Crypto Startup Earns $4 Billion Without Product Offering
Even without offering any live product, a startup company located in the Cayman Islands managed to raise more than $4 billion this week, surpassing the largest initial public offerings on stock exchanges worldwide.
Block.one is currently financing its blockchain platform dubbed as eos.ios via initial coin offering (ICO). The startup is offering a cryptocurrency called eos which provides eos tokens in exchange of ether on the premise the platform will be useful in a digital network once it is established.
Token Report, a division of blockchain advisory company New Alchemy, said the fundraising activity has earned 7.12 million in total ether with an exchange rate of $576 per ether as of Thursday. This is equivalent to $4.1 billion.
According to its founders, the system would support more efficient operations for “decentralized applications” than current platforms including ethereum. In the event eos.ios becomes a success, it could heighten the adoption of cryptocurrency-oriented technology.
Block.one previously said it would set aside $1 billion of its bounty recruiting developers, with billions more on establishing relationships with financial institutions and lobbying with regulators around the globe.
Investors, however, remain confused as to how the company will use the majority of capital it generated as the company has not yet unveiled any live product.
Talk show host John Oliver highlighted the platform in his monologue in a March episode of TV show “Last Week Tonight,” where he cautioned the audience about the “speculative mania” and perils of investing in digital currencies.
“It can be incredibly hard to tell which companies are for real,” Oliver said at that time, which garnered 5.98 million views on YouTube. “If you want a good example of this, look at Block.one, which has raised $1.5 billion.”
Oliver pointed out various concerns including the evident lack of seriousness by advisor and eos being a software startup which has no intention of selling any software, citing pioneer bitcoin investor Brock Pierce and a report by Wall Street Journal.
For William Mougayar, managing partner at JM3 Capital and author of “The Business Blockchain,” Block.one is an “anomaly” and on the “extreme” side of the fundraising arena.
Block.one has set high expectations for themselves in terms of meeting their goals. “Now is the time to not just deliver the coins but the technology with it,” Mougayar said.
“This is the crypto world we live in. The eos founders have done a great job at marketing their technology, ahead of its delivery,” he added.
The confidence in Block.one’s Chief Executive Officer Brendan Blumer and Chief Technology Officer Dan Larimer are the reason for investors to believe the starup will deliver what it promised.
“Dan is among the most accomplished blockchain developers on the planet. He’s well respected in the space and well-accomplished,” said Kyle Samani, managing partner at Multicoin Capital who invests in eos.
Samani stressed blockchain companies are in competition to have developers utilize their code to design “decentralized” applications, although rivalry is expected to be complicated since it would allow at least 10 companies to enter the battlefield.
“In this market, the answer is raise as much money as possible. It’s plausible that we look back and say the team that spent the most money won the tech war,” he added.
CoinDesk said cryptocurrency prices have sputtered this year, with bitcoin slumping over 45 percent of its total value in 2018 after surging more than 1,300 percent in 2017.
Still, investors are willing to invest their money into coin offerings amid some crypto offerings being tagged as illicit acts and scandals engulfing the crypto industry.
Research firm Autonomous Next stated ICOs earned $6.6 billion in 2017 and have touched $9.1 billion in this year so far. Entities that have gained substantial amount of money from ICOs include Telegram Open Network ($1.7 billion), Dragon Coin ($320 million), Huobi ($300 million), HDac ($258 million), and Filecoin ($257 million).