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Some people buying ICOs these days do not remember the dot com bubble that started in about 1997 and burst in the early 2000s. That financial mania saw many companies that were little more than a concept raise operating capital through the sale of stock at Initial Public Offerings (IPO) and then fail completely. It is worth remembering that history repeats itself as the popularity of cryptocurrencies spreads.
Three coins that seem to have a viable intrinsic value that could survive a bubble burst are Smartlands, CarTaxi and Dentacoin. Smartlands will launch its ICO on November 1st, and the other two are in the midst of their ICO. Each team is predominantly Eastern European with at least some industry experience, with Dentacoin leading in that category. Each team also boasts of a successful pilot project under their belt.
This coin melds the digital and the physical world in a unit of cryptocurrency that is backed by tangible assets. The concept is to use the value of land or crops to support the value of the Smartlands token in the same way that assets of a company provide support for the value of the stock of that company. Smartlands has worked out the legal aspects of these arrangements through the use of separate business entities.
Smartlands is intended to have a stable market value. Asset Based Tokens (ABT) should reflect the value of the underlying crops or farmland and not be subject to significant swings in value. Ironically, this concept is presented as an argument in support of price appreciation as the cryptocurrency market comes to value less volatile coins. The total number of tokens (SLT) is 250 million.
Appreciation is also the key value proposition of this coin which is designed to disrupt the towing industry. The CarTaxi token is intended to be used to hire a tow truck when the coin holders’ car breaks down but will also receive dividends while it is in their pocket and their car is getting them places without a problem. The token (CTX) has already paid dividends to holders.
The coin seeks to create a global towing industry that is available locally. Tow truck operators complete on the platform for jobs, insuring the lowest cost for the driver on the side of the road. CarTaxi will charge a commission on the transaction, creating revenue will generate the dividend and open market purchases of the coin. The total number of tokens (CTX) is 500 million.
Using operating profits to purchase coins is a strategy that Dentacoin will also employ, but the fundamental value of this coin is preventing dental problems before they begin. The coin is engineered to be used to purchase dental treatments through the use of a smart contract, but the services are bundled in an insurance arrangement executed as a smart contract instead of on an as-needed basis.
This smart contract limits the patient’s outlay and obligates the contracting dentist to provide all the dental care necessary. The patient is obligated to practice good oral hygiene, including three dental visits a year. The dentist is obviously incented to keep the patient’s teeth in good condition and thereby avoid performing costly procedures. Dentacoin has issued 240 billion tokens (DCN) out of a pre-milled total of 8 trillion.
Each of these coins seeks to create a value that depends on the use of the token as part of a regular business transaction. This is not a simple supply and demand model that requires speculators to enter the market and drive value. These coins require a more sophisticated approach that estimates the future stream of revenue generated and then discounts that stream to the present day at a specified interest rate.
An evaluation of Dentacoin is even more complicated since it will include a personal benefit to the holder in the form of better, healthier teeth. Assigning an economic value to that benefit is a very interesting question that involves more than simple cost savings. Presumably healthy teeth are worth more than just what is not spent on fixing dental problems.
These are the types of evaluations that cryptocurrency investors need to become familiar with as tokens acquires more of the characteristics of an equity investment in an operating company. Issues such as market share and price margins will become important considerations. For example, does the commission charged by CarTaxi make the service too expensive for both the car owner and the tow truck driver?
This does not mean that the cryptocurrency investor needs to get an MBA in finance or become an expert in the business a cryptocurrency is entering. However, it does mean that the days of the gut instinct investor are numbered. The level of information and research necessary for successful cryptocurrency ICO purchases is increasing, and that is a sure signal that blockchain is beginning to profoundly impact industries.
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