VeradiVerdict - IEOs (the new way to crowdfund) - Issue #29

VeradiVerdict

Hi, I am Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing into blockchain companies and cryptocurrencies. I focus on early stage investments and want to share my thoughts and what’s going on in the industry in this weekly newsletter.

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Editorials

Summary

For those of you who have been under a rock, we are currently in a bear market for cryptocurrency prices. While there has been over $20B invested into ICOs, the downward trend of prices started around this time last year during tax season and when there were rumblings of regulatory crackdown from the SEC. Since then, the pre-sale market for ICOs has been relegated to private accredited investors, sometimes only non-US investors. In addition, projects and investors are waiting until at least 1 year after the transaction to start trading/issuing these assets.

Until there is more regulatory clarity from the SEC, token projects have avoided retail. I’ve always speculated that instead of projects building their own crowdfunding portal or using 3rd party crowdfunding portal for retail investors, if exchanges got into the crowdfunding, it would change the game. Exchanges already provide the liquidity channel for tokens, do KYC of users, and can whitelist/blacklist depending on criteria.

Enter the IEO or Initial Exchange Offering and this is going to be a huge trend on how token projects raise from retail investors and do regulated crowdfunding for the foreseeable future.


What is IEO?

IEO, or initial exchange offering, is the process of developers sending minted tokens to an exchange (or multiple exchanges) that in turn sell to individual investors. Instead of sending cryptocurrencies into a smart contract that governs the ICO, participants need to create an exchange account and purchase the project token directly from the exchange. The exchange acts as a guarantor and conducts a project due diligence check on the project team, and developers are no longer required to perform KYC (know your customer) verification.

For exchange platforms, they benefit through an IEO by collecting listing fees, obtaining new users that may eventually become loyal, and engaging in joint marketing with the IEO teams.

Here are some information on IEO platforms and their past projects.


KuCoin

KuCoin announced an initiative called Spotlight that will serve as a launch platform for the exchange to partner with blockchain projects on IEOs.


Huobi

Huobi will have its own IEO service through launching the Huobi Prime platform later this month. The CEO of Huobi has stated that unlike Binance Launchpad that assembles a large crowdfunding platform, Huobi Prime is a selective token listing channel based on Huobi Token.


Binance

The IEO service of Binance is called Binance Launchpad, which announces the date and time of project launch site wide and notify its users the details (accepted cryptocurrencies, token supplied on Binance Launchpad, and individual cap) of the launch. One of the recent token sale for fetch.ai took only 11 minutes and 14 seconds to meet the 6M cap. Celer Network today raised $4m in 17 min today. Other IEO projects include BitTorrent. There is a $1,500 cap per person, and the BNB token is needed in most cases.


Bitmax

BitMax introduced the concept of “reverse mining” offering a separate incentive structure for market makers, and launched margin trading of up to 10x leverage for many of its trading pairs.

DOS Network (DOS) launched a community token promotion program for BitMax.io users, and the the promotion was sold out within 1minute and 34 seconds. Bitmax has now announced more listing partnership with tokens like Alluva and Fantom.


Bittrex

Bittrex cancelled its first initial exchange offering of RAID that was supposed to take place on March 15. After e-gaming data analytics company OP.GG issued a statement distancing itself from RAID, Bittrex made an announcement that it will no longer continue with the scheduled IEO.

Digests

Physical Delivery vs Cash Settlement (Adoption vs Market Manipulation)

Perpetual swaps are a popular instrument in crypto. They are a cash settled future that auto-rolls every user’s position and uses spot markets to imply a funding rate to keep the contract in line…

'Facebook Coin' Could Generate Billions in Revenue: Barclays Analyst - CoinDesk

Facebook’s reported stablecoin project could be a significant moneymaker for the social media giant, according to Barclays analyst Ross Sandler.

Why Open Source Finance Will Win – Balance – Medium

50% of all assets will live on an open source financial protocol in 50 years.

In the Tweets

Bittrex International

@BittrexIntl

Bittrex International has cancelled the initial exchange offering (IEO) of the RAID token. We apologize for the inconvenience, but also wanted to provide a more fulsome explanation to our users. https://t.co/2pbaZ2X9Dp https://t.co/EXnFd76z2o

10:43 AM - 14 Mar 2019

CoinDesk

@coindesk

JUST IN: Six banks have signed up to issue stablecoins through World Wire, an @IBM network built on the @StellarOrg blockchain. https://t.co/eT5hpasKai Report by @IanAllison123.

9:01 AM - 18 Mar 2019

News

Bittrex introduces Initial Exchange Offering, doesn't explicitly ban Chinese citizens - The Block

U.S. crypto exchange Bittrex is following in the footsteps of fellow crypto exchange Binance’s “Launchpad” initiative and introducing new token offerings.

Amun raises $4M to give stock-like buying options for crypto investors – TechCrunch

Amun, a company that wants to make buying crypto as easy as stock, has pulled in $4 million in funding to offer more established channels for crypto ownership.

A Blockchain ETF Is Launching on the London Stock Exchange Today - CoinDesk

Investment management company Invesco is launching a blockchain exchange-traded fund (ETF) on the London Stock Exchange today.

Stellar Foundation Hires Mozilla Exec as Its New CEO - CoinDesk

Longtime Mozilla Chief Operating Officer Denelle Dixon has officially joined the crypto ecosystem.

Regulations

SEC Chairman Clayton just confirmed Commission staff analysis that found Ethereum (and cryptos like it) are not securities. | Coin Center

We’re often asked whether that policy, articulated mid-last year by Director of the Division of Corporate Finance William Hinman, truly represents the …

Texas bill seeks to require identity verification to use cryptocurrencies - The Block

A bill has been proposed in the state of Texas by Phil Stephenson that would require a person receiving cryptocurrencies as payment to first “verify the identity of the person sending payment.

New Products and Hot Deals

Polychain, DCG Invest in Crypto Futures Exchange CoinFLEX - CoinDesk

Venture capital firms Polychain Capital and Digital Currency Group (DCG) have invested an undisclosed sum in cryptocurrency futures exchange CoinFLEX.

Tendermint Inc Announces Series A Round – Tendermint – Medium

We’re proud to announce our Series A investment round. We closed a $9M round, led by $400M crypto investment firm, Paradigm, along with participation from Bain Capital, 1confirmation, and others.

Samsung Unveils Cryptocurrency Wallet, Dapps for Galaxy S10 Phone - CoinDesk

Samsung Electronics has just revealed the cryptocurrency wallet for its just launched flagship phone, the Galaxy S10.

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New York, Consensus Conference, May 13-15

New York, Token Summit, May 16

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