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ICOs

ICOs, Token

What is Trans-Fee Mining?

June 27, 2018 • By

The “Trans-Fee Mining” model seems to be growing in the smaller, exchanges as evidenced by a couple of recent news stories on FCoin and Bit-Z, CoinBene, and BigOne. Liquidity challenged, smaller, cryptocurrency exchanges compete for users and funds. Exchanges adopting this model seem to be enjoying record volume.

FCoin, based out of China, led by former Huobi CTO, Zhang Jian, (according to this paid press release) is perhaps considered the pioneer of this model with Bit-Z and CoinBene implementing similar models.

Using the FCoin whitepaper, here’s a brief look at how this proposed model will work. It is important to add forward looking emphasis, as the project is only a little over a month old with most of the concepts still waiting to be tested in the months ahead.

FCoin (FT) is an issued token, it is not mined.

FT provides transaction free mining. The platform charges fees, payable in BTC or ETH and then issues FT to reimburse 100% of the fees. It functions similar to a reward token, giving the trader FT as a reward for utilizing the platform.

Total Supply = 10 billion

Token Distribution

Private Sale = 5%
Strategic Partners = 9%
Founding Team = 12%
FCoin Fund = 23%
Community Rewards = 51%

The FT tokens in the Community Rewards serve as the reimbursements.

What may be some of the potential benefits and uses of this model? For the exchange, this certainly would increase the supply of BTC and ETH. Additionally, with ICO fatigue, and projects looking for innovative methods to increase user adoption, this will serve to distribute the token and increase network effects. Finally, the exchange will see increased volume.

For the FT token holder, the rights and interests are:

  • Revenue distribution – 80% of the revenue will be distributed to token holders and the remaining 20% will be used for operations and future growth
  • Voting – FT holders will be able to vote using smart contracts on operational decisions and governance

So far, transaction free trading and participation in an autonomous organization sounds ideal. What could possibly go wrong? Let’s have a look at some of the criticisms raised to date, mainly by Binance Co-founders:

  • Is it an ICO? The user is paying BTC or ETH for the token. Albeit, there is the utility of a trade in the mix, substantively it resembles an ICO.
  • With “no fee” trading, it is possible to “create” fictitious volume. Traders may trade with themselves or a bot. Coinmarketcap.com, an exchange aggregator, will not include trades from “no fee” exchanges in the price and total trading volume because it is not possible to verify the true volume.
  • Token price manipulation. Even if the platform is transparent, the team and project control a significant amount of the circulating supply. It does not seem difficult to imagine a bot or a small number of individuals could quickly earn a majority of the community.
  • Is it sustainable? After distribution of the tokens, how will the tokens re-enter the ecosystem?

The screen shot below of CoinBene on CoinMarketCap demonstrates some of these potential concerns. You will see the significant volume and “**” indicate that it cannot be counted toward total volume for the trading pair. To give reference, I’ve included Poloniex volume also. If you are following “Tethers,” you know that a recent study found limited “Tethers” returning or burning. Perhaps they’re all stuck on CoinBene?


Airdrops, ICOs, The Henry Raines Show, Token

Start Here

June 11, 2018 • By

Interested in learning about cryptocurrencies and blockchain? Having trouble consuming the literature and filtering the noise?

FRESCO co-founder, Roy Huang, joined us on the Henry Raines Show and shared a way that you experience the process without risking or surrendering any fiat currency.

After learning about FRESCO, reviewing their whitepaper, and engaging with several members of the community on twitter; I was delighted that Henry coordinated a guest appearance with Roy. His warmth, enthusiasm, and sincerity naturally create an engaging environment. Reminding us that it is possible to leverage our existing strengths, talent, and social platforms to contribute.

What is FRESCO?

A blockchain application (DApp) that serves to create an awareness about art, reduce the opaqueness of the industry, verify authenticity, and create a navigable path for newcomers. Do you consider art a store of value? If your answer is no or you are uncertain, now is the time to explore and expand. By leveraging blockchain technology, FRESCO seeks to increase the number of participants in the world of art. You can learn more by listening to the show, reading my review of their whitepaper, checking out the artist amongst us on the show, Augi, or have a look at the FRESCO site and whitepaper.

I’ll highlight one of my favorite parts of this token: the incentive to learn. Not only about art, and blockchain, but about the economics surrounding both. The FRESCO community gives a detailed walk through in this post. Briefly, when an artist creates a work, for example, a print, s/he has the opportunity to create multiple editions. What is the right number of “editions” to create? Through FRES Edition, owners will be able to experiment with the appropriate number to offer. If an owner believes that s/he can generate interest by creating 25 multiples, s/he can allocate the token FRES Cash to reproduce and issue 25 FRES Editions. These must be ‘transferred’ to investors within 24 hours to be deemed a successful issuance. If not, the owner has the opportunity to revise the number of multiples. Once issued, collectors, dealers, institutions, and users have the opportunity to contribute additional FRES Cash toward the artwork, increasing the value of all editions. The FRESCO team is attracting experts in all areas of the art world, providing a transparent platform where one can learn by watching, engaging, experimenting, and doing.

Photo by Ian Schneider on Unsplash

Confidence in their product, a passion for giving emerging artists a voice, and expanding the art investing market; FRESCO secured funding (most recently from Elastos co-founder, Dr. Feng Han) and abandoned an effort to raise capital through an ICO. Rather than put retail investors at risk during this time of uncertainty or delay participation, FRESCO is conducting an Initial Coin Distribution (ICD). Through the ICD, you have an opportunity to earn 2,000 FRES tokens, experience some basic elements of utilizing blockchain technology, and gain an understanding of the art market.

There are several ways to participate:

  • Register for the ICD. It is in the final stages, and requirements vary depending on whether you are or are not actively involved in the art world. The theme of this version is “The Art Expansion”
    If you are not in the art world, you’ll need to upload a video of you conversing about art to YouTube, twitter and Instagram with #FRESCOArtExpansionv5.
    Next you need to take a 100-question test about art.
  • FRESCO Awards. Use your talent to share with the world what Art and Blockchain mean to you. There are weekly awards for writers, designers, and videographers. Additionally, there is a special Art Award running through August 22, 2018.

Before you start:

Learn how to set up an Ethereum Wallet. If you do not have experience is setting up a wallet, now is the time. This is a perfect way for you to understand the difference between public and private keys in cryptography.

Recommended wallets include, My Crypto Wallet or My Ether Wallet. Both have tutorials that are exactly where you should start in understanding some basics. Learn about browsers and extensions that are compatible with the blockchain through MetaMask.

Even if you know the basics of phishing attempts and scams, I see these happening regularly throughout the cryptocurrency world and on social media. Reminders of insuring that you are on the correct, secure (https://), website and best practices are helpful even for seasoned experts.  Once you get a comfort level, it is easy to be tempted by scams. Many have learned this lesson by experience and losing a transaction. In an effort to curb that I’ll repeat my regular PSA … legitimate airdrops, distributions, circulation of tokens DO NOT ask you to send BTC, ETH or any other cryptocurrency, or fiat currency. Do not fall prey to false social media handles (often with a slight transposition of characters or addition of numbers) encouraging you to send .03 BTC for the token.

Photo by Austin Chan on Unsplash

This blog is provided for informational purposes only. Nothing herein shall constitute legal or financial advice.


ICOs

Have you seen a blockchain shoebox?

April 2, 2018 • By
Big Pile of Stacked Shoe Boxes

With the number of Initial Coin Offerings (ICOs) increasing in the last quarter of 2017 and continued surge in 2018, I sense that there should be some “virtual” shoeboxes starting to fill corners of tax preparers’ offices.

I realize that not all of these are US based, have US employees or contractors, nor transact in the US. I am also aware that not all of these offerings are by individuals intending to comply with federal and state tax laws.

For a look at those well-intentioned participants, transacting in the US and may be seeking professional tax assistance … this is what I envision would be under the lid of that shoebox:

  • tokens issued to employees and contractors with value
  • exchanges of USD, crypto currency, and the token
  • transactions for USD, crypto currency, and the token
  • 1099’s with no basis for individuals trading cryptocurrencies
  • a few pieces of paper with long wallet addresses
  • transactions with 8 or more decimal places

It is with these well-intentioned individuals, my dedicated colleagues who deserve a few restful hours, and my enthusiasm for what the future of the accounting profession may look like as it evolves with the latest technology that I launch this blog and my practice.

There is plenty of fear, uncertainty, and doubt (FUD) in this space. However, the position of the IRS is known and I will begin with how we may address the knowns.

This blog and my practice are for small practitioners who may not have a crypto department, but have clients transacting in cryptocurrency or issuing ICOs.

Should you need assistance calculating payroll tax liabilities for alternate payment methods, navigating the blockchain, exchange rates, basis, have clients interested in accepting alternate payments, or other needs in this space, please get in touch.

For those projects and organizations that are considering issuing a token, I urge you to seek the advice of an accountant. It is imperative not only for tax planning, but also to test your model with some supply and demand scenarios.

Creating a token is neither a one-sided entry nor free.

I welcome comments and interaction. This is a centralized blog with my fellow practitioners in mind. So please see my blog guidelines here.

T-Accounts, token economic models, software examples, and ‘80s references (as my humor is not as advanced as my technology adoption) in the days ahead.

This blog post is for informational purposes only. Nothing herein shall be construed as legal advice.