Community Perspective: A look in to the next-generation cryptocurrency exchange
A trader finds what a legitimate company and ICO, with a relatively low risk for loss of investment, look like.
What are the most important things to value in an ICO? To understand what a good ICO looks like, one trader sets out to investigate what the hype is all about with COBINHOOD—the next generation cryptocurrency exchange.
The photos and interview transcript below was posted by the user @raven77 (Tash Anestos) at 9:59pm GMT+8 of September 13th 2017 on COBINHOOD’s public Slack channel. The original version can be viewed/read from there.
For the version posted below, it is reviewed and edited by the COBINHOOD team for clarity and grammatical improvements. The original intent of the writer is fully kept intact. Any major annotations are duly noted within the article.
This transcript is posted with permission from the author; and you can reach out to him in Slack for more questions.
COBINHOOD (COB) Due Diligence/Q&A
Hi. I’ve been following blockchain technology and cryptocurrencies since late 2013. I’m currently living in Taipei, Taiwan as an expat for a tech company.
I ran across the COBINHOOD ICO recently by a random occurrence and later learned they are also based in Taipei. I joined their Slack channel and got involved in some of the discussions, and a lot of questions were being raised by the interested investors trying to validate the legitimacy of Cobinhood — to ensure themselves it’s not a scam.
So I volunteered to go down to their HQ in downtown Taipei and do a meet & greet and Q&A with the intent of reporting back my findings to the Slack channel. The following is a summary of my visit to their office on 9/13/18 where I met with CEO & Founder, Popo Chen, and Business Development Manager, Daniel Chang.
COBINHOOD is located in downtown Taipei in an upper-end business complex shared with notable business entities like Mozilla and JP Morgan. They occupy a large open office space with about ~30 desks. I saw about 15–20 engineers/devs working there. They have a large screen TV with the ICO results broadcast for the team to view.
I was greeted by an HR rep who seated me in an office where I first met with Daniel Chang, the Business Development Manager who answered a few of my questions before taking me to meet Popo Chen, CEO, and founder; where together, all of my questions were answered.
All Q&As are paraphrased or summarized based on my memory and understanding, these are not direct quotes from the COB team.
Q1: What is COBINHOOD (COB)?
A: COB is a combined cryptocurrency exchange platform and ICO underwriter company.
Q2: How big is the COB team and what talent does it have?
A: Currently, around 23 people, 15 of which are engineers and developers, with 50% of them are back-end devs. Two of the members have experience coding blockchain; two are ex-Google developers. All are located in Taiwan except for two developers in the US.
Q3: Where is your company registered, and what if the Taiwan [government] tries to shut it down like what they did with Tether, recently?
A: We are not registered [in] Taiwan — we are registered in the Cayman Islands. We do not think the risk is high of being shut down and we are willing to move operations if necessary.
Q4: Is your platform a centralized or decentralized exchange?
A: It is currently a centralized exchange platform (like Bitfinnex, Bittrex) with plans to build a decentralized version in 2018.
Q5: What are the incentives for people to use the COB exchange?
A: We offer “free trades” with “zero fees” for standard trading accounts. Our token is not required to use the platform or conduct a trading pair exchange.
Q6: Where does your revenue come from if you do not charge trading fees?
A: We will charge a fee for Margin trading similar to other exchange services, but will be at competitive rates with additional discounts for using the COB token. We also generate revenue through the company-owned tokens that appreciate over time. We will reserve 40% of the tokens for this purpose (10% go to angel investors, 50% go to the public ICO).
Q7: If the ICO does not sell all the tokens, will you burn the unsold tokens or have a second round of ICO sale?
A: No, the unsold tokens will not be burned nor a second round ICO [will be raised]; the remaining tokens will go back into the COBINHOOD company fund.
Q8: Won’t this devalue the token?
A: No, because all COBINHOOD company tokens require a strict vesting period of 10 years at 10% per year; so these coins can’t be dumped, thus, should not devalue the token.
Q9: Is there any vesting period for ICO buyers?
A: No. Vesting is for company held shares only.
Q10: What will allow your platform to conduct high capacity trades per second with low latency?
A: We will use the latest Google DB tech, Google Cloud Spanner. We speculate based on user testing that other exchanges can also use this to solve their speed and capacity issues, but possibly, do not choose to spend the funds to do it. We cannot confirm this, but Kraken, for example, goes down on a regular basis, and exchange times can take up to two seconds on exchanges like Kraken and Bitfinnex. We believe we can do much better than this using Google’s latest tech to build our platform from the ground up and with our experts working with us that used to work for Google who are familiar with its tech.
Q11: If no token is required to use your trading exchange, what is the use-case and incentive for people to buy the token and, thus, appreciate the value of it?
A: The token is used for discounts in margin trading, but the real use-case and value is in the ICO underwriting whereby COBINHOOD is guaranteed 5% of underwritten token ICOs, and our own COB token is used to buy new ICO tokens at discounted rates not available to the public. These discounts will increase the demand for COB driving up the value.
Q12: Are there any restrictions for new ICOs being underwritten by COB?
A: Yes, we will only accept ICOs with large financial backing to ensure a high success rate and a high return for those using COB tokens to invest in new ICO tokens at a discounted rate.
Q13: What is the incentive for ICOs to be underwritten by COB through your ICO Spark Program, why wouldn’t they just release their own independent ICO and avoid giving 5% of shares to COB?
A: By using COB as the underwriter, our clients will receive immediate liquidity by being listed on our exchange as soon as the ICO finishes. Currently, other exchanges are also charging equivalent or larger fees, and many ICOs are not being listed immediately because the fees are too high for new tokens, so they resort to low-volume exchanges and suffer low liquidity and slower token value growth. We believe our exchange will bring high volume due to zero trade fees and access to new ICO tokens that come directly through COB. We believe by combining our trading exchange with the ICOs we underwrite is a win/win for our clients, COB, and our token holders.
Q14: Do you have any ICOs signed-up yet?
A: Yes, for example, Filecoin, a decentralized storage network.
Popo supplemented that COBINHOOD needs to wait until having trading volume.
And “Filecoin” is a project from “Protocol Lab”. Mentioning Filecoin (by Daniel or by the team or anyone of our partners) was just an example of an underwriting service.
Q15: Is Du Jun, co-founder of Chinese exchange Huobi and media outlet Jinse.com, affiliated with you, and if yes, can you prove it?
A: Yes, he is a sponsor, but there are legal considerations preventing him from direct participation in the ICO.*
*Note: Popo reasonably proved to me Du Jun is working with them by showing me his phone and chat conversations with Du Jun, but I was not allowed to take any physical evidence due to legal considerations.
A couple of additional comments and conclusions.
- Legitimate and promising
I was skeptical at first about this ICO, as a couple people [there] in Slack can attest who I chatted with in DM. But, after visiting COB, seeing their setup and team, and discussing with Popo and Daniel, I feel like they are certainly not a scam and they are, in fact, a well-set-up and well-funded company — although a very young but talented team from what I could ascertain.
2. Best features: zero fee exchange combined with the ICO underwriting
I think the value in COB is the zero fee exchange combined with the ICO underwriting which works hand-in-hand together to incentivize clients on both sides and add value to the COB token.
3. Low risk
It’s my feeling that although the percentage of coins retained by the company is a bit high, it has a low risk of a sell-off due to the long vesting period. It actually might be better this way for investors because the fewer tokens sold without vesting, the lower the circulation supply and the higher the probability of valuation increase.
4. Margin trading
The use case of margin trading, in my opinion, is not strong enough incentive to own and trade COB tokens, but I can picture a scenario where people will want to own COB to get discounts on ICO tokens that could save them thousands in return. This could increase the value of the COB token but it could also limit it because it would never be worth more than the return savings value from the discount on the new ICO’s. They may need to be careful to allow the market to drive the price then adjust the swap price for new ICO tokens accordingly as a flexible value.
Another thing I did not ask is, what happens to these tokens when they are swapped for discounted ICO tokens, do they also go back to the company? If this is the case, then the circulation will decrease with deflation and the price of the COB token will rise. But on the flip-side, it may eventually lead to too much centralization of the COB token in corporate hands. I look forward to learning a bit more about this.
Raven77 asked this question in a subsequent discussion on the Slack Channel and Popo responded as posted below.
Q16: When a COB holder swaps COB for underwritten discounted ICO coin, where does the COB coin go? Back to corporate pool? Or it goes to new ICO company in trade for their token?
A: The coins won’t be destroyed so the value remains. Plus, a COB holder has privileges forever — hold a COB and you’ll get white-listed for future tokens with significantly cheaper price.
Overall, my assessment is that this is a legitimate company and ICO with a relatively low risk for loss of investment, but only time will tell. Note, this write-up has not been reviewed or censored by the COB team and any errors therein are my own and I invite the COB team to comment and correct anything that I may have misunderstood or misstated.
End of transcript