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COTI ICO Review: Digital Currency Built for Payments

Chad — Analyst @LuxeEquity
10 min readApr 23, 2018

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https://coti.io/

Summary:

COTI is planning for the future when digital currencies are a central part of people’s lives, especially when it comes to our everyday type of transactions. The transaction space is a very lucrative one — nearly $50trillion worth of transactions are processed annually. Within this lucrative space are some inefficiencies and to be honest, this space has not evolved very much in recent years; this is a market that has been ruled by banks and credit card companies. COTI lists some of these inefficiencies as transaction costs, low approval rates, high overhead costs and the fact they do not help the unbanked population. The team at COTI has set their sights very high, the transaction market is extremely profitable, and they are not only trying to take that market share they are trying to add to it by allowing the unbanked population in underdeveloped nations to be able to take part as well.

How:

Whether you are newcomer to crypto or more of a veteran of the space, you have most likely heard the term “scalability”. While blockchain tech is what every Fortune 500 Company is talking about, it does have some issues that need to be worked out while in its infancy. In this case scalability refers to transactions per second (TPS). As crypto and blockchain gain popularity and explore many use cases this brings more people, companies and institutions trying to utilize the blockchain, which can simply overload it. Credit card companies are working with about 65,000 TPS, which is a lot, and blockchain has some work to do to get on this level. COTI will be implementing what is called a directed acyclic graph or “DAG” — think of this as a system that is designed for large numbers of low-value transactions. DAG systems work better when there is a higher number of transactions, which means it’s perfect for this type of market. All these transactions via DAG are called “Clusters” and the Cluster acts as the ledger does to the blockchain.

Business Strategy:

COTI is not the only project to see how lucrative the transaction payment space can be, they will have competitors from both the digital currency space and the banks/credit card companies. Let’s talk about how they can compete with all these projects and institutions.

  • We touched on one already, DAG will help with scalability, low to zero transaction costs and less overall network congestion. COTI will be decentralized, which is a huge advantage over your typical card network, but obviously other digital currency competitors will also be decentralized.
  • Next up is TPS — COTI will be aiming for 10,000TPS along with instant confirmations. This will mean they have a distinct advantage over most other digital currencies but will not be at the card network of 65,000 TPS.
  • Reliability — COTI will use independent mediators to achieve reliability. There will be a group of mediators who will not know the other decisions thus creating a system that is truly fair and efficient. This is a big problem for card networks when it comes to cross border payments — coti plans to take advantage of this.
  • This mediation system also allows for efficient and decentralized buyer/seller protection. This is another very costly area for card networks that they make up for via their higher fees.
  • Transaction costs — one of the more important items for the success of any project in this space. COTI will implement a trust-based mechanism for its users, simply put the higher your trust score the lower your transaction fees. Card networks rely on trusted 3rd parties (another hand in the cookie jar). Digital currencies are trustless and COTI will allow users to generate trust. Trust score is loosely based off Google’s search engine algorithm and will be calculated using the following parameters:

1. Account balance; how many transactions have you engaged

2. Dispute occurrences

3. How many disputes have you won

4. How many disputes have you lost

5. User rating; do others like doing business with you

  • Regulation — COTI will be fully compliant and welcoming of any new regulations. This will be a huge advantage over other digital currencies that are mostly unregulated.
  • It should be noted that COTI will also be issuing their own debit card to help facilitate growth/acceptance
  • COTI will also allow other projects to build on their protocol which can add another avenue for revenue and demand

Coti will be focusing on the merchant to customer services but where they can really separate themselves from card networks is the peer to peer (P2P) market. They will be implementing their own wallet which will be used for any type of transaction but will have some nice features for the P2P segment.

  • Obvious one is individuals with COTI wallets will be able to make instant transactions
  • COTI wallets will be able to distinguish proximity and allow users to recognize a nearby wallet allowing for potential transactions
  • You can use your COTI wallet to store both digital and fiat currencies — these funds can be deposited via well-known digital currencies, bank wire, or debit card
  • COTI will have an exchange so that users can move from one currency to another — starting out with USD, EUR, GBP, COTI and other leading digital currencies

Team:

In any project the team driving the implementation and growth is of upmost importance:

Advisors:

Advisors are key in these projects trying to get a foothold in any market, they provide insight and can offer guidance but most importantly can offer connections for these early stage projects. COTI has a very good team of advisors, many are CEO’s or founders of companies in the banking, transactional and processing market.

Roadmap:

  • ICO — May through; June 2018
  • Alpha net launch; Aug 2018
  • Exchange and Wallet Launch (Beta); Sep 2018
  • Mediator and Merchant onboarding; Oct 2018
  • Exchange and Wallet Launch (Full Launch); Nov 2018
  • Test Net Launch; Dec 2018
  • Integrated Decentralized KYC/AML; Jan — Feb 2019
  • Debit Card Launch; Mar 2019
  • Scale up test; May 2019
  • Mainnet; Jul 2019

Token Metrics:

The token will be a utility token, COTI is certain from a legal perspective this is accurate. Like most projects the token will give you benefits when using it in their system vs. other currency and will also be the only form of currency that can be used in certain operations.

  • 2,000,000,000 total COTI
  • 30% available for private and public sale with a $30M USD hard cap
  • 22% for Reserve
  • 15% for team
  • 10% for backers, partners and advisors
  • 13% incentive program
  • 10% for liquidity
  • COTI will implement Masternodes — the specific amount of tokens has not yet been released but more than 10,000 COTI will be needed. (These are referred to as DSP Nodes in WP)

Partnerships:

Processing.com

This is a very bullish segment for this project. COTI has partnered with Processing.com which will really act as a springboard upon roll out and allow for a fantastic avenue for adoption. Processing.com is an organization that works with merchants, helping them to facilitate payments in over 160 currencies spanning 5 continents and already has a network of over 10,000 merchants. Processing.com acts as a gateway for merchants to easily and safely accept payments online, offers fraud protection, refund management, real-time reporting, traffic flow analysis and accepts all major credit cards. This partnership means that COTI will be offered within Processing.com as a means of payment, making cryptocurrency even more viable as an everyday type of payment. COTI will also be offering approved merchants $1000 worth of COTI in their wallet as a method to reward merchants adopting COTI.

Bancor

COTI will also integrate with Bancor to facilitate a robust payment network for millions of users. Bancor will help with liquidity by creating smart contracts via Bancor protocol — Bancor Smart Tokens interconnect to form token liquidity and helping user-generated tokens to thrive. Essentially this means that Bancor helps small market cap coins solve one of their biggest problems (liquidity) by using the Bancor Smart Token connection mechanism to convert any token to another at continuously calculated prices through a decentralized liquidity network.

Transact Europe

Transact Europe is an organization that focuses on the Acquiring and Issuing industries since 1998. Their team can help merchants over a wide range of various verticals and help to create an infrastructure for banking system connectivity which will facilitate transactions in fiat currency. COTI will be able to further their reach with Transact Europe’s 10,000+ merchant network.

What does this mean for you?

This is the part where I will tell you my thoughts and how I would go about investing in this project. Remember this is not financial advice and purely my opinion.

This is a lucrative space; card networks have never had much competition outside of each other and they certainly are a little concerned about digital currency in the future. Tons of money to be had which is good if a project can realize their goals. The technical jargon you will find in the WP seems to be sound; they have a method of tackling the biggest problem of scalability and low transaction costs.

COTI has some serious partnerships already and they can really help them to facilitate a path for adoption. Most projects have early partnerships but COTI has a partnership that is allowing the use of the COTI token which is a direct implementation, this is usually more rare when it comes to partnerships in this space. Their partnerships are allowing them access to the customer base they need for growth in a big way which is a very bullish indicator. Another factor is that COTI has already set up 2,000+ merchants and 50,000 consumers which at this stage, if nothing else, shows the team is dedicated and trying to hit the ground running which is exactly what you want to see early on if you are thinking about being a part of this project.

From your money perspective, the token metrics are not ideal — $30M is an ok hard cap but for 30% of the tokens that can be a red flag.

One plus about the tokens is that this project will implement MASTERNODES or DSP Nodes. In this case the DSP stands for Double Spending Prevention, so making sure no one is acting maliciously and trying to game the system. DSP Nodes will require you to hold more than 10,000 COTI (exact amount not determined). Projects require a large buy in for nodes to make sure the node operators are invested and do not try to harm the system. If you operate a DSP Node, you will be compensated by getting paid out a % in the COTI token — pay out will be proportional to the amount of COTI deposited in a multisig account.

The roadmap is standard, most of the largest events will be Q1 of 2019 but this will certainly have some events that will be bullish later in 2018.

Upon getting some more information from the organization, it looks like the team is growing and evolving which is always a good thing. The team has a wide array of backgrounds and come from all kinds of different market segments. The team’s experience ranges from IBM, Ripple, Blackrock, HSBC, Investec Bank, Plus500 and some individuals have served in Army elite units and intelligence units.

Advisors are the best part of this projector — CIO of BlackRock is HUGE, couple that with Greg Kidd who has been with organizations such as Ripple and been an early investor in companies such as Square and Twitter. The connections from this alone are crazy bullish. Most advisors are CEO’s or founders of other finance projects, which again lends itself to some very good opportunities for expansion, implementation and partnerships. The caveat to advisors is how involved are they, most have no COTI connection on their LinkedIn page but that is not necessarily out of the norm. As always DYOR!

Rating:

“Short term Flip — Positive”

“Long Term Hold — Positive”

**Disclaimer

This article and the information contained herein is not intended to be a source of investment, financial, technical, tax, or legal advice. This article cannot substitute for professional advice and independent factual verification. The ideas and strategies on this article should never be used without first assessing your own personal financial situation, and without consulting a financial professional. All content in this website is for informational purposes only, and is provided “as is”, with no guarantee of completeness,accuracy, timeliness or of the results obtained from the use of this website. The Disclaimers apply to all visitors, users, and others who wish to access or use this article.

***Copyrights

All rights reserved. No part of the materials contained herein may be copied, photocopied, reproduced, translated or reduced to any electronic medium or machine-readable form, in whole or in part, without prior permission of Luxe Equity. Any other reproduction in any form without the permission of Luxe Equity is prohibited.

Bitcoin
Cryptocurrency
Cryptocurrency Investment
ICO
Digital Currency

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Chad — Analyst @LuxeEquity

Written by Chad — Analyst @LuxeEquity

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