In earlier posts I discussed how cryptocurrency based tokenisation opens up new ways to representing and trading assets worldwide (see Part 1), and discussed what types of assets are best for tokenisation (see Part 2). In this post, I’m going to look at platform and non-platform based approaches to raising funds in ICOs.
I will start with a bit of a tear-down of platform -based approaches for token based ICOs.
Generally speaking, successfully launching a platform is better and more lucrative than launching a product. That’s why Microsoft made so much money off DOS and Windows, Apple makes so much off iTunes, and Facebook …exists. Platforms allow companies to make money as transactions intermediaries, as rent seekers for people wanting to use the platform, and finally as a platform for the platform owner to launch products that implement the most lucrative aspects of applications that have been implemented by other people on that platform. However, successfully launching and sustaining a platform is incredibly hard. Just ask Google that has spent billions of the money it made on search, subsidising its efforts at competing with Apple. First mover advantage and the ability to execute flawlessly are key. Building a platform means getting your potential competitors to stop being suspicious of your intentions, making the value proposition in terms of their clients so unbeatable and cheap they want to join you. It also means doing the same thing for their clients on the other side. So it’s a lot of work, and the matchmaker of a product between providers and clients has to be so well executed means that unless you are creating an industry, or you are Microsoft and IBM wants to gift you an industry, or like Google or Amazon, you have unlimited reserves of money to burn, you’re going face a tough time.
However, the amount of money on offer is large and some people might be correct in assuming that the cryptocurrency industry is so new and immature that there is actually first mover advantage. However, that doesn’t get rid of the cost and product execution requirement. You may be early on the spot but your platform still needs to be good enough for people who don’t like you to want to use it. So, you’re running an ICO to make the money, which you obviously don’t already have, to get your one shot at making the platform good enough it’s going to take a lot of money off the backs of others. Sounds a bit far-fetched, a bit of a hail-mary, and a great recipe for wasted money (if you are being truthful about the use of your ICO.) If you’re poor enough to run an ICO, you’re probably better off building a product that you could possibly turn into a platform.
And so that leads us to the second more direct approach building the product before the platform, i.e. make sure you can get a horse before building a cart. If you read my earlier pieces (here and here ) you will know that I commented favourably on both tokenising real estate worldwide as well as doing it with acquisition of assets rather than pure income streams. So I’ve looked at a few different real estate plays in cryptocurrency ICO space, such as atlant.io, realisto.io, and caviar.io, and all appear to take what appears to be a no-brainer, global investment in tokenised real-estate, and make a lot of noise about platforms. In fairness to Realisto, after reading the song and dance about building a platform it is clear they are implementing their projects first to get momentum and return money to investors, then moving to “waste” money on platform and software. Caviar appears to be favouring income streams and discussing a platform involving sophisticated algorithms which, let’s face it, is for lending out money for mortgage income streams and …may not need it. Goldman Sachs may need sophisticated lending algorithms but this may be a little premature. Atlant.io sounds like it has been sinking investor money into building a DAO (lord help us for such ether-eal dreams), then a platform, for whom to use, I wonder.
Continue reading “Platform or not ? (Tokenisation Part 3)”