An innovative new use for cryptocurrency.
I have been watching the ICO (Initial Coin Offering) market with a great deal of curiosity as several of the startups I’m working with are interested in launching their own ICO. Some of the in-revenue growth companies I’m working with are also interested in diversifying offerings within the ICO space. For those who don’t know about ICOs, they’re an effective means for raising cryptocurrency without the regulations and legal bottlenecks of a traditional capital raise. Many people don’t know that there are significant legal limitations to investing in startups in the US (thanks SEC). Meanwhile, achieving a round of investor-raised money for startups can be extremely challenging despite how easy the tech media likes to make it seem. This is why ICOs have taken off as a new means of fundraising, with over $1.3 billion raised in cryptocurrencies in 2017 so far.
With little to no regulations I fear most ICOs will fail, and most investors will not get a return. In fact, many of them come across as currency-exchange scams with no clear indication of how they are going to create value for both hopeful investors and the future customers of those ICO-funded startups. Unlike fiat currencies, a cryptocurrency is directly tied to value creation for both investors, and future users or customers.
Anryze ICO and Value Creation
I recently came across an ICO from a startup out of New York and the Ukraine that has a fascinating model to create value for their cryptocurrency and customers. Anryze is an AI powered encrypted call tracking and analyzing service for risks & compliance management, and already have customers on their platform. However, their original solution is prohibitively expensive, as they have to buy expensive compute power from companies like IBM and Google to be able to process their data. This compute overhead essentially makes it difficult for them to create a sustainable business model so they came up with another solution.
I reached out their CEO, Anton, and found out they originally raised seed funding, and started going down the traditional investment road before pivoting to an ICO model, all while rejecting traditional investor deals. The reason they’re launching an ICO is because they believe there is more value in creating their own cryptocurrency that leverages the Waves platform — which can be mined by providing computing to process their customers encrypted data — and what’s even more clever is that the blockchain can even store their product’s call-and-voice data.
Essentially what they’ve figured out is that if they create their own cryptocurrency they can pay miners for their computing power offsetting Anryze’s #1 expense, and reduce their overhead to manageable levels for both themselves and their customers. What this cryptocurrency model also does is incentivize miners to provide their computing power to Anryze and their customers, and in exchange they will get paid in cryptocurrency (which can incidentally be traded for other currencies) that could potentially increase in value as their market cap grows. What this does for customers is allows them to process their telecom data using cryptocurrency instead of dollars bringing down the overall costs of Anryze’s services.
By selling some of their coins (est cost?) in an initial coin offering they are enabling investors of all types, including crypto-financiers, as well as future customers to essentially pre-buy their coins to be able to use Anryze services in the future. This is one of the few ICOs I’ve seen where the business model and supporting economic logic actually makes sense for everyone involved. The miners are providing direct value to the consumers in the form of computing power, and consumers have their needs met at a lower cost than using US dollars and traditional cloud computing services; meanwhile Anryze has mitigated their largest overhead cost.
Now the only question is if Anryze can build up the value-chain, get enough miners to join their network, and enough customers to warrant their mining efforts.
Disclaimer: This is not financial advice, and I am not advising anyone to invest in Anryze or any ICO for that matter. There are still considerable risks to an ICO, and most startups fail. The reason I wrote this is because I am interested in cryptocurrencies, and I found this use of cryptocurrency to be fascinating.