ICOs, Initial Coin Offerings

Blockstack ICO: Evaluation and Analysis

Blockstack ICO

The Quick Pitch

Blockstack is a network for decentralized applications. This platform leverages a serverless architecture, which helps remove critical points of vulnerability. By eliminating these weak points, which have frequently fallen victim to hacks, Blockstack makes user data more secure.

Further, this particular network gives individual users greater control over their data, helping them determine where this information is stored and who has the ability to access it.

In a nutshell, Blockstack offers a similar experience to the more traditional internet, and it does so in a manner that empowers users by giving them greater control of their data and helping keep that information safe and secure.

Blockstack’s initial coin offering (ICO) was scheduled to start on November 16 and end on December 1. This ICO was set up to consist of two separate sales, each of which will offer 440 million tokens.

The first sale, known as the Accredited Sale, is available to accredited investors and qualified purchasers, while the second, referred to as the User Sale, is open to interested parties who do not meet the requirements of being accredited investors or qualified purchasers. Those looking to take part in the second sale can obtain vouchers that they can later use to buy up to $3,000 worth of the tokens being offered.

Through these two separate sales, Blockstack is offering 880 million tokens. These tokens were priced at $0.12. As a result, Blockstack is looking to raise $52.8 million through each of its two sales, for a total of $105.6 million.

To take part in the Accredited Sale, qualified purchasers – defined as individuals who have at least $5 million in investments and organizations with at least $25 million in investments – will invest in a Delaware fund. This fund, in turn, will invest in Blockstack tokens.

Accredited Investors – meaning those who have generated an income of at least $200,000 for the last two years or who have a net worth of $1 million or higher – can participate in the Accredited Sale either through something called a Simple Agreement for Future Tokens (SAFT) or a fund similar to the one that qualified purchasers will use.

The Problem and Solution

 The internet’s current setup provides centralized points of vulnerability, for example, remote servers and databases.

In addition, the majority of user data is hosted by a handful of companies, for example, Facebook and Google.

These central points are susceptible to hacks, and a perfect example of what can happen is the user data lost in the Yahoo hack. Because of this security breach, the information of 3 billion accounts was compromised.

Blockstack aims to solve these problems by decentralizing the internet. One way it seeks to achieve this goal is by decentralizing storage, making it possible for individuals to have greater control over where they can store their data and who can access it. Blockstack provides this benefit through Gaia, a decentralized storage system that eliminates the need for central trusted parties.

In addition to spreading out data storage, Blockstack wants to make it possible for users to run their applications locally, instead of relying on remote servers. Users would have their own keys, which they could use to access applications without relying on identity providers or remote servers.

The Team

Blockstack has a very strong team, whose members have impressive academic backgrounds and startup experience.

Muneeb Ali and Ryan Shea, Blockstack’s two co-founders, both went to Princeton, with the former receiving a Ph.D. in Computer Science and the latter receiving a Bachelor’s in Mechanical Engineering with a Minor in Computer Science.

Ali and Shea, who founded Blockstack in 2013 as Onename, participated in the Summer 2014 class of Y Combinator, a startup accelerator that provides both seed money and support to fledgling companies.

Aaron Blankstein and Jude Nelson, both engineers for Blockstack, also studied at Princeton, with Blankstein’s LinkedIn listing attendance dates of 2011 to 2017, and Nelson’s LinkedIn revealing he is a final-year Ph.D. student at the school.

Michael Freedman and J.P. Singh, listed as technical advisors to Blockstack, are both affiliated with Princeton. Freedman, who won the Presidential Early Career Award, is a full professor at the school. Singh, also a full professor, serves as the director of the school’s CTO program.

The company’s founders have been communicating openly, using their Twitter handles on a regular basis to provide updates on the sale, as well as other information.

The Token

Blockstack tokens, referred to as stacks (STX), are essentially “utility tokens,” used to pay for different network operations.

These operations, which consist primarily of registering and maintaining domain usernames and registrations, might also include being involved in picking out app reviewers or, alternatively, voting on changes to the Blockstack protocol.

While Blockstack had been up and running for more than three years before the ICO began, the token was designed to help users access new functions, which were in development when the sale began.

While Blockstack plans to distribute 880 million tokens through the Accredited Investor sale and the User Sale, a group of founders, employers, and investors in Blockstack Public Benefit Corp., known as Creators, have already purchased 440 million tokens, which have a value of roughly $0.07, in a separate offering.

As a result, Blockstack plans to distribute 1.32 billion tokens through these offerings. These digital assets will be released for use following a certain lock-up period, during which specific requirements must be met. If the requirements are not met, the funds that have been raised will be liquidated and distributed to investors.

The first requirement is that the Blockstack token must be completed and deployed on the network by January 30, 2019, and the second is that the network must obtain 1 million verified users by January 30, 2020.

Further, new tokens will be released into the system through mining. The rate at which these new tokens will be added will decrease over time. While the mining incentive will by 8,000 tokens during the first year, this incentive will decline by 500 tokens every year.

While mining will add new tokens, these digital assets will be “consumed” (destroyed) every time they are used to pay for certain operations on the network. For example, if an application generates 20 million users, and registering a user account requires $5 worth of Blockstack tokens, registering all these users will require $100 million worth of these digital assets to be destroyed.

Should Blockstack achieve widespread adoption, the rate at which these tokens are “consumed” and removed from supply could easily surpass the rate of creation, making these digital assets increasingly scarce.

While the tokens being sold in the Accredited Sale and User Sale were priced at $0.12, their value could rise significantly if the supply of these digital assets dwindles relative to their supply.

On the other hand, mining will release new tokens into the system indefinitely, so if demand fails to keep up, Blockstack tokens could see notable downside.

If Blockstack tokens become listed on one or more exchanges, this could be another source of upside, causing their value to skyrocket if they become a target of speculative demand.

The Community

The Blockstack Twitter handle has been quite active, regularly retweeting the posts of its co-founders, as well as others.

The organization’s GitHub is currently maintained by nine people, all of whom are listed on the Blockstack website. This GitHub has 57 repositories, which include a generalized repository, a JavaScript library, and a folder for the network’s browser.

The Blockstack YouTube channel has more than 100 videos which explain many concepts crucial to the Blockstack network and also feature talks the founders have given at different events.

Next Steps

Blockstack tokens could provide significant opportunity for investors, depending on how much demand there is for these digital assets.

Because stacks must be consumed to harness certain features of the Blockstack network, these digital assets could become increasingly scarce if users begin flocking to this network. If demand outstrips supply, this situation would likely drive the price of stacks higher.

Further, Blockstack tokens could potentially surge in price if they became listed on exchanges. Should stacks become available for trade on these marketplaces, more investors might start snapping them up, pushing their values higher.

As always, any investors who are considering purchasing stacks through the Blockstack ICO should keep in mind that investment is inherently risky, and it is important to conduct thorough due diligence before participating in any token sales.

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