Value Chain, Token Sales and Beyond
Eddy Travia speaks up of the experience towards how ICOs can impact the fund raising industry.
The CEO and co-founder of Coinsilium Eddy Travia talks about how to identify value in the world of blockchain, focusing especially on investing in ICOs. Eddy Travia has been involved in blockchain investment for over four years and has co-organized the first digital currency event in Asia. Mr. Travia has also been pointed out among the top three investors in blockchain. He believes that the impact of blockchain will be as drastic as the impact the Internet has made to how people interact with value and data. He also states that long-term effects will be seen on various industries, technologies and infrastructures.
Mr. Travia emphasizes that most companies used blockchain for transactional means early on and got involved in financial services, payments, remittances and trading markets. However as seen from todays companies’ area of interests and in line with Mr. Travia’s anticipations, it seems like blockchain will be used more and more in areas like, security, smart contracts and Internet of things (IoT). Right now, the major sectors blockchain technology is used in are digital currency, smart contracts, securities and record keeping. He states smart contracts will concentrate on issues such as financial inclusion and digital identity. Applications involving smart bonds and smart derivatives will evolve to undertake the functions of financial institutions and banks. Also record keeping will improve significantly according to Mr. Travia, because blockchain enables safety and efficiency in record keeping. For example, by hashing all the data belonging to a person such as title records, mortgages and other similar safe keepings on blockchain, financial transactions would be a lot secure and faster. In addition, Mr. Travia highlights that smart contracts have lots of application areas and will spread through all the other sectors involving block chain.
Eddy Travia’s company, Coinsilium, invests in blockchain startups and guides them through their growth. However, they are not alone in that domain, a lot of big companies have attacked small blockchain startups by either investing in them or buying them, and moreover Mr. Travia also claims that talent might also be hard to find in this area. He further states that most of the investments have taken place at the end of 2015 and during 2016. Taking the Ether and Bitcoin prices as reference, he provides the information that around 3 billion dollars of tokens are sold and multi-million dollar hedge funds are created specifically for crypto investments. He continues stating that the emergence of ICOs has surprised all the industries when they saw that some companies were able to raise millions of dollars in just minutes after the ICOs started (of course the preparation period for the ICOs were long termed).
Mr. Travia underscores that this new technology brings along some problems with it and there are lots of opportunities for fraud to emerge, like site hacks, fake ICO site replicas and phishing. Also identifying the value of a startup might be confusing for investors, as most of the startups are now combining equities with tokens. Not understanding the technology and therefore being afraid of it is another reason that investors back out from investing, says Mr. Travia as an answer to a question regarding different Bitcoin types, and continues by adding that not having any historical records about investments in the area of blockchain also puts a lot more pressure on instincts and predictions of what the company can do. Mr. Travia claims that token utility has become another aspect that investors focus on because of tax and other legal risks and also adds that tax implications might not be clear for ICOs and the investor might have to pay taxes later on. Therefore, in his opinion, to avoid regulations, utility tokens have become more important.
Mr. Travia warns about the exhausting ICO preparation period and advises startups not to lose grip on their product development. He suggests companies to have two separate teams, one focusing on the ICO and the other focusing on the continuing development effort for the product. He also cautions potential startups to give equal attention to forming their execution team as their token model because the investors would like to see people who are dependable.
According to Mr. Travia, in the current transition phase from traditional investing methods to tokens, thanks to ICOs, now startups have the opportunity to easily transform into public companies. Declaring tokens as new asset classes, Mr. Travia predicts that another 10 billion dollars of tokens to be sold over the next 12 months. Even tough he anticipates the regulatory problems to continue, he still believes that the close relationship that ICOs create between investors and entrepreneurs will persevere in a flourishing manner with improvements in technology and security.