The safer, smarter advancement in crypto fundraising
A TAP™ (Token Augmented Partnership) is a new fundraising mechanism which extends and strengthens the processes involved in either an ICO (Initial Coin Offering) or STO (Security Token Offering).
What is an ICO
The current ICO (crowd-sale) fundraising model revolves around a new entity which pre-sells its underlying crypto tokens to anyone interested in purchasing them. Purchasers send their funds at today’s valuation (at a discount) to a smart contract, or via an exchange platform or any other pertinent recording and storing mechanism as offered by the tokens’ issuer which will distribute an equivalent value in the new token at a later point in time.
While many purchasers are motivated by the possibility of a gain on their pre-purchase of the tokens, an ICO does not translate to any transfer of equity in the issuer’s business, contrary to an STO which clearly promises future returns on investment and, as such, might be subjected to more stringent regulations on securities. STOs have emerged only recently and are yet to become mainstream.
While the ICO/STO fundraising style keeps on attracting massive attention from the market with an appetite eclipsing nearly completely any other traditional form of investments, the past few months have unveiled a few fundamental issues with ICO’s. For example, most ICO’s raise money pre-product, in other words, they raise money to fund the development of a future product/offering, not an existing one. Purchasers of tokens offered via an ICO determine the viability of such token by reading the narratives in a so-called “whitepaper” (a “business plan” about what will be offered), or the posts of influential web bloggers or by way of marketing hype.
This makes the purchase (ICO) or the investment (STO) extremely speculative and risky. Many ICOs end with losses. In some cases, ICOs are used by scammers and semi-scammers who build a glossy website, promise the greatest project ever, collect funds from naïve purchasers and deliver nothing at all. In other cases, especially during the final stages of an ICO fundraising, when the volume of transactions might heavily peak depending on the marketing spent, both genuine ICO participants might be targeted by spoofing actors who fake the issuer’s identity/address to entrap misled purchasers. Trolls might be ransoming issuers and the range of innovative malfeasances is increasing.
In addition, structural challenges are now looming and, beyond hacking incidents, also include the all-too-known “single protocol vulnerability” issue, whereby most ICOs are underpinned by a very few highly centralised protocols or operators, directly conflicting with the original distributed intent of DLT technologies. “Forking” events are a common manifestation of such protocol cartelisation, leaving investors and end-users often in dire straits or exposed to high variability in the valuation of potentially defunct tokens.
Other structural excruciating systemic issues include low transaction speed whereby mainstream first-generation protocols such as Bitcoin or Ethereum seem unable to scale beyond their current unworkable current TPS below 10 transactions per second (in comparison, credit card networks would, for example, perform thousands of times faster), or low exchangeability whereby the value of a token actually crashes past the pre-release marketing fury due to poor merchant and/or user adoption.
Why TAP is different
While a TAP is also a fundraising mechanism via which individuals can purchase either utility or security tokens to fund or utilise the underlying platform or product they are interested in, there are substantial differences between TAP and conventional ICOs/STOs.
First, the TAP is formed by two or more entities that either create a totally new industry sector or are disrupting an existing one through the creation of new industry tools, platforms or assets. This multiplicity of independent actors strengthens the fundraising as it divides risks between multiple actors who might mitigate their peers would any of them falters. A TAP effectively dilutes risks.
Second, contrary to conventional ICOs/STOs which might be listed or offered via a variety of mainstream exchanges and other wide-scope market engagement, a TAP specialises and focuses on one specific industry vertical. This considerably strengthens the fundraising in a few ways: on the one hand, it narrow-targets, therefore enhances the efficiencies of market engagement activities (more value for money, less funding wastage in market engagement, better conversions) and, on the other hand, it better guarantees the higher adoption and success of the issued token both from a utility and security perspective. A TAP might indeed imply and include its very own specialised exchange.
Lastly, because of the multiplicity of initiating independent stakeholders and the range of inter-organisational due diligence and due process between them, a TAP generally manifests itself within a specific market once an MVP (Minimum Viable Product) or set of MVPs are already operational. This is a significant departure from the risky often washy-washy elusive or POC-based (Proof of Concept) “whitepaper” approach for conventional ICOs or STOs. Risks are again considerably reduced as the TAP can trade and operate in a much sooner timeframe and possibly well into the future. TAP investors are well informed on the current state of their investment, can follow the roadmap and assess if the entity is meeting their set objectives just as an IPO shareholder would do.
Enquiries to TAP@cloudyBoss.com