Cleaning Up Coin Sales *{Part 1}

ICO’s seemed all roses at the beginning of 2017. They started raising 100’s of millions rather than 10’s. Great success stories emerged. Then the mood changed mid 2017, the cypto community developed hay fever and ICO Tulipmania wasn’t so fun anymore. The roses and some contributors wallets began to wilt.

A minority siphoned ether from unwitting investors and ran off with their Trezors. It seemed they had spoilt the opportunity for the genuine projects. To token sale or not to token sale became the toughest question Zinc faced in 2017. Many grey hairs were formed over this key issue. But despite the now sceptical view on token sales and seemingly unfavourable timing. We decided there was an opportunity to help bring legitimacy to token sales, by proposing a new model. We set about trying to propose a framework for the sale that was in line with Zinc’s values. I’ll share our learnings in this 2 part series and be open about the risks.

Trezor in mouth

This year we’ve worked with our advisors to find the best model for our Zinc Token and it’s sale. Thank you to all those that have helped us. Thank you also to community that have fed back and supported us. We have reached several hundred email subscribers and several thousand followers now, our telegram is the best place to get in touch. We are also pleased to announce the opening of our whitelist with this post.

The reason we’ve stressed over the token sale so much, is that like blockchains or criminal records, tokens are forever. Smart contracts mean hard coding the business rules of your ecosystem. It’s not smart to be making these business defining decisions with such little data. You’re likely doomed to fail. A Zinc value is kaizen, as per ‘The Whitepaper Revolution’, plans often must change in order to succeed. We have put as many mechanisms in place to access plan B, C and Z if necessary.

One aspect many of those newly formed greys were split over was the total number of tokens to create. We spoke to tokenomics experts and went through countless utility token papers. But we couldn’t find any real substance behind this critical decision. Most projects skimmed over this decision, a few admitted they had no explanation. At least the latter were honest… Civic said they chose 1billion tokens because “It felt like the right number. No scientific reason here”. Clearly there’s been a lot of guesswork going on. We weren’t prepared to take that risk.

We reverse engineered our way to determining the total token figure. Based on the number of actors we projected the network to acquire in four years time. Being a utility token we needed to find a way of ensuring our token was utilised (not hodled) so the network grows. Thus avoiding the issue of a token saturated in the market and a plummeting post-sale price.

Credit to our advisor Toni Lane for inspiring this framework. The Zinc values which formed the strategy for this the sale framework are; transparency, trust and kaizen with a goal of long term value. The approach is Continuous Coin Release.

Our first and most important goal is to deliver long term value to those in the network.

Coinception CrowdSale:

A token sale is the perfect way for Zinc to kickstart the growth of our network and the Zinc Token. We could have up to 3 Coinception crowdsale events if we reach our project milestones. This allows us to acquire actors in the network in a measured and transparent fashion. We’re structuring the sale like crowdsale funding rounds and are hoping to execute them over a 4 year plan.

We’re dedicated to proving the value of the platform and the Zinc Token. We’re releasing just 30% of supply and capping large investments in the general sale. We predict we’ll have the right amount of tokens in circulation to reach those interested in the utility of the token. The Coinception token sale offers the networks services at a discount, in return for backing the project at a risky early-stage.

Coinception Sale Structure:

Pre-Sale Ends Feb 2018: we’re partnering with a select number of firms in the pre-sale who value the utility of the token with a 2 year lock-in period. They’ll bring actors into our network through referencing the workers they’re assessing. Working with a set number of partners we can make estimates on the rate the network will grow. Rather than dumping the entire supply of tokens into the market. These pre-sale tokens are held by Zinc, solely for utility use on the platform. Ensuring the utility of token is realised, the value of the network should grow. General Sale Begins Feb 2nd 2018: to register for the Crowdsale, you must join our whitelist and Telegram. We will be following Quantstamp’s proof of caring application process. POC asks you to write about Zinc in some form in any corner of the internet; Medium, Twitter, Telegram, Facebook. We will guarantee that everyone who joins the whitelist can contribute to the sale. Thus places on the whitelist are limited, so join as soon as possible. We will notify everyone who has registered for our Crowdsale about how to make contributions beginning Jan 30th.

Coinception Sale Mechanics:

Milestones ~ Funding: As projects progress in the VC funding world they justify larger sums, this is reflected in Seed, A, B C rounds. We have seen a few milestone based models which we think are the right approach to show contributors long-term intentions and commitment to the roadmap. Such as the recent Blockstack sale. It de-risks the sale somewhat for contributors. Zinc will be breaking the project into 3 milestones to release funds: 30% successful token sale, 40% released upon main network launch in 2018, 30% released for reaching 10,000 active users of the network by 2019. For instance if we do not successfully launch the network, we’ll refund 70% of contributions. If do not achieve our network growth targets, we’ll issue 30% refunds.

Governance ~ Releasing Funds: Unfortunately funds raised in most token sales go directly into the hands of founders or non-profit entities usually offshore. We’ve seen this go badly in some cases (Tezos) and it’s not true to a decentralised network. Zinc will operate a true DAO governed by a DAO framework like Aragon. All token sale contributors will earn voting rights on functionality and deciding when the milestones have been hit. Zinc is one of few companies to host their crowdsale in the UK as a UK Ltd company. The funds will be governed by the crowdsale supporters themselves. This doesn’t not indicate a stake in the UK Ltd company —Zinc. Pre-emption Rights: Again borrowing ideals from different funding channels like the VC world. The earliest contributors should get the most favourable terms, since projects de-risk over time. They should also get the opportunity to buy in future token sales at the most favourable terms. Post 1st Coinception, future sales shall hold a pre-sale phase with only open to the previous sale contributors. With the most favourable terms.

Structure: We will hold 2 further Coinception events if all milestones from the previous sale are reached, prospectively they could be annual events. The Zinc DAO will govern consensus of reaching these milestones. We’re selling 60% of the total distribution of Zinc Tokens over three events.

~ Coinception 1 (30%). January 30th 2018

~ Coinception 2 (20%). Prospectively Jan 2019

~ Coinception 3 (10%). Prospectively Jan 2020

Each Coinception is triggered by a certain number of utility (reference) transactions happening and bringing actors into the network. This should indicate nearing capacity and tokens becoming scarcer. The Coinception sales may in fact be sooner or later depending on the growth rate.

As per the transition in whitepapers we predicted. We think that token sales will be structured more like traditional funding rounds. As the crypto world becomes more mainstream, practices will start to mirror those of the traditional startup sphere.

To recap the structure is multiple token sales, each sale triggered by reaching a certain capacity in the network. Decentralised governance on milestones give contributors guarantees on refunds if Zinc doesn’t deliver on it’s promises. This shows Zinc sharing some risk with contributors in return for backing the project at a risky stage. With long term commitments, no high pressure tactics, hopefully contributors can make better informed decisions.

One of the good actors in this space ~ Coinlist, who have helped introduce the SAFT and provide a compliant ICO framework fed back on the model… CEO Andy Bromberg said about the Coinception sale:

‘I think this is a good model, we’ll see more of this’.

We’ll publish part 2 of this series detailing the tokenomics of our project. We’ll also be publishing a token valuation report and a guide to Zinc’s Token. Follow us on Medium, Twitter, Telegram go to >> https://zinc.work <<

Disclaimer: Zinc’s Coinception Crowdsale is not an investment opportunity in Zinc. This blog does not constitute investment advice, I’m heavily under-qualified to provide that. Whilst we borrow models from different funding approaches the Coinception crowdsale is an open opportunity to purchase utility tokens that represent no stake in the UK Ltd company Zinc.