7 “Proofs” To Consider When Evaluating Token Offerings
A new token, just like any new product, can be — to borrow the words of Shark Tank’s Lorrie Greiner — a “hero or a zero”.
Tokens can be categorized by purpose. There are tokens that are intended to represent shares of an entity or asset (investment tokens). For this particular article, though, we refer to network tokens.
Investors in the crypto ecosystem by now know that initial coin offerings (ICOs) and token crowdsales have major differences with initial public offerings and crowdfunding. The ICO and token crowdsale are nascent funding models and carry risks, and those who are thinking of buying new tokens, for example, will bode well to get as much information as possible about the network the new tokens represent.
With the many token generation events in the market today, how should people assess them? How should they filter the chaff from the grain?
1) Proof of Identity — Diligent KYC Process
To comply with the Anti-Money Laundering (AML) and Know Your Customer (KYC) rules, any FinTech company should exercise due diligence on the identity verification process. After all, identity fraud must be prevented right at the gate.
A serious ICO should require all token buyers to undergo stricter whitelisting. Aside from submitting their passport or driver’s license as proof of identity, buyers at Traxion.Tech are required to undergo a blockchain and cryptocurrency quiz and a financial and risk assessment.
2) Proof of Capability
The expertise and experience/track records of the team are significant indicators of their execution capability. Due diligence requires researching the background of members, and validating if they have various domain expertise in the industry and new technologies of their product.
Check out the qualifications of the Traxion.Tech team here.
3) Proof of Concept
In the startup world, a proof of concept is a prototype that confirms certain ideas can have real-world application. However, the company that is offering a token will be more ahead of the curve if it had gone beyond the proof of concept stage, and in fact, had already created a minimum viable product to prove that people need the product and are willing to pay for it.
In Traxion.Tech’s case, various projects have been launched. It has two of the four components of its infrastructure — the payment platform TraXionPay and fundraising platform Gava — as well as corporate partnerships already in place.
To-date, Traxion.Tech’s existing platforms have over a dozen payment options through its various partners ranging from credit card providers to over-the-counter payment centers.
4) Proof of Network
Credibility can come from the quality of a company’s network, both from the customer and the service provider-partner sides. The list of existing partners is a sign of how far a company has gone in its development roadmap.
Meanwhile, check out its customers, too. Are there credible brands that have used the company’s services or products on a long-term basis?
5) Proof of Legality
There are plain contracts and there are smart contracts. For businesses built on the blockchain, smart contracts are used to establish contractual relationships. These are agreements between parties written into lines of code that self-execute a certain action once certain conditions are met. They are tamper-proof, computable and unambiguous.
Such new technology is build into Traxion.Tech’s infrastructure. For added security, each smart contract and application code is further audited by a leading technology company on the blockchain.
6) Proof of Transparency
As money would be involved, buyers of tokens will want to know how a token could drive the business. Typically, while the white paper elaborates on everything about the project, the team and the token use, there should also be a public access to the repository of the smart contracts of the token. You can easily check that by looking for the “github” icon (a cat icon) and browse through the code of the contract.
Judicious investors also look at the business plan as much as the total supply of tokens and percentage allocations.
Traxion.Tech aspires for such transparency, as can be gleaned from its whitepaper.
7) Proof of Security
While the blockchain is secure because transactions are tamper-resistant, one cannot ignore the fact that there are botnets that will attempt to attack network and transport layers and the application layer (layer 7).
Herein lies the need to have superior security frameworks. To prevent bad actors from initiating such distributed denial of service (DDoS) attacks, Traxion.Tech uses a network that offers unlimited and unmetered mitigation of DDoS attacks. This is to make sure that any assault cannot degrade the performance and availability of Traxion.Tech’s website or application.