Game Theory Group

The Blockchain Brief

What Are ICO's And How Do I Get Involved?

An attempt at simplifying blockchain concepts, companies, and coins.

Author: Julian

Early investors are making 50-100x returns on ICO’s.  Yep, you read that right. That means $100 => $5K – $10K. Absolute insanity. You thought the returns on BTC, ETH and LTC were insane this year? They pale in comparison to what some investors are making by placing early bets on what they hope will be the next Bitcoin.
If you want some serious FOMO, just take a look at this aggregated data of ICO returns from ICO Stats


So What Are ICO’s? 
ICO stands for initial coin offering. It’s very similar to an IPO, but with the ability to "get in" at the ground floor, by avoiding the wait for the company to hit publicly traded exchanges. What you are essentially doing is buying these companies' tokens for future use as payment on their platform (not speculation of course...) Because of these astronomical returns and access to fast/cheap capital, you have more investors pouring capital into the space and companies looking to launch ICOs. As a result of that, quality has been decreasing and it more difficult to pick winners from the crowd.

Image Source: Hackernoon

Image Source: Hackernoon

Image Source: Hackernoon

Image Source: Hackernoon

How Do I Participate In ICOs?
Most ICO’s now are held on the Ethereum network, however with the proliferation of new platforms being built. Down the road you will see EOS, LISK and NEO ICO’s. I was able to catch up with the NEO founder a couple weeks back at an NYC meet up and their pipeline for upcoming ICOs is pretty impressive. 
In order to participate in an Ethereum based ICO, you will need to first purchase ETH. Once you have ETH in a wallet that you control the keys to (important NEVER to participate in an ICO by sending ETH from your exchange wallet) you will need to get Whitelisted and go through what is called "Know Your Investor (KYC)" compliance. Most companies will give you a walk through on how to participate, check out Blooms ICO contribution page, I think they do a great job at walking you through the process.
After you’ve found a couple of projects you like, make sure you spend an exorbitant amount of time really researching the projects. You have to be aware that there are a lot of scams, and companies ICOing for the sake of ICOing -- with no true utility in the tokens themselves. A lot of companies now really don’t even need to leverage the power of Blockchain, but who can blame them with the massive influx of capital flooding in.

Not an ICO but damn did this make me laugh. Moral of the story…lots of scammers. Do your diligence! 

Not an ICO but damn did this make me laugh. Moral of the story…lots of scammers. Do your diligence! 

My recently mentioned digital mentor Andreas Antonopoulos gave a talk titled "Blockchain or Bullshit" that helps to provide some guidance as to whether or not the company really needs to be on the blockchain and should consider doing an ICO.

Here is a quick summary in his words.

  • If you can replace the world “blockchain” with “database” and the brochuse reads the same, it’s business as usual.
  • If it’s not decentralized, borderless, neutral, censorship-resistant, or open, then its not innovating.
  • If it re-establishes trust in intermediaries, it’s just a database and that’s not distruptive.

With the proliferation of ICO’s it’s a matter of time before we see some heavy regulation. Which I believe we actually need. As some of you may know the Munchee ICO was shut down by the SEC. The biggest problem with all of these ICO’s is that there is just so much gray space. You could be a true utility token but if you start talking about making profits from token appreciation, you start wandering into security law territory. If you have the time, take a listen to this Podcast about How Crypto And Blockchain Technology Should Be Regulated
TL;DR – Even the leading lawyers in the space have no idea how it will shake out but they do provide some interesting insight. What I found most interesting was that they believe the SEC won’t provide guidance and that this plays out in the courts first (class action lawsuits/aggrieved parties from token sales…cough cough Tezos, don’t mess it up for the rest of us) and from there the courts will decide.
I’ll end with a couple of companies that are currently running an ICO or will in the near future. To be honest, I like the projects however don’t think I will personally participate because I am not a fan of their token economics. More on that in the future and I’ll describe exactly what I look for in an ICO before I jump in. But take a spin through, my investment thesis could be different from yours.
Nucleus - Consumer data play on blockchain with a hardware component
Gladius - Decentralized CDN and DDOS protection on blockchain
Bloom - IDV, risk assessment and credit scoring on blockchain
Singularity Net - Decentralized marketplace for AI algorithms
- JJ

Final thought: Don't get FOMO when people tell you they got in a $0.11 cents and the current price is $3. They all sold that shit at $0.25. The only people that didn't sell lost their private keys and maybe just found them. Or maybe not...

Quick note about Bitcoin drop and Bcash pump last night

Last night Boris and I got a collective 50 texts about the drop in Bitcoin price and the huge spike in BCash. Here are some of my favorites. 

- "All the whales are moving to bch, its going to overtake bitcoin." (NO)
- "Yo I am going to buy on binance and flip it to gdax to do an arb play. thoughts." (NO)
"Bitcoin might crash to its support of 14K. Oh shit... it might go to 11K" (I WISH)
- "Dude - bitcoin is crashing. is it dead? should we switch to bitcoin cash?" (NO)

Read about all the times Bitcoin has died here

So, what happened?

Yesterday, Coinbase & Gdax listed bcash and gave all of their users who held Bitcoin on their platform during the fork(August 21st) their bcash allocation. We are talking billions of dollars being infused in the market. That plus a likely coordinated pump skyrocketed the price of bcash to the point where Coinbase had to halt trading on their platform/their site crashed. On top of that, Coinbase is investigating potential insider trading around bcash. 

Look guys - there is a lot of hype, FUD, pump and dumps in the crypto world. I've seen coordinated attacks on BTC enough times where 20 points downward swings no longer phase me. Do your research and trade based on real research and info, not hype and reddit forums. You will literally go crazy. 

While bcash was pumping to a ridiculous $8500 (settled at $3200), and BTC was dumping to $15600, I was maxing out my credit cards (only option because Coinbase was frozen and couldn't move capital in)  to buy as much BTC as I could. Bcash is not Bitcoin. Bitcoin is Bitcoin. 

Julian Jung