Elena Masolova (TokenStars): «Be ready — blockchain is here once and forever»
Original article — https://secretmag.ru/cases/interview/elena-masolova-tokenstars-blokchein-eto-navsegda-gotovtes.htm
Elena Masolova, an Internet entrepreneur, invested $300,000 in TokenStars — a startup which allows to invest in the promising young sportsmen with bitcoins. SecretMag met her and Pavel Stukolov, Tokenstars CEO, to learn how and why cryptocurrencies can be used to support tennis and football players. We talked about the future, when blockchain will become a conventional and easy for use technology.
«There’s no sense for private investors to play in this market»
Elena, is it true that it was Viktor Lysenko (cofounder at RocketBank) was the first to tell you about blockchain last May?
Elena Masolova: We first talked about blockchain with Vitya Lysenko over a year and a half ago, in February 2016. At that time he was changing his job from RocketBank to Acronis to become a VP of blockchain. We were strolling through Stanford University for 2 hours, he was telling me about blockchain and was really hot on this topic, used complicated terms, and I was thinking “Oh, my gosh… What a crud he’s going to work with? He shouldn’t have left RocketBank, or at least he could have tried another startup.” A year later we talked again, when ICO was already booming, and I finally got the point.
What exactly did ‘click’ in your head?
EM: I used to think that cryptocurrency is a pure speculation, a kind of toy-like money, not much different to web money. However, some fundamental factors about cryptocurrencies coincided. First, cryptocurrencies have been legalized in a few countries, and the more countries agree to legalize them, the more investors will come to this market, both private and institutional. It means cryptocurrencies are not going to disappear, they came here to stay. In May there were 12M e-wallets, and soon we’re going to have 300–400M of them. Each of the investors coming to this market will bring his money, which, in turn, means the market will grow. Corporate investors also keep pace, more and more of them will join, and this will be another growth factor.
However, you wrote that you didn’t trust ICO.
EM: I wouldn’t say I don’t trustin ICO, but I’m trying to be cautious. The same applies to the securities market. If you don’t have a specialized knowledge, investing all of your money at the stock exchange is a bad idea.
Can you point out top 5 projects which had ICO, and the worst 5?
EM: It’s impossible to tell what is cool and what is terrible, as it’s not clear which criteria to use for the evaluation of the projects. You can evaluate the technology, or you can calculate the profits. There are projects with 36х return rate, and there are projects with 25х rate. There is a project called Bancor, (a protocol for standartization of interaction between cryptocurrencies and tokens. — editor’s note). It’s really a top-notch technology, they raised $153M, but today their token costs 0,53х of the initial price. As of today, investors lost almost a half. Is that project good or bad?
For the time being this world is Wild, Wild West. It’s hard to foresee what will shoot, the market faces complete lack of regulation. On the one hand, it is an advantage as the lack of barriers enables rapid growth. But we should understand that non-professional investors still miss protection, and they have no information, no analytics expertise.
Could there be professional investors on such a new market? Even the funds make mistakes in the stock exchange or in the real estate market, and we know about the consequences of their mistakes. Have they already got the right competencies to work with blockchain?
EM: At average, foundations make more accurate decisions compared to private investors, and it is also true for ICO and cryptocurrencies. Investment funds with thousands of analysts can do necessary audit, can inquire additional information from the team.
A private investor — even with a professional expertise, for example, in the real estate market — still has less data and less skills to analyze it. There is no sense for private investors to play in this market. There is a tier of professional investors and funds already emerging who are ready to offer competent management to take care of your money assets. If you still wish to do it yourself, you should note a few rules: don’t invest all your money, don’t make decisions based on emotions, diversify your investments portfolio.
«Anyone can be tokenized»
Tell us a bit about TokenStars. Why did you choose sportmen? Why tennis?
Pavel Stukolov: Sport is my long-time hobby, especially football. I have a season pass to Spartak FC matches — I’ve been a fan since I was three. It always seemed interesting to combine professional competencies in investments with a hobby, to learn the sport economics from within. After the blockchain emerged, I understood that it was possible to offer a different format of communication and interaction between sportsmen and their fans, or people who for some reasons want to support their favorite club or sportsmen. On the other side, there are brands. TokenStars helps to unite them all: sportsmen, a huge audience of their fans, and brands who want to offer them sponsorship.
However, our project is not only about sport. You can tokenize any celebrities. As the next step we’ll allow to tokenize actors, singers, writers, entertainers — anyone.
How does that work? I buy a Bitcoin, exchange it for your token and give the token to an athlete — which means I make my investment in him or her, provide my support, right?
PS: When you buy our token, you become a member of our project and help young sportsmen to grow professionally. At the same time, you support professional players and contribute to their promotion (see the chart on our website). That was about the business mechanism.
There is also your personal gain from buying tokens: they act as a tool for direct communications and interaction with the athletes we work with. It can be either in a form of trainings, personal meetings etc. What we do is we break the barrier which exists now between the sports celebrity and his audience. Token crowdsale will start on August 31*.
Now it all sounds similar to Kickstarter. I invest money and get a personal meeting or some merchandise.
EM: It’s more complicated and easier at the same time. We have celebrities, for example, tennis players. They need fans because their support means popularity, without it no brands no brands will come to them or pay them for advertising. Token is a currency meant to simplify the interaction between all three parties. Why do we need that? First, sports juniors need financing, when they grow professionally they’ll be able to earn their prize money and sponsorships. Their TMA will take a fee for arranging sponsorship relations with brands. It’s a conventional, transparent model. IMG is working with Maria Sharapova on these conditions and over her carrier span they’ve earned $285M only on advertising contracts.
Second, there are female tennis players, say, from Russia’s top 50. They do have money to travel to tournaments, but they need help to build profitable relations with brands. Only a few create a portfolio or are able to present their advertising opportunities to brand managers. However, it could increase their income five- or even seven-fold.
Third, an athlete needs to build relationships with fans, and tokens can be used as a currency for all stages.
The best explanation of what a product token and ICO is comes from Konstantin Vinogradov from Runa Capital. He gives an example: imagine, we’re building a new underground. We’ve issued underground token coins in advance. Then we say: you pay now, get your tokens, when the underground line is ready, you’ll use your token coins to travel. A product token has a real life application. You have it — you can travel by underground. You paid to Storj — you can use their capacities to store your data. You paid to TokenStars — you can visit a tennis match, say, with Sharapova. Or you can have your brand logo on athlete’s T-shirt.
You can actually pay for this opportunity at the coming US Open, I’m not joking. You can have your company’s logo on caps or T-shirts.
What are the cohorts of athletes which you offer to support?
EM: These are the groups of players, in football or tennis, which we gradually sign. The first in tennis cohort is Veronika Kudermetova. She’s 20 and she’s won 19 tournaments. Why we chose cohorts instead of individual players: a promising player can get injured or simply quit after receiving a huge amount of money at 16. Sometimes it’s the opposite. For example, when Roger Federer just started, I was thinking: “Who is that? Whom did they choose to play for Swiss?” At the end, he became the greatest tennis player. When we have a cohort, there is a higher chance that someone will become a star.
Are you talking to the Russian athletes only? And why are you talking to them individually, not to the teams or clubs? Is it easy to explain them the idea and what their gain is?
EM: We’re negotiating with athletes individually because it’s how this market works — each of the football team members has own conditions and own agents. TokenStars negotiate with all who have arrangements with European tennis players from the top of junior ranking. We’ve already started negotiating with football and poker players, but we signed only Veronika by now, so we can’t disclose any other names.
Veronika Kudermetova, just like Maria Sharapova, used to work with IMG, however, she didn’t have a personal manager. When we negotiate with athletes, we say that we offer a professional approach to building their relationships with brands, it sounds interesting to them. It’s a clear mechanism of funding juniors for the market. Besides, the market is not saturated. Out of professional TMAs, IMG has only one scout in Russia. Octagon is focused on events, not on the promotion.
Same is for football: only a few players have social media accounts. If you don’t do that — you’re not so attractive for sponsors. So football players get really enthusiastic about working with TokenStars.
What is your financial forecast?
PS: We plan to raise $7.5–15M, we’ve already raised $1.5M before pre-sale. These money will be enough to have a cohort of 3–5 professional players, and 10–15 beginners. We’ll be able to cover their training costs, participation fees, to pay for good coaches and for good sparring partners. You can see financial calculations and plans in our White Paper.
Who will buy your tokens? Fans? How are you planning to attract your buyers and explain them what to do?
PS: Our buyers will be companies, brands, investors. After placement we expect lots of private investors to buy our tokens. We provide detailed explanation of how the platform looks like, how people can choose the athletes.
EM: It’s not a problem to attract fans. They always want to be somewhere near the celebrity. They always want to have a one-to-one training with a ‘Maria Sharapova’ and get something signed by Cristiano Ronaldo, or visit an ‘invitation-only’ event. It is quite easy to attract fans, all you need is to have media partnership with sports websites. This is an obvious part.
Which part is not so obvious?
EM: Brands. It’s more complicated to work with them, but still possible. For example, in Russia we understand that working with JAMI advertising agency we’ll reach any of the brands in the market, including international corporations. However, today we do not know who will be our local partner in China or in Brazil.
How long did it take to prepare the project for launch?
EM: Six months ago Pavel first started talking to trainers, scouts about the project.
Tell us about your team.
EM: Our website is localized in 17 languages. Our support team of 10 covers all time zones and almost all the languages. There are 4 online marketing staff and lots of freelancers. We have 6 PR managers, not including outsourced specialists.
We have about 20 bounties. These are the people from blockchain community who are in fact our project’s ambassadors. For example, an guy from Indonesia comes to us saying: you pay me an amount in token equivalent to $1000, I’ll translate all your stuff in Indonesian. I know all local forums, I’ll be handling all chats and answering all the questions. They are highly motivated.
There is a person in charge of investor relations, one is handling brands relationships, legal issues are outsourced. There are 4 people in our IT Department: two software developers and two designers. We have two analysts: one is dealing with market analysis, and one is scouting. And we have Pavel.
On top of that we have our advisors, we meet them approximately once a month. They are recognized authorities in tennis: Anastasya Myskina, Sergey Demekhine, Maya Kurilova, ex-Operational Director at Octagon.
What about cyber security? In blockchain it is possible to hack the platform and steal cryptocurrency.
EM: It can happen when the project is handled by two students who do all the work and on the night before the release they quickly write a smart contract with plenty of bugs. With us it is impossible. Our smart contract is checked by outsourced programmers. I understand that this market is really tricky. Recently we’ve faced DDoS attack which lasted for a week! They attempted to take over administrator control. We had to move to different servers, now we are located at Amazon and other secure facilities. Blockchain is a geek community, all of our members are quite smart in IT and programming. Such guys can try a DDoS attack purely for interest.
Are you mainly based in Russia?
EM: Yes, we are, for the launch period. Soon we’re going to Asia, and in 3 weeks our Asian roadshow will start: 10 cities in China, Singapore, South Korea etc.*
Generally speaking, our project is global and that makes blockchain similar to gambling industry. Developers are located worldwide, you can work from any location. That’s the concept of Ethereum and, by the way, of Pavel Durov’s Telegram. Intelligence agencies have no track of their location.
“Everyone will have to go blockchain, the question is — in one or three years”
How will the utopic future world look like in 20 years, when blockchain becomes a common and conventional technology?
EM: I’d rather say, in 5–10 years. In Europe where the borders between states are already diluted, this process will take even less. Lots of multinational companies will emerge, with global coverage and without an exact location.
One of the core points of blockchain is decentralization. Our project is a good example. There is IMG — a talent management agency, they have 60 scouts, and even fewer people dealing with advertising contracts. Russia is covered by one person. It is easy to guess why: oversized structure is expensive. Even this structure still is not cheap. Blockchain enables having a cheap structure with 600–60 000 freelancers.
We have our scouts in Brazil, they do their work and earn $10,000 for each player whom we sign. Blockchain is transparent: the amount of reward is stipulated in the smart contract, and the system cannot deceive. When the contract with the player is signed, the reward is automatically sent to his scout’s account. Building a decentralized system is easy in blockchain, cash flows are rapid and transparent, and you don’t need lots of offices and legal entities.
You mean that in future we won’t have banks, lawyers, labor contract and labor legislation at all?
EM: Financial and labor relations will continue, but they will be reshaped. Smart contract can be a labor contract. In fact, a smart contract is a kind of code, or formula: “If THIS happens, you should do THAT”. If after 30 days ‘dismissal’ variable is not equal to ‘1’, you should pay to Employee 1 his salary from the cell “Salary 1”. And to enter the details of this transaction into the public register.
Project Aragon has succeeded in incorporating companies and even arranging court hearings in the cloud. Cloud organization enables starting a company nowhere, beyond any existing jurisdiction. It sound shocking when you hear about it for the first time, but later you start thinking that the idea itself is really brilliant.
It is clear that disputes will emerge, so a kind of cloud arbitration is also required. Aragon suggests that the jury should be chosen randomly from the blockchain community, the same as in the real life. After studying through the documentation, learning about the claim contents, and the conditions of smart contract the jury is able to offer their verdict. For example, if the subject of the dispute is the salary, the disputable amount gets frozen at the company’s account and depending on the court’s decision, it can be either transferred to the employee’s account, or released for company’s use. The court as a concept remains, but the form of proceedings changes.
Which entrepreneurs should rush for blockchain?
EM: It is a final destination for any company. The only question is whether it happens in a year or in three. I can compare blockchain technology now with Internet emerged in 1993. At that time only few people understood what is will look like, but it was clear that it was the fundamental shift. Indirectly, blockchain will have an impact on everyone, like the way it happened with payment systems. Any café or hairdresser’s today handles plastic cards, because this technology today is easy and affordable.
What else is it important to know about blockchain now?
EM: Firstly, ICO is a temporary hype, it will go down, but some large companies will remain who will share the same pool with Google and Amazon. Today all the headline-making recruitment stories happen in blockchain projects. For example, 3 weeks ago we hired Irina Shashkina one of Runet’s Top 10 managers. She is ex-COO at Rambler, ex-CEO at Lingualeo and ex-CMO at Groupon. Cash- and brain flow from ICO will help blockchain industry to create more technologies, more breakthrough projects will emerge.
Secondly, the blockchain community was initially quite geekish. Some project descriptions are funny to read from business point of view. I saw a statement like this in White Paper of some project: the real estate market is $37 trn, if we occupy 1%, we’ll become a large company. Or: in 2 years we are going to have 500,000 real estate objects. It sounds naive, of course. However, ICO will bring people to the market who are good at business and finance, and who are to build businesses according to a standard scheme. Blockchain migrates from purely technology-based projects to business, and TokenStars is the first example of this
Talking about real-life applications and mass adoption: technology will be applicable in almost any industry, but the specific business use cases are not clear yet. The pace of growth is crazy. Look at what happened just in one week. SegWit — bitcoin was divided into 2 currencies. A Russian guy who laundered $4 bn using cryptocurrencies was arrested. Coinbase raised $100M, the next day Filecoin outperformed with $250M. One day in our project accommodates more events than an ordinary startup faces in quarter.
Which business models be built on this technology now?
EM: The time for the new business models will come a bit later. Today you can consider the conventional models from the Internet and check if blockchain can be integrated and what the advantages are.
Another option is dealing with real estate market. Blockchain enables selling shares in the property rapidly and super cheap. If before to sell a 1 sq.m at a house in Manhattan took 2 months and extra $15,000 for notary, fees etc., with blockchain you can make an immediate transaction and pay only $1 fee. We know a project called AltEstate which can do that. Using blockchain helps reducing the entry threshold in the real estate market. You don’t have to save $5M to buy a penthouse, with just $5000 you’ll be able to collect a portfolio of smaller shares.
So if I’m a baker, can I sell my bread in exchange for tokens?
EM: That’s what we call ‘meaningless’ application of blockchain, and it’s frowned upon. That does not help the industry, it only generates informational noise and prevents other projects from delivering their message. Investors learn how to differentiate a scam from real projects with a good core idea.
By the way, ‘scam’ is a term which appeared about 2 years ago. There was a boom of projects which used fake profiles of their founders, without advisors, anything. After raising some funds (fortunately, not too much — about $2M) they simply disappeared. Sooner or later the Interpol will find them anyway. Our industry today is not much regulated. However, it learns to self-regulate. There are experts who issue reports, they learnt how to verify the projects.
Blockchain regulation at a state level is a complicated issue. It a global technology with lots of backdoors. Even if some states introduce regulation for blockchain, it is likely to rise up the entry barriers and make things more difficult, but not too much. Blockchain can be regulated in the area where it is connected with the real world. Sooner or later tokens should be exchanged for cryptocurrencies, and cryptocurrencies — for fiat. Where can you get fiat money? In a bank. So any regulatory measures are possible at the level of banking system.
The last thing: a few years ago you wrote an article for us describing your experience of listening to the lectures by the Silicon Valley heroes in Stanford University. You quoted Marissa Mayer and Elizabeth Holmes a lot. How did you feel watching the fall of your mentors?
EM: It was quite clear and predictable already, that both Holmes and Mayer would soon face lots of changes in their lives. I wouldn’t say that was ‘a fall’, particularly for Mayer. She had a great ‘golden parachute’, and I’m sure she has nothing to worry about. In Silicon Valley people are smart enough to understand: one project is over, move to the next one, and it’s going to be your ‘tabula rasa’. She had an extra difficult task. Mayer told us how many people she had to fire and how many she hired. She rotated 60% of the Yahoo! staff and continued doing that. When you have to change almost all of your staff, it’s hard to blame the manager. Competitors were 10 years ahead, and to keep up you have to pull out each new employee from the competitors. I think she went above and beyond for that.
- Please note: this article was originally published in Russian in SecretMag.ru website on August 23rd 2017. Since then, the date of ACE token crowdsale has been changed to September 10th. Learn more in our blog post: https://medium.com/@TokenStars/15-good-news-from-tokenstars-c1cbe7832864.
