How I discovered the Power Ledger ICO

I stumbled upon the Power Ledger ICO after seeing an article in the AFR (Australian Financial Review) claiming they were the first Australian ICO.

When I first read through the Power ledger paperwork, I was very impressed. Not only did they release a whitepaper, like other token sales projects, they had an entire suite of documents that covered the token distribution and breakdown, a legal disclosure document, and even a comprehensive slide deck explaining how their entire system works. Not only were they very comprehensive and concise, the level of technical detail covered in each document was very impressive, to say the least. They clearly have done their homework and were serious about bringing their project to the market and making it a success. I immediately connected with the team and registered for their pre-sale.

For me personally, what was more profound was the fact that I had spent a good 3 months earlier exploring potential blockchain uses in the energy markets (It also helps that I have an interest in smart grid technology and have previously worked at Ausgrid, Australia’s largest electricity network operator).

What I discovered about the Power Ledger ICO

It was only after locking in my purchase of tokens during the mad rush that was the first hour of the POWR pre-sale that I really looked in depth at the Power Ledger paperwork, to figure out what they were doing, and how they were running their token sale.

To the team’s credit, the more I read, the more I appreciated the elegance of their ICO design.

To truly understand the logic, I asked the team:

Why did you decide to conduct an uncapped token sale? Why didn’t you follow other ICO’s and just set a price?

The answer from the team was consistent:

We want as many people to have the opportunity to buy into our token sale as possible!

As someone who had just bought into their pre-sale, I initially couldn’t comprehend that statement.

Surely, there was some other motive or purpose. But the more I read their responses in the chat sessions and the more I read about the experience other teams went through during their ICO’s, the more I realised something profound - they actually meant what they said.

Specifically, what they were saying (reading between the lines here) was:

We don’t just want whales and opportunists to jump into our token sale and buy up all our tokens. We really want everyone who wants to be part of our journey and ecosystem to participate in our ICO.

So basically, their ICO was designed to be Anti-whale and Anti-pump and dump (aka flipping). That was a position I could support . More than that, it was definitely a position I could identify with.

It was refreshing for me, when I realised that the Power Ledger team had designed their token sale to prioritise the interests of their community and early adopters, over maximising the financial returns and potential takings of a hyped (aka pump and dump) ICO.

I decided to buy a second batch of tokens during their pre-sale. This was when I made the decision to become more active on their channels.

Why I believe Powerledger’s token sale model is a glimps of the future

Welcome to the Wild West of the ICO market in 2017

ICOs have been perceived as the wild west of fundraising, and the explosion of recent high profile headlines have only entrenched that image. The rapid rise and explosive growth of ICO activity this year set up some very unrealistic expectations in the crypto-token space, reminiscent of the dot com craze in the late 1990’s.

The narrative around ICOs now is this:

Any Tom, Dick and Harry with a bit of tech skills and an idea can start a crypto token project by taking some freely available open source base code from Bitcoin, or Ethereum (or one of dozens of similar blockchain github repositories), make a few minor tweeks, then raise millions of dollars from a virtual crowdsale (like a virtual Kickstarter project), with those lucky enough to get in early, riding the hype wave, earning up to 10x on their initial investment from selling the tokens after they hit the open exchanges.

I admit, it’s a very tempting offer and narrative that many ICOs implicitly endorse when marketing themselves to potential supporters in the current unregulated world of ICOs.

While this narrative and the current market hype draws in new, naive and inexperienced investors into the ICO space, this short term speculative market is both unsustainable, and, more importantly, sets a very dangerous expectation for new and future ICO entrants.

It’s gotten so bad, that in the Power Ledger telegram and slack channels, I’ve seen people accuse the Power Ledger team of running a scam, only because it doesn’t conform with their expectations of how ICO’s should work for these early “investors”.

(Side note: My experience gives me a greater appreciation for why current rules & regulations are needed - they are doing the business world a favour).

This has, undoubtly, brought in billions of dollars of new money and exposure to the crypto markets in 2017, which is fueling a mad rush, or in this case, a crypto rush, where everyone tries to secure their spot in the early rounds (pre-sale or ICO) of new projects, irrespective of their sustainability.

They just want to lock in a favourable early price while the demand is still rising, and the market is growing. But the free ride won’t last forever, and if recent reports about regulatory intervention are a good indicator, it’s coming to an end sooner rather than later.

Any serious company or established business that is looking to enter the ICO market or is thinking about using crypto token sales as a potential new fundraising channel needs to tred carefully into this space.

This is clearly not an ideal model for creating a sustainable token sales market and doesn’t bode well for many of the crypto-tokens already on the market (at last check there are over 1000 listed on Coin Market Cap).

What Power Ledger did right

There are 2 key design elements to the Power Ledger ICO, that I believe will become more widely adopted in future token sales.

Using a public blockchain based Utility token to drive buy in, and driving these buyers into their own private blockchain ecosystem; and Setting a token sales approach structured around a fixed time schedule (4 weeks) rather than monetary cap or baseline token value. This not only reinforces their message of a community and ecosystem focused crowd sale, it also removes any possible regulatory ambiguity as to whether it is or isn’t a security.

While this may not be very attractive or align with some of the current norms and expectations in the unregulated crypto- ICO land, I believe long term backers, company executives, corporate legal and regulatory compliance teams will closely examine the Power Ledger token sale model, and recognise that it is one of the early ICO projects that got it right.

What Power Ledger could have improved on

Nothing is perfect, and it’s always easy to look back at past events with 20/20 vision. It’s foresight in planning and aligning the strategy with the execution that ensures success. While the POWR token presale was a big success and sold out in a little over 3 days, there are a couple of areas that could be improved for the main sale:

The technical infrastructure : having experienced various technical issues during the presale which took several days to clear the backlog, it would have been prudent to review resourcing for technical and system support, potentially bringing in virtual support teams or staff to help with enquiries from around the world and different timezones;

Stronger marketing campaign and target audience advocacy: I believe digital sales still require strong marketing campaigns and support teams to back them up. At the end of the day, we are still dealing with people; and

Leveraging early adopters as brand ambassadors: apart from the support from within their community of early backers, it would be much easier to leverage the interest of early adopters to spread the message and build momentum through a collaborative engagement process with a story or themed messages. While having the POWR mods help out in the community channels is a great start, helping the community to craft the message around themes will empower advocates to take ownership of and spread the message to their own networks.

Early adopters and some project backers may feel disappointed or frustrated they aren’t being offered the best possible deal, or given similar short term upside opportunities for being an early supporter. What they may not recognise is the longer term value of a well designed and implemented token offering, that both protects the viability of the project (therefore the underlying value of the tokens), as well as minimises the risks associated with exposing the business to regulatory action.

Implications for Companies exploring the ICO option

As we have seen in recent days, news and unconfirmed rumours of possible regulatory action from China have had significantly adverse impact on the crypto-token markets in general, but especially projects and businesses that operate within the Chinese regulatory sphere. Companies cannot afford to have product or service lines that expose them to these regulatory risks.

The Power Ledger approach also aligns with typical corporate business processes and schedules. For example, to support an ICO, established companies would need to develop product launch plans, marketing and awareness campaigns, as well as customer and technical support channels that typically run for weeks and months after the announcement or main launch event.

Running a flash sale, as we have seen in the daily deals market, is not a sustainable or viable long term business model for most established entities. The same is true for the rush into the ICO market. Companies that want to leverage the market for better access to liquidity, need to consider the downstream implications, once they embark on the ICO journey.

As regulators tighten, and look to take back control and de-risk the crypto-token market, more established companies will naturally enter the market. They will look for safe models that can be easily replicated, or adopted, and importantly, that maximise the potential upsides of playing in the crypto-token space, while minimise their exposure to regulatory risks.

How the market evolves, and which direction the market takes is anyone’s guess. But one thing is for sure. If there’s enough money to be made, tech savvy businesses and corporations will look for ways to step in and carve out their share in the market. As we’ve seen in recent history, that’s when things get truly interesting.

Disclaimer: I don’t work for Power Ledger. I have bought some POWR tokens in their pre-sale and have been an active member of their slack and telegram community channels (so they invited me to help out as moderator)

Full disclosure: After accepting the role, we (POWR mods) were informed that Power Ledger will gift each of us some tokens for our efforts and have extended an invitation for us to attend their secret ICO launch party in Perth — flights and accommodation not included.

All comments are my own opinion based on my subjective observations and do not reflect any official position by Power Ledger or that of my employer.