Throughout 2016 and 2017, ICOs of all shapes and sizes have repeatedly set new fundraising records to the point of creating, quite, a phenomenon. But before entering this new world, let us attempt to answer the main questions on everybody’s mind:
First and foremost, what exactly is an ICO and what do I get in return for my contribution ?
What it is an ICO:
ICOs are a mix between IPOs and crowdfunding campaigns. Like IPOs, a stake of the startup or company is sold to raise money for the entity’s operations during an ICO operation. However, while IPOs deal with investors, ICOs deal with supporters that are keen to invest in a new project much like a crowdfunding event.
What do I get?
You are receiving a cryptographic token which value is determined by the value of the economy being created by this entity.
Let’s take a step backward and investigate the different types of tokens.
- A Currency token or Coin, digital currencies in which encryption techniques are used to regulate the generation of units and verify the transactions. Example: Bitcoin.
- A financial security token, is by definition a tangible, fungible, negotiable financial instrument that holds some type of monetary value. Example: The Investment fund token designed to invest in blockchain markets that investors receive in exchange for their part of contribution to the underlying project.
- A utility token that gives the owner access to a specific protocol or network, privileges and sometimes rights. Example: Ethereum, a decentralized platform that runs smart contracts.
Lately, with the first type of token, like Bitcoin, the currencies have been skyrocketing to the point that certain people are questioning its rationale. But one should not forget that we are moving towards a cashless society where disintermediation will play an important role in speeding up transfer and reducing their costs. Looking strictly at their performance, utility tokens have, in most if not all cases, performed better, but the question is, why? The main reason for their success lies in the functionality and potential behind this new paradigm. Many examples can be given to illustrate the potential of utility tokens but, here, we would like to describe our vision for SwissBorg.
The core feature of the CHSB (SwissBorg Network Token) is giving holders the ability to choose the direction of the network’s growth. All CHSB token holders will have the opportunity to participate in the development of the SwissBorg network through the concept of “proof of meritocracy”. Active members will be rewarded for their input and contribution to the most promising projects that bring true value to the SwissBorg platform.The voting power will be weighted based on the amount of CHSB tokens users hold at the time of the referendum announcement and it will not cost any CHSB tokens to vote. Inspired by the open protocol philosophy, SwissBorg is leveraging on a new type of open protocol utility: “proof of meritocracy” to revolutionize the wealth management industry.
In most case tokens don’t confer any legal rights but here at SwissBorg, through this referendum, we try to empower the community and give it back some control.
Given the uncertainty of the regulatory landscape, there are even benefits to presuming that a token would be issued in a compliant manner, regulatory organizations will start to mitigate and regulate the ICO space. Companies that issue tokens with an angle of conviction will be more confident that they will not suffer significant business interruptions from regulators and private litigation.
Understandably, there are fears that regulation will stifle innovation. Moreover, rules in such an innovative space usually don’t age well, they may become, potentially, incompatible with future innovations. But, there are two considerations to keep in mind.
- Regulators are aware of this risk of stifling innovation, that is why they are adopting a wait-and-see approach.
- Those in charge of regulation know that if the rules are too strict, companies will move to more friendly jurisdictions, which is economically undesirable. Regulators will have to practice balance between protecting vested interests and crafting rules that don’t suffocate innovation. This will help Blockchain become mainstream and experience an even stronger boom. Back in the 90s, when internet was just beginning to develop, could you make a signed a contract through internet and enforce it? No. The same concept applies here, contributors have to make their due diligence and then take a leap of faith. But, now, this leap is made even easier than before thanks to the blockchain, all transactions are recorded. Blockchain, indeed, finally, has achieved pure trustless transactions.
Equipped with a token that is participatory and not just a means of exchange, and a clear concept of a crypto management platform that bridges the off-chain and on-chain realms aiming to benefit both, and a philosophy of meritocratic participation and rewarding, SwissBorg is uniquely positioned to help investors navigate the exciting new universe of cryptocurrencies.
Christophe Diserens, COO & Jeremy Baumann, Head of Discretionary Portfolio Management