Crypto Invest Summit LA, 2018

It was exciting upbeat mood in the Crypto Invest Summit 2018 @ LA Convention Center and everybody looked exciting and curious about the crypto world.

I joined the conference with the discussion — Past Present and Future of Block Chain with Steve Wozniak, Apple co-founder on the Main Stage. Steve shared his passion for this technology and compared the excitement with the Blockchain technologies just like the time people were excited about computers and internet how to make it available to the masses. His advice on developing new services was to keep it simple like Apple pay.

I moved over to the Security Token stream where they were talking about designing a Security Token. So to summarize, there are different kinds of token in the Crypto world:

1. Utility Token (ICO)

2. Security Token (STO)

A token is a utility, an asset or a unit of value issued by a company. In most cases, tokens are issued when a company launches an initial coin offering (ICO) — that works more or less like an initial public offering (IPO). You receive a stock or Token in exchange of your investment.

Utility Token:

Utility Tokens provide access to the products or services offered by a company. They are not created to be an investment and hence Utility tokens are exempted from regulation and security laws. They just offer a future service for which the company is raising funds. There is no guarantee that the company will deliver its promise in future. The price of a Utility Token in the market will fluctuate based on the speculations about their services/progress.

As of now, Utility Tokens are not regulated by SEC and it can happen any time in future. With ICO’s raising over 6.3 billion in Q1 of 2018 it is clear that crypto market has grown much faster than expected, leaving regulatory people in the dark wondering how to approach this new budding industry.

Some typical examples of utility coins include Filecoin, which managed to collect 257 million dollars by selling tokens which will provide people with access to its decentralized cloud storage platform.

Security Token:

A security token is a digital asset that derives its value from an external asset that can be traded. Therefore, these tokens are subject to federal laws that govern securities.

Then main difference between an ICO and STO is that , STO is backed up by an asset and you are trading the asset based.

To understand what security tokens are, it is crucial to understand securities. Securities are tradable financial assets such as bonds, shares (stocks) etc.. And if we take the example of stocks, you might understand that it is a way to own a part in a company without taking actual possession of it.

Companies and governments use this method to raise money from capital markets from various investors. And then these investors are promised a return back programme in the form of dividends or interest rates or share of company’s profit in some form or other.

In simpler terms, security tokens are cryptographic tokens that pay dividends, share profits, pay interest or invest in other tokens or assets to generate profits for the token holders. This takes care of the liquidity issues. Imagine, your dividends being paid to you on a specific date upon meeting a certain condition via a smart contract!. All these programmabilities can bring in a lot of automation and swiftness to the whole process because after all, you are creating programmable security.

Why is the market so bullish about STOs?

1. Programmable Equity

As mentioned above, many features of the STO can be programmed and automated using Smart contracts, which make it much faster for the customer and give it more control for the companies that issue them.

2. Micro Investment through STOs:

Tokens can be made more affordable and have more liquidity than the equity and hence can be accessed by more people.

3. Global Access:

The STOs can be globally invested, 24/7 and hence have more reach to the masses.

4. Elimination of Middlemen:

Programmable smart contracts can do a lot help in removing the middlemen, which make the service more affordable to both parties and also making the system more efficient.

5. Direct access to Customer:

Direct global access to the customers through DApps wil make it more universal.

Security Token Market is still not mature and need a lot of infrastructure yet to come.This will require the development of a whole new infrastructure for security tokens because the old model is too old now. Securities token will need:

· Marketplaces/exchanges

· Custodians

· Wallets, etc.

There are only a couple of Exchanges that can trade security tokens and a lot new ones are coming up 2019. You can get more details here:

https://www.cointelligence.com/content/security-token-exchanges-launch-2019/

https://medium.com/@tatianakoffman/your-official-guide-to-the-security-token-ecosystem-61a805673db7

And there are a huge assets waiting to be tokenized from Real Estate, precious metals, IP etc. and it has no limits on what could be tokenized.

That is the reason why everyone is bullish is that they can see tremendous opportunity in this space.

Now back to the Summit.

There were lot of discussions on how to start a security token and the people involved in the discussion were the ones who have already done this in US. SPiCE VC was one of such companies, where they tokenized the VC investment last year.

Crypto Trader Live Taping on Stage:

On the second day, there was a live taping of CNBC’s Crypto Trader show by Ran Neu-ner and you can see that episode here:

https://www.youtube.com/watch?v=NDhGs9DGvGU

The following were some of the topics discussed on the following day:

Issues with the Crypto Industry:

· Infrastructure:

Ethereum is a stable platform, but it has got scalability issues. A number of enhancements including the Proof of Stake instead of Proof of Work is still in progress and has no ETA as of now.

You can get more information here on this topic:

https://www.bitdegree.org/tutorials/eos-vs-ethereum/

Alternative block chain platforms have emerged like EOS, NEO, Stellar, TRON etc.

You can find a comparison here:

https://nulltx.com/neo-vs-eos-vs-tron-vs-stellar/

· Lack of Regulation:

ICO are highly volatile and often misused and hence a regulation in this field was on top list. STOs are a good step in this direction and hence there was a lot of hope there.

Even there is a need to regulate the Crypto exchanges.

On the product side there was a number of products floating in the market already:

· TOTLE : Offered services to buy an ICO comparing multiple exchanges straingtht to your wallet. They were one of the main sponsors of the event.

· ABRA : Provide a simpler way to crypto investing thru mobile app.

· OWNERA: A UK based company which provides an asset tokenization platform and they are going to be launched soon.

· NETKI : is a B2B service which provides tools required for this industry. One of the example is KYC including the back ground checking and they link your finger print data to the background information.

· BIT IRA: Makes it easier to transfer part of you IRA or invest in IRA that isbased on Crypto currencies.

· BlackMoon is a major player in the STO field.

· Block Quake: A regulatory driven security exchange

To summarize, there were lot of upbeat mood throughout the summit about the possibilities of Block Chain and Crypto currencies for the years to come and it is a new field not yet explored and hence an early player has got a lot of advantage, whether it is a company or a developer who are trying to explore this field.

Let’s hope for the best in the coming years!