ICONOMI Financial Report — Q2 2018

Q2 was one of our most productive quarters so far. We achieved three major milestones: by implementing the first stage of the fiat gateway, we opened the doors to new users, especially those with less experience with digital assets; with the addition of the first stablecoin, we created an option for DAA managers to hedge during bear markets; and with the proof of solvency, we demonstrated our dedication to transparency and set a new standard for the blockchain industry.

We had the chance to interact directly with ICONOMI enthusiasts and ICN holders at events around the world, both events we hosted and events we attended. We found that attendees were especially impressed by two things: 1. The fact that we have already launched a functioning platform, in contrast to many projects in the blockchain space; and 2. Our open and transparent style of communication. We will be attending several events in Q3, including Delta Summit, Malta’s leading blockchain and digital innovation conference, where co-founders Tim Zagar and Jani Valjavec will be speaking.

The market correction that lasted throughout Q2 impacted every aspect of the crypto-economy, resulting in less overall activity and interest. While this was not surprising, it was an interesting trend to observe.

Despite the market correction, Q2 showed some positive numbers. We received a large number of DAA manager requests and accepted several applications, increasing our DAA manager base by 27%. We also added 2,662 new users, for a total of 60,637. Our book value in Q2 was $148,840,329.

While Q2 was a very busy quarter, Q3 will be even busier: the bulk of the goals outlined in our roadmap will be achieved this quarter.

Innovation is at the heart of what we do. As we enhance our platform, we will continue to evaluate all new features with strict performance and scalability expectations.

Department Overviews

• Legal
• Customer Support
• DAA Managers
• Marketing and Communications
• Development
• Human Resources

Revenues

Revenues in Q2 were US$404,410, representing 141.95 ETH earned from platform fees ($64,613) and 746.51 ETH (US$339,796) from CCP performance fees. Q2 revenues were 253% higher than in Q1 2018.

Expenditures

Expenditures in Q2 totalled US$1,544,306. The three biggest expenditures were:

• Salaries: US$848,256 (increased compared to Q1 due to additional taxes and obligatory holiday allowance)
• Services: US$194,418
• Travel, marketing, PR: US$153,149

Columbus Capital

On June 30, the assets under management for CCP totaled US$65,969,795 (a 1.47% decrease compared to Q1 2018). During Q2, CCP made investments in seven projects, which we will disclose in the near future. A more detailed report will be published by Columbus Capital.

Repayment Program and Treasury Management

We continued our repayment program by buying and burning 226,635.78 ICN tokens using 289.14 ETH and fees collected in ICN. The total amount of ICN tokens outstanding at the end of the quarter is thus 98,930,686. The token burn smart contract can be viewed here.

Note: Do not send tokens to this address. Tokens sent to this address are permanently locked in the smart contract and cannot be recovered.

In Q3 2018 we are continuing with our repayment program using revenues generated in Q2, which amounted to US$404,410 or 888.46 ETH. As stated in our Introducing Fees Payable in ICN blog post, DAA management fees are now collected and converted to ICN on a daily basis and will be burned at the end of each quarter, rather than in the following quarter.

Legal

The legal department has been very proactive in regard to regulations, banks, and achieving GDPR compliance. We have set a strong precedent for handling the legal aspects of businesses involved in the blockchain space and are recognized as experts in this field, being regularly invited to conferences to give talks and take part in panels.

Highlights

• Regulation

We have continued in full force with the work we started in Q1. Being in contact with EU regulators throughout Q2, we have made great progress toward becoming regulated.

ICONOMI is actively monitoring proposed changes in the regulatory environment of the digital asset industry in order to identify the most appropriate means of obtaining adequate licenses to support its business model. We deem users’ trust to be the most fundamental building block and as such paramount to the very existence of our platform. This is why we have undergone a proof of solvency and also why we currently have in place a level of self-regulation that far exceeds any legal requirements in the blockchain industry. On April 5, 2018, a Big four accounting firm verified that ICONOMI had $133.6M of liabilities and $210.2M of reserves distributed across 80 digital assets, fully covering all liabilities.

Regardless of self-regulation, we are working tirelessly to obtain appropriate licenses fit for the business model of the platform.

We have regular contacts and meetings with Maltese regulators and welcome the progress Malta has made in this field by setting up a regulatory environment for blockchain-related businesses. Malta is a leading light in this field because it has been fast and adaptive in developing a regulatory framework and at the same time has made this framework flexible and open enough that it can be adopted by such businesses. We will continue working with Maltese authorities to secure ICONOMI’s place in Malta’s newly established regulatory environment.

• Banks

We have established good business relationships with the banks we connected with in Q1, explaining our business model, our work in anti-money laundering, and our work in other fields where banks see problems with crypto-related companies, making it clear that our self-regulation is at such a high level that risks are minimized to a level acceptable to banks.

• Fiat Gateway

The fiat gateway service was publicly launched in Q2 and is currently available for larger sums via OTC deals. This is not the final stage, however, and in the future the fiat gateway service will be made available to all users with no minimum transaction value. Making progress in this area was very work-intensive for the legal team, requiring alignment with banks. Further details will be communicated in Q3.

• GDPR Compliance

On May 25, 2018, the General Data Protection Regulation (GDPR) came into force in the EU. A complete overhaul of our privacy policy and supporting systems on the platform was undertaken to achieve full compliance, and we are taking further action to devise a sustainable GDPR-compliant system for handling our users’ data. We have all the checks and balances in place to fully respect all the rights provided by the GDPR.

• Trademarks

Being the first of its kind, ICONOMI has developed a large number of proprietary solutions as integral parts of the platform. Many of these solutions are the first of their kind. To protect these solutions, we have continued to register trademarks, a process that began in 2017.

In recent months, it has come to our attention that ICONOMI’s intellectual property rights have been violated. We have successfully appealed all known infringements and will continue to monitor potential violations.

• Legal Staff

We have added another lawyer to the team with years of experience in the legal field. He will be taking over day-to-day tasks, easing the burden for other members of the team and allowing them to focus more on their specialized tasks: AML, compliance, governance, etc.

Focus for Q3

Our main focus in Q3 is on registering ICONOMI as a money service business in order to enable a fiat payment gateway for all users of the ICONOMI platform.

We will also be focused on preparing applications for licensing under the new Maltese DLT regulatory framework and actively engaging in discussions with Maltese and other (European) regulators with regard to proposed regulations for governing DLT.

As part of ongoing operations, we will be providing internal support to all ICONOMI departments in order to maintain the highest legal standards and full regulatory compliance.

Finally, we will be increasing automation of AML/KYC processes to achieve the highest possible level of automation by 2019.

Customer Support

The downtrend influenced by the bear market was reflected in a general decrease in activity across the industry, including in the number of support-related requests ICONOMI received. Despite this, our support department stayed busy.

In Q2, our users made more than 12,000 searches in our Knowledge Base, and our support team solved more than 1,100 support requests.

Highlights

• With the latest releases of the official ICONOMI iOS and Android apps, users can now verify their accounts to both Tier 1 and Tier 2 directly from the app to raise their deposit and withdrawal limits.

• We added support for eight new countries for Tier 2 verification: The United Arab Emirates, Egypt, Ghana, Jordan, Kazakhstan, Malawi, Peru, and Serbia.

Common Questions

• Similar to Q1, the most common questions we received in Q2 concerned lost two-factor authentication details, DAA manager applications, and verification issues.
• The most-read articles in our Knowledge Base included: How can I make a deposit to my account?, Interested in becoming a DAA Manager?, and DAA management fees.

Focus for Q3

In addition to ongoing support operations, in Q3 we plan to update our user-friendly ticket request form to automate solutions for the most common support requests and optimize the process of solving tickets. We will also be preparing for support requests related to the fiat ramp-up.

DAA Managers

We started the quarter with 26 DAAs and by the end of Q2 had onboarded 7 new ones. Three new countries were added to our DAA manager map, and we now have 33 DAA managers from 18 different countries. Because of the continuing bear market, some of our candidates are still waiting for more favorable market conditions to create their DAAs.

Highlights

• Because we expect a lot of interest in DAA creation during the next bull run, we have been continuing to optimize the onboarding process and the background checks we perform for each of our DAA managers.
• To enable DAA creation for a wider audience, we lowered the required seed amount to $50,000 and introduced fees payable in ICN tokens.
• With the introduction of the fiat gateway, we are now able to accept seed money in euros.
• Two thirds of DAAs, including the top three, outperformed BTC in Q2. At the highest peak of Q2, DAAs outperformed BTC by an average of 52%.
• By adding our first stablecoin, TrueUSD, to our platform, we now offer more options in times of volatility. Because of the continuing bear market, one DAA manager has already started using TrueUSD as a hedge.

• We are in constant talks with our DAA managers to learn more about their experience using our platform, gather their feedback, and implement improvements and new features. In late Q2/early Q3, the first DAA manager voting for a new platform feature was conducted, this time for a widget design. Most of the managers voted for the same design.
• We established further relationships with our DAA managers through our Meet the Managers events. Together we have conducted several interesting panel discussions in which we discussed our views, experiences, and predictions for both the crypto-economy and the traditional economy.
• Members of our team attended various events and networked with industry experts as well as potential DAA managers. East Chain Open Hub, Consensus, Zeroing in on Europe, and the Cryptocurrency Fund Forum were among the bigger events we attended.

Focus for Q3

Moving forward, we will continue interviewing prospective DAA managers and onboarding them to our platform. We will also be focusing on relationships with existing managers and continuing to improve their experience on the ICONOMI platform.

In Q3, we are planning to conduct more frequent voting for new features and include managers in the platform creation process. This way, we will be able to truly deliver a high-quality product and a perfect tool for both existing and future DAA managers.

Marketing and Communications

Q2 market trends strongly reflected influence from Q1’s moderate growth trajectory. In Q2 we were primarily focused on content marketing, building on two trends simultaneously: trust and accessibility. With every feature launch, we’ve created and delivered on a disruptive proposition, a foundation from which we can build a broader customer base in the future.

Highlights

• We continued to organize Meet the Managers events throughout the world to help our DAA managers take advantage of the new opportunities presented by changes in the crypto-economy. Events in Madrid, Amsterdam, Hong Kong, and Singapore gave our DAA managers a chance to present their DAA strategies and insights on digital assets in general. Attendees were able to connect with the ICONOMI team, DAA managers, and representatives of companies with digital assets available on the ICONOMI platform.
• We used our attendance at internationally leading blockchain conferences such as Consensus to present our platform and products at a customer-specific level in relevant markets and regions.
• We sponsored two events: a TedX event in Ljubljana, Slovenia and Finnovating’s Digital Assets Evaluation Executive Program in Madrid, Spain. The goal of the TedX event was to educate students and future generations on the importance of the crypto-economy. We always support the engagement and enthusiasm of our DAA managers and are always willing to help them promote their DAAs to their local community. The event in Madrid was organized by DAA manager Jesús Pérez and was also attended by Lander Rubio, manager of the COINBEST 1 DAA. We have more sponsorship activities in store for Q3.
• We published 31 blog posts (excluding weekly updates) in Q2. In the last 90 days, our Medium publication has received 49,180 total views on posts and pages. We were also happy to announce that we reached the 50k Twitter followers milestone in Q2. To celebrate, we randomly selected 20 winners to receive ICONOMI branded promo materials.

• We successfully carried out a Twitter campaign for the addition of 10 new digital assets to the platform, which resulted in a significant increase in impressions (+42%), engagement (+362%), and traffic to our website from Twitter (+332%).
• We improved our website analytics to effectively track user behavior and measure conversions and other metrics that will help us analyze and optimize our UX and marketing campaigns.
• We are revising our digital marketing strategy. Marketing activities in the B2C segment are currently focused on SEO (search engine optimization), a trend that will continue throughout the year.
• Our marketing department is growing. We are testing several social media management tools that will allow us to work more efficiently and aid in scaling the department.
• Since the beginning of the year, we have been standardizing our communication outlets and channels and implementing changes according to user and community needs. In Q2 we moved our AMA sessions to a dedicated channel on Rocket.Chat where we answer the most requested questions on a more frequent basis. We also decided to move our Weekly Update series to a biweekly format. This series is now called The ICONOMI Digest, a name chosen by the ICONOMI community. Be sure to subscribe to our Medium publication to receive updates!
• The General Data Protection Regulation, or GDPR, went into effect in May 2018. The GDPR standardizes data protection legislation across the EU. Among other GDPR compliance efforts, we have switched to a new email provider.
• We attended and are planning further marketing sessions regarding rebranding and positioning, which will be reflected on our website. Our primary goal was to research our current user and DAA manager base and to further define our target market.

Focus for Q3

The most significant activities in Q2 concerned the development of our brand, and this work will extend into Q3 and Q4. We are currently preparing midterm marketing strategy and re-evaluating and designing new event hosting and digital marketing activities. To bring new users to the platform and increase awareness, we will be creating authentic campaigns and trying out new approaches that represent our brand, as well as putting a stronger focus on performance marketing (measure, report, analyze, test, improve, and repeat).

Moving into the third quarter of 2018, there are two main focus areas. First, we will be addressing potential customers and individual investors by providing better access to the market. Second, we are excited to share the next two major anniversary milestones with our users: the anniversary of the public opening of the platform in August, and ICONOMI’s two-year anniversary in September.

Development

For the second quarter of 2018, the development department was focused on some very important items for our users. We have continued to make strong progress on our roadmap for 2018.

For more details on our progress in line with our development roadmap for 2018, see our Q2 development overview.

Highlights

• On May 25, 2018 we added the TrueUSD stablecoin to the platform as a tool for risk reduction. TrueUSD was requested to be added to a DAA for the first time by Menno Pietersen, manager of the CARUS-AR DAA, on the same day it was added.
• Android users are now able to increase their deposit/withdrawal limits and verify to Tier 1 or 2 directly from the app. Make sure to download the app from the Play Store!
• We opened the first stage of the fiat gateway, enabling buying and selling bitcoin and ether with EUR for high-value transactions. We are progressing toward providing access for all users.
• Our trading engine is in the final testing stages.
• The first version of our API is in testing and will expose a small amount of platform data. Additional functionality will be rolled out in stages.
• Since December 2017, we have been adding new digital assets to the platform on a regular basis. Before adding a proposed digital asset to the ICONOMI platform, we follow a due diligence process in which we look at several criteria based on internal protocols.
• We are redesigning the architecture of the Android app to enable a more modular approach to development.
• Aspects of the affiliate program are in testing.
• On April 5, we verified that the digital assets on our platform have been reported accurately and that ICONOMI is solvent. Following the Merkle tree approach, we established a procedure for putting all user and DAA holdings into Merkle trees, allowing users to check for themselves that they were included in our liabilities without revealing any personal information. Because we underwent a proof of solvency by a third-party Big Four accounting firm, users can be confident that all account balances are correct and all company liabilities have been calculated accurately. You can verify your own balance here.
• We created new DAA manager profile pages that include descriptions and social media links.
• We enabled multiple user authorization for accessing the same DAA as part of our support for corporate accounts.
• We enabled full history for DAA charts.

Focus for Q3

Our focus for Q3 will be on releasing the API and upgraded trading engine, which are currently in testing. For a better overview of our DAA managers and ease of use for our users, we will also be redesigning the DAA discovery page, followed by a complete redesign of the website.

Human Resources

In contrast to Q1, the growth of our team has stabilized. In Q2 we onboarded two new members, one in the legal department and one in the marketing department. Instead of scaling our team as quickly as in the past six months, we have been focused on integrating new team members and making them feel welcome.

Highlights

• Integrating new team members

We organized several activities to help our new team members adjust to our internal culture. We also continued with informal activities, such as group hikes and interdepartmental lunches, where members of different departments can meet less formally but still exchange crucial information. At the end of June we also organized a picnic for the whole team.

• Continuous focus on internal cohesion

We know there is a lot more to group cohesion, and especially employee engagement, than informal activities and workplace surprises. To effectively shape group cohesiveness and ensure it is reflected throughout the organization, serious and structured activities must also be undertaken.

Real, stable internal cohesion is built over time, and employees need support and the chance for their voices to be heard.

This is why at the end of June our management team invited all employees to give their feedback on our culture, processes, and leadership style and make suggestions for improvements.

Focus for Q3

Our focus for the future is on having more employee feedback sessions and inviting employees to be part of the decision-making process when it comes to office culture and the workplace environment. This will help support the continuous improvement, personal growth, and development of our team and the organization as a whole. During summer, we will build a solid foundation for company culture projects and plan relevant activities for fall. We will also build on the leadership competencies that directly impact organizational culture.

Check the dedicated jobs section of our website for open positions at ICONOMI. If you qualify, don’t hesitate to contact us!

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