The future of IPOs is blockchain

Is it possible to improve the traditional ICO by adding best parts of IPO? Let's figure it out
03 November 2017   63227

Nowadays, ICOs became very popular fundraising method. In 2017 amount of funds, raised via Initial Coin Offering is already more than $3B.

Bigger part of modern ICOs has little in common with Initial Public Offerings, or IPOs. Nevertheless, one company believes that ICOs with their innovative use of blockchain technology can replace IPOs, that have unchanged for decades.

The pioneer of online trading, Binary.com decided to perform and ICO instead of IPO as a  more advanced substitute. Binary.com ICO is scheduled for the end of 2017 and it will issue  securities-backed smart tokens tied to the company’s shares.

Binary.com
Binary.com

Let's take a better look at main parts of every traditional IPO an compare them to what  Binary.com is hoping to create through its “IPO on the blockchain.”

Company development stage

The bigger part of tokensales are considered as high-risk investment due to the people running them - young startup projects that need money to put their idea into practice or even individuals with questionable business plans. But an IPO is typically being held by the more mature company with business model, that works for decades and generate profits.

Binary.com is a firm latter camp member. It is a profitable and debt-free company that's been working since 2000. Its financial history and key financial milestones are fully available in the Information Memorandum for its ICO. In the near future, we may see more companies with similar track records to consider ICOs of their own.

Binary.com gross and net profit
Binary.com gross and net profit

Regulations and investor profile

Almost all ICOs are not regulated by a governmental regulator. They rely on self-regulation,  and the onus falls on the company conducting the ICO to decide on the extent of transparency and protection it wishes to provide to prospective investors.

Binary.com ICO advantages
Binary.com ICO advantages

Binary.com has designed its ICO to protect investors by adhering to best practices in corporate governance, investor disclosure, and transparency.

Listing requirements

The IPO performing companies must list its shares on a traditional stock exchanges after the IPO to sell them and provide liquidity to its shareholders.

Ordinary tokensales are not required to list on any exchange to provide liquidity to its shareholders. Nevertheless, Binary.com made an agreement with Lykke.com cryptoasset exchange to list its tokens after the end of ICO. This will allow investors to buy and sell Binary.com tokens, and, as a result, to increase their value. Lykke is a fintech company that’s building a global blockchain-powered marketplace for securities-linked tokens.

Lykke exchange
Lykke exchange

Beneficiaries and transaction costs

ICO gives no fees to beneficiaries, presented in any IPO, such as underwriter and the stock exchange itself. Additionally, when participating in traditional IPO, you will have the trading costs. Even buying a share is not cheap. Typical broker fee is $10 - $50 or a % of the purchase price. If you want to buy a share listed on the oversea exchange, local broker service is very expensive

No middleman
No middleman

And let's compare it to a cost of cryptocurrency transactions –– practically free when you’re trading directly with another person. If you are using the centralized cryptocurrency exchange,  you can expect to 0.1% - 0.3% fees.

Are ICOs are better for investors?

A blockchain-based IPO offers many more advantages, including round-the-clock trading, faster settlement times, international reach, plus an immutable and public audit trail. These cannot be replicated by traditional stock exchanges easily and we may see that Binary.com’s “IPO on the blockchain” is a new wave of financial market development on the blockchain.

DigixGlobal to Return 386,250 ETH to DGD Holders

Back in 2016, DigixGlobal raised more than 460,000 ETH (worth $ 5.5 million at the time) thru sale of DGX and DGD tokens
26 November 2019   282

DigixGAO, behind the DigixDAO ICO project, is considering the possibility of returning 386,250 ETH (more than $ 57 million at the current exchange rate) to DGD token holders, The Block reports.

Back in 2016, DigixGlobal raised more than 460,000 ETH (worth $ 5.5 million at the time) in the hope of “transferring gold to the blockchain” using an economic system based on two coins:

  • DGX - a token allegedly secured by gold held by The Safe House, a Singapore-based company;
  • DGD is the management token of the decentralized autonomous organization DigixDAO, responsible for managing funds raised during the ICO.

DigixDAO currently stores 386,250 ETH. At the same time, 335,450 ETH are in offline stores, and 50,800 ETH in online wallets.

DGD's market capitalization is currently $ 24.6 million. Thus, provided that the current price proportions between ETH and DGD are maintained, DigixDAO investors can profit after the liquidation of the project storage.

Earlier, DigixDAO holders supported a proposal involving the burning of DGD tokens in exchange for ETH from the company's storage. However, DigixGlobal opposed this proposal for fear that the US Securities and Exchange Commission (SEC) would consider the coins of the project as securities. The co-founder of the company, Kai Chan, noted that he would prefer such a mechanism to completely eliminate the DigixDAO storage and, consequently, close the project.

Now the founders of Digix plan to submit a proposal to the vote, which will last about one month. According to Chan, the DigixGlobal team owns at least 8% of DGD tokens. If at least 60% of investors vote in favor of liquidating the repository, then the project participants will free up funds for working on other projects.