation of AI by storing the AI ??mechanisms that process data on a distributed registry. At the same time, using private and public keys, users themselves determine who should be given access to their personal data. And for those who want to further protect personal information from third parties, AI-powered blockchains may provide decentralized identification.
US, UAE and Malta lead revolution
One way or another, everything depends on the approval of regulators and authorities in matters of adoption of any kind of technology. No matter how innovative a technology is, it first needs to prove its worth to average people to become profitable. And that is why governments are considering the capabilities offered by AI — an already proven and effective technology — and its merger with blockchain, which still requires considerable research.
The U.S. government is already leading the charge after issuing an American AI Initiative order that will facilitate investments into AI and related technologies research. On Feb. 11, the Trump administration announced that the president signed an executive order that calls upon federal government agencies to allocate the necessary resources and workers to adapt to the era of AI. The initiative has documented Trump’s long-term plans to enter the AI-powered future. Back in May 2018, the White House held a meeting devoted to AI, with over 30 large companies from a number of industries — including Ford, Boeing, Amazon and Microsoft — in which the officials promised not to prevent the technology’s development by creating AI regulations.
The United Arab Emirates is trailing close behind as the National Program for AI and Blockchain Capacity Building was launched on Nov. 28, 2018 to provide university courses and scholarships in AI and blockchain technology under the purview of the Ministry of Education. The innovation has complemented the UAE’s Strategy for Artificial Intelligence, which is aimed at turning the country into a leading power in the adoption of AI by 2031.
Malta is seeking to take on a leading role in this brave new world of technological races as it strives to become a “Blockchain Island” and a “top AI nation.” As reported by Cointelegraph on Nov. 1, the Maltese government announced the launch of the initiative called “Malta.ai,” creating friendly conditions for the companies developing AI solutions. Finally, India, a powerhouse economy, is launching initiatives aimed at improving its energy sector using AI and blockchain. The government created a special committee to carry out a national AI program that aims at helping startups and venture funds to conduct research related to the technology. The country also announced a partnership with Russia to cooperate in using blockchain and AI technologies at the Strategic Economic Summit, which was held in Russia in November 2018. The two countries agreed to boost two-way investments in the high-tech sector to $30 billion by 2025.
Use cases
Despite the fact that blockchain and AI seem to be incompatible at first glance — the first is based on the principle of decentralized data storage, and the second allows information to be concentrated in the hands of centralized corporations — today, companies have learned to combine them in their processes. New networks combining AI and blockchain aim to make machine learning transparent and less biased, says Jeremy Epstein, the head of Never Stop Marketing. Today, industry leaders are solving the nontrivial task of combining two technologies in order to preserve the privacy of user data and achieve greater automation in complex analytical processes. DeepSee, a media platform, strives to provide the solution to the problem of fake news and become a decentralized alternative to Reddit, YouTube, Medium and Twitter. At the same time, DeepSee reportedly uses the same machine learning mechanisms used by Facebook, but transfers them to a trusted blockchain platform that guarantees transparency of privacy settings, as well as rewarding users for high-quality content in a similar way to Steemit.
In the health care sector, personal information security is of the highest importance. The AI-powered ??company Deep Mind, acquired by Google, is already leveraging blockchain to better protect users’ health data. In February, Neuromation also entered the health care sector, entering into a partnership with the Longenesis, a decentralized marketplace of personal data. Longenesis, in turn, intends to provide individuals with control over their own personal data and the option to monetize it by passing certain data to corporations, research institutes and medical institutions at their discretion. Such data includes not only a medical history or a genetic profile, but also, for example, test results. “Our goal is to create a new, data-driven economy,” says Alexander Zhavoronkov, chief science officer of Longenesis Limited.
Another use of the blockchain in AI-based services is being investigated by Mind AI and SingularityNet. The companies use a decentralized registry to reward users. Mind AI, a company that has invented an AI-powered solution aiming to achieve human-level reasoning, leverages blockchain to make the entire machine thought process transparent for average people. As an open-source platform, Mind AI rewards its contributors with tokens for adding value to the platform’s ontology database. Thanks to the AI-powered reasoning engine and the ontologies input by the community, Mind AI can reason like a real human, requiring no massive quantities of data. Lee, the platform’s co-founder and CEO, believes that blockchain in AI solutions enhances the way users’ data is protected and used for the
community benefits:
“Without ontologies, Mind AI is like a car without fuel. We’ve split the source code of the AI engine and the ontology database to make sure the ownership of our technology is not centralized. The ontologies will be crowdsourced and stored into a distributed storage system utilizing blockchain, and the contributors of the ontologies will be the owners of the data. The community has control of the data, gets rewarded when their data is used, and has a voice in how his or her data is used.” He also shared with Cointelegraph the challenges that may be faced when developing and managing such
complex platforms:
SingularityNet rewards users with tokens every time someone uses its proposed AI model, thus allowing anyone to monetize AI algorithms, and letting companies and developers buy and sell AI at scale. In an interview with Cointelegraph, Ben Goertzel, CEO of SingularityNet and chairman of the Artificial General Intelligence Society, explained how both technologies can be used to socialize the
AI industry:
In the run-up to changes
A revolution, as the term implies, is a complete turn of events around a focal point, thus leading to a new stage or phase. With technologies, revolutions involve a variety of changes in everyday lives. But the uniting factor of all revolutions is a strive for improvement and efficiency. Experts predict that by 2021, the blockchain technology market will grow to $2.3 billion and investments in AI will grow to $52.2 billion. As the investments in both AI and blockchain grow, more and more global companies — including Microsoft, Dell, and Porsche — are spending money on their research and testing. Fred Ehrsam, the co-founder of the cryptocurrency exchange Coinbase, predicted it could take some time for these systems to prove themselves and show the results in practice, but that once it happens, they will boost the industry’s democratization.
Julia Magas
Julia is good at analysing cryptocurrency and blockchain market, as well as finding the deep and most demanding information, even when it's practically impossible. Julia writes for a number of digital information resources, raging from music to technology and game reviews. Practices some trading for experimental and analytical purposes.
https://cointelegraph.com/news/blockchain-and-ai-leading-the-way-to-the-fourth-industrial-revolution-against-the-odds