Bet vs. Buy? The ICO Market Has a Serious East-West Divide
In the U.S., initial coin offerings (ICOs) are about ideas. In the Asian market, they’re about returns.
“At the very beginning, the information coming from Asia to the US was very limited. We didn’t know what’s really going on,” Zhuling Chen, co-founder of Aelf, a cloud computing startup out of Singapore, told CoinDesk.
So the Asian market took off on its own, informed by the ecosystems around bitcoin and ethereum but also distinct from them, such as when major Asian banks launched distinct efforts starting in early 2016. Some of the differences between the two markets became clearer as CoinDesk spoke to investors and entrepreneurs during Blockchain Week in New York City.
If one common theme ran through our conversations about Asia, it was this: retail and institutional investors all want returns to realize much more quickly than investors do in the U.S., which may help explain why it has always had a vigorous ecosystem of exchanges.
Said more frankly, Jason Fang, managing partner at Sora Ventures, put it this way during a panel at Token Summit III: “Asians love to gamble.”
As he told CoinDesk, they don’t want long lockup periods like so many Western projects expect. Instead, they want to see tokens get released, listed and realize some of the gains that come from retail investors and market makers buying into a new coin.
Investors in Asia move fast into getting coins listed and sell them as they go up, because they know there is going to be an uptick after listing as market makers enter new tokens, but his firm avoids exiting to fiat.
“We’re money in, money out in crypto,” he said.
But Fang wasn’t alone in saying Asian investors want a good shot at a quick return.
Ricky Li, a co-founder of the new blockchain asset management company Altonomy (and an alum of one of the largest crypto funds in Asia, FBG Capital) agreed. He told CoinDesk that one of the Asian market’s problems is a tendency for investors not to diversify their portfolios over time.
“U.S. and Europe ICO project teams are more well invested in terms of financial knowledge,” Li told CoinDesk. Chinese companies and their neighbors will raise funds in ether and largely maintain those positions, sometimes failing to lock in gain or riding volatility through their whole portfolio, he said.
His company helps funds adjust their portfolios so that if there’s a massive loss in one asset it doesn’t threaten their solvency.
Entrepreneurs also illuminated other facets of the East-West divide in crypto, such as why Asian projects mirror Western protocols and the China ICO ban. Still, there was a strong willingness for both camps to find common ground.
Nick Tomaino, of VC firm 1protocol, told Token Summit attendees:
“It could be argued that Asia is kind of the most important part of the world in terms of cryptocurrency.”
Language helps to explain another point of relativity in the crypto space: the fact that the market has copied existing protocols from the U.S. market that could theoretically work everywhere.
During the panel, Fang argued that as buzz grew around ethereum, there wasn’t documentation for the software in languages like Chinese or Korean. So, Asian-facing protocols launched and now they have strong communities built around them.
Community is key to all these early efforts and localizing can help some projects get there.
“The best way is to have your own project that’s local,” Li concurred. “That’s very appealing to investors in China culturally.”
In China, the web has history of localization. The state banned the Western internet which enabled the Chinese entrepreneurs to create a mobile business that largely started out by imitating Western products that were a proven success.
Now, though, with the Chinese ban on ICOs, Chinese firms have been forced to take a different approach.
“There’s no domestic market in China so all the companies learned to do globalization,” Chen explained. He called it something of a mixed benefit of the ban.
But still the companies remain focused on business results.
“The whole thing about tokenization, is you create incentives,” Li explained. In other words, a project raises money to do its work. It has those funds to support its staff and an incentive to deliver a product that people want to use so the tokens price will rise again after that first sell-off, as people start to use it. “I wouldn’t call the shorter turnaround necessarily a bad thing,” he said.
What it does mean, he granted, is more “paper projects” in Asia and more work for those interested in ICOs to discern which ones are real and which aren’t.
Fang agreed that shorter horizons can still work over time. “It will always be relative, not absolute,” he said. Plus, Asian tech companies are less hesitant about getting into tokens. Multiple Asian investors told us they liked “reverse ICOs,” where existing tech companies sell a token.
And sometimes entrepreneurs in one country will launch a localized version of another country’s creation for more structural reason. Abhishek Pitti, founder of Nucleus Vision, a $40 million ICO out of India that’s making what he called the “Neo of India” explained that it localized for a more structural reason.
“The Indian government doesn’t want to use any international protocols for security purposes,” he said.
New markets abroad
At a certain point, though, a mature project has to expand beyond the geography where it originated, and that reality is part of what brought so many entrepreneurs to New York for Blockchain Week.
“The most important thing to us is trying to hire the most talented guy you can find,” Chen said. Beijing he said, is strong on entrepreneurs, but needs other skills, particularly good cryptographers. “Most of them, I think they are in the U.S.,” he said on the panel.
“The general view is that a lot of American companies are pushing the boundaries of technological advancement,” Chen said. “In China, it’s slightly more balanced. More companies are looking from a business point of view.”
Fang summed up the West more succinctly: “I think right now people are betting on professors.”
Plus the U.S. has a giant pool of liquidity. “It’s about the community engagement,” Li argued. “If they want a project to be successful, you have to be global. Even NEO is very well received globally.”
Pitti made the same argument for India, saying that blockchain is still basically unknown there. If Asian capital comes online, it will be another massive pool of liquidity to stabilize the industry with. Still, there’s even more liquidity in the U.S., so more firms seem to be expanding here first.
But it’s not the only place. From the panel, Vansa Chatikavanij, managing director of OmiseGo, said her firm’s mission is to smooth financial frictions, which makes the West a lower priority. She specifically mentioned Vietnam as an opportunity, for example.
She said, “We are providing a wallet SDK as part of our solution. What we need local partners to do is actually implement it themselves,” because of national laws about money transmission.
But everyone is looking for users, wherever they can best be found; it’s a numbers game, Li explained:
“The retail customer is key to the success of the project. The key to the pricing. The key to opinion.”
Written by CoinDesk.com
Coinbase Is Rebranding Its Crypto Exchange Service
Coinbase announced Wednesday that it is launching a new version of its GDAX platform called Coinbase Pro and acquiring crypto trading relay platform Paradex.
The new platform seeks to “make the trading experience easier and more intuitive,” according to the startup. Other features include a new chart system which provides streamlined access to historical data and a consolidated portfolio view.
Beyond simply trading assets, Coinbase Pro aims to provide a host of new features for investors, according to the release, which reads:
“Our vision is to give customers the ability to participate in services like staking and protocol voting that are distinct to crypto. As the decentralized ecosystem advances, we expect there will be many more opportunities for customers to interact with digital assets in new and unique ways.”
As part of this effort to let customers use digital assets, Coinbase Pro will integrate Paradex support over the next few weeks, which will enable users to “trade hundreds of tokens directly from their wallets,” according to the release.
“Initially, this experience is for our customers outside the U.S. but will be available to U.S. customers as soon as we obtain regulatory clearance, which we’re actively working toward,” the company said.
Paradex enables investors to trade ERC-20 tokens directly from their digital token wallets, by acting as a relay for transfers. Hardware wallets – notably the Ledger wallet – are supported as well.
In order to transfer ethereum tokens, the system requires users to turn them into “wrapped ether,” which is described as “a tradeable version of regular ether.” Users can also transfer other tokens after connecting the Paradex app to their wallet, according to the site.
While Paradex allows users to trade ERC-20 coins held in their wallets, it remains unclear if Coinbase will add direct purchase or trading support for such tokens. In March, the company announced it was adding support for the ERC-20 technical standard, but did not reveal any specific products at the time.
Coinbase/GDAX image via dennizn / Shutterstock
Written by CoinDesk.com
Banks Lose International Payments Business to Disruptive Solutions Like Blockchain
Transaction banking faces continued pressure from disruptive solutions from blockchain and cryptocurrency ventures, which are taking a significant share of a once-upon-a-time undisputed market.
While bleeding customers and transaction volumes, banks remain confident that its legacy technology is ‘good enough for now.’
Banking Industry in Denial While Losing International Payments Business
Over the last year, banks have lost 40% of market share for consumer-to-consumer (C2C) cross-border payments to non-banks.
Data on consumer-to-business (C2B) and business-to-business (B2B) payments also show that businesses are going around financial institutions in order to have their international payments processed in a fast, secure, and cheaper way. Banks have lost 30% of the C2B payments market and 5% of the B2B market.
Jinal Surti, Director of Business Operations at Ripple, the real-time gross settlement system and remittance network based on distributed ledger technology, is appalled that banks at the annual BAFT Conference this month are okay with their legacy systems in spite of the disruption in the space.
“It worries me that banks believe this. Far too many leaders in the space are missing the forest for the trees — shrugging off advances as not important to their business objectives today, or in the future.”
Non-banks are taking over an increased market share of international payments and are being able to cater to a wider range of client profiles in an increased number of services.
TransferWise used to serve consumers only and is now offering services, including process batched payments, to small- to medium-enterprises (SMEs). The platform’s role has widened from being a cross-border payments service to a multi-currency account holder for businesses and a deposit holder with its customers.
Non-bank institutions are proving banks are no longer essential as they become just a ‘utility’ in the system. The economy no longer needs liquidity services from banks to process international payments as digital assets made it possible for small banks and non-banks to send money with no pre-funded destination liquidity.
Cryptocurrency is democratizing the global access to finance and liquidity while forcing a re-shuffle of the banking hierarchy. Quality customer experience will dictate the industry leaders in the business as they compete with scalable, real-time, and on-demand infrastructure that reduces the marginal cost of a transaction, potentially to zero.
“The traditional banking infrastructure is failing and banks need to employ new technology today to remain competitive. Because payments are just the beginning. Losing payments leads to losing a lot more,” Ripple’s Surti added, as the company positions itself as a remittance solutions provider for the banking industry.