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Investing in the best ICOs: A simple guide

Cointelligence is presenting you a concise step-by-step guide to help you invest in the best ICO projects. We will walk you through how to spot the most promising ICO projects, doing your due diligence, purchasing the tokens, and finally selling your purchased tokens for profit. It is worth mentioning that ICO tokens represent a highly volatile form of investment assets, so trade safely and never invest an amount that exceeds what you can afford to lose.

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Startups have raised around $5.6 billion via ICOs during 2017, according to a recent report published by Business Insider. In 2018, the market witnessed a huge boom in projects and startups raising capital via issuing their own cryptocurrencies. While the total market capitalization of cryptocurrencies is currently valued around $254 billion, in 2017 it exceeded $600 billion. This attracted the attention of thousands of traders from all parts of the globe and brought many new investors to the ICO market. Throughout this simple guide, we will help you understand what ICOs are and how to determine which are the best ICOs for you, should you choose to invest.

What exactly is an ICO?

An Initial Coin Offering (ICO) represents a means of seed funding and crowdfunding through the issuance of a brand new cryptocurrency or cryptographic token. These tokens, issued mainly via Ethereum’s blockchain, are sold to investors in order to raise capital for a particular startup or project.

There are currently more than 1,500 coins are traded on cryptocurrency exchanges. Not all cryptocurrencies or ICO tokens are issued on new blockchains. In fact, most of them are created using other well-established blockchains. Many ICO crowdsales rely on creating ERC-20 tokens that function on Ethereum’s blockchain.

Benefits of ICO crowdfunding

Democratic funding:

ICOs enable projects to bypass the conventional means fundraising, such as seeking loans from banks and funds from venture capitalists. Such traditional funding usually requires a large amount of time, as well as a large number of personnel and other resources. Via an ICO, anyone can advertise their project to a large community of potential investors. Anyone can be an investor and choose to purchase the project’s tokens in order to fund it. Often, this means that the investor can enjoy high returns in a relatively short period of time when the ICO’s tokens are listed on cryptocurrency exchanges for trading.

Huge profit potential:

The price of many cryptocurrencies has skyrocketed, rising from cents to dollars in only a few months. Due to this, many investors are eager to invest in the next booming ICO coin. Even though some ICO coins have no real technical potential, the large number of speculators and investors stepping in to bet on high returns. This has boosted prices astronomically during 2017.

 The following steps will help you to understand the steps required to invest in an ICO.

Step 1 – Researching upcoming ICO coin lists

It is critical for any investor to thoroughly research upcoming ICO crowdsales. There are several websites that list upcoming, ongoing, and completed ICO projects. Sometimes, it is quite profitable to invest in ongoing ICOs, so keep an eye on those too. Cointelligence offers one of the best portals for monitoring Initial Coin Offerings’ sites. Whitelist ICOs are ICOs that require investors to register prior to the launch of the crowdsale to be able to buy the ICO’s token. Whitelist ICOs are potentially more profitable than ICOs that don’t involve a whitelist.

There are other websites and portals that list upcoming, ongoing, and even completed ICOs. Some of these sites offer valuable ICO statistics. These sites include:

Apart from ICO listing websites, there are other online communities that offer valuable information regarding various ICO tokens. These include:

  • Various subreddits on Reddit including r/cryptocurrency r/ethtrader r/ico and r/icocrypto
  • Bitcointalk Forum’s announcement section
  • Specialized channels on Slack, e.g. Coinfund

Step 2: Exercising Due Diligence

It is important for any investor to thoroughly research the token’s features in order to ascertain whether the ICO represents a potentially profitable business opportunity. There are numerous key points that have to be considered to properly assess the potential of an ICO project. The following questions are key questions that will allow any investor to begin to vet an ICO:

  • Does the project clearly present a solution to a current problem?
  • Does the project’s team offer a reasonable roadmap?
  • If the ICO involves a new blockchain, does the coin’s blockchain protocol represent a clone of another altcoin?
  • Is the ICO’s whitepaper properly written? Is it technically sound? Does it include any grammatical errors? Does it include any false or inaccurate technical data?
    • Any investor can answer these questions even if they don’t have any technical background by researching the technical specifications on Github, Bitcointalk.org, and Reddit.

You can also check reviews and analyses written by others to verify the potential of a specific ICO. High-quality ICO reviews can be found on:

  • Crush Crypto: A website specializing in the analysis of ICOs through thorough fundamental analysis.
  • Reddit: Certain subreddits include ICO reviews presented by experienced redditors, such as r/Cryptocurrency, r/ico, r/icocrypto, and r/ethtrader.

 Step 3: Buying an ICO’s tokens/coins

Creating an account on a cryptocurrency exchange:

After you have completed your research, you may decide to purchase the token or coin of an ICO. At this time, you should open an account on a cryptocurrency exchange so that you will be able to convert your fiat currency into one of the two main cryptocurrencies –  Bitcoin (BTC) or Ethereum (ETH). Coinbase, Kraken, Bitfinex, Bitstamp, and Binance are a few of the best exchanges one can use to buy bitcoin or ethereum.

Creating your cryptocurrency wallet to take part in the ICO:

It is critical that you have your own crypto wallet, as taking part in an ICO and buying the ICO’s tokens requires you to transfer BTC or ETH from your personal crypto wallet. It is also necessary for receiving tokens from crypto airdrops. Your exchange account (e.g. Coinbase/Bitfinex/Kraken) is different from your crypto wallet. On crypto exchanges, you do not have any control over your coins’ private keys. Moreover, if you send the funds from an exchange’s wallet, you won’t actually receive the ICO tokens. This is because the transfer originated from the exchange’s wallet and technically you do not own any wallets on the exchange. Blockchain.info offers a wallet that is a user-friendly and safe to use with your bitcoin, ethereum, and bitcoin cash.

It is recommended to use ETH as the base cryptocurrency for participating in ICOs, as many ICO coins are compliant with the Ethereum token standard, known as ERC-20. The most convenient wallet is MyEtherWallet (MEW), which can also be used to store Ethereum-based tokens after the ICO is over and the tokens are freely tradable on cryptocurrency exchanges.

Purchasing tokens from the ICO’s website:

Each ICO project has an official website where you can purchase their tokens or coins and store them. Usually, these coins are stored only for the period of the ICO. Occasionally, the coins are stored for a period of time following the completion of the ICO. You will be able to find detailed instructions on the project’s official website regarding how to participate in the ICO’s token or coin sale.

Almost every ICO project sets up official communication channels via services such as Telegram, Discord, Slack, and Whatsapp. You can find answers to any questions that you might have by joining the ICO’s official communication channels.

Selling your tokens:

There are various strategies adopted by traders participating in ICOs. Some speculate over ICO tokens, i.e. they purchase and sell them after a predefined period of time or after the price reaches a specific target. Speculating over tokens is referred to as ‘token flipping’. Given the fact that the volatility of ICO tokens is extremely high, token flipping represents an extremely risky trading strategy.

Others are long-term holders. This group includes traders who believe in the long-term prospect of the project and intend to hold their tokens for years. Practically speaking, ICOs were meant to be a means for funding a project and distributing its ownership among holders of the ICO’s tokens.

There are also short-term holders, including those who hold the tokens for weeks or months, and then sell them when a target price is reached.

After an ICO is completed, the tokens are listed on cryptocurrency exchanges for trading. If you didn’t manage to participate in the ICO itself, you can still purchase its tokens on exchanges where they are listed for free trading.

There are numerous cryptocurrency exchanges that list ICO tokens and coins. Some are more secure than others. Some exchanges have been hacked during the past couple of years, while others have been shut down after their owners stole traders’ coins in exit scams. The following exchanges are recommended for being more secure than others: 

IMPORTANT NOTE: No matter how safe or legitimate an exchange might seem, never use it as a wallet to store your coins or tokens. Always remember that when your coins are on an exchange’s platform, you don’t own their private keys. As such, you technically don’t have control over your coins.

In the end, we can never stress enough how volatile ICO tokens can be. It is important to always trade wisely and never invest more than the amount you can afford to lose. Follow the charts and the news closely. Stay in touch with other members of the cryptocurrency community so that you can benefit from the opinions of others. Try to anticipate price movements before they occur.

Cointelligence wishes you the best of luck in all your future investing endeavors.

 

Publish your ICO on Cointelligence to attract new investors today

A person contemplates stablecoins

Your most comprehensive guide to stablecoins

Tamer SameehSep 28, 2018
ImageFlow / Shutterstock

The term stablecoin refers to any cryptocurrency coin or token pegged or backed by an asset with a relatively stable price, such as fiat currencies or gold. A stablecoin can be under control of a central entity, such as Tether (USDT), or a Decentralized Autonomous Organization (DAO), such as Dai, a stablecoin which is issued on the Ethereum network. Nubits is another stablecoin which is partly controlled by a DAO, but is also under control by a central authority, representing a hybrid issuance model.

A stablecoin is typically backed by a reserve asset that has the exact equal value of the coin/token. The reserve can be a fiat currency, a precious metal (e.g. gold), or a cryptocurrency. The issuer, whether it is a central entity, or under control of a DAO, should only issue an amount of stablecoins equal to the reserve they own. New coins can be issued only when the reserve grows.

How do we define stability?

What is stable? To be considered stable, a currency or asset’s value has to experience only minor fluctuations, such that its value remains relatively steady over time. Is bitcoin stable? As of yet, we have not seen bitcoin stable in terms of value.

Why do we need stablecoins?

Why are we seeing so much interest in stable crypto? The truth is that while the volatility of cryptocurrency values makes them a popular choice for those who enjoy high-risk investments, this volatility isn’t ideal for those who actually want to use their cryptocurrency. Until we start to see a stable BTC value, people are going to look for alternatives. A stable coin can be seen as an attempt to marry the best parts of digital currencies with the relative stability of real-world assets.

The four most common uses of stable cryptocurrency are as follows:

  1. To create stability in cryptocurrency trading pairs in forex-style trades. Tether (USDT) was frequently used for this purpose, though recent concerns about that currency (explained later in this article) has lead to many exchanges replacing it with other stable coin options.
  2. Professional investors and hedge funds can use stablecoins to diversify their portfolios in times of market instability. You’ll see institutional investors in the coming months and years trying to determine what is the most stable cryptocurrency to use for this purpose.
  3. Because a stablecoin has a steady and predictable value, it can be used for transactions as easily as a fiat currency. Those with an interest in seeing mass adoption of cryptocurrency see stablecoins as a natural step towards this goal.
  4. Similarly, their stable value makes stablecoins the ideal medium for recurring payments such as salaries and rent. The current volatility of major cryptocurrencies can make it difficult to use them for monthly payments, as the value can swing wildly from month to month. Stablecoins may be especially attractive to blockchain startups who want to make a statement by paying their teams in cryptocurrency.

Popular Stablecoins

Let’s take a look at some of the most popular stablecoins across the cryptoverse.

Tether (USDT)

Tether (USDT) is a stablecoin that is issued by Tether Limited, which claims that each USDT is backed by one USD (often cited when making a stable currency definition). However, the company has never managed to provide audits for the token’s USD reserve. Most cryptocurrency experts believe that Tether Limited was printing millions of Tether that had no USD backup. The main objective of USDT is to facilitate exchange transactions between cryptocurrencies and fiat currencies with a rate pegged to the USD.

USDT is issued on Bitcoin’s blockchain via the Omni Layer Protocol. Tether Limited claims that each USDT is backed by one USD held in the company’s reserve, yet users cannot necessarily redeem them via the Tether Platform or partnering exchanges. USDT can be stored and transacted just like any other cryptocurrency. To transact and store Tether, users have to have an Omni Layer-enabled wallet such as Holy Transaction, Ambisafe, or Omni Wallet. USDT offers an alternative means to Proof of Solvency via introduction of a Proof of Reserves process.

The USDT Proof of Reserves system, the number of USDT tokens in circulation, can be checked on Bitcoin’s blockchain via the tools available on Omnichest.info. The amount of USD comprising the backup reserve can be proven via publishing the company’s bank account balance and undergoing periodic audits performed by professional auditors, who publish the financial transfer statement and the bank’s account balance of Tether Limited.

During the period between January 2017 and September 2018, the volume of circulating USDT rose from around $10 million to more than $2.8 billion. During the early months of 2018, USDT represented around 10% of bitcoin’s total trading volume, yet during the third quarter of 2018, it accounted for around 80% of bitcoin’s trading volume.

In June 2018, USDT was the tenth biggest cryptocurrency by market capital. Researchers and crypto experts proposed that a price manipulation scheme that exploited USDT, accounted for around 50% of the rise in bitcoin price during the fourth quarter of 2017.

USDX

To solve the problems associated with USDT, USDX was created to bridge the gap between cryptocurrencies and fiat. The USDX token is pegged to the USD via a novel logarithmic protocol, mitigating the risks that accompany the usage of USDT or other stablecoins.

USDX promotes stability of its value through its algorithmic central bank, which boosts and reduces the total supply of USDX tokens to match the value of USD in real time. A market price feed is delivered via Oracle Feed, which extracts price data from multiple exchanges. To boost transparency, exchange rates have to be accepted or dismissed via randomly selected token holders. Through this process, the system boasts a decentralized, trustworthy means to accommodate value indicators.

Despite the fact that USDX is not the only stablecoin that utilizes a transparent, elastic supply mechanism, its founders claim that it promotes superior decentralization and stability via its innovative algorithmic protocol.

TrueUSD (TrueCoin)

TrueUSD (TrueCoin) was developed to solve USDT’s problems, as it is based on regular auditing, maximum levels of transparency, full backup reserves (collateral), and legal commitment to exchange TrueCoin tokens to USD whenever needed. The company plans to create stablecoins pegged to the Euro, Yen, precious metals (gold and silver), and other assets (real estate, stocks, etc).

While USDT is marked by a centralized and suspicious architecture, TrueCoin has partnered with a wide range of chartered banks and trusts to make sure that there is a transparent reserve of USD backing up the stablecoin. The strong legal architecture of TrueCoin represents a clear improvement upon the questionable nature of USDT. When you buy a TrueUSD token, you are legally an owner of one USD that is fully redeemable upon request.

Havven

Reliance on unrelated assets such as fiat currencies or altcoins poses a serious challenge when it comes to the development of stablecoins. Havven was established to provide the market with a decentralized payment network and a stablecoin solution that defies volatility. nUSD is Havven’s first nomin, which is a stablecoin pegged to the USD. Havven is planning to issue nomins for several fiat currencies, towards the end of 2018, including nGBP, nEUR, nJPY, and nAUD.  

Havven’s system is based on a dual token design that offers a stablecoin solution that is on-chain, asset backed, and decentralized. Nomins are backed up by the value of the system’s collateral token, havven. The value of havvens originates from fees charged by nomin transactions, which reward holders of havven tokens for staking their tokens. Overall, nomins’ value is stabilized via nomin holders, who are rewarded with the ability to control the overall supply via the percentage of fees they receive. Havven, the company, holds 80% of the total supply of havven tokens in escrow, to shield the system against the aftermaths of price drops accompanying large scale sell-offs.

Havven is endorsed by a group of the world’s top cryptocurrency investors and funds, including AlphaBlock Investments, BlockTower Capital, and GBIC. Furthermore, the company has also announced future partnerships with some projects that will rely on nomins for providing a stable medium for transacting including intimate.io, MARKET Protocol, Swapy, and others.

Rockz

Rockz is a stablecoin that is pegged to arguably the world’s most stable currency, the Swiss franc (CHF). For every Rockz token issued, one CHF is held as a backup reserve, legally enforceable by the company. 90% of the total CHF backup reserve of Rockz is held in paper form and stored in vaults secured high in the Swiss mountains. The remaining 10% is held in some of Switzerland’s most trusted and secure banks to promote liquidity.

Every holder of Rockz tokens has the full enforceable legal right to the corresponding amount of CHF. As such, in the event of the company declaring bankruptcy, token holders will have direct access to their funds secured in the vaults and/or Swiss banks.

Every month, Rockz’s holdings are audited via a trusted third party auditor, so that token holders are transparently assured that 100% of their investments are solidly backed by the CHF collateral. Rockz is a stablecoin that can help crypto investors ride out periods of extreme price drops without having to convert their crypto holdings to fiat and deal with high fees and taxes.

MakerDao/DAI

DAI has been issued to solve some of the problems associated with stablecoins, especially those pegged to fiat currencies. Mainly, whenever a stablecoin is backed by fiat currencies saved in bank accounts, manipulation and legal actions taken against the holder of the bank accounts will jeopardize the token’s value.

The creator of the MakerDAO coin solves this problem via the use of Ethereum’s smart contracts to promote stability. Instead of purchasing DAI coins, users create it after locking up their ETH in the Maker system. When a user doesn’t need their DAI coins any more, the CDP smart contract will return to them the same amount of ETH that was collateralized. To mitigate the problems associated with ether’s price volatility, DAI boasts an automatic liquidation process whenever ether’s price drops. The ETH locked up by the CDP smart contract is proactively auctioned off right before its price falls below the value of the DAI it backs up.

Basecoin

Basecoin’s approach to stablecoins is very innovative. In contrast to other stablecoins, the concept behind Basecoin is very simple. Basecoin’s value is pegged to either an asset or an index, such as the Euro, USD, Consumer Price Index, SP500, or others. Via continuous monitoring of price feeds, the total supply of Basecoins is automatically modified to offer a stable value.

Basecoin also relies on another pair of currencies; Base Shares and Base Bonds. These currencies serve as an economic incentive for holders of the token to adjust the token supply by exchanging their Basecoins for bonds, which opens the door to users to earn profits on their investments. Shares are issued whenever the supply has to be boosted. Both of these processes promote the stability of Basecoin’s value.

Even though Basecoin will be initially pegged to fiat currencies, this is planned to shift to an index offering promoting decentralization of the whole system, price stability, and complete independence from reliance on fiat for token pegging.

DigixDAO

DigixDAO was the first company to issue a stablecoin pegged to gold. DigixDAO issued two tokens on Ethereum’s blockchain; DGX and DGD. One DGX token has the value of 1 gram of gold, and is backed up by real gold. DGD tokens offer their holders voting power that is proportionate to the amount of tokens they hold.

Seigniorage Shares

Seigniorage Shares is a non-collateralized stablecoin. It is intended to form a central bank via smart contracts that can continuously issue a currency with a value of $1 to control the overall supply. The smart contract is programmed to issue new coins and offer them for sale whenever the price skyrockets, until the price drops back down to $1. As such, the smart contract will generate profits. On the other hand, buying Seigniorage Shares coins takes place to reduce supply, which will lead to a rise in price.

Basis.io

Basis.io is an algorithmic stablecoin offering, designed to expand and contract supply, similar to the way central banks buy and sell fiscal debt. The intention is therefore to stabilize purchasing power, as when demand rises, the blockchain will create more Basis. This expanded supply is designed to then bring the Basis price back down. It’s important to note that there are no tangible assets with Basis, but the system creates incentives designed to build up a stable equilibrium for the currency. The more that Basis grows, the stronger its status as a potential medium of exchange, and the stronger its stable equilibrium. The company has raised $133M from an impressive list of top VCs.

Terra Money

This is another stablecoin which expands and contracts supply algorithmically, with a Stability Reserve intended as a decentralized guarantee of solvency. Most central banks maintain reserves via foreign currency and gold, and similarly, Terra’s Stability Reserve finances contraction of the Terra money supply whenever necessary. The company has the ambition of Terra becoming a global currency, and it is designed for mass adoption, with an eye to making everyday transactions possible. Terra has raised $32M from Exchanges and VCs.

Other stablecoins

Other stablecoins that are backed by crypto include Shelling Coin and TruthCoin. Digix Gold and OneGram are backed by gold. Kowala, Stably, Augmint, Carbon, Nubits, Gemini dollar, Paxos, Nushares and USDC are stablecoins pegged to the USD. GJY is a stablecoin backed by Japanese yen. EURS which is stable crypto backed by EUR

Final thoughts

Even though some of the stablecoins discussed might seem promising, picking the winning horse among them can be quite confusing. Governments might have begun to accept cryptocurrencies, especially in that they support the shift towards a cashless society. However, the high volatility of crypto and the fact they are non-collateralized currencies are the main reasons that governments remain reluctant to accept mass adoption of crypto. As long as governments have to ask “How stable is bitcoin?” we can’t count on them to trust it. Stablecoins might be the answer to governments’ fears, but we have yet to witness the birth of a stablecoin that perfectly adheres to the principles of the blockchain technology: decentralization, full transparency, optimum security, and immutability.

This article is part of Cointelligence’s Stablecoin Week! For more information and opinions about stablecoins, see What does ‘stable’ mean? and Subjecting stablecoins to the duck test and A stablecoin fairytale.

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City skyline with an overlay of transactions via security exchanges

An Overview of Security Token Exchanges Expected to Launch in 2019

Tamer SameehSep 5, 2018
Pushing Images / Shutterstock

The year 2018 has definitely witnessed the breakthrough of security tokens. The blockchain technology has permitted the tokenization of various forms of securities and assets. It is inarguable that security tokens have made it possible to tokenize almost everything that bears a value including equities, goods, real estate, fundraising, futures, credit, time based rentals, service leases, creative products such as music, art, and literature, credit, futures, and more.

Security tokens are revolutionizing security markets and mitigating most of the problems associated with conventional security trading. The blockchain technology promotes transparency as all trades and ownership records are stored on public ledgers which cannot be tampered with. Security tokens make it possible to tokenize securities, so financial assets such as stocks, bonds, futures, equities, swaps, and forwards can all be managed via distributed ledgers.

However, where will security tokens be traded? Presently available cryptocurrency exchanges are not equipped to support security token trading. Moreover, most exchanges don’t have the necessary licenses to permit the trading of securities. As such, licensed security token exchanges have begun to emerge to fill this gap and provide liquidity for the security token market.

Obviously, security tokens will attract an enormous share of Wall Street’s money during 2019. This expected shift has urged many venture capitalists and entrepreneurs to invest in the establishment of security token exchanges during the past couple of years. Throughout this article, we will take a look at security token exchanges that are expected to launch in 2019 and 2018’s fourth quarter.

Before we get started, let’s explore the most important security token exchanges that have been already established and are currently promoting liquidity of the security token market.

Current Security Exchanges

BankToTheFuture (BTF)

BTF is a crypto security investment platform that is only open to professional investors. To qualify to join BTF, investors have to have an annual income of over $200K, and should be able to invest at least $1,000 with them.

BTF is trying to establish itself as a market for blockchain-based projects that issue security tokens, shares, conventional bonds, futures, and other forms of tokenized securities.

By issuing their native token, BFT, they have taken a big step towards bringing together the highest net worth investors interested in tokenized securities, cryptocurrencies, and other forms of Fintech solutions.

tZero

tZero is the brainchild of Overstock which has been established to serve as an exchange for security tokens. The greatest thing about tZero is its user interface which is extremely friendly and easy to use. The platform boasts front-end integration of a risk management system, an order management system, an order matching engine, place orders, market orders, proprietary technology, and full support for security token trading.

tZero has partnered with Polymath to simplify the legal process of issuance and trading of security tokens. Polymath has innovated a new Ethereum based token standard, the ST20, which can only be owned and held by a list of authorized Ethereum wallet addresses, which have completed KYC verification procedures, which enforces compliance with government regulations.

tZero recently concluded the private sale phase of its security token (TZRO) which lasted til the end of August; that’s when the trading platform went live.

Bancor

Bancor has innovated the Smart Token protocol which is the seed for a decentralized cryptocurrency exchange. Smart Tokens can be continuously and autonomously converted to other tokens on the network using a technology that operates in a manner that is somewhat similar to Atomic Swaps.

Bancor has joined the world of Security Token exchanges. Literally, the Bancor protocol is fully compliant with security token trading and the BNT token will act as a connector token, or a bridge token, that can intermediate the exchange between any pair of security tokens.

Now, let’s take a look at the security token exchanges that are expected to launch during Q4 2018 and 2019.

Forthcoming Security Exchanges

Gibraltar Stock Exchange

The Gibraltar Stock Exchange (GSX) is a Gibraltar based stock exchange. GSX was the first fully licensed stock exchange in Gibraltar. The exchange was fully operational in 2015’s first quarter. In October 2017, the CEO of GSX announced the establishment of a new subsidiary for the exchange, the Gibraltar Blockchain Exchange (GBX), which aimed at the establishment of a regulated utility token marketplace. Soon after the GBX announcement, GSX Group Ltd. confirmed that it was planning to revamp the group’s stock exchange (GSX) to become the world’ first ever regulated security token exchange.

Even though trading of security tokens was planned to kick start by the fourth quarter of 2018, delay in regulatory approval by the Gibraltar Financial Service Commission (GFSC) led to adjournment of the process to the first quarter of next year. The launch of security token trading on GBX will mark a big moment for the crypto community as security tokens become recognized by an EU licensed stock exchange.

Coinbase

Coinbase, the popular US-based cryptocurrency exchange, has announced that it is on track to enable security token trading on its platform. Being based in the US, acquiring the necessary banking licenses and brokerage statuses can take years. To overcome this, Coinbase has decided to merge with companies that already have the required licenses and registrations. That’s why Coinbase has successfully purchased three financial institutions: Venovate Marketplace Inc, Keystone Capital Corp, and Digital Wealth LLC.

Approval of these acquisitions by the government will help Coinbase acquire the legal standing of a full brokerage, which will enable the exchange to launch security token trading on its platform. It is expected that users will be able to trade security tokens on Coinbase in 2019, yet a specific date for the launch of Coinbase’s security token exchange hasn’t been announced.

Templum

Templum is another US based security token exchange that is planned to launch in 2019. Templum Markets LLC is a subsidary of Templum that is established to permit issuance and trading of various forms of tokenized assets.

Last February, Templum acquired Liquid M Capital, which gave the company access to an ATS, enabling a secondary market for the institution. Via the ATS, Templum will be able to offer security token trading on its platform in compliance with the US SEC regulations.

Even though Templum’s trading platform is live, the listed tokens are very few. So far, BanQu was the only company to conduct a TAO, and BCAP is the only secondary trade successfully completed. Templum has just partnered with CUSIP Global Service to be able to bring the standardized identification number to ICO security tokens.

The platform is expected to be completely developed in 2019, enabling security token trading that is fully compliant with the US SEC regulations.

SharesPost

In 2009, SharesPost was established to open the door for online private equity secondaries. Today, SharesPost has over 50k accredited investors and has executed more than $4 billion worth of shares transactions for over 200 technology companies.

Last May, SharesPost announced that it would revamp its current ATS to be able to offer security token trading on its platform. Thereafter, the company announced in June that it managed to close a $15 million Series C round that had been led by LUN Partners and Kinetic Capital to expand their ATS and open markets in Asia. SharesPost’s CEO aims at creating a global marketplace for trading of both conventional and tokenized security assets of various private companies.

Australian Securities Exchange

The Australian Securities Exchange (ASX), Australia’s primary stock exchange, announced in 2017 that it was working on becoming the world’s first stock exchange to develop an infrastructure for its trading platform based on the blockchain technology. ASX planned to use public ledger technology to replace its clearinghouse framework, known as Clearing House Electronic Subregister System (CHESS) to offer traders improved system efficiency, security, and reliability. Australia’s top stock exchange is actually developing their own blockchain, i.e. “permissioned blockchain”, to tokenize securities for the equity market in Australia.

Even though ASX planned on launching its security token trading platform in Q4 2020, the exchange’s board has announced recently that the launch date was adjourned to March/April 2021. ASX started exploring various applications of the blockchain technology in 2015, in order to be able to replace the exchange’s settlement, registry, and clearing system with a blockchain based system developed via collaboration with Digital Asset (DA), a software company specializing in the development of distributed ledger based solutions for financial institutions.

The new trading platform will operate on a permissioned blockchain where registered account holders will have to obtain clearance to be able to use it, while ASX will represent the only party with the ability to commit financial transactions to the ledger. As such, the new platform will represent a centralized network for trading of tokenized securities.

Malta Stock Exchange

Malta Stock Exchange has just inked a number of deals aiming at enabling MSX, the fintech arm of the exchange, to launch a trading platform for tokenized securities. These deals will see MSX partner with Neufund, a platform for the issuance of security tokens, to build a decentralized, fully regulated, stock exchange for trading of tokenized securities in addition to security tokens.

The partnership is planning a pilot during the next few month, which will include an ICO hosted on Neufund’s primary market, and the ICO tokens will later on be listed and traded on Binance (via means of a separate agreement with Neufund).

MSX is working closely with the regulators in Malta to comply with the Malta Financial Services Authority Act. Malta has emerged as a haven for blockchain investors, with big businesses like OKEx and Binance relocating to the country, which has been referred to as the “blockchain island” during the past few years.

SIX Swiss Exchange

SIX Swiss Exchange, Switzerland’s primary stock exchange, announced last July that it is developing a fully operational trading, settlement, and custody platform for security tokens and tokenized securities. The exchange’s new project, which has been named “SIX Digital Exchange” (SDX), is intended to be the world’s first end-to-end exchange for tokenized asset markets. SDX will tokenize existing conventional securities and other forms of non-bankable assets to boost the liquidity of illiquid assets. Furthermore, SDX’s services will include the issuance, listing, and trading of security tokens. SDX will be fully compliant with the regulations of the Swiss financial regulator FNMA, and endorsed by the Swiss National Bank, similarly to the SIX Swiss Exchange.

London Stock Exchange

London Stock Exchange, one of the world’s earliest stock exchanges, announced last July that it is collaborating with UK’s main financial regulator, the Financial Conduct Authority (FCA), in addition to two UK based firms; 20|30 and Nivaru, to issue tokenized equities in a UK based company in full compliance with the regulations of UK’s Financial Conduct Authority.

The planned partnership will utilize LSEG’s Turquoise platform, a hybrid exchange that offers a broad universe of European equities. The equities will be based on Ethereum’s blockchain and will be mainly comprised of ERC20 standard tokens. Later this month, 20|30 will be the first platform to test the process. Following a one year lock-up period, the service will be launched to the public, enabling startups and corporations to tokenize their shares. Interestingly, a large number of companies are awaiting to test out the process.

Final Thoughts

Finally, it is worth mentioning that all these emerging security token exchanges and trading platforms for tokenized equities represent just the beginning of a new era that will take equity markets to a whole new level. Blockchain based security tokens offer traders a myriad of efficiencies and advantages that promote transparency and security. Even though a considerable percentage of the world’s conventional financial institutions are resisting utilization of the blockchain technology, the market has just begun to adapt, as we’re witnessing the emergence of many trading platforms for security tokens and tokenized equities during the upcoming year. As more and more people are beginning to realize the advantages of the public ledger technology, the market will definitely start moving towards a new model based on tokenization of assets.

I wouldn’t be surprised if all of the world’s equity markets shift to the blockchain within the next few years. Who knows? Let’s just wait and see!

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A vintage detective investigates ICOs in black and white

Quick way to spot an ICO scam

HarelAug 31, 2018
sergign / Shutterstock

Everybody knows that it’s important to perform your due diligence before any investment in the ICO industry. But few people seem to understand what that actually means. One of our missions is to teach people how to spot a scam, rather than relying on others to do it for them. In the interest of increasing your own self-reliance and ability to outwit the scammers, we’re presenting a new tutorial on how to validate image authenticity on ICO websites.

Know your templates

As we’ve mentioned before in our above-linked guide, many ICOs use ready-made website templates as a way to both present the ICO without a lot of effort and save money on web design. While some of these templates give ICOs a base structure and allows them to use it to create a very personalized page, others offer a completely generic pack with very few possible changes.

Becoming familiar with the most common ICO templates, and what they look like in their unmodified forms, is a valuable tool in your scam-prevention arsenal. One common red flag is when the ICO has not changed the default images that come with the scheme. Let us demonstrate.

In this case, we searched for the image of the mobile application presented on the website of Referpay Network, a known scam. This image was originally used in the template from which this website was created.

Default image of an app from ICO website

By simply searching this image, we found that more than 70 ICO websites had never changed this image and are still presenting it as their “app-to-be-developed” on their website. It didn’t stop there.

We went through each one of these websites to confirm that the actual image is still there. As we discovered two very interesting things:

  1. The vast majority of these sites were scams. Luckily, about 90% of these scams had already ended in February. Unfortunately, there are 7 scams that are still active (which we will be publishing in the coming week). All initially connected by the same image. One of these scams has actually created a wallet app that looks exactly like the image, yet does nothing.
  2. Although the majority of the websites had a false link to the various application stores, some of the sites had links for the HB Wallet app on all the stores. We followed up with HB Wallet, and they stated that there is no connection between them and these wallets.

Image searching: quick, easy, necessary

This is a great example of how important it is to Google the images used on an ICO’s website. This wasn’t a team member’s profile picture or something buried in the whitepaper, it was prominently displayed as the mobile app image.

But how do you search for an image? It couldn’t be easier! Simply right click on the image, and click on “Search Google for image”. See many results, from different sources, containing that image? Congratulations, you have found a stock picture.

Not sure which image to Google? Since it’s so quick and easy, we recommend searching every image that presents information about the ICO. Team members, apps, charts, and graphs should all be investigated. And remember, you can save yourself a lot of search time by familiarizing yourself with the most common ICO templates and the images they use, so that you’ll recognize them when you see them later. The more you research and investigate ICO websites, the more you’ll start to develop a hunch about what images have been carried over from the default or stolen from other sites.

We hope that this guide will help you in your efforts to spot ICO scams!

 

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