Overview of integrated solutions and escrow services for ICO market
The ICO market continues to grow rapidly (around 600 ICOs were conducted in Q1 2018), competition among projects is growing, and it becomes increasingly difficult for investors to find promising startups that will achieve the project's goals and will not disappear with the raised funds. Demand generates supply, so integrated solutions that help startups to organize turn-key ICO and escrow services that allow building a transparent relationship between project founders and investors appear on the market.
The projects founders are interested in the answer to the main question: "How to organize and conduct ICO effectively?". As for investors: "How to choose the most worthy and promising project among such variety?".
Let's imagine that you have an experienced guide in this complicated process who is interested in your success as in his own, regardless of which side of the market you are in.
In this case, we are talking about the same integrated solution, which not only unites investors and ICO organizers, but also helps them to achieve their goals with the help of optimal solutions. There are several such solutions on the market:
- BitPride ICO
- Como Capital
Comparative analysis of integrated solutions for ICO
Analysis and research of the project / market
A service is provided by: BitPride ICO, Como Capital, ITOLab, marketing agencies.
Benefit for investor: opinion of independent experts with recommendations on investing in the most promising projects.
Benefit for ICO: opinion with recommendations on highlighting among competitors, increasing product potential, optimal regional and global positioning of the product.
Technical support of ICO / ITO
A service is provided by: BitPride ICO, Como Capital, ICOBOX, ITOLab, KICKICO, IT-companies.
Benefit for ICO – professional technical support:
– participation in tokenization modeling;
– project integration into secure nodes;
– оopening of safe emissive wallets;
– development of safety protocols for "cold" and "hot" storage.
A service is provided by: Como Capital, ICOBOX, ITOLab, IT-companies.
Benefit for investor: enhancement of smart contracts code protection.
Benefit for ICO: enhancement of smart contracts code protection.
A service is provided by: BitPride ICO, Como Capital, ICOBOX, ITOLab, law firms.
Benefit for investor: mitigation of legal risks.
Benefit for ICO – mitigation of legal risks:
– a detailed package of legal documents for the ICO;
– selection of optimal jurisdiction;
– banking and licensing support.
A service is provided by: Como Capital, ITOLab, specialized escrow services (ARBI, Darfchain, Descrow, Jury Online).
Benefit for investor: guarantee of investments safety.
Benefit for ICO: increasing the credibility of potential investors.
A service is provided by: ICOBOX, Como Capital, BitPride ICO, ITOLab, KICKICO, marketing agencies.
Benefit for ICO – increase the effectiveness of marketing investments:
– creation of strong positive connections with target groups of different market segments;
– reducing barriers and costs for publications in the media and participation in thematic events;
– increase the confidence of potential investors;
– accurate forecasting of marketing activities.
Recruitment for the project
A service is provided by: Como Capital, HR-agencies.
Benefit for ICO: hiring activity worldwide in blockchain, marketing and law field with confirmation of the competence for the project.
Road Show organization
A service is provided by: Como Capital, conference organizers.
Benefit for ICO: private meetings with investors worldwide.
A service is provided by: Como Capital, cold wallets.
Benefit for investor: 100% security of cryptocurrency and tokens with access to assets 24/7.
Benefit for ICO: 100% security of cryptocurrency and tokens with access to assets 24/7.
The benefits of integrated solutions are mentioned, now it's time to point out the shortcomings and possible risks.
In most cases, turnkey projects are offered by marketing agencies, law firms and IT companies. It is important to fulfill one condition in integrated solutions: there must be specialists with different skills and successful cases in past among the team of the performer. Passing management of your marketing to experienced lawyers or, conversely, a legal structure to a high-quality marketer, is too risky, since they are simply incompetent in other areas, except for their own. You can hardly find a real Mr. Fixit.
ICO 2.0 — DAICO
Vitalik Buterin, the founder of Ethereum, proposed an updated model for decentralized DAICO fundraising in January 2018, which includes elements of decentralized autonomous organizations (DAO) and is designed to increase investor confidence and minimize risks of ICO investments through funds dispersal control.
Market needs urgently the tools for investment protection to mitigate the risk of losing funds invested in ICO. Then several companies offered the independent escrow solutions to the market problem of investments security:
- Como Capital
- Jury Online
Experts of the first professional digital rating agency DigRate surveyed the characteristics of escrow solutions among active market participants and found that 80% of the smart contracts for escrow solutions are based on the Ethereum ERC20 standard (the most popular platform for creating decentralized applications).
The commissions of these services varies from 1% to 5%, 40% of escrow solutions charge 1%, 20% charge 5%, and the remaining 40% charge from 1% to 2%.
Personal investor accounts and wallets are introduced within 60% of the services, 80% of wallets are multicurrency.
KYC is used in 100% of the solutions, although automatic verification is performed in 50% of the escrow solutions, while the second half is manually operated.
When deciding whether to allocate funding to the project or not, 60% of the services vote with the participation of investors, while 20% vote with the participation of escrow agents. 60% of escrow solutions additionally attract independent experts, that reduces the risk of making an erroneous decision by inexperienced investors.
All escrow solutions, without exception, use their own expertise during the evaluation of ICO projects, 80% of them also conduct an independent expert evaluation, and 40% have implemented an automated scoring system.
Disputes arbitration is provided only in three escrow solutions of five.
In general, the escrow service market is only being formed, some of the solutions are in test mode, and the majority of market participants have not yet realized the essential capabilities of "smart" escrow to reduce the impact of human errors in verifying users, evaluating projects, and in resolving disputes in decision-making on further projects financing. Only one survey participant (Como Capital) is able to offer the market a ready solution as of April 16, 2018, while the remaining participants are in the process of raising funds through the ICO and developing the final version of the software product.
Let's take a look at the example of the smart escrow solution by Como Capital for a better understanding of the DAICO principle. The escrow solution is a kind of scam-killer, which allows the token holders to monitor the use of funds invested in the project.
The idea of the service is simple and effective. Before launching the ICO, the project introduces the smart escrow solution openly, voluntarily limiting itself to the possibility of withdrawing funds after the end of the crowdsale. The project team can withdraw publicly only a pre-agreed part of the raised funds. If the project founders need a second tranche, then they are required to report to the token holders on the stage of the project development and state the purpose of the next stage of financing. A decision whether to continue funding the project or not is made by token holders via online voting in personal accounts.
On the one hand, the project founders are forced to plan their expenses more restrained, knowing that each new tranche will have to be coordinated with the token holders. On the other hand, protected investors are more likely to invest in new projects with guarantees of funds return.
The practice of spreading escrow solutions for the ICO market is a sign of market evolution, where ICO is used by project founders not to buy expensive cars, mansions and luxury living, but as a tool for implementing the project idea, creating a product and building a company. The reluctance of projects founders to use phased financing will be recognized as the creation of a scam project in future.
Clear and precise systems for the analysis of crypto projects should be created in addition to specialized tools for funds dispersal control, as it was in the financial field, VC investments and the stock market earlier. Professional traders in the financial sector have hedging instruments, asset insurance and reliable data sources.
So far, the market for such services has been struggling to develop the entire blockchain industry, and it's too early to talk about a full transition of the crypto industry into the legal field. But, in our opinion, the conditions for important changes have already been created: 2018 will be the year of implementation of blockchain projects from major international companies, as well as the legalization of the ICO market and cryptocurrency.
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