ICO’s — you either love them or you hate them. They polarise parties on both sides of the financial fence. To the traditionalists, ICO’s are, at best, the unregulated Wild West, or, at worst, Ponzi schemes. To Technology entrepreneurs, they are democratic capital available globally — a quicker way to raise funds for a Technology start-up. To global contributors, it is a way of getting behind projects you believe in — and for some for speculative purposes. The impact, however, of ICO’s will have even more fundamental and far deeper implications …
Having been involved in the granularity of blockchain over the past two and a half years and our own Token Sale for the last six months, I have seen, first hand, how powerful Blockchain technology can be. ICO’s, however, take the transformational capability of the technology to dizzy new heights. We are at the tip of a very large transformational iceberg that is getting increasingly ever closer to sinking the banks, leading to making many of their roles irrelevant. The band is already warming up to play its last tune, the slightly obese lady sings her last aria. Overall, it’s time for the banks to face the music… the music of smart contracts.
For the first time in the digital space, smart contracts generically give the ability to “programme money”. Now that might sound challenging or even far-fetched when you first hear it, but let’s see how this works in practice.
For the Veredictum Token Sale, we built a smart contract that runs our entire Token Sale process for us and for our contributors — without the need for an external, trusted third parties to get involved. At a very top level, the process within our Token Sale is very simple:
· Supporters buy Ethereum (ETH)
· They send their Ethereum to our Token Sale’s Ethereum address
· The smart contract of our Token Sale deals with the entire Token Sale process automatically and at the end of the process allocates the token purchased during the token sale automatically.
The core metrics of our Token Sale are as follows:
· We have a minimum raise of $2m USD. In other words, if the Token Sale fails to reach $2m USD the Token Sale is considered to have failed and supporters can automatically claim a refund of the amount of ETH they sent.
· We have a hard cap (i.e. a maximum raise) of $20m USD. If the Token Sale reaches the hard cap of $20m USD the Token Sale is considered to have finished.
· We have an end date for the contract of 11 September 2017. If the Token Sale finishes on September 11 and is above the minimum threshold the Token Sale finishes and the value of Ethereum received transferred automatically into a “fund wallet”, which has multiple signatories attached to it before any subsequent payment can be withdrawn.
· Ahead of the Token Sale completing, all funds are held in the smart contract itself as escrow until the Token Sales succeeds (or fails).
Let’s further consider the Bonus tokens structures. We have a volume based incentive scheme. The more you buy the more additional bonus tokens you get offered
>$2,000,000–35% bonus tokens
>$500,000–30% bonus tokens
>$100,000–20% bonus tokens
> $25,000–15% bonus tokens
> $10,000–10% bonus tokens
> $5,000–5% bonus tokens
The smart contract is automatically programmed to allocate bonus tokens associated with the volume of ETH received from a contributor.
Finally, because we have decided to undertake appropriate due diligence on all larger sums through Anti Money Laundering and Know Your Customer processes, we have built into the smart contract the process that:
· Will not accept any balance over the equivalent of $10k from being automatically submitted.
· Once approved for KYC and AML, the individual Ethereum address is added to a “white list” manually and, as payment is made to our Token Sale address, this white-list is automatically checked and the payment is allowed to be received.
So, using the technology, programming money is now achievable. Think of it in terms of a parallel with traditional banking — your own bank account number. When you receive monies directly to that bank account number automated activities can be programmed to happen. That is powerful…but there is more… so much more.
The majority of contributors to our Token Sale are from overseas. Now, to fund Veredictum to date, personally, I have used money from the United Kingdom, where I am originally from. Being based in Sydney, Australia it is quicker for me to fly from Sydney to Heathrow, drive down to Brighton on the South Coast of England, go to my bank draw the cash out and fly back to Sydney than it is to use the Banking System. Not to mention the $50 fees the banks charge and the exchange rates that are around 2.5% — 4% below market rates.
With Ethereum or other crytpocurrencies, funds can be cleared in less than 60 minutes and the costs of the transfer is cents. The funds are transmitted outside of the banking system — across the Ethereum blockchain, itself.
Imagine how complex it would be to receive $50, $100, $1,000 from contributors from an overseas country and in a foreign currency. The reconciliations, the exchange rates, the manual checking of multi-currency bank accounts for balances, the bank fees, the sheer time and effort wasted.
With ICOs, once you have understood how to buy Ethereum or other cryptocurrencies, which can take a day or so to set up (you will need your ID for example), the process of buying into most ICOs is fully automated using a new infrastructure outside the banking system. As soon as people get over the initial hurdle of getting into crytpocurrencies, the relevance for banks, especially for international transactions will diminish exponentially.
This is just the beginning of transformational change within the technology that is happening at laser-fast pace all around the globe. Let’s hope the banks can change their tune quickly to adapt to this fast expanding technology — unfortunately it may already be too late.
Disclosure : the author of this post holds a crytpocurrency portfolio which includes Ethereum.
About the Author: Tim Lea is the CEO of Veredictum.io that is re-thinking film and video distribution by creating a decentralised anti-piracy and distribution platform that hits the drivers of piracy and not just its symptoms. Veredictum has a Token Sale/ICO in progress that finishes September 11 08:59am