Token holders' reward is the opportunity to use the product or service which would not be available to them without a token. Think about it as an exclusive private club in which only the members get access to certain discounts, economic benefits or offers – says Anar Babaev, co-founder and CMO of ICOBox in Bithub.pl’s #SundayInterview.
ICO is essentially a form of crowdselling. However, there are quite a few crowdselling platforms in the internet, many of them addressing specific types of projects. Why would ICO be better than, say, Kickstarter?
Anar Babaev: Indeed, as a crowdsale technology ICO is similar to Kickstarter, with one major difference: since it is implemented on blockchain, it is much more secure and transparent. It is a tool for conducting sales of tokens backed by specific readily available products and services – not just a bright idea or a pie in the sky. Kickstarter targets general audience, and although until recently ICOs tended to focus exclusively on high-tech blockchain projects, ICOBox intends to shift the situation by bringing into the fold non-blockchain startups that are seeking new markets for their products and services.
Effectiveness of crowdselling depends on reaching the target group. However ICO is a rather mysterious term for the majority of entrepreneurs and internet users in general. How a company carrying out an ICO is supposed to gain token buyers? Doesn’t it take a big and costly marketing campaign to make it happen?
AB: The key to success is to capture audiences that are already familiar or are curious about blockchain and fintech industries. Token sale campaigns are usually a rather short affair, lasting from several hours to a couple of months: A startup will not really have the time to educate the general public about an entire new industry. But if users already have even a passing familiarity with blockchain and are interested in what a specific ICO may have to offer, they are much more likely to test the blockchain waters by buying the relevant tokens.
How are token holders usually rewarded for their participation in the project? Do they in any circumstances get a share in the profits of the enterprise or is the compensation usually limited to some kind of rebates for the company’s goods and services? What other rewards can be used by token issuers?
AB: No. Token holders never acquire any shares in the company, its assets, or liabilities. The token holders' reward is exclusively the opportunity to use the product or service which would not be available to them without a token. Think about it as an exclusive private club in which only the members get access to certain discounts, economic benefits, or offers.
It would be perfect if the ICO issued tokens were exchangeable currency, circulating in the crypto market, that could be sold for bitcoins. Does it happen sometimes?
AB: Yes, after they are issued, many privately issued tokens enter the general market by getting listed on cryptocurrency exchanges where users can freely buy and sell them. ICOBox is currently wrapping up its ICOS token sale, which has already collected almost 3,300 BTC. With the funds we receive we plan to launch 800 new ICOs over the next year. Our ICOS token holders gain an additional market advantage: They will be able to exchange their ICOS tokens for tokens of many new projects issued with the ICOBox’s tools at the ratio of 1:4.
Plenty of ICOs have been successful but many of them failed. Opinions that ICOs are scam are not rare in the internet. Has it reflected badly on the ICO reputation? How can potential token buyers find out that a company rolling out an ICO is legitimate and not trying to trick them out of money?
AB: Caution is the name of the game. Indeed, there have been several ICOs which failed – the DAO being the most spectacular of them. Some ICOs conclude successfully only to have the value of their tokens take a sharp dive. Generally speaking, potential token holders are advised to do their own due diligence: carefully study the project’s website and White Paper, study and assess the team members' LinkedIn profiles and professional reputation, evaluate the project’s transparency and financial arrangements, engage with the project founders and read reviews, and finally make their own determination of the project’s worth to them personally – are they interested in the product or service the project is offering? Will it be of use to them? Nothing in life is guaranteed – not even life itself. But prudence can save a lot of later heartache.
Interviewed by Przemyslaw Cwik