Automation of ICO project investment fund management solution based on Fusion DCRM blockchain technology.
This is dedicated to crypto investors who supported innovations in the field of cryptography, but lost their investments in ICO crypto projects.
Most modern ICO projects fail
But along with this, on June 12, 2017, Ethereum-based Bancor held its ICO. He raised $ 153 million in 3 hours! The BAT ICO $ 35 million in 30 seconds! Welcome to the crazy world of ICO! In the first half of 2017 alone, they raised more than $ 1 billion! In the second quarter of 2017, ICOs earned nearly $ 800 million! Compared to this, venture capital was only $ 235 million.
Interest in ICOs in 2017 was almost 40 times greater than in 2016. ICO crypto startups raised a total of $ 5.6 billion, according to a report from Fabric Ventures venture capital fund. But, during the first three months of 2018 alone, more than $ 6.3 billion in ICO-related funding was received. The year ended with $ 7.8 billion, and a total of 1,253 registered ICOs.
Given the thousands of ICO projects launched with a total total amount of raised capital in the amount of $ 14 billion to date.
But, we can say that the vast majority of them failed. Coinopsy and DeadCoins, found that more than 1,000 projects have already been defeated in 2018. Projects range from simply abandoned to outright scam.
Dotcom Bubble
In 1997, the Internet became large, and technology companies began to appear everywhere. Investors began to invest their money and get huge amounts of profit. Everyone who saw this began to give their money to companies, without even having the slightest idea of whether the business has potential. And most of the companies that received millions from their investors failed, and some turned out to be scammers. In the end, the bubble burst in 2002. Companies crashed and lost millions over the course of the year.
The parallels between the ICO bubble and the dot-com bubble are a little scary. Like the dotcoms, ICOs have attracted many investors who do not want to miss the gold rush.
ICO Market Potential
Most ICOs that are invested in do not have an alpha version of their final result, all this is based on speculation about the potential of the project and most of these projects will not be able to get the final results. The fact is that about 99% of all ICOs fail. And given the crazy success of some ICO projects, such as Ethereum, scammers flood the market to get their share of the ICO pie.
We are in the “ICO bubble” and it is obvious that at the next rise of the crypto market this bubble will continue to grow and will take away millions of dollars from new ICO investors in the coming years, who will come to the crypto sphere from all over the world.
For example, the number of Americans owning cryptocurrencies nearly doubled in 2019, from 7.95% in 2018 to 14.4% in 2019.
Institutional investors in ICO projects
This year 2019, institutional clients received new investment opportunities, in particular, the launch of the Bakkt platform. However, a study from Vision Hill notes that the institutions that own billions of dollars still refrain from sending them to the crypto market and the ICO project market.
Many investors invest in Bitcoin.
But, there are still Institutional investors who are interested in:
1. Smart contracts.
2. Security tokens.
3. New to Web3.
4. Methods for integrating blockchain technologies.
5. DeFi, DAO.
Many institutional investors are at the study level, they need to understand what millions of dollars will be invested in. Institutionals will not force events, the study of a new segment is gradual. This is another reason why there is still a relatively small amount of institutional funds on the market.
As you study the crypto industry, confidence will increase. In 2019, many new instruments for institutional investors were launched:
• Bakkt site;
• implemented the ability to purchase Bitcoin on Nasdaq;
• Bitcoin funds from Galaxy Digital;
• Stone Ridge Asset Management and 3iQ have received regulatory approval for the launch of BTC funds;
Institutional investors are already gaining new opportunities for investing in the crypto space — they allow them to invest with the same ease as was available in the traditional industry.
Forecast for 2020
Researchers at Vision Hill believe that 2020 will be one of the brightest periods of development for the crypto industry. This is not about an increase in the rate of crypto coins. Experts have in mind the beginning of a new qualitative period in the development of the industry itself, and it remains to be seen how the assets will respond to it. If the value of assets depended only on the development indicators of the industry in terms of fundamental progress, then over the past few years the world would have seen the most powerful bull market in history, but in any case it will happen. And at that moment, numerous ICO projects will resume new marketing rounds.
To protect the interests of old and new investors in a crypto ICO and reduce investment losses associated with the failure of many ICOs, in 2017 I began to think about creating such a financing model that could protect the investments of crypto investors even in the case of a fraudulent ICO. And along with this, in my funding model, I proceeded from the principle of reasonable sufficiency of funding for any startup ICO project. This is what it means.
For example, many investors are often surprised by the amounts announced by startup ICO project teams to realize the project goals, for example, $ 25M, $ 100M or $ 200M, the requested amount can be almost any, and this is mainly based on speculation about the potential of the project, but most ICO projects cannot get the claimed results.
The principle of reasonable sufficiency of investment funds means that the ICO project team can collect any requested investment amounts, for example, $ 150M dollars, but you can access some part of the start-up project investment fund only by providing the project investors with a budget for the first round of financing that spells out cost items, for example, rental of premises, office, purchase of computers, purchase of tables and chairs, payment of meals in the dining room, payroll programmers, payroll for participation in the exhibition, fund for payment of travel expenses, hotels.
So investors find out the real amount required to start work on the project. Having received a spending budget, investors check all expense items and it is obvious that this amount, for example, cannot be more than $ 1M dollars for the first 1–3 months.
Thus, no matter how much the ICO funds are raised, due to the request by the ICO team for a budget for the first stage of 1–3 months and verification of items of expenditure by investors, the principle of reasonable sufficiency of project financing for ICO purposes and reasonable phased spending of an investment fund of any size will be observed.
Further, if listing is to be done on the crypto exchange, the project team provides investors with the necessary investment request and, if approved by the investors, receives this new portion of finance from the project investment fund, for example, $ 1.5 million.
At the same time, the project team in a timely manner provides a report on the work done, spoiled funds, on progress in the development of technology, provides working models of the declared processes and, on the basis of this, requests new rounds of financing.
Obviously, for a technical analysis of the work done and the models provided, investors can hire independent experts who can evaluate the quality of the program code and the prospect of continuing to finance the project team.
Thus, during the implementation of the ICO startup project, the amount of reasonable sufficiency of financing will be spent to achieve the goals of the start-up project.
This means that investor money is used only for the implementation of the project objectives; this investment money cannot be extracted by the project team at a time.
For example, now the project teams get immediately 100% access to the investment fund of the project. And then they can decrease activity on Twitter and after 1–2 years disappear altogether from the radar of investors with the received investment fund.
But the financing model under consideration will ensure the targeted spending of the requested investment funds on the one hand, and on the other hand, does not refuse the project team the declared high amount of fees.
Thus, the status of all participants will be taken into account, the startup team will collect the requested amount, for example, $ 10–250M dollars, and investors will be able to issue investments from the fund as necessary for targeted financing.
The project investors essentially manage their own investments in the project, and the project team shows the results of their work and if the results do not meet the stated terms and objectives of the project, then investors can stop further financing and extract their remaining funds Bitcoin, Ethereum and stablecoin from the investment fund of the startup project.
Thus, no matter how much the ICO collects funds, the principle of reasonable sufficiency for the implementation of the project will always be respected, and the excess funds will ultimately be returned to investors.
The project team can make a profit in only one case — if it realizes the goals of the project, the implementation of project tokens in the business economy and the creation of value for ICO project tokens.
In this model, there is no chance to enrich team members at the expense of the investment fund, this can only happen if the project is successfully implemented.
At the same time, the remaining funds of the investment fund can be withdrawn by investors according to the principle of sufficient financing of the start-up project goals, or for example, part of the funds can be paid to the team in the form of a bonus, bonus for successful project promotion.
Model description
Today, ICO project teams immediately receive the entire volume of investments, and sometimes it is tens of millions of dollars that are instantly on the accounts of the project team. The project team can be located at a distance of thousands of kilometers from the investor and the investor receives a limited number of project tokens and can receive announcements that the project team sometimes makes and this is essentially all and no guarantees of preserving the investment in the event of various force majeure circumstances.
Investors cannot control their investment funds in the project and this is precisely what often leads to investment losses.
But today, crypto investors are not the same as ordinary stock or institutional investors.
Crypto investors are a new generation of advanced investors who actively participate in the telegram group of the project channel, try to control the investment funds flow, monitor the implementation of the project roadmap, request a monthly report on the work done from the project team, request the balance of investment funds based on the life of the project and far not always such activity of investors in carts channels of ICO projects finds a response from the project team.
Nevertheless, crypto investors are distinguished by their increased activity and involvement in the project development process. They are present around the clock in the telegram channels of the project and monitor the state of affairs. In fact, it is an institute of round-the-clock monitoring of the progress of all stages of work in ICO projects.
The investment fund of the ICO project usually includes Ethereum, Bitcoin and stablecoin tokens.
A method of organizing an ICO project management system for investors occurs through linking investor tokens with investment fund tokens.
As a result of the ICO, the received investments (Ethereum, Bitcoin and stablecoin) will be associated only with tokens of crypto investors who filled the investment fund.
This allows crypto investors to control the investment fund of the ICO project and protect their investments in case of failure of the project.
Investment fund management is carried out through the “voting investor tokens” which are tied to the investment fund of the ICO of the project, make it possible:
1. project investment fund management
2. phased allocation of funds from the investment fund
3. protecting investors from theft of investment funds by the ICO project team
4. protect investors from the loss by the ICO team member of the key from the project investment wallet
5. ensure the principle of reasonable funding for the ICO project
6. create non-combustible “investor tokens” that are tied to the investment fund and which will not lose investment value in the event of a collapse of the ICO of the project
7. in case of failure of the goals of the ICO project, investors activate the return of their investment funds in the form of Ethereum, Bitcoin and stablecoin
Investor ICO tokens become non-combustible and will contain value even in the event of a project collapse, since the remaining stock of the investment fund will be distributed only between investor tokens.
The project team can receive funding for the stages of the project only in accordance with the payment schedule agreed with investors.
Investors decide to finance the next stage by meeting in the telegram channel of the project and holding voting with tokens for voting, which the project team produces and then sends out between all the investors’ wallets.
Investors have a non-combustible “voting investor token” which have a voting right in the investment fund of the project.
Investors can select the executive body of the “project investment fund” among the active investors of the project and delegate their authority to the selected investment fund management body.
Individual investors cannot independently extract investment funds from the ICO fund, because this is not provided for by the ICO investment plan.
But, the general exit of all investors from the project is possible by making a collegial decision, for example, if the deadlines for the implementation of the project are not respected. For example, in such a vote, there must be a quorum of at least 75% of the vote, in which case all the funds remaining in the investment fund are distributed between investor tokens and at the same time investor tokens burn out and investors officially leave the project. But those investors who still want to continue their participation in the project can independently buy ICO tokens from the project team or in the open market.
In the event that the project objectives are realized and the project self-sufficiency period occurs due to the implementation of the project’s business goals, investors with a “voting investor token” can initiate the return of most of the investment fund, implementing the principle of reasonable funding adequacy.
Work regulations
The ICO project team provides a plan of expenditures and a budget for a certain period.
The project team cannot suddenly gain full access to the entire investment fund of the ICO project.
Investors discuss and then approve the budget through a vote.
After approving the budget, the team gets access to the next tranche of financing in the form of Ethereum, Bitcoin and stablecoin.
In order to provide an ICO management system, these crypto investment assets must be tied to the ICO project tokens.
To date, many projects are already coping with this task, which to one degree or another connect various crypto assets to each other, for example, projects that implement crypto lending, for example Fantom, which ties an FTM token or bitcoin to stablecoin CSDT. Also, a makerdao project has existed for a long time that ties the Ethereum token to stablecoin DAI. And not long ago, the Fusion project announced that it would build the first decentralized custodian for crypto assets, based on DCRM technology that can also cope with the task of storing the ICO investment fund of the project and managing this fund through “voting tokens owned by investors”. (by the way, another option for using the crypto asset binding, for example Bitcoin and corporate crypto-share, is described by me in the project Buybac Bitcoins and linking them to a “security corporate token-share”)
Each time financing is required, the project team provides investors with a cost plan and budget, for example for 3 months.
Thus, crypto investors are actively involved in all stages of project financing. Approve the budget of each stage.
The teams then receive a report on the work done.
Get a budget plan for current expenses and future expenses and approve it.
The project team provides a description of the business logic of the next stage and those responsible for the execution.
An investor can install the application on a smartphone and manage an ICO project online. Discuss the agenda and voting results in the TG investor community.
Make a decision on the budgeting of the next stage of the ICO project.
Demand from the project team a weekly progress report and the submission of a work plan next week.
The investor may approve the decision to hire a new employee and the level of remuneration. Make a decision on the dismissal or termination of the allocation of remuneration for an employee with a low efficiency indicator.
Method and system for managing an ICO project:
- Solves the problem of controlling the expenditure of investment funds at all stages of the ICO project
- Creates non-combustible “voting investor tokens” of the ICO of the project, which are tied to an investment fund containing bitcoins, Ethereum and stablecoin
- Allows you to return the investment if the project team does not fulfill the ICO goals.
Many crypto investors are not satisfied with the existing conditions for investing in ICO projects.
And I think that the appearance of such a service, which is protected for investors in ICO projects, will be able to gain popularity not only among crypto investors, but also among institutional crypto investors and kickstarter. And it will also attract the attention of numerous large communities studying the safety of investments in a particular ICO project.
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Crypto investor, install the application on your smartphone and manage your ICO project online.
Discuss voting results in the TG investor community.
Make a decision on financing each stage of your ICO project.
Get a weekly report from the ICO project team.
Hire a new employee, approve his pay level, study his KPI indicators.
Be sure that your investments will not burn out due to the fault of the project team or in case of force majeure with one of the team members.
You can always return the investment if you do not fulfill the stated objectives of the project.
Your investments will always be protected by the principle of reasonable sufficiency of investing in an ICO start-up project.
The automation of the ICO project investment fund management solution can be implemented based on the Fusion blockchain technology DCRM.
About Fusion
Fusion Foundation is a non-profit organization building the next generation infrastructure for decentralized global finance. By providing innovative companies and developers with the open source technology they need to build peer-to-peer time and value-based applications, the world will enjoy financial transactions that are more accessible, efficient and transparent than previously possible. Fusion’s seasoned team of industry veterans led by Founder and CEO DJ Qian, a blockchain pioneer who previously launched two top 20 global blockchain projects (VeChain and QTUM), is working to collaborate with financial institutions, cryptocurrency companies, businesses, peer-to-peer lenders, third-party app developers, academia, and the broader blockchain community. By providing the foundation that enables different cryptocurrency tokens, digital assets, off-chain values, and data-sources to be created and exchanged between the Fusion blockchain, other blockchains and financial systems, Fusion is moving ever closer to a globally accessible system for the free exchange of values. Visit www.fusion.org to learn more about Fusion and its partnership program.
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