TOKEN (https://presale.market) is selling the first 20% of its total token supply via an online auction where the winning bidder takes all. Now partnered with over 50 of the leading token experts globally, this project aims to bring the crowd back to token fundraising. ITN caught up with TOKEN’s Founder, Irish Olympian Fraser Brown to learn why the project is opting for an auction:
How would you describe what we are seeing in the crypto markets right now?
I did business throughout the dot-com crash in 2001 and the global economic meltdown in 2009. The markets were decimated because most investors had run for the hills. Crypto is in this place right now. In particular the ICO market has collapsed. Put bluntly, if there is no crowd, there is no crowdsale.
What is TOKEN’s vision?
Our vision is about creating velocity for tokenized investments. This means bringing back the crowd.
We don’t want a future where only financial institutions can be trusted with our money, and that retains all of the friction of banking, currencies and borders. We want a future where businesses and people can benefit from globally distributed, fully decentralized, and frictionless financing system. Actually, we think that tokenized fundraising is at a crossroads, it will either be the former or the latter.
So, we are reinventing early stage token financing straight out of the ashes of this collapsed sector, and delivering a solution that will bring the crowd back, and velocity. Our solution’s Alpha is live and being used by many of the industries’ leading experts right now to assess token models.
Why an auction?
The crowd – the “Average Joe” – has gone, and many crypto investors are spent. Other players in the space dismayed by the lack of integrity of projects, and seemingly endless proliferation of scams and fake, well, everything have given up. Cofound.it is a recent high-profile example of a project that failed to work out tokenized investment’s issues and gave up completely.
Despite this, for those with liquidity, these times should offer tremendous opportunity. But projects are currently coming up with ever more imaginative presale offers that are fundamentally making false promises in our opinion. The assumption they hope remaining investors will buy into is that the crowd is still there to pick up the latter part of the offering at premium prices. Of course, the crowd is no longer there so presale buyers will effectively end up owning most of the supply with no discount in real terms (unless those telegram accounts with over one hundred thousand fake members suddenly, like Pinocchio, become real).
The current calamity creates an opportunity for new approaches – such as an auction – that allows those with liquidity to grasp good deals arising from the market conditions. Our thinking is that we can either chase down the remaining potential token buyers one by one (who are completely overwhelmed by deal flow) and deal with their enormous buyer power, or invite these groups and pools to an auction and let the winner take all.
More fundamentally, we believe it is a fairer mechanism than today’s typical ICO because the market gets to decide what your token’s supply is worth here and now rather than a project defining it arbitrarily. For example, if a project sets its “hard cap” at $10million and raises $1million, burning the remaining tokens, then its buyers seemingly benefit from holding a greater share of total tokens but, in reality, they should be disadvantaged by the lack of token distribution in the market that was needed according to that project’s design (not to mention the fact that the project probably spent most of that $1million to raise the $1million).
There is a second reason why an auction is our preferred strategy. Projects that publish their token offerings on presale.market to be assessed by our expert community could be interested in reaching the investor audience that our auction attracted. We plan to introduce the best of these projects to this community by running additional presale auctions for them. This will allow presale.market to serve its core purpose, and build a community of engaged investors, while its mainnet deployment is in development, and the market recovers.
What are some of the challenges with this innovative approach?
The single greatest risk for bidders in an auction is shill bidding. This is the practice of the owner of the item under auction themselves or through others nefariously bidding against genuine bidders in order to drive the price higher.
We could introduce an audit system to address such concerns, but this offers little satisfaction because it happens after the event. We have decided, therefore, to limit the bidder applicants to established groups and pools. Some of these pools utilize an Ethereum based on-demand pool management platform called primablock (https://primablock.com) which manages the process of aggregating pool member’s contributions, and even automates the distribution of tokens.
We have found that some of the pools that were formed to offer their members the benefits of early-stage deals by aggregating buyer power are among those now wanting to call it a day. This is for the reasons outlined above – principally that these “early discount” deals are no longer trusted or attractive because, fundamentally, their attractiveness is relative to the ICO-buyers crowd size. Auctions are a perfect fit for pools for three reasons: One, the group that can aggregate the most buyer power will win; two, because the only way to access our action is via a pool, they will attract new members to their groups; and, three pools are in competition with each other for new members, and for success in bringing great deals to members.
Can you explain the mechanics of this type of deal?
Parts of the process happen off-chain and parts on-chain. I mentioned primablock above. It allows the pool owner to assign a destination Ethereum smart contract address that cannot be changed. This will be our crowdsale smart contract. If this pool does not win the auction it can simply be closed whereupon participants are repaid their Ether automatically. If they win, we can whitelist their pool address and set the wei price of TOKEN according to the ETH equivalent of the winning bid so that the pool coordinator can send its Ethereum to our crowdsale contract and receive TOKEN automatically. Primablock even has KYC functionality, which is a requirement for a Swiss utility token offering such as ours.
Pool owners retain their filtering proposition of bringing only good deals to their communities plus they can now cap the pool size based on what they think their pools max bid should be. If the pool does not reach this cap they can still bid in the auction, and perhaps win.
Our auction will have 5 lots, spanning 5 months, one per month. The first auction for 0.4% of the total TOKEN supply (200,000 TOKEN) will conclude on October 3rd 2018 at 5pm CEST. Subsequent lots will be on the 3rd of each month, with the final lot selling 10% of the total TOKEN supply (5 million TOKEN) closing on 3rd February 2019.
Why do you consider any deal attractive in this market?
Picture yourself in the year 2002. You are scouring Ask Jeeves (Google’s predecessor) for a glimmer of hope amidst the wreckage of the dot-com crash. During this insanity any two kids that managed to put “.com” in front of just about anything raised millions. In the aftermath of nobody, nobody was investing in dot-coms anymore. The investors disappeared like ice off a hot roof.
Some will remember online clothing retailer boo.com founded in 1999 and that blew its tens of millions in months, closed, and was overtaken by nimble, well-run startup boohoo.com founded in 2006. Facebook was founded in 2004, and YouTube in 2005. This was just a few short years after the dot-com lunacy ended. Tens of thousands of other dot-com ideas, teams and websites from every country on earth had vanished and were forgotten. At that time, they said that YouTube’s valuation based on the allegedly illusive idea of future advertising revenues was barmy.
Today, utility tokens are taking the brunt of naysayer’s abuse, and, don’t get me wrong, many deserve it. But, even though acceptance and use defines intrinsic value and both are in short supply for most utility tokens, you cannot claim that the good ones have no acceptance and use. No one believed that the massive investments in companies like YouTube and Twitter would ever yield the advertising dividends that justified their valuations either. But they did.
The gems – call them killer dApps – that are token powered and blockchain based are being built right now. They will approach the spectrum of mass adoption many years from now, but the time to back them is right now.
Where can our readers find details about the action?
Head to https://presale.market and click the big yellow AUCTION button on the top right of the page. The first lot is live now.