ziftrCOIN crowdsale ended this week and they sold a whopping 4,141,444 ziftrCOINs worth more than $875,000. ziftrCOIN promotes itself as a gateway coin that will enable e-commerce. It comes together with a wallet, online marketplace, and a secure API that enables merchants accept both cryptocurrency and credit cards without having to store the customer’s card information. All these together form what is called the ziftrVERSE.
ziftrCOIN which was officially launched on December 9th, 2014, hoped to raise US$ 1 million by the time the presale ended on Friday, January 23rd, 2015. They missed their goal with only $125,000. The company will be giving away a total of 300 million ziftrCOINs over the course of 2015, and each ziftrCOIN will have a minimum redemption value of US$1. The presale allowed buyers of the coin to purchase either in Bitcoin or US Dollar.
The latest presale by ziftrCOIN represents a shift from the more common approach of funding through the crowd. In the traditional approach, known as crowdfunding, a startup would have put up the project on a crowdfunding site such as Kickstarter or Indiegogo and get funders for the project. Typically, the project owners would incentivize giving by offering rewards.
That model has its limitations. For example, suppose a potential donor does not like the reward on offer, what then? If the company later changes course or is bought outright by another, would the donors have felt cheated?
It is for such reasons that many companies in the crypto space are using crowdsales as opposed to crowdfunding campaigns. That way, the rights and obligations of the parties, both founders and donors are clearer. In a crowdsale through the block chain, startups offer equity and or assurance contracts.
Several startups have been able to acquire funds through a crowdsale. One of the first crowdsales was held by J.R. Willet, who developed a protocol for smart property and a decentralized exchange built on the Bitcoin protocol. This project came to be known as the Mastercoin. The project went on for about a month and raised more than 4,700 in Bitcoin. The crowdsale participants received 91% of the new Mastercoins and 9% of them went to the developer team that was involved in building the project.
The heady success of this crowdsale encouraged other projects to do just the same including Counterparty, Bitshares, and Storj among many others. Each project has tried a different approach to selling the newly generated coins, and the time durations for each crowdsale have varied between 1-6 months. Increasingly, the recipients of the coins have also come to include miners, third party developers and others who have added value to the projects.
As is typical with much of everything else about cryptocurrency, regulators have seen themselves playing catch-up. For example, the US Securities and Exchange Commission has come up with rules that sought to govern crowdfunding. The rules are yet to be implemented though, something that has seen growth in this area stall and shutdowns such as in the case of BitFunder.
Crowdsales promise to be an effective workaround as they are currently not subject to the same level of scrutiny by the SEC. However in the absence of regulation that comes with a caveat writ large. Some investors have chosen to perform their due diligence. Others have chosen to use the reputation-based method. However the unique dangers of a decentralized market are such that anyone can create a project on the block chain and it would not have to be brought under scrutiny, and not all investors would be said to be astute enough to tell the difference between genuine and fake.
It is safe to say that until someone is able to thread the needle of how to protect investors in this brave new world of the block chain, the growth of crowdsales as an investment option will always be hamstrung.
Image: ziftrCOIN Website