New Crypto-World Regulations Will Protect Investors by Making Investment Opportunities More Transparent
You have most likely heard of Bitcoin. Or maybe even Ethereum, Ripple, LiteCoin… These are all crypto currencies; probably the most controversial investment opportunities nowadays. Some recognize them as a new form of money – or at least value exchange – while others see them as a bubble or scam.
No matter how you look at them, they are here, creating more and more buzz. Combining human nature (read: greed) with a quick opportunity for enormous gains, is it no wonder that every day more and more money flows through crypto pipes.
One of the ways to invest in cryptocurrencies is buying less known cryptocurrencies, called alternative coins or alt coins. If you can spot an opportunity and buy a coin before it rises sky high in value, you can make a fortune very quickly. However, you have to be careful. The more potent the opportunity, bigger the risk. You can finish with a significant loss.
Investors that are more knowledgeable go even a step further. They buy “coins” even before they come to exchange and officially become alt coins. We are talking about so-called crypto tokens. To understand the opportunity, you need to know how they are created.
If banks don’t want to give you money, here is another option …
Remember IPOs (Initial Public Offering)? There is a quite similar procedure in the crypto world, called ICO or Initial Coin Offering. It is a process by which a founder publicly announces business idea by issuing a document called a “white paper”. This is like a business plan a company prepares for the bank when applies for a loan, for example.
ICOs are arguably the easiest way to collect financial resources because they come without any obligations to investors. There is no feasibility study required, no guarantees for money taken, and no restrictions if founder won’t put the idea to work.
That’s why we have more and more ICOs, offering all kinds of more or less promising ideas. Most of them are structured around “blockchain technology”, “decentralized processes”, computer programing and applications.
Sometimes projects are so absurd that you don’t know if people are serious or they are making fun of themselves and potential investors. Like the idea of Jesus Coin, offering a “decentralizing Jesus”. The project is “powered by Jesus” himself, having Jesus Christ as founder and CEO of the company, Judas Iscariot is Trustee, and Saint Peter covers public relations.
The other risk with ICOs is potential Ponzi schemes. For example, there is a hugely successful project, offering a token called OneCoin. The project is banned in some countries due to Ponzi while somewhere is still going on.
The idea to money 101
A part of a white paper is also money distribution. According to the amount of money to be raised, the founder issues a corresponding amount of tokens.
For example, if a company wants to obtain 2 million dollars, it issues 20 million tokens that are available for 10 cents. A token has a name, generally related to the company or business idea.
An investor who likes the idea and assumes that it will be realized buys the tokens, expecting their price to go up. If the founder succeeds with the project and token makes to the one of the coin exchanges, its price usually rises. If the project is stagnant or even abandoned – that is common practice as well – the price of token goes down and even to zero. Also, if the token is not listed on an exchange, it is very hard to sell it, although not impossible.
This is the process of how Bitcoin, Ethereum and approximately 1,500 other alt coins were born.
A Crypto “Catch 22”
So, you probably see a problem here. If you have a nose to spot a good project – the earlier you recognize it, the better – you can make a fortune. Founders who issue the project know that, so some of them “polish” the story. Because of very few restrictions, lack of regulations and sanctions, the whole idea can be embellished easily. The more promising the project, more money usually comes in.
Of course, more exaggerated an unrealistic the idea is, less likely is to be realized… which means that the token will never be listed on the exchange, and most likely investors will lose all their money. Also, hollow promises are spotted immediately, so the idea is usually hidden behind strange technical expressions and hard-to-understand phrases.
Does is mean that all crypto projects are castles in the sky? No. There are many great ones, but sometimes they are hard to recognize because of the lack of bells and whistles. Namely, a founder with a great marketing agency can make an average idea look far more attractive that a project of an honest founder who describes it with no exaggeration.
To invest in ICO or not to invest?
So investing in tokens during ICOs could be a wise decision and a very profitable one, but you have to take a good – almost like an X-ray – look of them. You also have to know how to evaluate an idea. Moreover, most likely, you have to be an expert in the specific industry – knowing the major trends, problems and setbacks, competition, opportunities and the like.
This is not easy. It is time-consuming, and you have to have much knowledge. As already mentioned, ICOs are so new that there are no official regulations yet. Some countries are trying to regulate them, but so far investors have no good guidelines and support. There are also some private groups that evaluate ICOs, but you can’t know who stands behind and what their intentions are (read: how they are connected to ICO founders).
That’s why in Slovenia, sometimes called “Silicon Valley for Crypto”, a new academic organization, called the PREON Institute was established. It represents a bridge between governments, experts and potential investors, by offering better understanding and by launching new unique tools to make these technologies even better, understandable, and more reliable for our common future.
In constant connection with a group of academics, entrepreneurs, scientists, professional bank risk experts, ICO founders, and technology developers, the PREON Institute wants to become an international centre of “up to date” technologies, ideas and certification solutions.
In conjunction with the world’s finest universities and other experts in the industry, PREON will hold international conferences on the introduction of new technologies into state institutions, regulators, banking mechanisms, proposing legislative changes and due mainstream media, presenting the findings to the public.
A part of PREON Institute will also be the “Crypto Community Intelligence Council” (CCIC), one who’s of the major tasks will be ICO evaluation, offering certificates validating their legitimacy.
“The standards for ICO certification will continually evolve based on the stewardship of the CCIC which represents great progress for the cryptocurrency market and supports the economic progress of the country itself,” according to one of the founders of PREON, prof. Slobodan Slovic, PhD. Sc. from the Financial University of Russian Federation Government in Moscow and Russian Academy of Natural Sciences member.
Prof. Slovic is also a professor of finance and investment with a decade of expertise in the positions of CEO, investment advisor and member of the board of directors in banks.
The other founder is Asst. Prof. Marko Vidnjevic PhD. Sc., an experienced crisis manager, researcher, and lecturer at the European Academy of Sciences and Arts (EASA), Alma Mater Europaea (ECM) with a second doctorate in marketing and cryptology.
“By unique certification process and issuing golden and silver ‘Community Trust Certificate™’, the ICO fundraising process will be more filtrated, secure and more understandable for the community. Introducing new tools with the minimum set of criteria determined by the CCIC, the ICO founders will have a unique opportunity to improve their projects, as well,” announced prof. Vidnjevic.