There is no doubt that 2018 is the year of the blockchain. After riding in on the coattails of cryptocurrency, blockchain technology has asserted itself as the preeminent technological innovation of our generation.
For a time, its prowess was overshadowed by the stunning spike in cryptocurrency values, but, in a gratuitous twist of fortune, cryptocurrencies have dropped in value by nearly 2/3 since the start of the year. Meanwhile, people can’t seem to say enough good things about the blockchain.
From the U.S. Congress to perennial crypto-skeptic Jamie Dimon, everyone seems to love the blockchain. The New York Times even concluded that it will be “more valuable than Bitcoin.”
Already, that prediction is playing out.
In just the first half of 2018, there have already been nearly 500 new blockchain platforms launched using the Initial Coin Offering (ICO) format. With an ICO, a company sells a new digital currency to fund its endeavor. Since the beginning of 2017, companies have raised almost $15 billion selling new iterations of digital currency.
However, in a real way, this is the blockchain’s biggest problem. Many people are treating ICOs like slot machines – dumping money into startups and hoping to hit the jackpot.
All too often, these platforms turn out to be scams run by people as eager as their investors to get rich quick. In May, The Wall Street Journal analyzed 1,450 ICOs and found that 271 had the hallmarks of fraud including, “plagiarized investor documents, promises of guaranteed returns and missing or fake executive teams.” At the time of the study, these projects brought in more than $1 billion.
Blockchain technology can make vital improvements to virtually every industry at both large and small scales. It’s too essential to mismanage the capital raising component of new companies. Fortunately, ICOs aren’t the only way to get this done.
A Better Way to Fund the Blockchain
This week, Blockhive, a blockchain incubator in Estonia, is completing its Initial Loan Procurement (ILP), a compelling alternative fundraising mechanism that contrasts the dubious ICO strategy. Rather than relying on blind investment, the ILP enables strategic investors to intentionally support the platforms that they believe in, potentially earning returns on that investment.
An ILP allows interested investors to extend a loan to companies while earning interest payment on the loan. The entire process is facilitated by the blockchain’s smart contracts that outline the terms of the loan and distribute funds accordingly. Blockhive’s FLAT tokens are the conduit for the entire process.
To ensure that blockchain projects are viable and authentic, Blockhive collects identification information and conducts a verification process before companies can receive a loan. It’s a simple way to improve upon the Wild West mentality that’s so prevalent in the ICO space.
An ILP encourages blockchain maturation in several ways. Because ICOs require companies to sell a digital token, many companies are pressing tokens into existence that don’t have any purpose or practical value. With an ILP, companies can focus on the actual functionality of the blockchain-based platform, while still maintaining a level of funding and financial opportunity.
With their current ILP, Blockhive is demonstrating the practice’s viability and efficacy.
Blockhive’s Collaborative Space
Blockhive has done a lot more than develop a new capital raising technique. As a blockchain incubator, they are facilitating the technology’s expansion and maturation by connecting companies with critical expertise and guidance to advance their platform.
By connecting companies with expert advice, they can best navigate the complicated road to launching a startup. Rather than hoping that siloed developers can create the best products, Blockhive embraces the communities strengths by creating a platform for collaboration and connection.
With its ILP fundraising model and its collaborative support structure, Blockhive is hastening blockchain proliferation while simultaneously improving the quality of the space. It’s a transformative approach to the burgeoning blockchain industry, and it’s one that is desperately needed to convert the tremendous hype surrounding the technology into realized expectations.
Its ILP ends this week, so the time to begin participating in the process is right now.