Equi is an effort to bring the worlds of Crypto and Venture Capital together. We’ve seen several such efforts in the past, most notably Blockchain Capital that raised $10 million in its ICO. There have been several other companies like Science and Spice as well that have tried similar concepts. Then of course there are the much more well known native blockchain players i.e. ICONOMI and TaaS that do asset management and reward their token holders. The area of asset management/venture capital combined with crypto is an old one with many companies. So what is Equi doing different?
There are several things that stand out about Equi that differentiate it from the existing companies. For one, Equi is a full platform where you make investments with the EQUI token. This is different from the other projects where the token is used mostly as a means of distribution only. Then, the Equi project has different levels for holders and investors, thereby encouraging investments on its platforms.
We’ll cover the economics of this in a later section. Alignment of economic incentives and interests is of foremost importance in any crypto project. The team seems to have given that a lot of thought, and has come up with various ‘tiers’ of users of the EQUI token itself.
The EQUI Stakeholders
The Equi platform has three primary stakeholder groups:
Each one has a different motivation and a different benefit in using the platform.
The investors are the most committed users of the platform. This is because the investors actually use their EQUI token to make investments in the projects that are listed on the platform. It should be noted that as with any investments, there is a high risk involved and investors may lose capital. That being said, the investors class is also the one that stands to gain the most from successful investments that they make.
The holders are more akin to passive investors. They don’t vet individual projects and don’t want to do the research and take on the risk of doing this. Instead, they just hold their EQUI tokens in a passive manner. They can still have a long time horizon – they just don’t want to be in the trenches doing the due diligence and putting their money to work in risky projects.
The traders are usually the ones that provide liquidity to the underlying token. They don’t really care about the investments being done, and are not long-term holders either. They aim to buy the token at a lower price and sell at a higher price. As such, they are the least committed to seeing the platform succeed (it is not that they don’t want the platform to succeed, just that they don’t really care).
Benefits to Stakeholders
Each of the stakeholders described above has a different motivation. Now, let’s look at why they want to hold the EQUI token and why they care about the platform. First, let’s take a quick look at the design from the team’s website:
As you can see, Traders get the least benefit while Investors get the most. Holders are somewhere in-between. Let’s parse these out a bit:
- Token Value Increase: This is the common component that keeps everyone on the platform. It is pretty self-explanatory – if the token value increases, you get more returns and benefits.
- Project Investment: This is exclusively for the Investor class, who take the risk by investing in a given project that is listed on the Equi platform.
- Direct and Indirect Project Return: Direct returns accrue to Investors and indirect returns to Holders. Direct returns refer to a specific investment that you make on the platform, which returns a profit. Indirect returns are obtained by Holders who don’t pick individual projects.
- EQUICredit Rewards: This is a special reward that is given only to Investors, in order to encourage the use of the platform for real investment as opposed to speculation. This is created via a 5% inflation of the EQUI token supply every year. These rewards get converted directly into the native tokens.
You can see the exact distributions above. Note that the platform fee itself is 3% as management fee. This is about 50% higher than normal hedge funds that charge 2% management fee. However, you’re mostly going to pay for access to the deals.
If you’re interested to learn more, check out the Equi website. It is currently undergoing an ICO. If you decide to participate, we strongly encourage you to first read the whitepaper before making any decisions on ICO participation.
Photo Credit: Arch_Sam