Penguin FA — FIC Network ($FIC)
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Circulating/Max Supply: 150 billion*/300 billion
*Based on Total Coins for Sale. A more accurate figure should be available once tokens and bonuses have been distributed.
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Overview
FIC Network has been working since 2016 to put fixed income financial instruments (like bonds) on the blockchain to provide more security, transparency, speed, and convenience. They also want to create a cryptocurrency fixed income market, providing crypto investors with a way to reduce their risk while earning some income. The primary targets for their product are financial institutions such as banks, investment banks, and hedge funds who are already working with fixed income financial instruments.
ECFs and Loan Syndication
When you buy a share of a bond, it usually means that you take on a certain percentage of the risk and reward of the whole loan until the bond matures or you resell your share. FIC Network’s platform will also allow more control and segmentation of loans by dividing payments into ECFs (Expected Cash Flows). ECFs represent individual payments that will be made. Those looking for less risky investments can purchase only the earlier ECFs, while those looking for greater profit can invest in later ECFs. This allows investors to create a personalized portfolio that suits their risk profile.
FIC Network’s platform will also allow lenders to offer syndicated loans, where multiple parties combine their resources to provide a bigger loan that they could not have offered individually. If the required level of funds is gathered, then the loan can go live and investors will receive their ECFs. If the target is not achieved, the platform should help ensure that investors will get their funds back.
Rising Demand For Blockchain in Finance
How much of a demand is there for a product like FIC Network’s?
The transparency and immutability of blockchain technology has gained the interest of financial institutions over the past year, with several of them even going ahead and experimenting with using blockchain to for actual bonds.
- In Nov 2017, British fintech company Nivaura tested the waters by helping Luxdeco issue its bond on the Ethereum blockchain.
- Spanish bank BBVA used blockchain for the world’s first blockchain-supported corporate loan with Indra in April 2018, as well as a corporate loan with ACS in July 2018.
- Russian Sberbank CIB conducted the world’s first commercial bond through blockchain technology in May 2018 using Hyperledger Fabric.
- In August 2018 the World Bank, through Commonwealth Bank of Australia (CBA), launched the world’s first public blockchain-based bond. While this bond was launched on a private Ethereum blockchain, the CBA did state in a press release that they remained “open to other options in the future”.
Cities are also looking into the benefits using blockchain technology to raise funds. Berkeley, California, is working on using blockchain to issue municipal bonds to “get around Wall Street” and make it possible to issue smaller, more targeted bonds without the need for bundling them into larger bonds. Funds could be raised for individual projects such as the purchase of a single firetruck or construction of a small building, allowing the community to easily purchase bonds to support the projects they believe in.
This interest is proof that there is a large potential market for FIC Network’s product.
Token Utility
FIC will be used to pay for deposits and fees to use the platform. Deposits will be returned when the action is finished, while tokens used as fees will be burned. This system of deposits and fees will help to keep the network secure by preventing “network spam and denial of service attacks”. New tokens will be created to replace the ones that are burned. FIC Network does not plan to make any profit from these fees, but will instead look to profit from apps and brokerage businesses that they build on this network instead.
Team
Note: The new FIC Network website currently has no Team page, so there may be other noteworthy team members that have not yet been made public. An updated list of team members is expected soon. Note that according to his LinkedIn, Aigars Staks (listed as co-founder in the white paper) no longer actively works at Factury.
Arturs Invanov graduated from the Latvian Riga Graduate School of Law’s Law and Business program. He worked for a year at the Latvian Ministry of Economics. This gives him a solid legal and financial background. He founded Factury (the company behind Fic Network) in 2016 with support and investment from Starupbootcamp Fintech New York and Boost VC. That experience should have given Arturs many connections within the fintech industry, particularly in the US. Though Factury appears to be the first company Artur has ever founded, he has the right background, support, and connections to have a good chance at succeeding.
Alvar Soosaar started his career researching and analyzing investments such as funds, bonds, and finance-related companies. He had 8 years of experience as the Managing Director of RAIT Financial Trust, where he managed billions of dollars, investing them into real estate-related assets. He also has 4+ years of experience as the Managing Director and Co-Founder of Fisher Row Capital, an investment and venture capital firm. There is no doubt that Alvar thoroughly understands investments, fixed income financial instruments, and how they can be improved. Alvar should also be able to bring the connections to the financial world that FIC Network will need to kickstart their platform.
Kalvis Kalniņš only started working as an engineer in 2015. As the Engineer Lead it would have been better if Kalvis had more extensive experience, but his previous year and a half of experience as the founder and CEO of Stellarmus (a blockchain project that worked on inter-bank transactions) should prove valuable.
Other Team Members
Aleksandrs Borovenskis — Head of Communications
Aleksandrs is the CEO of a marketing agency and has been working as a ‘media expert’ since 2005.
Valters Grišāns — Lead Designer
Valters has been working with digital design/development for the past five years.
Agnese Kerubina — Product Support Manager and Chief Scientist
Agnese has a Master’s degree in physics and is really good at math.
Peteris Ratnieks — Backend and Blockchain Developer
Peteris is a software developer who is also really good at math. He was also a co-founder of Stellarmus (the same project Kalvis Kalniņš led). Not much other information is available for Peteris. He does not have a LinkedIn since he is “very sceptical of social networks and presence in Internet”.
Advisors
Advisor Marcus Spillane is the co-founder of Capstone Intelligent Solutions, which is the company that issued the first bond on FIC Network.
Advisor Joon Pak is the Head of Blockchain at ComplyAdvantage, a company that helps firms with issues like AML compliance and KYC processes. His advice should come in handy as FIC Network will have to ensure everything is legal if they want people to feel safe using their platform.
Advisor George Popescu is, among many other things, the founder of Block X Ventures, which offers blockchain consulting, marketing, and exchange listing services.
Team Summary
FIC Network’s CEO is unproven as an entrepreneur but shows promise. The team has a lot of relevant experience in terms of finance and many relevant connections.
However, their development team would benefit from the addition of more engineers and developers to help them reach their development goals on time. If FIC Network wants more financial institutions and businesses to trust their platform, they will need it to be secure, stable, and scaleable enough to handle huge amounts of trading. Their Careers page does state that they are currently looking for a software engineer and front end developer to bolster their ranks.
Roadmap
FIC Network had initially planned their mainnet launch for Q4 2018. They then stated that they had moved it up and expected it in June 2018. In July 2018 they released an article saying it would “be launched ahead of initial schedule”. Finally on October 31, 2018, FIC Network announced their mainnet launch, followed the next day with the first bond issued on their blockchain. Their inability to keep up with their original planned mainnet launch dates is disappointing, but they did eventually deliver a working mainnet with their Ledger-compatible FIC Wallet to follow shortly.
There is no roadmap currently available on FIC Network’s website. A recent telegram post by Arturs mentioned that the next steps they would take after wallet launch and token distribution would be to give interviews (promote their project) and hire more staff.
On the technical side, significant future milestones to look out for will be the ECF functionality and more announcements of bonds successfully launched through FIC Network. Founder Arturs Ivanov stated in an interview (near the 9 minute mark) that they had “indication of interest from broker-dealers to start issuing bonds on this platform in excess of $200 million dollars over the next year or so”.
Token Sale Delays
FIC Network launched a token sale early this year, concluding their pre-sale on May 15, 2018 with a total of 7304 ETH or $4.8 million USD raised. These buyers were given the option of an additional 90 or 180 day lock-up period in exchange for bonus tokens. However, instead of the original plan to then have a public sale and distribute Ethereum-based eFic tokens to investors, FIC Network decided to delay (and eventually cancel) the public sale as well as eFic distribution and go directly to distributing their own FIC tokens upon mainnet completion. Apparently this was in order to have a better chance at being ruled as a utility token rather than a security by the SEC.
Unfortunately for investors, this means that instead of receiving their tokens at the end of the now-cancelled public sale on May 15, 2018 or at the earlier announced mainnet date of June 2018, they will now have to wait until the FIC Wallet release in mid November 2018. Ethereum prices have fallen from around $700 levels at the end of the pre-sale to around $200 levels today (around a 70% drop), which is probably why FIC Network plans to compensate token sale participants with a 70% bonus from the company’s reserves. This means that circulating supply estimates will have to be adjusted once compensation bonuses along with lock-up bonuses have been distributed.
This delay also means that impatient investors who unexpectedly had their investment locked up for several months could try to dump their tokens quickly once it gets listed.
Competition
Polymath
Polymath wants to make it easy to offer legally compliant security tokens on the blockchain. In order to do so, they have ensure that securities are only bought and sold by entities that have the legal right to do so. Ethereum, the platform that spawned the ICO industry, does not currently have a built-in way to prevent buying and selling between parties that don’t have the legal right to do so. Through the addition of a verifyTransfer function in Polymath’s ST-20 standard, it will be possible to do things like only allow a specific list of accredited, KYCed investors to participate in an STO (Security Token Offering).
Note that this is not a complete STO solution in and of itself. Creation of a security token will still involve working with developers, legal advisors, KYC/AML providers, and other third parties. Polymath just aims to make that process easier and more straightforward.
Polymath is already quite far along in its development. There are 5 STOs looking to raise a total of $210 million “within the next 90 days” (as stated in their announcement on August 21st). Polymath is marketed quite well. It has already been listed on Binance and is in the top 100 coins on Coinmarketcap. This is strong competition for FIC Network. However, for the time being Polymath is more focused on legally tokenizing equity investments (shares of a company), while FIC Network is focused more on fixed income securities like bonds.
Blockex
London-based Blockex is a Digital Asset Exchange Platform. They have a working exchange and ICO market at Blockex Markets. Their ICO market not only screens ICOs and enforces KYC and AML policies, but also has features such as Pot Allocation (proportionally distributing oversubscribed ICOs) and milestone-based release of funds to ICO projects.
Blockex’s Digital Bond Service is currently being tested in the UK Financial Conduct Authority’s regulatory sandbox. After the bond platform has been released, their future plans include blockchain-based syndicated loans, golden gate, trade finance, and equity asset creation.
Blockex’s future plans for digital asset creation look similar to FIC Network’s, but Blockex’s bond service appears to be further along on the path to getting approval from a financial authority. However, Blockex is working with a UK regulatory body while FIC Network’s first target is the US market, so the two projects could end up establishing their own footholds in different regions.
Conclusion
FIC Network is offering a product in a space that is already looking for a blockchain-based solution. Their team is promising, though it could benefit from the addition of more strong developers to help them reach their targets on time. There is some strong competition in the space, so FIC Network has no time to waste in getting its product to market.
Potential price catalysts include any news about completion of their unique ECF feature (which is not yet available) and Artur Invanov’s plans to “make ripples across the media” in the near future. Announcements of partnerships with various parties in the fixed income financial instrument market are also expected in the coming months.
As an investment, FIC should have more room for growth than an already well-known project like Polymath. The token is expected to be released to investors in November 2018, and should gather more interest as it makes its way onto exchanges. However, ICO investors have been forced to wait longer than expected to get their tokens, so large dumps may occur and caution is advised.
Recommended Resources:
FIC Network Medium Post: Bonds on Blockchain (Quick Summary of FIC Network)
Arturs Ivanov Interview on Ameritrade Network (Nov 2018)
Arturs Ivanov AMA (April 2018)
