“To sell more than 1.5 billion tokens, you must have an MVP (minimum viable product)”
[ZDNet Korea= Lim YooKyeong Reporter, 02.11.2018] While blockchain projects are getting more interested in the “Initial Exchange Offering (IEO)”, which is a way of releasing tokens through a crypto-exchange, the industry and the academic world are working together to create a healthy IEO culture through creating self-management guidelines.
This guideline defines the IEO as “selling tokens on exchanges with certain qualifications just prior to listing them on the exchange”, and limits that only if the product possesses minimum functions (MVP) they can sell more than 1,5 billion tokens. Korea University Cryptocurrency Research Center, Korea Blockchain Industry Promotion Association (KBIPA) and Korea Blockchain Start-Up Association (KBSA) held “IEO Guidelines Presentation” event at the Korea University’s Future Fusion Building in Seongbuk district of Seoul.
KBSA president Shin GeunYeong explained that the purpose of the IEO guidelines is “to correct the shortcomings of the current ICO market.”
Currently, the ICO has problems with frauds, Ponzi schemes, and similar receipts because of the gap in the regulations thus there is no filtering. In IEO, the exchange becomes a token sales controller, so it is possible to do filtering once in anyway wanted. Taking this into regard, exchanges can help in making the marketplace healthy through applying the IEO guidelines.
The main topics the guideline includes are the following:
▲The Definition of IEO
▲IEO Guideline Checklist Example
▲Recommended Limit of Token Sales
Firstly, the guidelines compare IEO to the IPO offerings in the securities market: “Like IPO sells stocks to the public to gather funds just before it is listed (in securities market), IEO sells the tokens publicly before listing them to secure the needed funds.”
The guidelines suggest, that the IEO guidelines checklist would be released on the project homepage after self-checking. The checklist consists of 160 items in five categories: technology, compliance, security, buyer protection and business value. According to the response to each items, points will be scored. 1000 points is the perfect score.
A total of 500 points were assigned to the technology category. The most important thing is to have technology to launch real products. If there is no MVP (Minimum Viable Product), 300 points will be reduced straight away.
Also, there are recommended limits for token sales: if you get less than 700 points according to the check-list, the recommendation is that you limit your token sales to 1,5 billion KRW. Since it is minus 300 points if there is no MVP, so basically the recommendation is to not sell more than the value of 1,5 billion KRW of tokens without a MVP.
This is because the Financial Services Commission (FSC) is promoting the revision of the Capital Market Law and Enforcement Ordinance to make it possible to raise money up to 1,5 billion through crowdfunding from next year January onwards.
“If you cannot make an MVP, you can collect up to 1,5 billion KRW and use that money to build the organization. This funding can help a start-up to develop till they will be able to make an MVP. The guidelines’ main message is that if you want to receive more investments, you have to be equipped with the same qualifications as in IPO’s”, explained chairman Shin. Among the blockchain companies participating in this event, there were concerns if the guidelines’ standards were too high to allow businesses in early stages to do IEOs.
“I think that IEO should be in the middle of ICOs and listings, but right now the guidelines seem to be leaning too much towards listing standards. This makes it hard for businesses in early stages to have IEOs”, Delio’s James Jung CEO expressed his concerns.
“ICO’s basic philosophy is that it is possible to change the world only with ideas and get investments from the people who sympathize the idea — we need this philosophy also in IEOs”, he suggested.
“If the guidelines are too strict, they will not me accepted by the market but on the other hand if they are too loose, they are useless. That is why we try to match the right level. As we open the guidelines to the public, we expect to get feedback and make improvements needed”, said the head of Korea University’s Cryptocurrency Research Center Kim HyeongJung (Graduate School of Information Security professor).
“In my opinion, IEO guidelines are necessary in terms of developing the blockchain industry as well as to protect the investors. I have also been asked, if the guidelines were made in communion with the government. We did not make the guidelines together with the government, but we believe that they will lessen the government’s burden in the future”, he continued.
Lim YooKyeong Reporter / (firstname.lastname@example.org)
[Originally written in ZDnet Korea 02.11.2018 in http://www.zdnet.co.kr/news/news_view.asp?artice_id=20181101224902&lo=zv37]
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