After less than a year Block.one has closed its Initial Coin Offering (ICO) EOS having raised a record, $4 Billion. Does this represent irrational exuberance in a company that is not able to deliver on its promises? John Oliver, host of satirical show, Last Week Tonight, thinks so. He featured the risks of Bitcoin and blockchain investing in his March 2018 episode.
Imagine it’s a hot day, and you’re thirsty, and you’re walking down a suburban street when the miracle of miracles you see a kid running a lemonade stand.
You run over and say,
“Hey, kid how much for a cup of cool lemonade?”
Kid looks at you and says,
“one million bucks and there’s a six-month wait for that lemonade, but don’t worry I’ve got the world’s expert on lemonade making it in my mom’s kitchen.”
You laugh at this kid’s guts.
But he just looks at you and says,
“Join the queue.”
At which point you see there’s a long line of thirsty adults stretching around the block carrying piles of cash and that kids are sitting on what looks like four billion dollars.
Crazy right? Well not if you replace lemonade with an initial coin offering called EOS the offering from Block.one. The Lemonade whizz kids in the kitchen are Brendan Blumer, the company's CEO, and Dan Larimer, its chief technology officer and early Bitcoin pioneer Brock Pierce. They promise to tackle some of the biggest problems facing today’s blockchain architecture. According to their white paper, the goal of the mainnet is to create a decentralized operating system that improves the processing speed and flexibility of existing protocols while eliminating the need for user fees. Oh and that mom’s kitchen? The Cayman Islands, not that most natural place to get your money back from if it goes belly up.
Block.one is a blockchain investment with thirsty investors buying tokens called “EOS” with a cryptocurrency called “Ether.” You can check the price of both on our latest pricing chart, which at the time of writing Ether being worth $456 and EOS $8 per individual coin. 4,100,000,000 dollars of Ether have been turned into EOS for a company that at the time of offering had little published for plans, strategy, or other resources. Exchanging one currency called Ether, which carries high volatility itself; for another, carries a high level of risk. The question to ask is if we are experiencing a “South Sea Bubble” or if there is so much promise in these innovations there is still room for valuation growth and an investment return.
I respect that John Oliver used his show as a platform to help bring awareness to the potential losses many investors may be faced with. In the episode John enlists Keegan-Michael Key to get potential investors equally excited about the concept of caution leveraging the hash tag #craefulgang. At Fund Wisdom we hope to provide insight and research to assist with the due diligence process to place long term investments in innovative financial technology and would love to hear from you.