Quick Summary286 Investors read this
It’s Venmo and Whatsapp, but for blockchain. That's the idea at least.
For all its potential and billions in market value, blockchain as a technology remains in development. No consumer-level products have actually entered mainstream use, and as a result, cryptocurrency remains a tool for the tech-savvy. In part, this is because blockchain is still young. Entrepreneurs continue to experiment with its role in the marketplace.
However, this is also because blockchain is daunting. Buying and spending cryptocurrencies require the consumer to understand 34 character private and public keys, currency exchanges which rival any forex market, and a fairly complex underlying technology.
This is the problem Tip would like to solve. Through customized usernames, a searchable peer-to-peer network, and point of sale devices, Tip wants to make crypto as easy to spend as plastic. Several platforms share this idea, and it’s a good one... if only the team’s approach was equally sound.
There’s definitely a market in making cryptocurrency easy to spend.
Tip has some good ideas mixed with others which seem poorly thought through. Its core conceit of enabling smooth, seamless transactions is strong. Cryptocurrency does need a mechanism that makes tokens as spendable as a debit card. In the words of the project's website, sending money to “@TipToken instead of 0x28AD00F1CDF1E24900031” is not only a good idea, it is likely essential if digital currency is ever to see mass adoption.
The same goes for finding merchants with whom to spend. Tip intends to build an indexed database of vendors, allowing users to easily find places to spend their tokens as currency. This is also likely a critical step to taking cryptocurrency from a niche investment product to a functional form of money.
At the same time, however, Tip plans on building a point of sale technology for vendors only through an app. The idea of providing merchants with point of sale technology is good. Making vendors provide their own hardware and installation, however, creates a hurdle that will likely alienate the very casual marketplace Tip claims it will serve.
Further, for reasons not entirely clear, Tip also will include a blockchain-based messaging service that features text, VOIP, video calls, and “animated gifs.” While this is not necessarily a harmful feature, Tip advertises itself as a transaction and marketplace utility. It is unclear how such a service would benefit from the ability to send dancing emojis.
There is likely a market for many of Tip’s ideas. Making cryptocurrencies useful has enormous potential value to both current users and consumers who are curious but daunted by the complexities of the blockchain. The rest of the project's features, however, seem either poorly thought through or outright irrelevant.
Tip is not the only blockchain project doing this. Startups including TenX, Vestarin, and others have all seized upon this idea. That doesn’t mean that Tip is not competitive; however, it is worth considering that they are not breaking new ground.
The success of this platform will depend almost entirely on its ability to attract more users than similarly situated projects. That in and of itself is no reason to believe the team won’t succeed; however, their website, whitepaper, and marketing materials make little mention of their symmetrical competition. Given how critical this will be to the project’s success, it would be encouraging if Tip’s public materials devoted more time to developing their market position.
The Tip management team inspires relatively little confidence.
This is not a bad team, per se, but rather one with limited experience. It is always a red flag when a project’s biographies rely on abstract language about “solutions” and “enthusiasm” in place of simple, concrete accomplishments.
Founder and CEO John Warmann has held a number of jobs over his career, few for any length of time and almost none in any significant position of leadership. In parallel with his technical positions, Warmann’s LinkedIn page credits him with the founding of a company called “Cell Innovation, Inc.” This app development firm appears to have no web presence, and its iTunes store page has been removed.
The same is true of Chief Strategist Garlam Won. Despite claiming credentials such as Deloitte and J.P. Morgan, Won’s profile has a history of scattered employment. His stint with J.P. Morgan lasted less than a year, and his time at Deloitte was only 15 months. Neither of these is evidence of ill-intent. Instead, it merely appears that Won is young and at an early stage in his career.
The leadership team of Tip does not appear to be fraudulent or acting in anything other than good faith. However, neither Won nor Warmann have experience heading up a project like this. In small places, such as the project’s embrace of buzzy ideas like messaging apps or the whitepaper's frequent insistence that “cryptocurrency mass adoption cannot wait another two or three years. This needs to happen now,” this inexperience verges on immaturity. That should inspire caution.
The Tip project is fueled and funded by its TIP token. It is unclear why that is the case.
Tip’s core function is, ultimately, as a data storage service. While allowing users to access blockchain keys through indexed usernames will require substantial security, this is ultimately a simple alias. Traditional data management is more than sufficient to do this. Indeed, in order to get their project up and running quickly, Tip will initially start with a standard database before developing a bespoke blockchain.
There is little (if any) clear reason for the team to spend considerable time and resources adopting a blockchain solution for a data storage issue which can be (in fact, initially will be) solved through other, less complex, methods.
The TIP Token raises similar questions.
According to the project whitepaper, the TIP token is a utility token which “is the unit of account on the Tip network. It is the native currency of the network, thus is used to pay for transactions, storage, and other services on the network.”
First and foremost, at no point does Tip make it entirely clear exactly what role this token will play in using the service. Although Tip advertises itself as an easy way to spend cryptocurrency and send it between consumers, its whitepaper indicates that the TIP token will be used for “transfer between peer to peer” [sic] and buying “things in the real world.”
If users don’t need the TIP token to move and spend cryptocurrency, then it appears largely superfluous. If the TIP token does stand in between a cryptocurrency transaction, then the project has created exactly the kind of barrier to spending that it claims to solve. None of Tip’s materials address this issue, nor is it even clear why a casual consumer wallet service would need any form of token-based functionality.
Further, the leadership team of Tip does not appear to have kept up with their own legal situation. Through its ICO, Tip intends to finance its initial development and launch cycle. Numerous regulatory agencies, including the SEC, have made it very clear that tokens which serve this function are securities, not utility tokens. In not addressing this, the team has exposed both itself and its users to considerable legal complications.
It is the opinion of this analyst that Tip is poorly designed for its intended customer base.
Many of the services Tip will offer are either extraneous from its core purpose, such as social messaging, or poorly designed for its core purpose, such as the entire TIP token. By building itself around a utility token, Tip has created exactly the kind of complications it claims to solve. In doing so, it will alienate the casual users upon whom it hopes to build its network.
In using this so-called utility token as a fundraising mechanism, it is creating substantial legal problems for both itself and its investors. It is very concerning that the leadership team does not seem to realize this.
TIP may have the marketing reach to gain attention. Its Twitter, Facebook and Medium presences are active and well maintained. If it can develop a good media presence and ensure that adoption is as seamless as possible, the project may gain some users.
However, as a threshold matter, there are several reasons to question the long-term viability of Tip as an enterprise.
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