Richard Kastelein ICO Insanity | Blockchain: Out of the Labs

So let me talk about a few ICOs. I worked on HumanaCare for, I don't know, about 3 months. Very interesting project. The first humanitarian ICO. Excellent. We raised $5 million in 3 weeks, 27 days. Our plan is to create an application and bring smartphones into emerging economies and give them to people so they can scan their face and we get biometric data. We give them a self-sovereign identity. That's great. And then we allow them to get access to Kiva-type loans. They can also earn money with their phones and mobile devices using similar services such as Amazon Mechanical Turk. And we have a direct pipeline between people in developed economies, a mobile relationship with someone that you maybe want to lend money to or donate money to. The currency will be HMQs. So we're not giving people dollars or shillings or anything like that. It's our currency. Our currency that people invested in in our ICO has what we call utility. So that means it's more than just a speculative coin that sits on an exchange somewhere and everybody's making money buying and selling, but the coin actually has value. So maybe if I invest in HNQs at the beginning and I get my, you know, 50% off in the ICO the first week, and I just sit on that for like 5 years, that may be— I may be able to loan €10,000 or €15,000 or $20,000 to someone 3 years down the line because the valuation has increased of the HNQs. From what I originally invested. Poland's Golem Network blockchain raised 82,000— sorry, 820,000 ETH worth $8.2 million in 20 minutes. This was a big one last November. A bunch of Polish guys nobody knew, but they had a great idea. They said, hey, Senti has a great thing going on with shared resources on multiple computers. Why don't we blockchain this? Well, they have— Eastern Europe has some of the top developers. As well as being the nastiest hackers, they're also some of the smartest blockchain people in Poland, Ukraine. iExec, last week they closed the— they did $12 million in 6 hours. Hello people, $12 million in 6 hours for a company that has a white paper and a good idea and a good team. 1997, '98, '99. Are we back there again? Is it a bubble that's going to burst? Good questions. Now, what's interesting about the people that are investing in this? The money's coming out of the Bitcoin, Ethereum world. We have what are called Bitcoin whales. Everybody that does an ICO looks for a Bitcoin whale. They want a whale. A whale is— despite all the discussion about the beauty of Bitcoin and how distributed it is, and I can go on because I'm a little bit of a critic as well— half of the value, the market cap of Bitcoin, is controlled by less than 1,000 people. That's a concentration of wealth that doesn't even exist in our own world, I think. Maybe, maybe not. But those are the people that we call the whales. And those are the guys that if they pull their money out, or girls, they affect the market because they have so much. 60,000, 70,000 Bitcoin, you know, or 100,000. Now those are the people that like to throw money at these projects as well because it's liquid. It's like, you know, it's Monopoly money. They got so much of this stuff. It's like, okay, let's throw $10,000 at these guys. We like that project. It not only helps stimulate the entire blockchain economy and Bitcoin, it's good for them. They got somewhere to put their money and just, you know, spread it out a little bit and make some more money in different crypto. Blockchain Capital, Brock Pierce. Does anybody know who Brock Pierce is? Blockchain Capital? Yeah, awesome. I talked to Brock actually in Bucharest a few weeks before we announced this. But, you know, to show you what had to happen, he had to do this through Singapore. He was only allowed to have 99 American accredited investors who could invest only so much, and then everybody else in the rest of the world got to invest as much as they wanted to. No problem. That's what he's having to do to be the first VC to do the ICO. He raised $10 million pretty quickly, I think in 6 hours. I see insanity. This is the one that happened last week. 300 million gnosis valuation sparks market reaction. I mean, it's just insane. This is like one-third of a unicorn in I don't know how many minutes. Liquidity is just crazy in a way. These are the guys from Consensus though. Everybody knows them in this space. Okay, these are the Toronto, a lot of the Toronto crew, like the Ethereum guys that came out of Toronto, Vitalik and the early crowd. The other one down in New York as well, some smart people. Great company called ConsenSys. Everybody knows who they were. They were cocky enough to say, we're keeping 95% of the coins, we're only putting out 5%. And they sold it for $12.5 million in like a snap of the fingers. And the valuation based on the numbers that they put out puts them at over $300 million. What are they going to do with that money? It's a strange startup, to be honest. I mean, it's a prediction market. So, anything goes. I don't know, I just read some weird stories about prediction markets recently, so I'm kind of uncomfortable with the whole idea. Upcoming ICOs. TokenCard, I love this one. You know, everybody's talking about how hard it is. I have a card in my back pocket, actually, it's a Visa card. It's a debit card with Coins Bank. I can take my Bitcoin out anywhere in the world out of any wall, $2,000 a day, no problem. You can't do that with Ethereum yet. This is an interesting ICO because not only can you take out your Ethereum from any wallet anywhere in the world into cash currency, fiat, whatever you want, you'll be able to take money out of any ERC-20 compliant coin. Most of the ICOs that are being done now, we're building what are called ERC-20 compliant Ethereum-based crypto coins. So it's compliant, it's in the Ethereum ecosystem. So it could be one of any 23 types of coins, you'll be able to use this card and simply suck it out of the wall. It's a debit card, basically. They're only raising $4.5 million. I expect that they won't last more than 5 minutes. They already have pre-orders, I'm sure, for half of that. Pre-orders? What are pre-orders? That's if you know somebody, you can get in. It's a bit weird, maybe that happens on Wall Street with IPOs, I don't know. I don't Maybe know. it needs to be regulated in some way. It's not yet, sorry. Now, this is another one I'm working on at the moment called SunContract. And it's about— it's really cool— it's about peer-to-peer energy trading on the blockchain. So we're going to run a trial with like 100 homes in Slovenia, where we're going to give them batteries and solar panels, and we're going to allow them to trade energy between each other. And we're going to have a currency, a coin called SUN, that they will use for that. So again, our currency has what we call utility value. If I invest in SunContract now, when these services go from Slovenia to Germany to the Netherlands to my neighborhood in 5 years, I might own enough SunContract coins to never have to pay for energy again in my life. Because that was kind of like a Ponzi scheme in a way, isn't it? But it's not. I just bought in at the right time. I got in early. I trusted it. I got into network value. when it was important, in the beginning, when we said, hey, you know, we think this coin's going to do something. And it has other value besides just, you know, how much did it go up today, or just sit on it for 5 years and see what you can do with it. I love this idea, I think it's great. So what we do, how do we run an ICO? People ask us. We've done 10 ICOs now in our little collective that we have of friends, basically. You know, we start off with what's called a pre-ICO, normally, for people that don't have the liquidity to do an ICO. We do something called pre. It's kind of a family and friends round, or the equivalent, where we raise about $250,000 to $300,000 for the marketing, the platform, everything to do the ICO. The people that get in that stage get 50% off the 50% off rate the initial week, so they get like deep discounts. And this is where the institutional investors want to go. We know this from Polychain, we know this from some other investors in Toronto, and New York, who say, that's where we want to be, at that earliest stage. So it's not even hard for us to raise that money right now. If we've got a great project like this, we just send out the feelers and we've got half a million dollars, no problem. So we do the pre-ICO, we raise the money to do the ICO. A good ICO now costs about $200,000. If you want to do China right, if you want to do your bounty programs, if you want to do your hiring, translating into 6 languages, you want to have your— Twitter teams, you want to have, you know, the great landing page, all the stuff, the white paper professionally done, your code audited. Everything takes money. It's not cheap. We also have something really cool because we create our own money, which is great. We make it up, Monopoly money. We actually take a percentage of the money and we put it into what are called bounty programs. So we say, oh, okay, everybody at BitcoinTalk, we're doing bounty programs for social media. Who wants in? And we have some software programs that actually do this for us, but they join up and they get rewarded in our currency for promoting our ICO in their networks. The money that we just created, which will have value after the ICO at some point. So it's not even real money at that point, it's just— they're getting into it because they're going to get rewarded in a currency. We're not paying them cash, we're saying, okay, we'll give you guys— we'll take 1% of our total raise, or You know, if we're looking for $10 million, that's $100,000, and we'll distribute that in bounty programs. We can also do bounty programs for the code as well. Maybe we've got 80% of our code written, we want the community to hammer it. All the best smart contract writers are usually out there beating us up anyway at every ICO, screaming scam, there's something wrong with the emission model. Yeah, let's pay these guys as well. So we actually crowdsource our marketing heavily. And our innovation. So we're talking crowd, crowd, crowd. The word's being repeated a lot here. Skudo, also another one, a Russian one's coming up, it's very interesting, trying to bridge the real world and the crypto world on a number of levels, from cards to trading desks, a Bloomberg kind of interface. They raised $4 million before they even did their ICO. I think they started yesterday. Bancor. Bancor? I know there's Bancor people here somewhere. Yeah, great project, great friends. I met them in Israel as well. They're gonna have an arbitrage coin that will do the long tail between all the different emerging smaller cryptocurrencies coming out. Fantastic idea, a way to bridge between all these. I'll let— I'm sure that will get explained better later in the next panel. So the first purchase with Bitcoin was two Papa John's pizzas for ten thousand BTC. Today, ten thousand BTC is worth about I don't know maybe twelve million. Those are the twelve million dollar piece six million dollar pizzas, right? Or one BTC could probably buy you a hundred pieces today. So that's how I used to explain to people when I talk about the energy thing as well, or a coin with utility value. Because we know that if you buy into that coin early, it's maybe one. Some coin to 1 kilowatt of energy. But because we capped it at a certain amount, it only can go into the lower denominations. So then it becomes like 1 kilowatt of energy will cost you 0.005, or like Satoshis, we start going into smaller denominations. And we can do that. We can go into meta, we can go into nano even if we want to, for machine-to-machine transactions. Something you couldn't— we can't do with fiat currency because there could be— Clearance costs are too high, just for, you know, you're not going to make any money on anything under €25, basically, or dollars. So this is my company, it's called Crypto Assets. We've worked on 10 ICOs. We do end-to-end, we do a bunch of different things. Happy to give anybody an hour if you want to learn some more. Hopefully not all at the same time. These are some of the projects we've worked on. Escudo, Sphere, Chronobank, Token Card. Yeah, we're really excited to be part of this. We've got a great team including John Klippinger from MIT, token designer named Jake Vartanian, American, Diana Biggs from London, she's a Canadian also, myself. We have a Chinese partner named Jane Zhang who's sort of the blockchain Queen in Shanghai, more or less. She's got a very interesting platform called Skyledger. We also have Christina Frankopan from London, who's a VC, Cambridge. And we also have Venkat Rassoo, who's from Bangalore, who's an investor as well. We're helping him understand the playbook, so hopefully in the next 12 to 18 months when ICOs hit India, we'll be part of that revolution. Also in China, so. That's it. Event coming up in London in July if you guys want to come. It's called Crypto Financing, and we'll be discussing all this stuff with the European community. Thank you very much. Thank you.