COVAL is in a unique position. The ₡OVAL cryptocurrency preceded the COVAL Platform due to the circumstances that lead to this point. ₡OVAL was like an orphaned coin that we chose to adopt and nourish. It’s original parent was a company that pivoted and no longer wanted to include the coin and blockchain network in their new strategic path. A distributed and decentralized blockchain ledger and associated crypto coin cannot simply be shut down but it can be abandoned. It is then up to others to maintain the network to keep it alive. In the case of COVAL, Shannon and I were the ones to take it over. We rebranded to “Circuits of Value” (COVAL) and migrated the coin, which was on it’s own blockchain, to the Counterparty Platform which runs on top of the Bitcoin Blockchain. During that time (about a year ago) we were strategizing on how to pivot away from the original concepts. We were attempting to make a useful cryptocurrency out of one that had no clear purpose. It was an open canvas for us. Since this process began, we have been transparently inventing COVAL.
In the same timespan that we started this journey, we have witnessed many fundraising schemes. The DAO could be considered the beginning of this latest token sale phase which occurred in the Spring of 2016. As many now have heard, The SEC just released a report on the DAO concluding that DAO tokens were securities. This report can be interpreted as either a serious warning to ICO projects or as a casual attitude since apparently the SEC has decided not to take action against those involved in The DAO (in part because all funds were returned and the project shut down due to the attack). Regardless, thus far in 2017 alone, more than $1.3 billion has been raised across many ICO projects.
The idea of selling tokens is not too new to us. Back in 2014, the first wave of token “Crowdsales” had begun and we observed these risky events then just as we have been observing the latest ICO craze now. I didn’t only observe. I too was considering doing a Crowdsale but after some months of preparing, I did not feel that it was appropriate based on both the substance of the project (too early) and the legal grey area that I would have had to experiment with. I recently published a retrospective piece on this unlaunched back-burnered project.
Just as in 2014, we are not comfortable with doing an ICO. Sure, we have many ideas on how to do one for COVAL and for other project ideas but instead, we have been more interested in how to leverage our unique position in this space. Since we are already associated with an existing token that people own and trade on exchanges, our focus has been on making this token useful. It is an inside-out approach and we sometimes refer to this as an Open Market Reverse ICO.
Since we have chosen to build a platform and a network similar to the approach of many other recent protocol projects, over time the ₡OVAL cryptocurrency as a network token will become integral which will transform it from being a coin without a home or purpose to a legitimate component of a token economy. Likewise, anything we and others build on top of the COVAL Platform would require to some extent the ₡OVAL cryptocurrency. In this way, it is not only a network token related to the fundamental economics of the COVAL Network, but it is also a broadly useful currency that can be applied to most anything.
The reality we face by doing the right thing and not taking advantage of the hyper-opportunistic atmosphere in the blockchain space is challenging. We don’t have a long or endless runway that you get with tens of millions of free donated money. What we are left with is traditional crowdfunding without the mask of ICO investment hype. So this is what we will do for the time being. It is honest and it’s straight up.
While ICO projects are taking advantage of the blurring concepts of donations as investments, projects like COVAL are just asking for donations to development funds. We do not subscribe to the entitlement attitudes that many seem to have in this space. We do not think that any ICO project that we have seen requires or should solicit enormous amounts of money which has been accepted without even a concept of refunds.
We believe what is happening is largely taking advantage of the newly formed ether and bitcoin wealthy (and the not so wealthy too!) and the willingness of these people to move their crypto tokens into these projects as highly speculative investments (Because Exchanges!) while not having any responsibility to provide to them a ROI. Free money. No shareholders. No risk. It’s an abuse of the crypto token creation technology. This is not sustainable and as mentioned it may cause some of these projects to go through a process with the SEC that will not be enjoyable, could cause the project to fail and could land some people in jail or with stiff financial penalties. This is not an outcome that we have any interest in being a part of.
Today, the ICO investors are willing and able to take risks with their magical internet money. Most of these people have a sense of the risks involved due to the volatile nature of cryptocurrency and tokens. It’s a game that they are willing to play. And quite frankly, it is this behavior that is supporting the feasibility of ICOs in the first place. Without centralized exchanges and traders, the ICO model would still exist but the atmosphere would be much more sober. As more outsiders enter the space to get rich quick, the detrimental effects will become more real as people use their fiat earnings to participate whereas the first wave of speculators I would argue are using crypto profits, not pulling from savings accounts and retirement funds. It is this second wave of investors that may have the hardest impact on the lives of everyday people and families. People who have barely been familiar with Bitcoin are now asking how to get involved with ICO investments or even how to launch their own ICOs. This is dangerous territory and it’s why the SEC will finally start taking a more aggressive role.
Eleven years ago this past July, I actually coined the term Crowdfunding while working on a platform to help creative independent video producers and videobloggers sustain themselves. Little did I know that this term would become so widely used and mean so many different things… from good causes to a startup investment act in congress (JOBS Act) and everything in between. Despite my interest in crowdfunding, I have never personally launched a crowdfunding campaign for myself or any project that I have worked on or been a part of. It is not until now that I am officially considering this as my first crowdfunding effort. That’s right, the guy who coined Crowdfunding is finally crowdfunding for coins!
Shannon and I would appreciate any donations to help us stay full-time on the COVAL Project and bring our vision to fruition. We would love to have a successful contrast to the ICO space by being a crypto token project that is deliberately not ICOing and proving that stuff can get built and projects can be successful without that multi-million dollar entitlement attitude. We’ll let you know when we think our stuff is worth $200M but we won’t try to solicit or accept that much from the crowd anytime soon. Let’s be real, again.
With that said, this decision is relevant to the now, not the future. We do not have a problem with the token sale model for funding innovative projects. In fact, we think the model is here to stay and is itself an innovation inherent in blockchain related technology. There are serious efforts underway to forge ahead with more responsible approaches to selling tokens that would be considered a security. One example is the SAFT. Though there is no simple solution at this time and more clarification is needed by the SEC and other agencies in different jurisdictions, we do think that over the coming months many questions will be answered, solutions provided and generally a sobering period will ensue. In the future, we will be able to assess our own project’s status and the regulatory information around token sales, ICOs and other forms of investment models to make intelligent decisions.
Below are our current Bitcoin donation addresses. One is for Emblem app dev and the other is for general Platform dev. The goal is a modest 40 BTC to support our efforts for the next 3–6 months which would include paying for resources beyond ourselves.
Thank you for your support!
Emblem App Donation Address 1CPbM73UCGbKn9S8Gk5m8fVeS6TXPT5cFJ
Platform Dev Donation Address 1NDiCcEr1YciMnKNKA5Y4uA6LXZzuuJUn7