Does the world’s first Field Coin Offering point to a new future for ICOs?
ICOs are in trouble. A recent report by ICORating showed that more than half of all ICOs failed to raise more than $100,000. Only 7% of recent ICOs have managed to achieve an exchange listing and as the year progresses funds are drying up: the total raised in June showed a dramatic drop from May’s figures.
Though the tokenization of assets is still an attractive prospect, the high risks attached to ICOs, and the possibility that a token price might go to zero, has cooled investor enthusiasm. Even the most successful ICOs have seen the value of their tokens drop by 50-80% this year, while a study by ICO advisors the Statis Group identified more than 80% of 2017’s ICOs as scams.
ICOs must adapt if they are to survive. Marc Couzic, the CEO of Fieldcoin Ltd, puts it this way: “the current crisis shows us that ICOs (Initial Coin Offerings) are outdated. They don’t fit the current need of investors and lack guarantees concerning the use of assets.”
Innovating on the ICO model
Forward-thinking companies are experimenting with variations on the ICO model, looking to offer a safer, more stable investment vehicle. One such innovation is Fieldcoin Ltd’s Field Coin Offering (FCO).
The Field Coin Offering is a land-specific version of an ICO. Backed by a real asset, land, the tokens should have a stability that other cryptocurrencies and tokens lack. As Couzic says, “considering that agricultural land is the most stable asset over the last 50 years, we are creating a stable instrument for trading on our platform.”
Fieldcoin’s LANDS token is based on the ERC-721 standard. Each token is unique and non-fungible as it is backed by a particular piece of land.
Trade Back Guarantee
Fieldcoin has also built in mechanisms to protect investors from market volatility. Holders of the Fieldcoin token will be able to buy LANDS tokens at “a certain rate that is fixed and increasing depending on the amount of the assets in the Eco-system.” The more the token value increases on exchanges, the weaker this trade-back effect.
When prices rise a small percentage of the increase will be sold for fiat, which is then used to purchase more land for the Fieldcoin ecosystem, raising the threshold guarantee of the Trade Back program.
The trade back program also allows investors to exchange their tokens for a guaranteed minimum price, calculated as a percentage of purchase price. For instance, if the factor is 80% and an investor buys €1,000 of FLC, that investor will always be able to exchange the tokens for at least €800, minimising the downside risk. If prices are higher, then the investor may sell on exchanges.
What’s more, an inflation factor is applied along with price rises. If in the above example there is a bull market and the investment doubles in value to €2,000, the trade back value will also grow above the initial 800€ initially, let’s say €1,100. Even if the market price falls back to €1,000, the trade back value will stay at €1,100. Such a situation would present a clear arbitrage opportunity between the trade back value and the prices available on exchanges, putting upwards pressure on market prices.
Described by Fieldcoin as “capitalization on the upward trend”, this system should prevent prices from falling so steeply in a crypto bear market while maintaining some stability in market capitalization. In a year when even the most successful ICOs have seen the value of their tokens drop by 50-80%, there will no doubt be significant investor interest in this new Fieldcoin model.