What does SEC ICO ruling mean to Zonafide?
After the SEC ruling on The DAO there was some noise in my network about the state of the crypto markets and ICO. I thought it would be useful to offer a copy of my contribution to an email thread last week.
“I had not said I would not pursue the ICO route. In light of my experience, I could not see the economic model underlying them. After many weeks I have arrived at what I believe is a viable model.
I think it is a bit excessive to conclude that the market is a mess. Many involved, even commentators, seem to lack the basic knowledge of how markets work. We forget we who have been in financial markets for years took a long time to comprehend some of the abstract concepts in finance and economics. It doesn’t matter if one agrees or not with the current financial system, any other system will evolve a similar abstract model to understand how it works. The current situation reflects the lack of knowledge that people in the crypto space have about markets and systems.
Some just want to make money and others believe it is an opportunity to depose the profit orientated capitalist system. I would hope that those with the latter ideology still understand that people and markets are driven by some form of a motivator. Our focus is on enabling people to work together to secure their activities. A means to do that is motivation enough. If it was possible to produce the software and operate it for free then being able to secure peoples activities should be motivation enough to use the product. Having activities safe from compromise would be a sufficient reward to have all the participants go out of their way to accommodate the use of the product.
However, we cannot bring this product to market for free. We have to pay taxes, eat and have a place to live. All the people we may bring together to make it happen also have the same needs. Unfortunately, the need to protect activities is a luxury compared to these basic needs. So it is necessary to offer others some form of reward for providing the necessary funds to bring the product to market.
It is a complex brew but the momentum in interest for the crypto market was, and maybe still is, an opportunity to find funding to bring our product to market. It, fortunately, is a crypto product in itself. Whether it needs to have its own rewards based economy may be questionable. If people philanthropically donated funds just because they wanted to help people avoid becoming victims of fraud or cyber crime then we would not need to invent a reward system. I think we can all agree that no sustainable funds are available philanthropically and the crypto investment market is evidence that people still want to see a return on funds provided: a Return on Investment (ROI).
What we have tried to do in our white paper is strike a balance between philanthropy, aka donation, and investment. We have used the concept of a token as a reward for providing services in the ecosystem. The tokens exchanged for services are merely a means to measure the value of the service provided. We have designed in “on and off “ ramps to FIAT for people to be remunerated in a currency that they can use in the dominant economy. The token is not a currency or a financial security because it is not implicitly exchangeable for any other currency, goods or services and does not represent a share in any value creation.
The Together Token is no different to tokens used to access shopping carts in some supermarkets. However, if the demand for those tokens means that a secondary market is created where people exchange other currency, assets, goods or services for them then we have no control or influence. No more so than the publisher of the Beano comics that are exchanged between collectors many years after publication.
The Together Token is a scarce resource by design. Therefore if the product provides sufficient value that they will be in demand then it is possible there value will be greater than some par value. Holders of Tokens, those that have earned them or those that have otherwise acquired them, might find they can sell them for a capital gain in a marketplace.
So, my position is that Zonafide is enabling people to work together to secure activities and a means to do that is the Together Token. It is not a financial security. It is not currency. It is completely normal for the Token like any other “thing” to find it has a value in itself because it enables people to do something of value.
I believe that people in the current financial markets and many in the new crypto world are not able to understand this. Everyone needs to work hard to educate along the lines I have explained and our approach should become a clear example of what a Token based crypto business model is.”
We still plan to publish our white paper to support crowd funding for Zonafide. We had already taken a different approach. We were using an ERC20 token standard but were not offering them for sale. We were using them to record acquisitions of a completely different and extremely well established legal concept.
Note: this article was first published on another Medium account I had on 1st August 2017.