The future of tokenization and blockchain is not just ICOsOn October 11, 2017 by Sally
Blockchain business case variety seems secondary in the conversation around blockchain hype. Tokenization on a blockchain system has received attention around the world with the increasing prevalence of ICOs (Initial Coin Offerings).
For those who continue to see “ICO”, but have no firm understanding of the definition, here’s an over simplified version. An ICO is a way a company can raise funding through using cryptocurrencies such as Bitcoin. This works by the company creating its own coin, perhaps the ClaytonCoin, and those interested in purchasing shares in the company can trade their Bitcoins for ClaytonCoins. A ClaytonCoin then supposedly represents a share in the company, but, to quote Smith + Crown:
“Most ICOs today are marketed as ‘software presale tokens’ akin to giving early access to an online game to early supporters. In order to try to avoid legal requirements that come with any form of a security sale, many ICOs today use language such as ‘crowdsale’ or ‘donation’ instead of ICOs.”
The unregulated nature of ICOs caused China and South Korea to ban them. On the other hand, ICOs in the US have found much success such as in the case of Tezos raising $230 million.
Even with successful ICOs happening in the US, tokenization built on blockchain is under utilized in terms of its potential. I ran into a start-up called, FundersToken, at an after party for RISE 2017 that is trying to fix this. FundersToken is a CRM software-based company, with the backbone of tokenization. Their software with blockchain technology offers business augmentation and digitalization. Their goal is to allow business with no blockchain experts to use tokenization for various business functions. These include exchange of goods/services, voting, equity transfer (ICOs), and dividends.
Voting and governance through tokenization has been done through Distributed Autonomous Organizations (DAOs). While in an ideal world the voting rights would work very similar to standard governance in companies, but there are again no regulations. This may prove to be an issue in specific scenarios. Yet, many VCs point to tokenization as the future of governance in addition to funding. Another article from Smith + Crown contains great comparisons of the Pros v. Cons.
For this technology to be industry changing, more companies like FundersToken must come forward and include the nontechnical. As a technology evangelist, there is a duty to be patient with the ignorant and help encourage productive uses of new technology. The worst thing that could happen for the future of blockchain is association with only ICOs. That is not to say ICOs don’t promote blockchain properly, in fact, it’s the exact opposite. But, imagine if when the Internet was gaining popularity, the only thing the Internet was known for was digital media. Sure, people would be thrilled to hang on my every word, but it would miss the greater potential.
The founding team of FundersToken will be joining myself and the rest of the ReadWrite team on WeChat to do a live AMA about both their product and tokenization within a week. If you would like to participate, feel free to connect with me on WeChat: