“The root problem with conventional currency is all the trust that’s required to make it work … but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.”
― Phil Champagne,
While no one knows the true identity of the person (or persons) behind the name Satoshi Nakomoto, they were pioneers in the concept of decentralization. Bitcoin and its underlying blockchain technology have become a global phenomenon not only because of the many crypto millionaires created last year but because the concept transcends national borders and is not controlled by any one person or central authority.
As recently pointed out by Miko Matsumura, founder of the Evercoin Exchange, Nakomoto took the additional step of decentralizing himself! It was one of the ultimate examples of being committed to your values.
Matsumura, who is also a limited partner at Pantera Capital, spoke last month at the Blockchain Expo North America, and suggested that everyone read the Book of Satoshi, which is a collection of Nakomoto’s emails, online posts as well as the original white paper that started it all.
State of the ICO Market
We are now seeing a flight to quality in the ICO market after a number of high profile scams, Matsumura observed. There have been many commentators who have proposed that 99% of ICOs are garbage and not worth investing in.
A few of the reasons for this include:
- Tokens that are not essential to the operation of the business;
- Lack of proper cryptoeconomic models, which means that in addition to the proper cryptography, there must be an economic incentive to get work done;
- Lack of proper cybersecurity, which could result in hackers successfully attacking the new blockchain and stealing all the funds.
Even though over $4 billion has been raised via ICO’s, this is only a very small part of the total cryptocurrency market cap, which is over $500 billion, Matsumura noted.
That number is so large that if you take the aggregate value of all cryptocurrencies, it would be the 26th largest global currency, Matsumura added.
A large percentage of ICO funding was captured by just the top few offerings:
Matsumura, who has a master’s degree in Neuroscience from Yale, is a limited partner with Focus Ventures, a firm with over $800M under management. They have launched 9 IPOs with 44 total exits.
“Open source P2P currency will eat traditional currency.”
― Miko Matsumura
Miko’s ICO Tips
The ICO market has many similarities to the 1849 California Gold Rush. Technologists, programmers, hackers, bankers, business owners all over the world are racing to launch their own ICOs.
Matsumura offered his advice in how to build a successful ICO.
First, find a market where a central authority is taking advantage of their consumers and service providers. There should be evidence that an externality will arise as a direct result of decentralization.
Second, ensure that you can eliminate economic free-riders and incentivize good behavior that adds value to the community. The Utility Thesis comes into play here, Matsumura stressed. Potential users must want to buy the token to get access to a product or service that they’re paying fiat currency for now.
Third, make sure you build your community. Metcalfe’s Law states that the value of a network is proportional to the square of the connected nodes. The more users you can attract to use your token, the more valuable it becomes.
Matsumura is involved with ICOs in the following sectors which he believes have the potential to disrupt the central authorities in their target markets:
- Ether Lending
- Banking the Unbanked
- Hiring and Paying Knowledge Workers
- Coordinating Emergency Responders
- Trading Public Equities
How to Improve ICO Governance?
Matsumura is on the team of ICOGovernance.org a non-profit foundation developing a disclosure protocol for ICOs. The current industry standard, which involves posting a private wallet address and asking people to send you Ether was ridiculous and never viable.
The goals of ICOGovernance are to provide:
- A self-regulatory framework to increase the total flow of capital
- An address custody chain for the use of proceeds – where does the money go?
- Improved transparency into the team behind each ICO
- Decentralization of capital markets
Another ICO that Matsumura is involved with is GetWala, which is an African crypto banking solution. The concept is to reward users for opening a bank account and handling all banking functions using their mobile phone, for which they will receive Wala currency. There are already over 1,000,000 users and the token is on sale now, Matsumura stated.
The goal of Workcoin is to decentralizing and facilitate P2P online services. Matsumura is an advisor to this company who claim to offer a zero fee process that will reward users through increases in the value of their token. According to their website, their token sale is open to accredited investors only.
Matsumura described another coin offering from the Naga Group as a “hybrid ICO/IPO”.
As described on coinclarity.com:
NAGA is a public listed, EU-regulated German Fintech company with trading-platforms for financial markets and virtual goods. Investments and trading are ruled and governed by greedy banks and corporates that control access, operate non-transparent and always take a cut of your money. By introducing the NAGA COIN, they are on a mission to revolutionize the outdated banking sector.
One online commentator accused NAGA of “double pumping” where the owners take a cut of the ICO proceeds, which is essentially free money since it is neither debt or equity, and can also profit from an increase in their public stock price due to the ICO hype.