This is a good read for those in the VC space “Buying tokens the new venture capital”

We find the original DNA and concept behind ICO’s to be intellectually brilliant and it has been useful for us to understand what cryptoeconomics is all about to help shed light on all things bitcoin, blockchain and ICO related. Cryptoeconomics is the use of incentives and cryptography to design new kinds of systems, applications, and networks . We would highly recommend these article’s here to delve deeper on the subject “Making Sense of Cryptoeconomics” and “Cryptoeconomics in context” reading for serious mental stimulation.

The understanding is that the best ICO’s done properly are meant to combine the use of cryptography to ensure security, economic incentives (reward and punishment) to build and protect the system, computer science and network effects to build entire new ecosystems of “value exchange” all without the need for a 3rd party intermediary overseeing, approving and checking authenticity of any transaction.

Bitcoin is currently blockchain’s most prominent application to date. Read Satoshi’s (the founder/s of Bitcoin) whitepaper on what Bitcoin (she/he called it a peer to peer electronic cash system) set out to do from its inception, it reads like utopian technology digital dream…that is now 8 years old and seems to be working fine (although hard fork proponents would disagree) Satoshi went MIA years ago and nobody really knows who, why, where or what, and if Bitcoin stays alive (which we feel it will) and continues to grow (which we feel it will) into something incredibly big, it is just another left field element to bitcoin that makes it so fascinating.

So there are 2 distinct types of ICO’s currently in the market (although the emergence of hybrid tokens is now coming too), whereby the “coins” being offered for sale/investment are either 1) Utility tokens or 2) Security tokens

For investors it is of increasing importance that you understand the difference.

Here are 2 articles that you can delve deeper on utility vs security tokens:

1)Understanding the difference between coins, utility tokens and security tokens

2)Tokenomics a business guide to token usage, utility and value

If investors are looking to invest into an ICO project, it is imperative that they know (and the issuers know) exactly what it is they are being offered. There have been many fraudulent ICO’s launched as utility tokens which were clearly security tokens, however, the issuers were not licensed and effectively breaking securities laws in multiple jurisdictions around the world all at the same time as they were raising money through the internet from all types of investors with no KYC or AML checks in place. In these scenarios, it is becoming more evident that governments are tracking down these projects and either fining or shutting down projects that have clearly broken securities laws. That means investors’ money could vanish overnight, or be withheld under long drawn out never ending legal battles or have no recourse.

Over the recent boom months of ICO’s, regulators around the world have released statements identifying their positions on ICO’s or are currently assessing what to do next, find some relevant articles on the following countries here- Australia, USA, Hong Kong, China, Japan.

Back home in Singapore, several foreign startups have recently launched ICO’s without having the proper capital markets license in place or filing necessary prospectuses which will create problems for investors, and here is a recent article showing the local stance on ICO’s Monetary Authority of Singapore (MAS) to regulate crowdfunding involved digital tokens

So onto Real Estate ICO’s….

Real estate ICO’s (RE ICO’s) are Initial Coin Offerings that allow people to invest in companies with PropTech or FinTech platforms or in real estate directly. Currently most RE ICO’s have been launched by startups with little to no track record to date. So it is very early days but let’s take a look under the hood:

Propy.com is dedicated to solving the problems of purchasing property across borders. Propy claims to be the world’s first international real-estate marketplace. The team at Propy.com facilitates connections between international entities to enable the seamless purchase of international real-estate online for the first time. The real challenge for this project is to convince governments around the world to store their property titles on a 3rd party’s blockchain system when they can build their own..BTW, Propy raised $16M USD in their ICO…

SmartRE, helps home owners gain liquidity from their home’s value by exchanging a small share of the equity in their home for SmartRE tokens using the Ethereum blockchain. The token’s value is derived from the value of the home. SmartRE says, “Why not put in a dollar in one property and another in a second property? Imagine holding portions of properties in areas you want, not where a fund manager decides, and have the peace of mind of a customized insurance policy for extra protection. No middleman, just you deciding where.” So what is the relationship with the home owner and what happens if they go rouge then??? not a whole lot of substance behind the concept

Estate Coin builds houses that mine coins. How? First there were data centers that redirect waste heat to warm nearby residences. Then came a Swiss facility that provides heat to a community swimming pool. Now the heat that is generated while mining cryptocurrencies, can be recycled to heat properties. And that is what Estate Coin is all about — giving investors the opportunity to invest in a housing and mining project simultaneously. After the initial ICO, investors can either sell back their utility tokens, or remain invested in the project for long term investment. That is a certainly a lot to get your head around not really clear what is going on….

However this is now on their home page and leave us very confused….

The REAL ICO was done recently

It says REAL, The Real Estate Asset Ledger, which applies blockchain technology to real estate investment, allowing investors to invest using cryptocurrency, rather than tying up their cash reserves or securities. The focus of the ICO is on purchase to lease commercial property investments, flip opportunities, loan note investments and high-quality hospitality assets. REAL raised $10.8M USD in their ICO…

Silicon Valley executives like Bernardo Hernandez also got involved in the ICOs. The former Director of Product Management at Google and head of Flickr, joined REAL after a colleague helped lead the success of Aragon’s ICO. That’s when he saw first-hand, the power of combining crowdfunding with real estate. As Hernandez told Bitcoin Isle, “Being a Venture Capitalist, I see the enormous benefits of ICOs for the ecosystem.”

Here is another ICO launching now called Caviar — which claims to give you access to a diversified basket of real estate and cryptocurrencies, powered by an algorithmic model. “Caviar will achieve these goals by combining investments in fast-appreciating crypto-assets with income-generating short-term loans, backed by real estate in the United States. By re-allocating funds between crypto and real estate markets, Caviar aims to provide income and growth via dual market exposure in a single token”. So I guess this offering is part crypto/part real estate, also a lot of moving parts in this project. Here is the planned project timing for the ICO deliverables..

And lastly for some interesting facts about ICO Funding

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Conclusion

We are waiting for some real game changing plans to come out, but it is going to take some time. We wish all the ICO’s past and present all the best, and hope they deliver for their investors and not tarnish all the incredibly good elements of what a great ICO can be or what the promise of blockchain might hold.

It’s still SUPER early days and the very few projects we have seen to date in the real estate ICO space don’t seem to have strong use cases yet or the proper financial services licenses in place to be making the offerings they are making.

Here are some harsh realities highlighted in the ICO world which this story picks up on Tick. Tock. Boom? but there are also many good actors and companies within the industry working hard to improve transparency and create a better universe for all and for the most part, the energy and vibes that we have picked up fromthe blockchain startup world is super positive and pumping.

The question for investors is really what are they getting and what is it worth? If there is no major disruption from any ICO plan, then its probably not worth investing into. If the proposed ICO is not providing 10X improvement to the current way of doing things, with a realistic plan of user adoption, then its probably not worth investing.

But like all things new, we are going to have to see a lot of trial and error before we start to see some really successful real estate ICO’s in action. We think in real estate, most token projects are best sold as securities backed by real estate assets and not try to become a utility token when the use case is not strong or needed. This, however, begs the question, will crypto investors like a “real asset” investment that actually makes sense in the real world, as it probably won’t get any crazy speculative value attached to it since it is a real investment?

That aside, we think we will see many security tokens coming to market by real estate companies with strong track records (not just startups with zero track record) and the necessary licenses in place to offer solid investment products in a way that protects investors whilst offering cryptocurrency investors access to real world assets. This is the big opportunity.

Can The Momentum Be Maintained?

Experts like Peter Van Valkenburgh, Director of Research at Coin Center likens ICO’s to the early dotcom success. According to Ars Technica’s Timothy B. Lee, Van Valkenburgh feels “We’re probably in a bubble.” But he doesn’t think that’s necessarily a negative thing, going on to say, “You can look at bubbles as being socially productive.” Looking at the dotcom bubble, the same boom that produced failed companies, created many that were extraordinarily successful, like eBay, Facebook and Google.

So after all of that if you are still interested in investing into ICO’s or for an interesting read at the very least (and I have not verified that anything reposted or linked in this article is true or not) try this — 6 rules for ICO investing ….it sounds logical to us and good luck with the results, we take no responsibility for any actions readers might take after reading this post.

All subject matters above are highly binary and investors seem to firmly sit on either side of the track, so here are 2 final articles to give you the opposite sides of the track to consider.

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