I think its safe to say the ICO model has been a revolutionary way of raising capital for your startup and really has plenty of merits like allowing smaller investors to take part in opportunities that traditional capital raising would normally exclude. Companies can bypass so much red tape, effort and save time compared to raising money via an angel investor, venture capitalist firm or going public (which is highly unlikely for many companies opting for ICO's)
Getting this quick cash injection allows businesses to become sustainable for a period of time and allows them to be agile in their decision making which is important in the tech space. Some ICO project's also try to provide investors with additional value by means of utility tokens with the coin being used as a commodity to drive the service or product in future once its launched, giving the investor the opportunity to not only cash in on his initial investment but the ability to transact on the service with the coins they were allocated.
Abuse of the ICO model
For all its merits and freedoms the ICO model has attracted some nefarious characters and without regulation, it's easy to see why. ICO's have zero accountability or legal liability on investors funds and there have been countless exit scams, scamcoins and shitcoins raising funds for the sole purpose of making the founders rich and nothing else.
ICO scams are rife and sucker in new investors each week. I've even begun a shitcoin of the week blogging series to help educate investors on scam and shitcoins currently in the market and why I feel they should avoid them.
Check out Shitcoin of the week here:
Competition for ICOs
As the ICO market becomes more competitive many projects can be drowned out by ones with bigger ones and with scam coins taking out valuable market share many ICOs may not be fully funded as they once were.
So whats the alternative?
If we regulate the ICO market we go against the principles of decentralisation and a trustless environment and once we let regulators in they pretty hard to get rid of and could choke the industry as a whole leaving many promising legitimate products dead on arrival. Yet if we do nothing we will only continue to see scam and shitcoins stealing precious market share that could have been used on better projects and kept investor confidence in cryptocurrency.
So what are our options? Blockhive and tokenote would like to propose one, called an ILP or Initial Loan Procurement.
What is an ILP?
Initial Loan Procurement (ILP) is a new fundraising solution that will change how organizations fund projects. ILP makes it possible for individuals around the globe to become a creditor by contributing to projects or causes they believe in and receiving interest payments.
The first of its kind, ILP is a digitalized loan agreement that is legally binding with a new token designed to make it easier for creditors to transfer their loans as they wish. Future Loan Access Token (FLAT) enables creditors to trade the loan agreement, and it gives new token holders the right to sign the loan contract with borrowers, adding a layer of liquidity and flexibility.
An ILP’s potential lies in its flexibility in usage. Since it is conducted in the form of loans and on a global scale, ILP helps you access capitals needed to fund projects for both private and public sectors.
The ILP model claims to be simple, comprehensive, legally sound, tax-friendly which remains to be seen until it is actually done in practice.
How does an ILP work?
Token
ILP structure issues Future Loan Access Tokens (FLAT), which are a form of “access tokens”, so creditors can transfer their loan agreements to others. Tokens will be issued to the creditors who lend funds to the company. Each company using Tokenote ILP structure can brand their tokens as they wish.
KYC
User identification and verification are a critical function to prevent fraud and anti-money laundering. Such procedures, or Know Your Customer (KYC), need to be completed before loan agreements can be digitally signed. Agrello ID, a digital identity and signature solution, provides the support necessary for Tokenote's ILP system.
Cryptocurrencies
Tokenote ILP structure, developed by blockhive, is based on cryptocurrencies. The creditors lend in cryptocurrencies and receive FLAT tokens. Tokenote can support cryptocurrencies including Ethereum.
Loan Agreement
Each creditor has to sign a loan agreement, before receiving FLAT tokens. Tokenote's ILP system uses Agrello smart contracts that can be digitally signed using the Agrello ID. Each contract is recorded on the blockchain.
**A short video explaining the ILP process**Who is Blockhive and Tokenote?
Blockhive is an Estonia-based blockchain company with roots in Japan. They aim to use blockchain technology to create practical and innovative solutions for companies wanting to raise funds in this space and help them with responsible access to funds. blockhive is developing an ecosystem for the incubation of projects that have the potential to benefit from blockchain technology.
While Tokenote is a joint venture between Agrello and Blockhive. The two companies together developed the ILP structure as a solution for businesses that need funding. Utilizing Agrello ID, its legally binding loan agreement, and blockhive's FLAT, they are able to bring the power of accessing borderless capitals along with financial regulation to the market.
For more on running an ILP check out:
My view on ILP
While the legitimacy of the company and the project is still in question the concept and idea they've put forth is a solid one. Whether blockhive and token node are the companies to take his fundraising model forward remains to be seen.
I do feel the ILP model holds value and will become more popular as investor confidence is lost in ICOs or regulation is passed. In the near future, an ILP could end up being the most important option the industry has for those looking to ease many of the pain points in the ICO space.
I'll keep an eye on this space and if i find a promicing ILP i'll definately share it on my steemit blog and try to partiicupate in one should I have funds available.
Have your say
What do you think of the ILP model? Would it be helpful for tech companies looking to raise funds? Do you think the ICO model is broken and being abused?
Drop me a comment and let me know what you think!
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