The Security Token Offering weekly #1
We’re sorry, ICOs, but it’s time to move on.
Instead of zero-knowledge-proofs, the industry should have been focussing on the zero-business-experience teams. Taken advantage of by slick New Yorkers and tall well annunciated Europeans that have swiftly moved from being ‘💰ICO Advisors💰’ to ‘STO Advisors’.
Alas, the dying gasps of the stealth protocols are being seeded. Red Hat style businesses are being pounced upon and the SEC is getting round to some world policing.
Capturing castles and betting on dice have come to be the single biggest use case for dApps, along with, of course, kitties.
But all is not lost. This amazing industry moves at lightspeed, creating an unprecedented pace of technological innovation. We just forgot two key factors, timing and adoption.
As the majority of us lick our wounds, as we look to 2019, there are many paths that we can and will take. The crypto-separation between the US, China and the common-law countries will grow. Entire business models that we couldn’t act upon this year or the year before, will flourish. The call for ‘actual’ businesses will emerge and with that, will bring massive liquidity to sectors of our economies.
Many view this period ‘as the end of crypto’. Anyone in crypto that was around before all of the speculative hype knows, this is just the beginning.
Security offerings, the next frontier? Not of DLTs, but of finance and our economies. For many, STOs seem like the logical next step. But are they really? Do they in anyway compare to open-source technology, distributed teams, non-for-profit foundations?
I will leave that for you as the reader to digest and consider. But may I add this, we can mould it to whatever we want it to be.
Industry.
A look at this week’s industry advancements.
The Millbrook Accord
A consortium of blockchain industry companies has announced the launch of a common framework to facilitate market interoperability of security tokens. The Millbrook Accord, formed at the Blockchain South Leadership Summit 2018 at the Millbrook Resort in Queenstown, New Zealand, includes SharesPost, Techemy, tZERO, Gibraltar Stock Exchange (GSX) Group, Global Advisors, ERCDEX, NEM, HyperLink Capital, Alchemist Ventures, Bankorus, Blockchain Labs, and AnyPay.
Why is this important? The Millbrook accord is attempting to create a unilateral standard. Much unlike the protocol markets, this eradicates mutual exclusivity. Thwarting any that attempt to create barriers to entry around their business, via technology only.
Notice this group includes a worldwide collective but spares one of the biggest players in this space, Harbor. Whom, have one of the first fully regulated STOs running on a pleasant UX, yet are still trying to be the top-down protocol builder of world domination.
When you’re a :
decentralized compliance protocol to standardize the way crypto-securities are issued and traded on blockchains.
Why the f**k would you include your trademark in your damn token name? It’s as though we didn’t learn from our mistakes.
It’s this authors belief that mutually beneficial game theory will prevail and that working groups such as the Millbrook Accord, can innovate and make the mistakes, such that the rest of the industry can follow and learn.
Digimax getting into STOs
This in and of itself isn’t interesting news. What’s interesting in the large pivot in resources companies such as digimax are making.
Consider for a moment an investment bank. For the uninitiated, if I were to tell them an investment bank wouldn’t even consider taking a company public at $100 million, what would they say?
‘5% of $100 million, that’s like $5 million+!’
Yes, indeed it is, but that’s still small fish. The STO market will have many of these small raises, from $10-$100 million. A new business model has to thrive in order for there to be sustainability and margin. Digimax achieves this by distributing the work across vetted partners.
Smart.
Well, that’s just flat out false, isn’t it?
Technology.
Yes, tech is indeed still involved in STOs.
Hyperlink Capital creates SFT
HyperLink Capital has devised an open source protocol that allows for compliance on-chain for the Ethereum network. Written in Solidity, the Secured Financial Transaction Protocol (SFT) will allow for the tokenization of debt and equity-based securities.
Now, when you view the initiatives of others, you may consider the motives behind the said initiative. As mentioned above, this may be to create ‘Walled gardens’, artificial barriers to entry for something that really shouldn’t have such as thing.
Hyperlink Capital, unlike most players in this space, are doing the exact opposite.
- The protocol is not rent-seeking, therefore, you don’t need a utility token to run on top of it.
- It’s open source, you can use it how you wish. Running on top of ethereum, written in Solidity.
- You’re not forced to sign up to X, or go with Y partners to run on top of it.
However, like most things, there’s still potential trade-offs, especially when using an ERC-20 standard.
Consider this example:
- I sign up through a registrar running this standard.
- I pass KYC/AML and am given a verified status to my wallet address.
- I find some friends in a bar in Columbia.
- I sell them my private keys to my verified accredited wallet.
- I disappear into Indonesia while they use my wallet to wash cash into regulated security markets and back out.
Of course, this would have severe consequences on me. But I could just be phished, right? Also, I would never do such a thing.
Overall, not many of these initiatives will be around in 5 years. But they all will likely learn and innovate of that backs of each other.
Read further and Github
Swarm adds ‘The Art Token’
Have you ever wanted to be in possession of an abstraction of an abstraction of a piece of abstract art?
Well, now you can!
That’s right, post-quantum chains with instant confirmation, using fog-computing running on chicken farts can’t even raise $1 million, but STO art is raising $5.5 million?
The world has truly gone insane.
Honestly, I think this is fantastic. Swarm’s main challenge here is how to navigate the legal framework, creating a fractional ownership of a piece of art. Arguably harder than real estate, for a few reasons.
Most likely, they set up a special purpose business vehicle. Said art is then ‘bought’ by this business. The business issues shares representative of the number of tokens they will issue. Bing bang wala tied up legally with a Security Token.
This is also fairly interesting if you think of it on a more micro-economical level. Will liquidity and the demand for art, whatever the abstraction, lead to a more enriched art market? Will this allow humans to start monetising creativity in it’s purest form?
What other parts of our economies that were previously unavailable to quick liquidity, can now be provided such?
Read further (Heavy paid shill)
Regulatory.
The most important yet the most boring. A snapshot of regulatory (re)progression.
Dubai, Dubai, Dubai.
Although Dubai has so far developed its security token regulations “under the radar,” King said that it would clearly benefit from the new technology. The city has a prominent financial sector and real-estate market, both of which could expand with tokenized securities.
Big if true. But this article mainly appears to be a super shill for the consulting firm that paid for it.
Read further (Very heavy shill)
Beijing
“I will make a risk warning to those who are propagating in Beijing and want to issue [an] STO. Don’t do it in Beijing. If you do it in Beijing, you will be taken away for illegal financial activities.”
Cool, see you next year China.
US and the SEC
“The numbers don’t lie. We’ve gone from 8,400 public companies to just over 4,000. The size of a company that you see entering the market is much larger. Companies would go public much earlier in their cycle”
A very refreshing read, a must watch interview for those in the US looking to operate in this space.
The chairman of the SEC alludes to the fact that the barrier to entry for a public company is huge, both pre & post offering. Costing up to 30 out of every 90 days work for management, just on compliance.
What is the answer? I’ll leave that for you to decide.
Colorado is bouldering ICOs
Don’t mess with Colorado.
With these four new orders, the total count of orders signed against ICOs in Colorado has now reached 18. There are at least two more orders pending to be signed, taking the total cases to 20 since May, the agency said, adding that all these ICOs violated the Colorado Securities Act.
4 this week, 18 total. Damn son. Tough time to be a scammer in Colorado.
See you next week.
I hope you enjoyed our first edition of trying to lay down some of the madness that’s happening around us. The industry is moving fast and it’s hard to keep up with.
This is where we shill you to sign up to the newsletter. You should sign up because all of the other ones are incredibly boring, written by the kind of person who considers the off-whiteness of their business card. Rest assured, I have no business cards.
