The ICO market experienced a surge in 2017, being considered a revolutionary way of attracting investment funds. Many ICO (Initial Coin Offering) analysts have published data showing that ICO investing dropped by almost two-thirds in the first four months of 2018.
ICOData.io, a site that collects data from all types of ICOs across the market, published a chart showing that funds sent to ICOs tracked by declined from about $1.423 billion in January to nearly $533 million in April.
Initial Coin Offerings (ICOs) are the preferred fund sourcing method of startups by issuing digital coins or tokens through their platform/software.
This type of soliciting fund has been criticized by many as being an unregulated security provider with little to no obligation to investors. The massive hype in ICOs has produced hundreds of millions of money, with most of the startups not even having a working prototype.
After Bitcoin reached its all-time high in December 2017, the subsequent 70% drop in the price of Bitcoin which occurred in the early months of 2018 was followed by a slew of altcoins issued through ICOs.
Founders can easily use their ICO earnings on hype campaigns instead of product development. Also, various types of manipulation and market build-ups often cause big run-ups followed by massive dumps of coins by traders that profited from the huge discounts in the token sale phase.
This has often lead to prolonged periods of stagnant prices for many coins after a crash, whereas naive investors wait for the right moment of the hype (often stories or announcements of “promising partnerships” or paid “endorsements”) that might run up the price again, although this rarely happens for most coins.
An Asset Token (also known as Equity Token) is a security token that represents ownership of assets of companies, such as stocks that have been tokenized. Tokenizing is the procedure in which asset tokens are issued by transferring real-world company shares onto the blockchain.
These tokens will automatically be converted into an investment agreement that follows the laws of the country where they were issued, to guarantee the validity of the investments. This is done through third-party local legal service providers and the developers that make the smart contracts to record them on the blockchain.
Speculators expect equity tokens to eventually become the primary type of token used in ICO campaigns. But, the U.S. Securities and Exchange Commission (SEC) has specified that equity/asset tokens fall under federal securities regulations, and momentarily there are very few startups that can issue equity tokens which are compliant to all of the commission’s regulations.
An initial public offering, or IPO, is the very first time a company makes available for purchase its stocks to the public. Before an IPO, the company is considered private, having a limited number of shareholders which consists mainly of early investors and professional investors (such as venture capitalists or angel investors).
When stocks are issued to the public, any individual or institutional investor who didn’t contribute in the early days of the company and who is interested can acquire the company’s shares.
Prior to a company’s initial public offering, the public cannot invest in it.
ICOs are considered somewhat similar to IPOs seeing as both offer ways in which organizations can sell a set of rights to a large audience in exchange for funds. However, ICOs and IPOs feature major differences in function, legal implications, customer segment, and risks.
An ICO that offers equity/security tokens (stock-like tokens) can be considered similar to an IPO, but depending on the startup, tokens may or may not have equity rights.
An IPO that offers an asset token is a unique hybrid between IPOs and ICOs. It offers crypto investors the possibility to purchase shares in a company through blockchain tokenization.
This novel type of token offering provides asset managers a legal and secure way to issue and manage tokenized funds, and for the investors, a way of investing in crypto tokens after the traditional and cryptocurrency-based investment model.
Blackmoon’s Xiaomi IPO Token
Blackmoon is the first company in history to tokenize an IPO with the Xiaomi IPO asset token on the Blackmoon platform. The platform allows cryptocurrency investors and users to have access to the Xiaomi Corporation IPO.
Based in China in 2010 by an experienced team of engineers and designers, the consumer electronics company became the world’s fourth-largest smartphone company and the leading smartphone phone brand in its native country.
The company produces a broad range of proprietary hardware and in collaboration with its partners also produces TVs and other smart devices which connect to the IoT platform. More and more people from all over the world are purchasing Xiaomi because of the good “price-quality” ratio and the appealing design.
Blackmoon is a company that developed “a platform for asset managers to create and manage tokenized investment funds,” as said in an introductory video on its website. It says that it merges the best aspects of the crypto and finance world, by using the benefits of blockchain technology to make real-world investments.
Blackmoon will be offering in its sale an asset token called the BMxXMI, which will be referenced by the shares of the Xiaomi Corporation. This asset token opens up a whole new world of opportunities for crypto investors. The platform will allow members of the general public to have access to the Xiaomi Corporation shares starting right from the IPO date.
Interested contributors will buy BMxXMI tokens from Blackmoon with cryptocurrency. The cryptocurrencies with which you can purchase the token include BTC, ETH, LTC. Blackmoon will then exchange the cryptocurrency into fiat via a broker that will apply for shares allocation in Xiaomi during the IPO. The tokens can be sent between users, and they will become redeemable 93 days from the IPO date.
This innovative way of offering tokenized assets might be the new wave trend that will sweep the crypto world in the following year. Its advantages and securities may attract a larger segment of investors which are looking for a more stable and reliable way of investing.