No challenge, no success
For nearly two decades, television shows like Money Tigers (2001), Dragon’s Den (2005), and Shark Tank (2009) have entertained and fascinated audiences around the world. The drama of an entrepreneur introducing their products and inventions with as much passion and persuasion as they can marshal, followed by an indifferent, calculated business rejection or sometimes an emotionally charged takedown by a Shark or a Dragon can be a lot of fun to watch. However, nothing compares to those wonderful moments when one of the show hosts get excited by the business proposal in front of them and invests in a new, innovative, exciting venture. Have you ever thought to yourself, ‘What would I do if I were one of the Dragons?
Changing the world for the better
You don’t have to wonder any longer. Cryptocurrency exchange platforms offer an easy way to help finance the very early stages of sometimes amazing, sometimes wacky, often totally unique projects by issuing utility tokens (ICOs). Through the use of utility tokens, just like a Dragon, you can help talented, passionate people kick-start their ideas into new products and services, even if you don’t have a lot of money to invest.
Merriam-Webster online dictionary defines a utility token as, ‘a digital token of cryptocurrency that is issued in order to fund development of the cryptocurrency and that can be later used to purchase a good or service offered by the issuer of the cryptocurrency.’
Utility tokens aren’t securities – you won’t participate financially in the new business or product sales. Think of them more like electronic coupons that you may be able to use in the future to access discounted services or products. Why would someone want to invest in something you can’t participate in financially? Maybe because you really want to support a charity, or a community you share a passion with or want to work on a project with, or a future product that you‘d like to see built and brought to market. A project that at its current state of development, might have no access to more traditional forms of funding.
Interesting examples of uses for issuing utility tokens
- Selling tokens to car aficionados – pooled funds are used to buy exotic cars – tokens give holders the right to ride in or drive the cars for a set amount of time – cars are given to token holder lottery winners when the project ends.
- Buying tokens that in turn are given as a reward to people who plant trees to support reforestation projects.
- Decentralized ride-sharing
Perhaps you want to support the development of robotic prosthetic limbs, or a new medicine, or an interesting artificial intelligence project. You might decide to support the project not necessarily because your tokens will gain value (although they might if the project you help to fund is successful), not necessarily because you will use the future product or service yourself (although this might be a strong motivating factor), but because you want to be a good global citizen by supporting an initiative that might benefit your community, or your country, or the world.
Like a Dragon, you have to do your due diligence
Before you get too excited about investing in an ICO offering, it’s important you take the time and do the research to make sure your money isn’t going to be wasted on a project that is so ambitious it’s impossible, or violates local, federal, or international laws or regulations. It’s also important to know if the team is strong enough and experienced enough to execute the plan. Are there other competitors in the field that might make this project redundant? What about the supporting community, how much engagement is there? Is there a realistic chance to raise all the money needed for the project to succeed? Although all of this research this might sound like a tremendous amount of work, lets look at a way that might make your due diligence process much more realistic.
Token prices have been volatile and the crash of token prices in 2018 has made investors much more wary of ICOs. This is a good thing. Taking out some of the wild speculation will make future ICO offerings stronger and future utility token purchasers more careful and thoughtful. One valid criticism of ICOs is that there hasn’t been much in the way of regulatory oversight. This predictably has lead to a number of abuses such as overfunding of a project, managerial incompetence, and perhaps in some instances, even outright fraud. So, if you are passionate about a project, how can you be sure your money isn’t just being squandered?
You may want to consider purchasing an ICO supported by a cryptocurrency exchange. I took a quick look at the application process to issue a utility token on the PLUSQO exchange. According to the website, PLUSQO has developed what they call the PLUSQO Token Examination Method (PTEM). This process has five steps including a white-paper review, a financial audit by accountants chosen by the exchange, and a review by industry authorities to ensure all rules and regulations are being followed. Finally, a go or no-go review and audit is completed by the exchange to ensure, much as possible, that the project is under the best stewardship and in the best financial situation possible (considering the project’s current stage of development) before an ICO is approved for investors.
If you want to think like a Dragon:
- Don’t get emotional and start trading utility tokens simply because the price has appreciated rapidly.
- Take your time and enjoy the process of researching new and upcoming ICOs. There are still lots of ICOs coming out all the time. There’s no need to unnecessarily risk your hard-earned money.
- Don’t invest simply because you’re in love with the idea. Just because a proposed ICO aligns with your ideals doesn’t make it a great investment. Think critically about how much public interest there is in the idea. Without wide-based support, it may be difficult to maintain the token’s price or to gather interest in the new product or service.
- Be sure to take the time to review the management team to evaluate both experience and reputation. At the very least, google the principals to get an idea about who will be making day-to-day business decisions with your money.
- Whether you’re investing money in a charitable project, or to change public behavior, or in the hope of token price appreciation, be sure to carefully evaluate the white-paper with at least the same vigor you would investigate before investing in a publicly traded company.
- Whenever possible use the expertise of independent auditors and business evaluators to increase the chance you’re investing in a winner.