ICONOMI Financial Report — Q4 2017

2017 ended with a month that even in the crypto world is seen as an outlier. We saw a run of BTC up to $20,000 USD and a “tsunami” of new investors in the crypto ecosystem.

Our user base increased more than 50% in the last quarter, and in January we added more than 10,000 new users. Our book value increased to $327 million USD, which is 173% more than in Q3. But even more important than book value is the revenue the platform is generating. DAAs have generated over $200,000 in revenue in one quarter, an increase of more than four times over Q3.

Revenues

In Q4 we made $1,015,999 in revenue, of which 20% was DAA-related and 80% was Pinta-related.

Correction: In previous reports we included DAA exit fees as revenue. In fact, the 0.5% exit fee goes back into the DAA structure to cover trading costs. Withdrawal fees are similarly used to cover transfer-related costs.

Expenditures

Expenditures in Q4 totalled $949,356.33. The three biggest expenditures were:

• Employees: $373,000
• Services: $223,000 (the primary cost in this area was our new ID verification partner)
• Traveling, marketing, PR: $155,000

CCP Transactions

On December 31, the AUM for CCP was $ 145,841,513 (a 192% increase compared to Q3). During Q4, CCP invested 1900 ETH into Real, Datafund, ENTX, and Unico. Additionally, Columbus Capital bought for CCP 2,633,583 ICN for 5,913 ETH, 987 BCH, and 101 BTC and sold 600,000 SAN for 3,970.86218 ETH and 5,853.673145 GYBT for 1,990 ETH. A more detailed report will be published by Columbus Capital.

Repayment Program and Treasury Management

We continued our repayment program by buying and burning 52,627.34 ICN tokens using 196.3 ETH. The total amount of ICN tokens outstanding at the end of the quarter is thus 99.736.033. 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 Q1 2018 we are continuing with our repayment program using revenues generated in Q4, which amounted to $1,015,999, or 1342.61 ETH.

In addition to the repayment program, we have started buying ICN for our treasury due to a significant difference between our book value and ICN market value. Our treasury management will be active, meaning we may also sell ICN if we notice excessive trading euphoria.

Q4 2017 main figures are:

Please read below for a detailed breakdown of Q4 activities by department.

DAA Managers

Optimizing the Onboarding Process

We started the quarter with the first batch of DAAs. On October 4, we onboarded 12 DAA managers and began gathering their feedback. After monitoring their progress and gathering valuable insights, we optimized the onboarding process and opened communication with new candidates. We share the information gained from these processes in our weekly DAA Insights blog series.

Selecting and Reviewing New Candidates

We started adding new DAA managers in November and carefully reviewed over a hundred applications, scheduling Skype calls with promising candidates. After getting to know them better, we asked them to outline their DAA structure and reviewed them one by one. Selected candidates signed an agreement and were asked to deposit the seed money necessary to create a base for their DAA structure. Based on our experiences from the first batch, we set the minimum seed amount to $100,000, which has proven to be optimal at this time for preventing large relative changes in DAA structure when users enter and exit.

• We finished the year with 18 DAA managers from 12 different countries.
• We currently have more than 10 DAAs preparing to go public. Because we are also constantly upgrading our platform, we will roll them out gradually.

Focus for Q1 2018

Moving forward, we will continue interviewing prospective DAA managers and slowly adding them to our platform. In addition, when we have gathered enough data and standardized the process, we will take over rebalancing as well as DAA creation, meaning our development team will be able to focus completely on our platform and the development of new features.

After our first live event with DAA managers, we will gather feedback and organize other events in major European cities. In addition, we will attend a variety of conferences where we will introduce our platform to both potential users and potential DAA managers.

Users

Number of Tickets Growing

With the constant growth of the number of users on the ICONOMI platform, the support team handles an increasing influx of support requests. We are able to respond to most support requests within twenty-four hours. We are also constantly updating and expanding our knowledge base, which should help lower the number of support requests we receive. We will be adding new members to the support team over the next two months.

Common Questions

The most common questions we receive concern lost two-factor authentication details, DAA manager applications, and verification issues. Depending on the type of question, support works closely with other departments, especially the development, legal, compliance, and marketing departments. Support actively manages additional verification procedures, verifies transactions, and optimizes our Zendesk knowledge base.

• The most-read articles in our knowledge base include: How can I make a deposit to my account?, How do I buy into a DAA?, Where can I buy/sell ICN tokens?, and Deposit options & Fees.
• Top help center searches include queries about fees, management, and APIs.

Redesigned Tier 1 Verification Process

With the Tier 1 verification process redesign, users from 186 countries are now able to verify for and use the ICONOMI platform. With this in mind, the support team constantly updates the knowledge base and designs processes for smoothly solving potential issues.

Focus for Q1 2018

• Onboarding new support members
• Implementing specialized support request forms that outline the information required for common types of support requests, lowering the amount of back-and-forth communication that is sometimes necessary when users submit incomplete information.
• Automating solutions for some of the most common support requests.

Communications and Marketing

Overall activity in Q4 2017 has been very positive, with a strong flow of media inquiries in December due to the addition of new DAA managers, digital assets, and supported countries, as well as, of course, our community and supporters. Below-the-line activities such as events, media relations, and building our social media presence were some of our main focuses in Q4.

Highlights

• We’ve been published or mentioned in more than 100 media outlets, primarily finance-related publications in Europe and the US.
• We’ve been interviewing our DAA managers and publishing interviews in our weekly series DAA Manager Insights. We aim to share their knowledge with our users and give them a chance to get to know the managers and understand their way of thinking.
• We started our New Digital Assets on the Block blog series to announce when new digital assets are supported on the platform.
• In December, our Twitter profile views almost doubled compared to previous months, with 15,000 new followers in Q4 alone.
• We collaborated with our PR agencies to promote announcements about new DAA managers and our activities and opinions about the crypto-economy. This work will continue and expand in 2018 to include press releases about other important ICONOMI updates.
• With our public Slack channel closed for registration, and after exploring the options for community discussion channels, we will be migrating to Rocket.Chat. We are currently setting up the channels and will soon begin the migration process with our first group of community members.
• Our team attended various conferences and organized our first event, which will take place in Vienna on February 14, 2018, where we will be joined by four of our DAA managers.

Focus for Q1 2018

• Updating the website and other content in order to expand our product offerings.
• Improving the buyer and DAA manager experience by updating the UX.
• Continuing to build strategic alliances with DAA managers and other leading companies and influencers in the crypto-economy.
• Focusing on community cohesion and interaction.
• Building brand perception through continued planned publicity in traditional media

Legal

Highlights

Among other initiatives, our focus in Q4 was on preparing a new anti-money laundering policy, as well as studying and investigating different legal jurisdictions with the aim of identifying the best place for ICONOMI to incorporate.

• Our anti-money laundering policy reflects the implementation of our new identification service provider, and we are following the current EU AML Directive to achieve compliance.
• We have prepared a roadmap for achieving GDPR compliance.
• At the end of Q4, we onboarded a new compliance officer.
• We were also present at several blockchain-related conferences, where two members of our legal team participated in a legal panel about ICOs, AML, and securities.

We are constantly investigating the development of legal frameworks for the crypto-economy throughout the EU and globally.

Focus for Q1 2018

• EU Jurisdiction

As we have previously communicated, we have incorporated a company in Malta, where we are engaged in continual discussions regarding blockchain legislation. Malta has a great track record of adopting high-tech businesses at an early stage in their development and creating a welcoming legal environment. Public discussions about how to regulate this industry have recently concluded. While Malta is a strong potential jurisdiction in which to do business, we are continuing to explore other options.

• Fiat Ramp-Up

We see the fiat ramp-up service as one of the building blocks of the ICONOMI platform. The fiat ramp-up will make using the platform much easier and more straightforward, opening the platform to many more users, especially those with less experience in the crypto-economy. Legal requirements for implementing this service include obtaining the necessary licenses for processing fiat in an EU jurisdiction, defining the business model in a compliant way, and mitigating risks while still offering a user-friendly service.

Human Resources

Building the Team and New IT Experts

ICONOMI expanded rapidly in 2017; at the end of the year, we already had 36 full-time employees. With the larger team and the change from a start-up to a fully fledged company, we have made some changes to our internal organization, including more pronounced departmental divisions.

When recruiting new employees, we look for people who are specialized in different areas: development, sales, legal, customer support, etc. At ICONOMI we know that the crypto world is dynamic and rapidly changing, so regardless of an employee’s field of expertise we always look for three characteristics:

• Aligned with organizational culture and ICONOMI’s vision
• Possessing an honest interest in the crypto world
• Demonstrated interest in their field

We firmly believe that the success and business results of a company stand on the shoulders of organizational culture.

Executive Changes

In line with the changes in ICONOMI’s structure, there have also been changes in our executive team. In Q4 2017, two new team members joined the company: Matej Tomazin, COO, and Miha Vidmar, CTO. Both have over 15 years of experience in their respective fields of finance and fintech software development.

Focus for Q1 2018

In the next few weeks, our main goal will be strengthening and expanding our development team. We will also be expanding our sales and customer support teams, which are our key links to DAA managers and end users.

Development

New Digital Assets, New Supported Countries, and an Additional Exchange

In Q4 we added support for one additional exchange and 20 new digital assets, which you can view on our digital asset page. To improve onboarding and increase the number of new countries eligible for sign-up on our platform, we also changed our verification tiers and increased deposit and withdrawal limits.

Uptime Improvements

December was an amazing month in crypto by any standard, and the high volume on exchanges also caused connectivity issues for our platform. Our regular platform users may have noticed some downtime in the beginning of December due to these issues. Since we rely on getting up-to-date order books and trades from exchanges, connectivity issues caused our rates not to be updated at all times.

To solve these issues, we have developed built-in circuit breakers, which we released in two stages. The first stage was released in December and temporarily puts our site into maintenance mode if prices diverge too much from independent sources. The second stage was released in January and temporarily disables buy/sell functionality for any DAA affected by price fluctuations and minimizes impact on other site functionality.

Monitoring and Safety

In the background we have added deposit monitoring to identify deposits from addresses known to contain stolen funds. This monitoring and its algorithms will be improved in Q1 to generate fewer false positives and increase our chances of detecting and preventing stolen digital assets from being exchanged on our platform.

Focus for Q1 2018

In line with our published plan for 2018, in January we started displaying the assets under management of DAAs, a much requested feature. We also made the first step toward full support for company accounts, which our managers can now create. Other goals for Q1 include:

• Providing the option to set up separate two-factor authentication specifically for withdrawals to increase security for our DAA managers.
• Improving the operational side of our systems and optimizing our back-office tools and processes to optimize the onboarding process, resolve support tickets faster, and simplify the rebalancing process.
• Adding features to our Android app, including registration, login, and portfolio viewing.
• Preparing for a Big Four audit.

Past quarterly reports are always available in the Financial Reports section of our Medium blog.

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