Investigating the Top 50 Cryptocurrencies, Part 9/50: Iconomi

Iconomi is a digital investment platform which matches investors with asset managers to offer a variety of asset allocations i.e. “crypto funds”.

Imagine that you want to invest in cryptocurrency but don’t want to spend hundreds of hours vetting individual tokens and learning about blockchain. What do you do?

For now, there are some ways to mimic an index fund… for example, you could buy a little bit of the top 30 currencies on Bittrex and transfer them to cold storage wallets for a year. That would work, but it wouldn’t be easy to do for a newbie.

What if there’s a better way? An easy gateway into actively managed cryptocurrency funds could lead a lot of new money into the space.

Iconomi is attempting to build that exchange. They offer a platform where asset managers can build and manage funds of digital tokens, while investors can research these funds and choose their favorites to allocate money to.

It’s a big idea. Does Iconomi have what it takes to make it happen? Read on for more information.

The ICN Token

On its surface, the Iconomi model doesn’t seem to need a token. It could operate more like a centralized exchange ala Bittrex or Poloniex, just taking small fees on each transaction. What’s the token for?

ICN tokens are ERC-20 tokens issued via an ETH-powered crowd sale. There are 100 million tokens in existence, no new tokens are ever issued, and 85 million of the current supply were sold via the initial crowd sale.

ICN tokens give the holders a portion of fees earned on the Iconomi network. Whenever people buy and sell funds via ICN, there are some fees associated… and those fees are distributed to ICN holders.

Originally the ICN dividends were going to be paid out via ETH distributions. Now it’s a different plan: 3% of management fees and 20% of realized gains from the Iconomi flagship funds will be used to buyback and burn ICN tokens. That… is not as good, lol.

Here’s a related exchange from the subreddit which sums up a lot of my thoughts:

It does make me wonder, what is the actual value of the token? It seems purely speculative on some level - this token has value because people will want to buy it in the future, because they too will want to sell it at a profit… that doesn’t work nearly as well as a simple ETH dividend.

More Info on ICN Token Distribution

Here’s the official statement on ICN token distribution, straight from Iconomi’s mouth: ”85 million of these tokens were distributed to ICO participants during the crowd sale, and a further 2 million were used for early-stage marketing and bounties. Of the remaining 13 million tokens, 2 million were distributed to advisors, 8 million were distributed to the ICONOMI team, and 3 million were reserved for future team members. The 8 million tokens distributed to the team are vested over 2 years. This means that ¼ of all tokens are distributed every 6 months.”

This represents a much less centralized token issuance than many blockchains. I like the way they avoid any pretense of holding a large chunk of tokens for the future - they sold most tokens, and kept a few for themselves.

The 2 year vesting period is pretty good - a bit fast, but in crypto-years, it’s long enough. It would be hard to lock in the best talent for much longer than that given the volatility of the cryptosphere.

The only bad spot is relying on the Iconomi corporation itself to buyback and burn tokens… that process should be automated in the blockchain. The smart contracts could automatically burn a certain percentage of tokens collected as fees.

There’s some good debate over at this recent-ish reddit thread re: Does the ICN token have intrinsic value? Check it out for more context

The Iconomi Team

Iconomi has a large team. Let’s take a look at some of the key players:

Tim M. Zagar is CEO, his fourth CEO role in the last 10 years following positions at Global Tim D.O.O, Open Hours LLC, and Cashilla Bitcoin Payment Gateway. His Iconomi bio includes some deeper info: ”. Tim has a passion for establishing business models which are yet to find their place on the market. He started working full time on blockchain projects in 2013 with the goal of connecting the crypto field to the existing banking world.”

Ervin Ursic Kovac is COO, utilizing his experience in law (where he finished his Master’s degree this year) and blockchain technology to help Iconomi success. Ervin doesn’t have a ton of experience - he completed his bachelor’s degree in 2014 and his main gig other than Iconomi has been at Cashila, a bitcoin payment gateway.

Ervin isn’t the only connection to Cashila… CTO of Trading, Jani Valjavec, was a co-founder of the company four years ago. Here’s a portion of his LinkedIn page:

There are a lot more people involved in Iconomi… this is just a glance. To see the whole roster, visit their website.

Market History

A typical young altcoin chart. Starts low, hangs steady, hits the moon briefly in July 2017, then slowly works its way back down.

To be honest, I don’t see much that will keep ICN at this value… even if the service is successful, there isn’t a big incentive to hold the token. If ETH dividends were paid out, this token would be infinitely more valuable… a real asset… as it stands, it is just too speculative.

Unfortunately, with regulatory issues so unstable and confused right now, it seems unlikely that Iconomi can go back to an ETH dividend model. As such, they’re stuck between a rock and a hard place.

I would personally not buy this token right now for investment purposes, even if I had faith in the Iconomi platform overall. Private VC funding may have been a better fit for this business model in today’s political climate.

I’m not an investment expert by any means… any experienced traders/HODLers want to chime in about this?

Final Thoughts

Iconomi as a service seems awesome. I’ve personally wondered about when there would be accessible crypto-funds for average investors.

Unfortunately, I am less convinced that this token has a good model. The shift away from ETH dividends is a big blow, turning the asset into a speculative instrument. The service seems a lot better than the underlying token for now.

Nonetheless anybody who wants to invest in the broad crypto market via actively managed funds should take a look at this. It’s a cool idea.

What do you think about Iconomi?

:-)

Loving all the feedback on these threads, by the way… I’m glad to know that many of you are enjoying this!