The Melonport ICO (first round, seed) was completed in under 10 minutes, and the project raised 227,000 Ether, which is around $2.9 million. Melonport (now dissolved, while melonprotocol exists) pitches itself as blockchain software for asset management. The ICO was finished way too early for many enthusiasts and therefore I believe the token wasn’t as widely distributed as it could have been.
In all, 500,000 Melon tokens were for sale to the public, out of the 750,000 created by the team for this round. The total supply of Melon tokens will not exceed 1,250,000 tokens, with the rest of the 500,000 tokens potentially being sold in a second round next year in 2018. The Melon ICO price was around 0.45 ETH.
The Melonport ICO was notable in the frenzy returning to the ICO markets, reminiscent of the First Blood and Singular DTV ICOs of 2016 that also got filled in record time of under 15 minutes for both the projects.
Another interesting aspect of the Melon ICO was that 56,750 ETH were sold via Bitcoin Suisse via their services which accepts not just ETH like the Melonport ICO smart contracts, but also currencies like BTC and even fiat currencies like CHF. In this way, Bitcoin Suisse was acting as an ‘investment bank’ for this ICO, reserving and guaranteeing a certain supply to be sold out to investors via their services. Terms between Melonport and Bitcoin Suisse haven’t been made public. Bitcoin Suisse was able to reserve 25% of all the Melon tokens sold to the public in the ICO, i.e. 125,000 Melon tokens were sold via Bitcoin Suisse for a total of 56,750 ETH. The price per Melon token was around 0.45 ETH (2.20 Melon per ETH). Bitcoin Suisse charged investors a fee of 1.25% and a flat fee of 100 CHF. Therefore it is likely that some of the big fish in the crypto markets had gone through Bitcoin Suisse instead of the little guys.
There has been no announcement from funds like ICONOMI or Coin Fund on whether they invested in the Melon ICO or not. In any case, as the ICO frenzy showed, it is a well followed and well watched project.
The Melon tokens are expected to start trading and become liquid in around 4 weeks. We anticipate a large increase in the trading price compared to the ICO price when it starts trading.
Dfinity completed its seed ICO yesterday with a total amount raised at 3.9 million CHF. The project had a soft-cap for the ICO at 1 million CHF and an additional 24 hours from this time before close. This soft cap idea is a new one in crypto ICOs. At the end of the ICO, i.e. 24 hours after the soft cap was reached, the ICO closed with around 3.9 million CHF total raised. The soft cap of 1 million CHF was hit in only 75 minutes from the start of the Dfinity ICO.
An Interesting Way to ‘Cap’ the ICO
Dfinity tried an interesting way to cap the ICO. Instead of a hard cap, i.e. the ICO closes the moment the Ethereum contract receives the maximum amount of money defined in the contract, Dfinity opted for a ‘soft cap’. The soft cap was implemented as follows – the ICO closes 24 hours after the soft cap is reached. This has an advantage that investors don’t need to wake up at ungodly hours to meet a 15 minute ICO window, which happened with some hot tokens last year like the FirstBlood token. Such ‘insta-sale ICOs’ are bad for the project as they tend to concentrate the tokens in the hands of a few whales instead of distributing them widely to the community.
Of course, the flip side of this is that investors don’t really know the price of the token they are getting until the end of the ICO, which makes return calculations hard. For example, if investors place a risk-adjusted value of $2 million in this round, there is no way to know whether to invest or not, because the ICO might raise more or less than that amount. With a 24 hour window, it was at least mitigated though.
The team has promised up to 78% allocated to investors in this seed round, and a subsequent “main” round.
Blockchain Nervous System
Dfinity has created some interesting ideas, most notably the Blockchain Nervous System. This allows the token holders to vote and change important economic parameters. It also is a back-stop against bad behavior, or bad bugs, like preventing potential The DAO type situations. If the majority decide, they can pretty much do anything, although proposals come at a cost. This has a very different dynamic to the ‘code is law’ principle followed by Bitcoin and Ethereum Classic. It is a softer version of that.
Although Dfinity claims not to compete with Ethereum, it offers a Turing complete language to write smart contracts and applications in. The technology developed with mutually benefit Ethereum and Dfinity, but there is also definitely a competitive element. Dfinity will provide value to the token holders by bringing in projects and apps being built on it, which would otherwise have been built on Ethereum, likely. Dfinity also believes that some of the technology being developed by the team will help Ethereum. Collaboration among crypto projects is always welcome as it moves the whole ecosystem forward.
April 2021 Update
Dfinity has made tremendous progress since we first wrote about the fundraise above. VCs like A16Z have been all over leading several rounds of funding for the company and foundation. A lot has changed in the crypto landscape in the last 4 years, and the rise of Ethereum and the ecosystem around it has been a gamechanger for a lot of potential applications of blockchains.
Dfinity still wants to differentiate itself from the Ethereum ecosystem. It has moved its marketing messaging from “Blockchain Nervous System” to “The Internet Computer”. Although several apps seem to be being built on it behind the scenes, we don’t know too many details. The Dfinity team has now promised to launch the network on 7 May 2021. See the official tweet below:
One question we get asked a lot from early supporters of Dfinity is how the ICO/pre-sale investors will be treated.
Here’s the answer from the team:
This was posted by Dominic Williams in April 2018. The “ICO” investors (ICO in scare quotes because after the bad practices of many ICO projects in 2017, no respectable project wants to use that phrase) are the “Seed fundraise contributors” who would get 24.72% of the Dfinity network. Given the private valuation of Dfinity is already in the billions of dollars, the seed investors should see a healthy return on their early bet on the team and project, even in BTC or ETH terms (hopefully).
Back of the envelope calculation is as follows:
~$4 million raised for ~25% of the network, which means seed investors got in at a valuation of ~$16 million.
Assuming a fully diluted valuation (FDV) of $1 billion, that is a return of 62.5x in USD terms.
The price of BTC on Feb 12 2017 when the ICO/presale took place was just around $1000. This means that in Bitcoin terms, you would break even around an FDV of $16 million * 55,000 / 1000 = $880 million (current BTC price of $55,000).
The price of ETH on Feb 12 2017 when the ICO/presale took place was ~$11.40. This means that in Ether terms, you would break even around an FDV of $16 million * 2635 / 11.40 = $3.69 billion (current ETH price of $2635).
We always calculate returns in BTC/ETH terms since that’s what crypto investors index to. So if you put in Ether into the Dfinity presale, then at around $4 billion fully diluted valuation, you should break even.
If you want to trade Dfinity at launch, make sure you have your Coinbase and Binance accounts ready. Given the scale of launch, it is likely that the largest exchanges will start listing Dfinity right away.
Santiment ICO presale (first round of the ICO) sold out within 2.5 hours, raising its target 12,000 Ethereum (ETH) during this time. The ICO presale had a lower limit of 4,000 ETH and an upper limit of 12,000 ETH. Unlike the recent Dfinity ICO seed round, the cap was a hard cap and therefore investors who weren’t able to get in during this time were out of luck. The presale ICO cap of 12,000 ETH, which was under $150,000 when the ICO closed, would be considered to be on the low side.
The santiment project is a ‘crowd sentiment data platform for crypto and blockchain assets’. The value of the token comes from its use on the platform. The token is required to pay for services on the network, while contributors to the platform earn the token.
The project aims to help crypto traders improve with better data. For instance, users can play crypto games in simulated environments before putting real money on the line. In addition, the projects aims to develop better visualization tools than what exist today in the market. The platform’s data might also become useful for researchers looking into the crazy crypto markets.
The value proposition of Santiment depends highly on the community, and indirectly on the data produced by the users. The data generated by crypto markets may not be as easy to analyze as regular markets. However, crypto traders are an active bunch, and their ranks are growing. Santiment might tap into their natural tendencies to trade (or perhaps over-trade) and generate the data required.
Investors and Follow-up Rounds
Given the small maximum size, only a few investors were able to get the Santient tokens in the presale ICO. Notably, the ICONOMI.PERFORMANCE fund invested in Santiment. This would be ICONOMI’s third investment in the cryptocurrency space, after Golem and Byteball. This is an interesting move, because there was no prior indication to the market that ICONOMI might be interested in this ICO. That might be a deliberate move, given the small cap.
Some investors are looking forward. The project will use the funds raised today for its whitepaper and a minimum viable product (MVP). The creators estimate a time frame of 3 months for this.
Also, investors might like to know that this was just the presale to the main token crowdsale that will likely take place after the whitepaper and MVP are released. However, investors who were able to get in on the presale will get a 54% ‘bonus’ in terms of price.
Dfinity, a new crypto ICO, raised its target of 1 million CHF (Swiss Francs) in just under 75 minutes. The Dfinity seed round started at 6:00pm GMT on 12th Feb 2017 and ended at 7:15pm GMT on the same day. Due to the soft cap of the round (see below), the seed round ICO will go on until around 7:15pm GMT on 13th Feb 2017.
This was for its ‘seed’ round. Dfinity will have another round of funding in the future as well, as part of its ICO efforts. Due to the earlier stage of the seed funding (and thus a higher risk of investment), there is a bonus to invest in the seed round compared to the follow-on round.
The project raised an impressive amount of money in a quick time. It is possible that institutional funds have invested a good amount of money in this project.
Dfinity ICO Soft Cap
Dfinity ICO is also unique in having a ‘soft cap’ on the amount of money raised instead of a hard cap or no cap.
In hard cap ICOs, the ICO ends whenever a certain threshold of funds is reached. This presents problems if the ICO is ‘oversubscribed’ i.e. if many people want to invest in the ICO. For example, SingularDTV put a hard cap of $7.5 million on its ICO. However, it was sold out in under 15 minutes. This causes the token distribution to go to speculators more than the believers and early adopters of the project. This can be quite problematic when the purpose of the ICO is as much to create that initial set of users and early adopters as much as it is to raise money.
In no cap ICOs, there is only a time limit up to which an unlimited amount of funds can be raised. The biggest problem with this model is that investors don’t know how much the tokens they are buying are worth, because it depends on how much the total funds are going to be raised in the future. This can present situations like The DAO which would have been a worthy experiment at $5 million raised but not at $100 million raised.
Dfinity is structuring its ICO as a ‘soft cap’, which means they will allow 24 hours after the goal is reached as the cut-off. This will prevent ‘insta-ICO sellout’ situations like FirstBlood and SingularDTV tokens. Therefore the Dfinity ICO will still be open for the next 24 hours after reaching the 1 million CHF goal.
About Dfinity and the ICO Token
Dfinity is a project similar to Ethereum (although they say they don’t compete with Ethereum) in that it allows the execution and creation of arbitrary smart contracts. The biggest difference is that instead of the smart contract code being the ultimate authority (and having situations like The DAO when a bug in the contract code can cause a loss of funds), Dfinity has a group consensus process it is calling the Blockchain Nervous System (cheesy name). There are many limitations on using it, but it can be deployed for special situations that would prevent issues like The DAO.
ICO investors in the near future will likely look a lot different from what they are today. This is due to many factors, from secular changes in the industry to the types of projects raising capital, to the types of people who are involved as investors in these projects. Gone are the days of pseudonymous developers raising millions of dollars without a business plan or a whitepaper.
ICOs Are Changing
ICOs have evolved significantly over the last 5 years or so since they started, with Mastercoin being the first major one. Instead of just speculation, there are many dividend paying cryptocurrencies. The tokens also have economic value, beyond just being a mere cryptocurrency. ICOs today are made out of serious ambitious teams with a vision (and yes, a whitepaper at the very least). The valuation and return calculations are different. They also lend themselves better to valuation models, which is liked by more serious investors as they look for returns beyond speculation.
Therefore, the profile of ICO investors is changing. Let’s look at the trends, and understand the implications.
Who Invests in ICOs Today?
ICO investors today are usually comprised of early adopters. The cycle usually goes like this: some investors get ‘rich’ through one crypto investment, and that money gets recycled into other projects.
We see that play out often. The first big crypto was of course Bitcoin. Some notable names that made it big include the likes of Joseph Lubin, who went on to be a co-founder of Ethereum and the founder of the Ethereum venture studio Consensys.
We see this play out with Ethereum too. The DAO was able to raise over $100 million before its collapse. That money was mostly from the Ethereum investors that got rich from Ethereum. Since ETH has kept its value, more or less, all the new ICOs on Ethereum benefit from these investors wishing to invest in ETH-based tokens. Therefore you see tokens like SingularDTV or FirstBlood on Ethereum sell out in a matter of minutes.
ICO Institutionalization has Begun
One look at the numbers will tell you that ICOs are serious business. In 2016 alone, ICOs raised over $100 million. That’s serious money. With these types of investments, institutionalization is only natural. The profile of ICO investors is already shifting from a few big players, or ‘whales’ to institutions where regular people pool their money, thus giving the institutions more say in projects. This is an interesting trend, and something that every ICO investor and crypto-enthusiast should anticipate. It is important to understand the motivations and methods of institutions over individuals.
Here are some serious ICO investors today. I am listing the institutions in the space.
Coin Fund: Coin Fund is one of the most respectable institutional players in the ICO and crypto space in general. The provide some very good analysis of new projects for everyone, which lends credibility to their skills. It is an ever-changing field, and Coin Fund’s returns are in no way extraordinary so far. However, they manage investor risk especially when new investors are not too familiar with the various intricacies and nuances of crypto projects. Funds like this will likely come up more in the future.
Polychain Capital: Polychain Capital has adopted the more traditional hedge fund model for their fund. It is simply a hedge fund that investors in ICOs and cryptocurrencies. Notably, some of the biggest names in Silicon Valley Venture Capital have invested $10 million into this company. That’s serious money. As cryptocurrency grows as an asset class beyond just looking at Bitcoin as an asset class, traditional hedge fund structures will likely attract more money.
ICONOMI: ICONOMI is a recent project, and is itself funded through an earlier ICO, with its token already trading in the markets. ICONOMI has already invested in Golem, one of the recent ICOs. The funds managed by ICONOMI have a few million dollars in commitment. This will impact ICO investors in the future because it will be a big fish that will impact the markets. Keep an eye out.
The trends towards institutionalization are clear. ICO investors are shifting from being early adopter individuals to more savvy individuals. These individuals are relying more on funds and institutions. These funds act as a pool of capital. Therefore, by virtue of their increased size, they will play a bigger role in the future of cryptocurrency investments.
Dividend paying cryptocurrencies are becoming a dominant, emerging trend. Crypto-investors should be aware of their dynamic, and how they can enhance returns. Given their similarity with dividend-paying stocks, we can look at historical data and models from the stock market to try and make predictions on how the dividend paying cryptocurrencies will or could evolve over time.
Note: We get a lot of questions on where to buy these tokens. You can buy them on exchanges like Binance or Bittrex. Another way is to go to Coinmarketcap and search for the token, then look at the list of exchanges that trade the token you’re interested in.
This assumes that you already have Bitcoin or Ether. If you don’t you need to buy those first at a place like Coinbase and then transfer the Bitcoin out to buy these tokens.
Dividends vs. Proof of Stake Rewards
Before we proceed further, I want to clarify that proof of stake rewards do not qualify as dividends. Dividends are paid via economic profits or usage of the network by others, whereas proof of stake rewards are paid via inflation. These should not be confused. In order to pay dividends, the cryptocurrency needs to provide some economic benefit, and use those proceeds to pay dividends to the token holders. Remember – earnings, not inflation.
Some proof of stake cryptocurrencies will pretend or mislead investors, and call their stake rewards dividends. Please don’t fall for that. In this article, we’ll strictly discuss ‘real’ dividends, i.e. earnings created in the ecosystem, and not ‘fake’ dividends paid out via inflation of the monetary base. We are only interested in dividend paying cryptocurrencies that provide some economic utility, that is then shared back with the token holders.
These can either be ‘work token’ or ‘security token’ or even some utility tokens in the future. We’ll discuss all categories.
A Brief History of Dividend Paying Cryptocurrencies
To be sure, the idea of cryptocurrencies paying dividends is not new. However, the idea has evolved over time, and so have the implementations.
The first time the idea was seriously used in a cryptocurrency system that I am aware of was in Bitshares (if it weren’t for the founder’s greed, it could today have been a great system). Bitshares originally was a decentralized asset trading platform that traded market-backed assets, with game-theoretic price convergence between the Bitshares-assets and real-world assets.
Bitshares’ original idea and implementation was that the entire ecosystem would take a fee for trades that occur on its platform, say, BitBTC/BitUSD trades. This fees is then returned to all the BTS holders. This original implementation didn’t increase the supply of BTS to the holders while keeping supply constant. Rather, due to programmatic ease, it just decreased the overall BTS supply, in effect making each BTS a little more valuable.
This is more like a stock-buyback rather than a dividend. Economists would argue they are the same thing, but psychologists should know better. The Bitshares idea never took off, and the dividends were limited anyway. Add in a later inflation schedule, and the supply increased way more than any economic benefit to the system, thereby rendering the whole idea invalid.
However, the case for paying dividends was clearly present. The economic value was supposed to be created by helping traders bet on the prices of commodities or other cryptocurrencies. The network charges a fees for this benefit, and this gets returned to the holders of Bitshares token (BTS).
Current Dividend Paying Cryptocurrencies
DigixDAO was the first Ethereum-based token that started paying dividends. Note that this dividend is paid from earnings, not inflation. The earnings model comes from gold storage – the Digix Gold Tokens (DGX) are asset-backed Ethereum tokens (gold-backend) that freely trade in the market and can be transferred via the Ethereum network to Ethereum addresses. This generates fees – usage and storage fees. This fees, in the form of earnings of the DigixDAO, is distributed to the holders of DigixDAO, the DGD tokenholders.
Note that unlike Bitshares, DigixDAO has a full backing of gold in its valut. This naturally also requires costs to maintain, insurance, audits, etc.
The economic utility is for people who want to buy, sell, and trade gold-backed tokens. The network charges a fee, which is then distributed to the holders of DigixDAO, i.e. the DGD token.
TaaS is a security token that pays a dividend out of profits. TaaS works as a closed ended fund for crypto tokens, with the TaaS team having complete discretion over how the money is spent. The holders of the TaaS token had given the TaaS team millions of dollars to manage as part of the ICO process. The team takes a fees to manage the money and a cut out of the profits. Anything that remains is shared with the TaaS token holders.
The TaaS project has been paying regular dividends in the form of ETH to the TaaS token holders.
Projects in the Pipeline
After the launch of Ethereum and its use as a serious cryptocurrency platform, there was a renewed interest in systems built on top of Ethereum that had real economic benefit. Many projects chose to provide that economic benefit in the form of dividends to the holders of the tokens.
The first large-scale Ethereum project to implement this idea was Augur. Augur is a decentralized prediction marketplace where REP (reputation) tokenholders report on all the events created in the system. To provide incentives for them to report (and report correctly), they are given a certain fee from all the markets.
This economic system in Augur is quite clear. REP tokenholders get rewarded based on the total economic activity occurring in the Augur system. The more people use Augur to place bets and trade them, the more the REP holders get paid. The payment to REP holders is clearly from the economic benefits provided by the system, not via inflation. Note that Augur differs from some other Ethereum-based tokens in that there is no ‘central’ party that generates earnings (centralized gold storage in Digix, the ICONOMI team in ICONOMI, the Singular team in SingularDTV, etc.) and the system is completely decentralized – there is no one party that holds power over the system.
Note that Augur as a token has launched, but the full platform is still in Alpha and hasn’t launched yet. It would be a great case study for dividend paying cryptocurrencies when it launches.
Many projects followed Augur that provide dividends from the economic activity being created. Here are some of these Ethereum-backed tokens:
ICONOMI (ICN) – it is a crypto fund-management platform that will create and trade an index-fund like token and a hedge-fund like token. The future plans also include a fund management system open to all investors and traders. The more popular these funds become, the more dividends ICN tokenholders get.
SingularDTV (SNGLS) – it is a digital rights management platform combined with original content. The original content includes a documentary and a mini-series. The more revenue the original content production gets, the more dividends get paid out to SNGLS holders. Also, the more their digital rights management platform gets used by artists, the more the payout to SNGLS holders.
Let’s discuss some of the basic terminology required to analyze dividend paying cryptocurrencies. These are similar to the corresponding terminology used for the valuation of other financial instruments, like stocks.
Revenue: This is the total amount of money brought in via sales of goods and services by the ecosystem. Examples of services include Augur, which provides the service of a decentralized prediction marketplace. Examples of goods include Nodio (not active anymore), which provides a home router with additional security layers built in.
Cost of Goods and Services (COGS): This is the money spent to acquire the revenue. We do not include any prior costs, such as running a foundation/organization that is responsible for creating the software product and other marketing costs. These are paid out through the ICO funds. We are interested only in the costs associated with providing the service. Some systems, like Augur, have a zero cost. Some others, like ICONOMI, have a variable cost that is determined at the discretion of the founding team.
Earnings: This is simply the difference between revenue and COGS. Earnings = Revenue – COGS. Earnings is the profits generated by the ecosystem.
Retained Earnings: This is the money that is earmarked to grow the ecosystem further. If a project has a positive net present value (NPV) (for simple cases, if the internal rate of return (IRR) is more than the cost of funds), then retained earnings can be used to take that project up, and hopefully it has a net positive impact on ‘shareholder’ value. Different projects handle this differently. Augur, for instance, has no retained earnings. SingularDTV has a fixed 40% retained earnings.
Dividends: This is the ultimate cash flow to the ‘shareholders’. It is the money distributed after removing retained earnings from the earnings, i.e. Dividends = Earnings – Retained Earnings. Ethereum based projects so far seem to prefer to distribute dividends in the form of Ether.
Buybacks: Buybacks refers to using the free cash flow to buy and burn some of the tokens, instead of paying it out in the form of dividends. As far as I know, none of the projects are using any earnings for the purposes of a buyback. However, Bitshares implemented such a system, which however isn’t very visible due to later introduction of inflation. I suspect some projects in the future might opt for buybacks in addition to dividends.
For the first time for crypto investors, it is possible to create a valuation model for these cryptocurrencies. That’s right, the dividend paying cryptocurrencies should be driven more by the underlying economics and less by speculation. Therefore, I expect the volatility to be lower than regular cryptocurrencies. Also, I expect their behavior to be similar to stocks in the stock markets. This is a good thing, because we can now use methodologies and analysis that works in the stock market already.
Before we proceed though, please note that valuing any cryptocurrency, even Bitcoin, is going be a very difficult task because the value is driven more by supply and demand and speculation than any income-earning potential. There is bound to be a fair element of speculation even within these types of cryptocurrencies.
Price-to-Earnings Ratio (PE Ratio)
The PE ratio makes the most sense out of all the other ratios, like price to sales, although you should keep an eye on those as well. The PE ratio that would determine the fair value of the token should take future growth into consideration. If the expected growth is high, the ratio will be higher, and the price of the token will also be higher. the expectation is that the future dividends from this dividend paying cryptocurrency will be higher than they are now, and grow at a rapid rate.
You should also take special events into consideration. Take Augur for instance. The market will likely grow with time, and you get a ‘stable’ PE ratio based on that growth. However, there will be other growth spurts, like in 2020 presidential elections, with the markets likely starting to take hold around 2019 already. Then there are major sporting events, like the soccer world cup globally, or US based events like the super bowl that will likely attract a lot of betting. In terms of growth, you should take organic growth in existing markets, like politics and sports, but also opening up of new markets, like financial CFDs or esports.
Note that assigning a PE ratio assumes a going concern for the ecosystem, i.e. it will last indefinitely. If you don’t believe this to be true, discount your analysis accordingly.
Dividend Discount Models
In cases where the dividend is easy to estimate as a percentage of earnings, you can apply dividend discount models to value these dividend paying tokens. One advantage of this method over PE ratio is you can split this up into components with different growth rates, and calculate the value accordingly. You also have more flexibility in terms of assigning a terminal value, after a given period, to make it aggressive or conservative.
The Gordon Growth Model is the simplest type of dividend discount model that you can use. It assumes a single growth rate and rate of return. This is usually too simple, so you can apply one of the multi-stage dividend discount models as well. Ultimately, you can tweak and play around with the number of growth stages, assumptions of growth, and terminal value calculations.
The biggest challenge is trying to calculate the required rate of return. This is an almost impossible task for cryptocurrencies. Your assumptions here will greatly affect the final outcome of the valuation.
The stock-like characteristics of dividend paying cryptocurrencies allow us to use some of the models used to value stocks. This helps provide a benchmark valuation model. Depending on the valuation obtained from the model, and the price determined in the free-market exchanges, an investor can make a decision whether to invest in this cryptocurrency or not, or what the fair value is. Combined with a margin of safety, the fair value estimation will determine whether the investor would buy or sell, or just stay put without taking any position. However, speculation can also play a role, like with any other cryptocurrencies.
Here’s how to buy ICONOMI (or ICN token) on ICONOMI exchanges. You can buy ICONOMI in many ways, using fiat or government money (like US Dollar and Euro) or other cryptocurrencies (Bitcoin and Ethereum). Note that ICONOMI is a token on Ethereum, which means the ICN/ETH market will be more active than some other Ethereum markets.
ICONOMI is one of the first dividend-paying crypto tokens built on top of Ethereum. The project generates revenues in a number of ways:
It’s flagship fund, ICONOMI.INDEX is a passive-investment vehicle for the crypto community. This will give investors exposure to cryptocurrency as an asset class, without worrying about managing many different cryptocurrencies individually, buying on exchanges, storing the wallet keys, etc.
It’s flagship fund, ICONOMI.PERFORMANCE is an active-investment vehicle for the crypto community. The team will employ crypto traders who will try to beat the market (likely the index defined above). When they do, it generates performance fees for the ICN token holders.
Open Fund Management Platform, which allows others to start their own fund and charge money. ICONOMI will simply provide the platform, and take a small commission. This commission will be distributed among the ICN token holders.
All these can generate a significant amount of revenue, depending on the kind of market share it is able to capture.
Note that buying ICONOMI funds (ICONOMI.INDEX and ICONOMI.PERFORMANCE) is different from buying ICN. The ICN token is the profit-sharing token. This means all profits from the flagship funds, and the open fund management platform will be distributed to the ICN token holders. As an analogy, ICN is the stock of a financial company that sells different funds. The profits from the funds are distributed to the stockholders.
Now here are different ways to buy ICONOMI (i.e. the ICN tokens).
You can buy ICONOMI on regular crypto exchanges. These are centralized exchanges with their own order book. Some of these will also allow trading directly or indirectly using local fiat.
At the moment, Kraken is the major ICONOMI exchange where you can buy ICN. It trades two pairs – ICN/BTC and ICN/ETH (the first allows you to buy ICONOMI using Bitcoin, the second using Ethereum). However, Kraken also trades BTC/USD and BTC/EUR. Therefore, if you only have local fiat and don’t have any Bitcoin, you can use the same exchange Kraken to first buy some BTC, and then use this BTC to buy ICN. Here’s a detailed guide on how to buy ICN on Kraken.
Liqui is another exchange that has listed ICONOMI. I haven’t used that exchange personally and cannot comment on its legitimacy or user experience.
ICONOMI on Poloniex
At the time of this writing, ICONOMI (ICN) doesn’t trade on Poloniex. The reasons are unclear. Understandably, some of the early adopters are puzzled by this development. ICONOMI raised $10 million, which is plenty to get Poloniex some nice fees. It has listed coins that raised far less. Also, the ICONOMI team constantly made mention of NDAs with exchanges, so they couldn’t disclose where it will be traded. This is a Poloniex practice, so it understandably led to speculation that ICONOMI will trade on Poloniex.
Some think it is because ICONOMI behaves too much like a security, with its dividend payments. However, other projects that do the same, like REP, are listed on Poloniex. There is no clear answer on why ICONOMI doesn’t trade on Poloniex yet.
Centralized exchanges are prone to hacking risk, regulatory risk, and other risks. Since ICONOMI is an Ethereum-based token, there are some decentralized exchanges where you can buy it. Note that there is no counterparty risk with these exchanges. However, you will need Ethereum first to buy from these exchanges.
At the moment, you can buy ICONOMI on Ether Delta. The order book is thin and the trading is lower than on regular centralized exchanges. Still, if you’re patient and don’t want to buy too much of ICN, this is a safer route.
If you’re a big fish looking to invest in ICONOMI for the longer term, try to do OTC sales instead of going through exchanges. This is so you don’t move the market with a large buy order, and you can be more sneaky about things. Since ICONOMI launched with a fairly decent bounty, there are lots of newbies looking to sell. Check out some people on their Bitcointalk ANN thread and you might be able to make individual deals, hiding your buying intentions.