The big story this week is 0x's ICO.
It is interesting for a number of reasons and I think can spark quite a few discussions.1) Token sale dynamics
0x has been seen as a new standard in token sale dynamics.
The ICO has been capped at $24M raise, and the price for each token has been set the day before the ICO to ~$0.05.
A pre-registration was necessary so that each pre-registered address would have the opportunity to buy an amount equal to the total supply of tokens divided by the number of registrants.
This has given the ability to everyone to buy themselves some ZRX without having to write crazy contracts, spend a ton in gas, etc.
Civic was used to try to limit sybil attacks, and seems to have worked pretty fine.2) Token price
A whole lot to talk about here.
As we said, the token price was fixed, which instantly gave a "market cap" valuation to the offering.
The combo of limited per-account supply and fixed price made for an interesting explosive mix.
Imagine you're someone who wants to bet big on this token:
you still can only buy 6.7 ETH worth of it (plus ask friends, SOs, etc. to donate their device / ETH account).
This means that usual whale buyers would have to rely on secondary liquidity to buy their usual ticket size.
But on the other side they wouldn't find big dumps, but only small sellers that bought ~6 ETH worth of the tokens and wouldn't want to sell it all.
I think this was the combo that made the price spike up to $0.5, a 10x increase in a matter of days.
This begs the question of the pricing of ICOs, and the similarity to the pricing of IPOs.
0x could arguably have done two things:
- found buyers that would have paid a much higher price than the 5c per coin and raise the same $ amount but giving up way less tokens and holding more for subsequent raises.
- sold many more tokens at the 5c price.
It's fascinating to see the experimentation going on in this completely new model of instant liquidity and valuation.3) Fun paradox
The first exchange where 0x has been traded was EtherDelta, a direct competitor to the 0x protocol.4) Public due diligence and the "not perfect" case
A few days before the ICO started, the Hacking Distributed blog (Emin Gun Sirer's personal blog, the same that published the Bancor is flawed analysis) published the results of a deep analysis of the 0x protocol
The post outlined several problems with decentralized exchanges in general, as well as specific problems with both 0x and EtherDelta.
This is another case of AWESOME public diligence
on publicly fundraising projects.
This one was even more awesome because it was the result of deep informed research, which would take a few weeks for a normal person, and wouldn't get Cornell-Phd levels of insights.
I don't think many people read the post, but it got picked up by Forbes
, and many people read that one.
I think it's great that people can access more information about specific projects, even if biased or partial.
My personal take on the post, is that the issues outlined are very minimal and fall very much into one of the patterns I hate the most.
The pattern is the usual "this new solution doesn't fix X Y Z, so it's not perfect." Or. "this solution introduces A B C problems, therefore it sucks".
The point that is always missed in this discussion is that the comparison should be fair, and so for that to be the case in my opinion we have to compare the potential of the current solution to the status quo solution.
When this lens is applied, it's very hard to see new solutions as sucky.
In this specific case, decentralized exchanges have all sorts of little issues, but they have two MAJOR wins:
- people can't run off with your funds
- you know that the trades you see are real
- the SEC can't come and freeze your funds.
To me, a solution would be better than the status quo even if I had to shout the orders from my window, as long as it solved these 3 issues.Disclosure: We both hold ZRX.