The Only Sunshine When ICOs are Grey

On the Relevance of adToken
Image by mechanoid

Two Checkpoints for ICOs

New-technology-induced investment bubbles are utilitarian. They last moderately long and do not prohibit life-changing profits for those outside the financial industry. They also create naturalistic startup incubators and subsequently take humanity to the next technology level.

Let’s look at bubble-time investments once more. If the dot-com bubble taught us anything, a primitive but important tool to avoid poor investment decisions was to stop for a minute and ask yourself “can a player in this market segment really win from super-magic connectivity of users and providers?” Buying groceries over the Internet always looked more klutzy than booking a hotel online, so there we have the contrast in values of investments into Webvan and Priceline, respectively.

However, a bigger and nastier disequilibrium lurked elsewhere: at the time of the bubble growing, it was clear the online stock trading segment itself was already benefiting from a fast and convenient telecom tech while Internet-induced advantages for virtually every other business were dubious. Thus, the service-level infrastructure has been heating up the market itself while it was supposed to be detached and limited to the delivery of buy and sell orders.

Today, deep into the crypto-assets bubble, I place the same blood test construction on it. When I try to inspect a company behind an ICO questioning whether it can really win its competition by going “decentralized” or “blockchain-ized”, I try to compare three alternatives: (1) the best of competing incumbents; (2) the proposed decentralized approach, and (3) a sober hybrid of the two. Projects that abuse the entire decentralization concept are rare but those who overcook it are not.

Straight Talk About DecentralizationWhat If Payments Were Already Decentralized Hundred Years Ago But We Haven’t Noticed.decentralize.today

The second (stricter) checkpoint inspects whether the project behind an examined ICO has over-average chances to survive the inevitable coin market crush. Just as during the dot-com times, the infrastructural incentive eclipses the project-level interest. ICOs are, to large extent, “unintentional scams” where even good teams get spoiled by easy money.

One way to tell a good offering from a bad one is to ask yourself whether the system given really needs a freely traded “native” blockchain token. Until yesterday, the only project that — according to my own common sense, of course — passed both checkpoints with ease was Bitcoin itself. Although, as you can see from the article linked above, I don’t think its particular take on decentralization of payments is exactly a winning type given current circumstances, Bitcoin is way better compared to its competition (FRSs+visas+ingenicos) and its inner coin not only makes sense, it is the sense itself.

Grey Business of B-plus Club Members

There’s nothing wrong with speculating the money (bitcoins, for example); I guess we even must trade it to make it money. The Bitcoin ecosystem doesn’t need to host players with aligned incentives. It naturally grows on the soil of conflicts. But trading with network protocol elements of a global computer… well, that idea is notoriously lax.

Years have passed since I started to interact with the Ethereum idea. I appreciate the point it raised, but I still don’t see an ideology of clarity close to that of Bitcoin.

To answer the question whether Ethereum can do better against the competition using the blockchain tech, one must first name the competition, i.e. to state exactly what it is that Ethereum sells. Smart contracts? There was no such thing to date and there’s no such thing yet since no one uses Ethereum to, say, pay dividends automatically. Maybe a more narrow take would work, like “programmable money”? Perhaps, but we still have to wait and see. Chances are there’s no timely demand for that sort of thing. Who are the longtime incumbents of Ethereum attacks? Lawyers? Notaries? IPO underwriters? I don’t know. So I can’t easily pass Ethereum through the first of my checkpoints. I can only do so conditionally, with obligations imposed to come back next year with homework redone.

I am neither convinced that a decentralized computing system should operationally depend on the irrationalism and greed of some traders. With the current variety of consensus mechanisms and ledger designs, “there’s no other viable option” is becoming an increasingly untenable argument.

In the case of Ethereum, a closed-loop “virtuous incentives circle” has to present itself and I don’t see it. Interests of large ETH holders, platform developers, hosted project developers, project investors, and project users do not look clearly aligned to me. Why otherwise would this world computer attract coders whose work is quite one-dimensional — the grey business of ICOs.

It was Ethereum, at least allegedly, that helped to inspire the ICO’s new identity. Ethereum’s own oddness is already dimmed on the background of many, many successful ICOs that lack both core decentralization motive and general meaningfulness.

Wild Delights of Wild WorldsOn the doorstep of the ICO bubble burst: saving our asses with zoningkeepingstock.net

As WhalePanda puts it: “Have you heard of primalbase? It’s an ICO with a token for shared workspaces. Why would a shared workspace need its own token? It doesn’t, it really really really doesn’t… First thing that an advisor should’ve said in this case was: ‘Don’t do it, it’s stupid, it makes no sense.’ But well there we have Mr. Ethereum himself. We all know that Vitalik has a cult-like following with the Ethereum investors so it will be very easy for primalbase to launch their ICO and use Vitalik’s face and name to get itself funded.” Coincidentally, in less than thirty hours after this article was published, Vitalik publicly pre-committed to only support a single ICO.

How many of those ICO-ed projects which exploit the “power is in decentralization” idea actually make sense?

Now, behold the power of a ray of light in the realm of darkness!

But that was yesterday and today brought us some positive news.

Disclaimer: I have nothing to do with adChain or MetaX. I am not acquainted with any of team members. It’s just when I read their whitepaper I was fascinated. Unfortunately, they use Ethereum and I don’t know how much of that is because the team is part of ConsenSys.

What gives adChain some big extra social standing among the neighboring ICOs is complete, full intelligibility.

I think the value of adToken should have some strong support because it is a rare example when an open market for a token is both a necessary and useful thing, not just a crowdfunding tool.

The adChain Registry project intends to fix the colossal problem of online advertising. Unlike tokenized shared workspace or even global lack of distributed computing, this problem is twitching. As James Young puts it, blockchain can do much in the way of “coordination cost savings” for the ad industry. And they call everybody to come and help. Decentralization at its best! I think it would be well to acquiesce in their call.

Why has coordination become an issue in advertising after all? Project authors point to systematic fraud and misaligned incentives within the RTB and other frameworks, but I suppose the problem is broader.

The root of evil is that the Web itself has lately become dominated by pseudo-science. In other areas of life, pseudo-science serves only as a reserve player and is mainly let out in bush league fields. Homeopathy, for instance, has comparatively small global revenue share. Psychotherapy and Feng Shui are only popular on a limited number of markets. It’s not so in the consumer Web.

The general recipe of a pseudo-science is to “look scientific”, i.e. to calculate something and formulate some “Laws”. A pseudo-science has a hard time surviving through an initial period of public acceptance, but if it’s lucky it can later exist for indefinitely long. Once people get used to a practice given, they stop questioning it and assume something being “scientifically proven once and for good” giving it the same level of respect as a GPS they use every day (which uses conclusions such as the theory of relativity to function). Unfortunately, in the Web, very few oligopolies have managed to persuade their false version of attention economy “science” so it has gained broad adoption.

The dominant “cost-per-mille” and “cost-per-click” advertising models pretend to be well quantified and efficacy-correlated (at least, compared to offline ads). They are not. The models are too primitive and easy to fool. The same is true about the main method of measurement of content quality. “Likes” surface up a lot of junk content. Again, this sort of quantification is trivial and its dominance buries much good content under tons of “popular” and yellow stuff. As the result, everybody loses: users suffer an ever-worsening average level of content quality and obnoxious ads, while brands have less and less utility from advertising that now seems to be a systematic fraud of bots with the ad-blocking fireball on the downward spiral orbit.

Worst of all, the closed circle of evil was created on top of those feedback loop abuses: publishers and dozens of breeds of online advertising segment inhabitants have learnt how to make more and more money on the problem, although in short-term only, now ad-blocking seems to be killing all of it including the free Web itself, but that’s another story. Anyway, online ad space has become a complete mess:

The adChain Registry is a witty take on the problem. The devs say: “forget about everyone but publishers. The problem to focus on is the dirty pool of ad inventory supply.” And rightly pointed out, as a brand manager who needs to advertise, one has little chances to have ads placed on good websites only. No matter how hard you try, unless you do it manually, one-by-one, limiting your exposure to very low levels, your brand will certainly be exposed on the wrong sites with inferior content, which, not uncommonly, steal your ad money.

So, we [the people] will now decide which publisher is good [yes, the binary decision] or bad. Let’s heal that [most important] segment “forcefully” and the rest of things will catch up. No need to mess up with the over-complicated ecosystem of programmatic (RTB) relations whatsoever. Let the wrongdoers die from suffocation once we take poison gases they breathe away from the room.

adChain Registry is building an economic game (play for money) and a clean pool of ad inventory supply.

Fair and Effective Incentive Cycle Between Advertisers, Publishers, and Public

So, this time I see some good tokens serving the good. Public = token holders. Token holders filter good publishers [domains] from fraudulent and low-quality ones. Important: token emission is one-time-forever; token is money, and participants play a profitable game. You, as a token holder, can pick any website that is not yet marked good or bad. Publishers are part of the public so they will try to whitelist their sites. If a player thinks the site is good and he also thinks that other people may also think it is good, then he bets some tokens on it. If the vote result is in his favor he wins money, otherwise he loses. The crowd voting could well be biased. However, in most cases, voters should act rationally and settle in productive “teams” for or against a particular applicant’s domain. I’m simplifying it here but the essence is that those who perform good diligence can win some tokens and those with poor judgment or wrong intentions will lose tokens.

Since people who need advertising will quickly learn about the Registry, more and more publishers will want their domains whitelisted so they will need to buy tokens to place bets on the game. That closes the demand circle. The price of the token will grow with the popularity of the docket.

The “game” effectively decouples the incentives of those who decide which publisher is good (the public, i.e. gamers) from those involved in the advertising business. adChain does not fix the problem, but it allows the advertising industry to see the line where the fraud starts.

Could All this be Done with Bitcoins Instead of Ethereum-based Devoted Tokens?

Say I want to contribute to this crowdsourcing thing and start helping clean the Web. My incentive is to win some money in this game. This is essentially like going to a poker house. I have no problem with buying chips [pegged to the money units] at the entrance and converting them back when I leave. But will it motivate me any stronger to play if I have to buy and sell chips on the open market? Nope. Thus, by introducing adTokens, do developers deliberately limit the applicability of the application and [maybe] the quality of the Registry as well?

No, they don’t, considering the general balance of things. Listen to Mike of adChain: “Imagine if you were allowed to use real money to play Monopoly: your richest friend would always win. The same is true in adChain. The total value to the advertising industry of a decentrally curated whitelist is never going to be as high as the total value of the Ethereum world computer (or Bitcoin). While it would be painful for an adToken owner to do irrational things like approve bad publishers (because it would make the adChain Registry less valuable to advertisers and send the virtuous feedback loop into reverse, ultimately making their own adToken less valuable), it wouldn’t substantively damage the value proposition of Ether if _this one application_ [AK: adChain Registry] on the world computer stopped working well. So adChain could be trolled.”

____

adToken ICO Snapshot (subjective opinion)

Product viability

Is the service offered of high and timely demand? Are there incumbent players doing this sort of business the traditional way?

Yes

Blockchain applicability

Are decentralization, “trustlessness”, and other qualities of the blockchain technology going to provide a notable leverage for a player in this business segment?

Yes

Meaningfulness of the token

Considering what this token is technically, is this setup reasonable? Is the project’s “native” token meaningful? Does its existence add much value to the product/service?

Yes

Development stage and prospects

Is the development in an advanced stage? Were there tests of the MVP? Can we feel convinced the team is capable of taking it to the finish?

No

Promotion and ICO support

Can we rely on the support team so they won’t miss a wondering potential investor? Is the overall marketing level of the promotion campaign satisfactory? Does the team look and sound qualified enough by making their statements?

Yes

Resource management

Does the team look like proper business executives and managers? Is their “use of proceed” chapter reasonable? Can we be sure they will use the resources smartly?

No

Token sale scheme

Are all potential technical concerns about the token sale structure excluded? Can we be sure no issues will rise with built-in inflation or inaccessibility of free trade? Is the cap reasonable? Can we hope that market makers will behave well?

Yes

Public sentiment

Is the public sentiment positive? Should we expect the crypto-community to accept the token well? Can we hope our expectations of the price rise will be justified and supported by the crowd?

Yes

Team background

Can we say that the team’s quality is a good stand-alone factor by itself? Do people involved have enough community “karma” and charisma to attract investors?

Yes

Degree of realism

Looking at all factors, can we say that this project can soon become live? Abstracting ourselves from its investment attractiveness in the ICO terms, should we hope people will actually use the promised service in the near future?

No

Score: HIGH (7 of 10)

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