Over the past 12-month IEOs (Initial Exchange Offerings) have replaced ICOs (Initial Coin Offerings) as the fund-raising method of choice for blockchain companies. There are undeniable advantages to IEOs compared to ICOs.
One of the biggest advantages is there’s a reduced risk of investment funds being siphoned from a hacked website. One example of this happening to an ICO is the Etherparty hack whereby hackers discreetly modified the Ethereum address displayed on the ICO website to reroute incoming investments to a Hacker’s Ethereum address.
The barrier to entry to launch an IEO is also significantly higher than an ICO, which is beneficial to investors. Trusted exchanges will (in theory) only list reputable projects after they perform extensive due diligence. Compare this to ICOs, many of which copy and paste existing whitepapers, create fake founder LinkedIn profiles, and then advertise to unsuspecting investors using Google Adwords.
In this sense, IEOs are a much better alternative to ICOs. Investors have a much easier time both accessing the fundraising opportunity as well as funding the investment. This is provided in a safe (but unregulated) environment as provided by the exchange. Different exchanges offer differing parameters for listing an IEO. For instance, we noticed much higher quality IEO listings with market leading exchange Binance, and Kucoin, versus some of the smaller exchanges such as LAToken and Yobit.
While IEOs provide financial benefits to both the host exchange and startups, the same cannot be stated for the financial benefits that are offered to investors. From crunching the numbers IEOs have to date performed poorly.
In researching this article we reviewed IEOs from all major exchanges. Over 50% of the IEOs on smaller exchanges were not listed on CoinMarketCap.
Nonetheless, there were some surprises. While the majority of IEOs performed poorly and provided negative returns on the majority of exchanges, Binance was the odd exchange which actually had a higher number of tokens outperform the market. This was especially true for IEOs launched in 2019.
Below we track the launch date of several IEOs on the Binance exchange, the amount raised, as well as the IEO sale price of each token and the current market value of each token. The reason we do not use market map is that this number is very misleading for investors, as the total market cap includes the entire value of a token project, versus the IEO tokens which were initially sold to investors.
These numbers are based on publicly available data and may not be 100% accurate.
|Company:||IEO Date:||Raise:||Initial Token USD:||Current Token USD:|
|Celer Network||March 2019||4M||0.0067||0.005940|
|Perlin||August 2019||6.7M||0.07743 USD||0.060321|
Unfortunately, other exchanges did not fare so well. Some exchanges performed so poorly with the IEOs that they offered, that we could not find the market value of the tokens listed anywhere.
In conclusion, what is currently more important than the actual project being listed, is where the project is listed. We anticipate that once regulated security tokens increase in popularity, that IEOs may be an enticing option to list these security tokens on regulated exchanges. This would be similar to how stock exchanges currently operate.
Disclaimer: While I have previously held BRD & BTT tokens, in September 2019, I did not hold any of the IEO tokens as profiled in this article.
DLT Replacement of ASX ‘CHESS’ Program Delayed
Dating back to 2015, the ASX has been developing a replacement for their ‘Clearing House Electronic Subregister System’, also known as ‘CHESS’. While they have a plan, and it is in motion, the popular exchange has suffered various setbacks along the way.
The latest of which is due to COVID-19. With so much market uncertainty, and workforce disruption arising from the pandemic, many of ASX’s partners are simply not ready. As such, in order to provide, both, themselves and their partners with ample time to ready their systems for the eventual upgrade, ASX has postponed the event.
In their public statement, ASX clearly listed COVID-19 as the reasoning behind this delay, by stating,
“ASX is replanning the CHESS replacement implementation timetable due to the uncertainty created by the unfolding COVID-19 pandemic”
This delay will see ASX reconvene in June, to discuss a new launch date for their replacement program. This launch will occur sometime after April of 2021.
In October of 2020, all users of the exchange are expected to be able to begin using the replacement system in a testing environment.
Launched 25 years ago, CHESS is a computer system operated by ASX subsidiary, ASX Settlement. It marked the exchange’s first steps towards electronic shares vs. physical shares. ASX notes that they rely upon this system for two major functions.
- Clearing and settlement of trades
- Electronic registry of shares from listed companies
The system has worked well to date, and will continue to do so until it is replaced. The ASX has noted, however, that they are always looking to the future, and what can be done to streamline operations. The implementation of distributive ledger technology, as a replacement for CHESS, is one of these forward looking moves.
Anticipated Benefits of DLT
While CHESS may have marked a major step forward at the time of its implementation, the 25 year old system has obviously begun to show its age. While fully functional, it simply is not as cost effective, flexible, or quick as what new technologies can provide. The following are a few of the anticipated benefits of DLT, once implemented.
- Clearing Times
- Settlement Times
- Cost Savings
- Reduction in Parties Involved
Once implemented, the ASX will be primed and ready to support what many feel will be a major step forward – the hosting of digital securities.
In addition to outlining the reasoning behind the delay of their replacement for CHESS, ASX Deputy CEO, Peter Hiom, took the time to comment. He stated,
“ASX remains fully committed to CHESS replacement. We continue to progress the project, including system development and testing, supporting back office software developers, and assisting users in their readiness activities. The investments we are making in the new system and in distributed ledger technology are for the long-term benefit of the financial services industry and the Australian economy.”
Australian Securities Exchange (ASX)
Founded in 1987, the ASX operates out of Sydney, Australia. Since their launch, the company has grown into one of the largest full service exchanges in the world. The company describes their full services as including listings, trading, clearing, settlement, tech & info services, and post-trade services.
Deputy CEO, Peter Hiom, currently oversees company operations.
In Other News
The effects of COVID-19 are already widespread across basically every industry. This includes tech, and the world of blockchain. We recently took a look at a few of the various ways the ongoing pandemic is changing the way many operate. Make sure to peruse the following article to learn more.
Binance Adds Tezos Trading Pairs
This week, one of the largest crypto exchanges in the world, Binance.US, added support for Tezos (XTZ). The addition places XTZ tokens within direct access to millions of traders in North America. As such, analysts predict the move will strengthen XTZ’s market price in the coming days.
News of the addition first came via a social media post from Binance. The post linked to a company blog in which the firm goes into more detail about the maneuver. According to company documents, XTZ trading pairs are active as of Monday, March 16th. Interestingly, the platform allowed investors to deposit Tezos starting the previous day.
Notably, Binance created numerous XTZ trading pairs. These pairs include one stablecoin, BUSD. Additionally, Binance added support for fiat pairs as well. However, the documentation does point out that users will need to complete both AML and KYC security protocols to participate in fiat trades.
Tezos Security Token Issuance
Tezos continues to gain ground across the security token sector. Importantly, the firm managed to secure a bevy of strong partnerships in the industry. For example, XTZ partnered with Latin America’s largest investment bank, Brazil’s Banco BTG Pactual S.A. back in 2019. The deal gave Tezos considerable pull in the region as it involved the tokenization of $1 billion in assets.
Since that time, Tezos continued to gain market positioning due to a combination of technology and networking skills. The company saw heavy media coverage earlier this year after the security token issuance platform Vertalo announced the platform would transition from ETH to XTZ. This decision echoed that of another major player in the field, the German-based issuance platform, Fundament, who also made the switch over to Tezos back in 2019.
One of the biggest partnerships Tezos was able to secure to date was with TokenSoft. TokenSoft is a leading security token issuance platform with a huge clientele base. The partnership significantly expanded Tezos’ market penetration as it was reported that $3 billion in security tokens were added to the company’s pipeline.
Tezos found a home in the security token sector for a number of key reasons. For one, the Ethereum blockchain has certain limitations imposed by its technical aspects. For example, ETH utilizes a Proof-of-Work consensus algorithm. This style of consensus is both expensive and slower than many other options now available in the market. Basically, ETH can handle only 15 transactions-per-second (TPS).
Additionally, ETH-based smart contracts are written in Solidity. Consequently, this programming language doesn’t allow for an easy formal verification process. Also, the decentralized and open nature of the Ethereum blockchain raises concerns about transactions receiving approval from unauthorized locations. Specifically, issuers shared concerns about individuals in sanctioned countries approving US securities transactions.
Tezos eliminates these concerns with a combination of helpful features. For example, Tezos can both create and verify smart contracts directly from the platform. Also, Tezos doesn’t need to perform hard forks to make major protocol upgrades to the system. This feature is important when you consider the shifting regulatory landscape currently in place. Notably, XTZ can create geo-locked regions to ensure no sanctioned regions participate in transactions.
Importantly, Tezos utilizes a Proof-of-Stake algorithm. This consensus mechanism is less costly compared to PoW and unlike other PoS protocols, any stakeholder can participate in the consensus process and be rewarded for contributing
Tezos Advance Security Token Blockchain
Today, XTZ is one of the key players in the STO sector. As more firms choose this protocol over ETH, more developers gain interest in the blockchain. As it stands now, Tezos is set to overtake ETH’s market dominance in the coming months.
ECSE to Enter STO Pilot Program with Blockstation
Another securities exchange, the Eastern Caribbean Securities Exchange (ECSE), has seen the merit behind digital securities, and signed a fresh letter of intent (LOI) with Blockstation.
This letter represents an upcoming pilot program, which will see Blockstation act as a service provider for the ECSE.
With Blockstation touting a comprehensive tokenization platform, this means offering a variety of capabilities. It is anticipated that these will allow for the ECSE to support the trading of various assets, such as BTC, ETH, and, of course, STOs.
At this point, it would appear as though the Caribbean has spoken, and made their choice of service provider clear – Blockstation
Each of the following are examples of pilot programs involving Blockstation that have either been completed, are off the ground, or are about to launch.
With regards to the LOI, the ECSE has indicated that they intend to leverage the Blockstation platform, providing their clients with access, but not limited, to the following perks:
- asset insurance
- compliant KYC/AML measures
- SLAP (a Blockstation solution which provides companies looking to host an STO with a streamlined process for creating a prospectus)
Upon announcing this newly signed partnership, representatives from each, Blockstation and ECSE, took the time to comment.
Trevor Blake, Managing Director at the ECSE, stated,
“The ECSE is proud to take a leading role in increasing access to and participation in our securities market through digital assets…This pilot follows the pilot being undertaken by the Eastern Caribbean Central Bank (ECCB) of a digital EC dollar (DXCD) that will be the world’s first central bank-backed digital currency, supporting the ECCB’s goal to remove financial frictions, promote financial stability, and expedite growth and development in the member countries of the Eastern Caribbean Currency Union (ECCU).”
Matt Singh, VP of Sales at Blockstation, stated,
“It’s inspiring to see the vision of shared prosperity resonate so strongly in our conversations with the ECSE and financial regulators in the region…We look forward to advancing the ECSE’s goals of leveraging the blockchain to bring transparency, improved security and new economic opportunities to their citizens and global investors.”
Speaking with Marko
In our ongoing interview series, we were fortunate to have recently interviewed the President and CEO of Blockstation, Marko Hafez. In this discussion, we learn more about what Blockstation has to offer, and how they found themselves helping exchanges like the JSE transform the way they operate.
Since being founded in 2015, Blockstation maintains headquarters in Toronto, Ontario, Canada. Blockstation looks to service and establish the digital securities sector, through their comprehensive tokenization platform.
CEO, Marko Hafez, currently oversees company operations.
Eastern Caribbean Securities Exchange
Acting as a subsidiary of the Eastern Caribbean Central Bank, the ECSE maintains operations in the island nation of St. Kitts.
CEO, Trevor Blake, currently oversees company operations.
In Other News
For those that may recognize the ECSE mother company, ECCB, it may be due to recent news of their decision to create a central bank digital currency. The ECCB fully intends to be first to market, globally, with their own digital variant of a central bank issued currency.
- Mr. Wonderful Aligns Efforts with Equity Crowdfunding Platform ‘StartEngine’
- Benjamin Tsai, President & Managing Partner of Wave Financial – Interview Series
- FINMA Releases Annual Report – List Security Tokens and DLT
- A Month in Review – March 2020
- Draper Goren Holm Adds Rodney Sampson as Venture Partner