Blockchain related ICO Investment Principles by INBlockchain

by lixiaolai, founder of INB (inblockchain.com)

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1. What is ICO?

ICO (Initial Coin Offering) is a means for blockchain startups to raise capital from the public that is somehow equivalent to IPO in the stock markets.

2. What is blockchain?

Blockchain refers to a public ledger system maintained by a decentralized network that serves as an open and immutable database.

3. What is Bitcoin?

The term "Bitcoin" can be understood in several different ways, which is why people always get confused and hardly agree with each other when it comes to discussion of bitcoin-related issues.

First of all, Bitcoin is the first, the most successful blockchain application.

Moreover, Bitcoin is a world bank that is not run by any authority, but by a decentralized network.

In addition, this decentralized world bank, Bitcoin, issued a currency that happens to have the exact same name, Bitcoin. Some people are more meticulous and incline to refer to the currency as BTC, rather than Bitcoin.

Finally, seven years after the birth of Bitcoin (2017), seldom have people realized that BTC could also be deemed as the stock of the decentralized world bank, Bitcoin.

4. What is altcoin?

Since the birth of Bitcoin, thousands of other crypto currencies have been issued. Though most of them are already extinct, some of them are still alive, and some even prosperous. Litecoin, for example, is the most famous example of altcoins, and Dogecoin is another.

At first, many people thought of these crypto currencies as "copycats", with no intrinsic value at all. Later on, witnessing that what they thought to have no value persisted or even flourished, they started using another term, "altcoin". Perhaps the world needs more than one world bank, who knows? And... who cares.

Here is what I think:

In the markets, people are buying two kinds of values: the intrinsic and the superficial. An undeniable fact is: for those who are buying the superficial, it looks exactly the same as the intrinsic.

5. What is MBAcoins?

By MBAcoins, I mean coins issued by Meaningful Blockchain Applications (MBA). By Meaningful, I mean the applications are solving real problems, not problems that have already been solved by Bitcoin.

Honestly, I don't think altcoins solved any problem that bitcoin didn't. And I wish (not believe), at the end of the day, one world bank would be enough.

The truth is, this world needs more than one blockchain applications. Perhaps the second MBAcoins is Namecoin, a blockchain application trying to offer a decentralized domain service. Ethereum is another successful MBA that is built upon blockchain technologies to serve functionalities including smart contracts.

Till now (June, 2017), many MBAs have been running for more than 6 months and are performing pretty well. For example, Sia provides decentralized storage service just as dropbox does. Steem is another young MBA that creates, discovers and distributes contents with a public ledger built upon blockchain technology.

6. What is the trend?

In the past few years, Bitcoin has dominated the blockchain world with its single largest market cap. In April 2017, however, Bitcoin's dominance dropped to 52%, although its price had been surging along with other blockchain assets.

This is an important signal that the blockchain world is transforming into a forest, not a piece of land with a single tree anymore. If this is the case, this prediction might well be true:

In the future, Bitcoin Dominance will continuously drop, and even drop to less than 5%...

7. What have we done in the past?

I'm a large bitcoin holder. Since I take BTC as the stock of a world bank, it's quite natural for me to spend as less BTC as possible.

Before 2014, we invested Bitshares, yunbi.com and I have been personally maintaining bitcoinsand.com, a bitcoin bank, for years. Since the last quarter of 2015, my team and I started to invest in MBAs in batch, yet with a rigorous set of principles. We have invested Sia, Steem, Zcash, QTUM, EOS and numerous others. Often, we invest both in equities of the startups and the blockchain assets they issue. We are actively participating ICOs around the world.

8. Why do I get the investing principles open-sourced?

Investment is by far the most risky activity for every one, because every aspect it requires cannot be genetically inherited.

Each time the birth of a true innovation is followed by more than many frauds. This is especially true when the innovation comes with inherent financial functionalities.

Investing in blockchain startups and their assets is extremely risky in that people are often attracted by the tremendous profit they have heard about, rather than by the thorough understanding of the value that the application creates.

By publicizing our investing principles, we are trying protect ourselves. At best, this altruism serves for selfish motives: the less fraud happens, the safer we are.

9. Principles

Sometimes asking questions is much more effective than describing principles: by struggling to get an absolute answer of appropriate questions, principles are sticked to. Here are major questions we have asked ourselves again and again before we decide to invest any blockchain startup or blockchain asset:

• Is this truly needed by this world?
• What otherwise unsolvable problem does it solve completely?
• Is decentralization truly needed?
• Is an open ledge truly necessary?
• Can an open ledge truly boost the efficiency of the business model?
• To what extent is it a DAC (Decentralized autonomous corporation)?
• If we decide to invest, what percentage of our fund should we use exactly?

That's all, the simplest questions needed tougher thinking to get more accurate and concrete answers.

10. Two Analogies

Look into the mirror, every thing looks exactly same in and out of the mirror, but they are reversed, not only the objects, but also the orders. Investment might well happen in the "mirror", every detail in the mirror looks familiar and simple, but naive investors don't know they are in the mirror - they don't know what they see in the mirror doesn't operate like it does in the outside world. More often than not, opportunities look like dangers, and baits smell like cheese.

Another perfect analogy is about driving a car. If you are an Australian and trying to drive in the United States, you will get uncomfortable and often confused, since you are customized to driving on the left. Even worse, you might get yourself killed if you are not getting yourself ready. So, be careful driving on the other side!