While Maersk and IBM’s roll-out of their private blockchain TradeLens captured the attention of the transportation and tech media, the entire blockchain industry is frothy with growth and excitement, at all enterprise scales. This comes despite a 50.61% loss of bitcoin’s value against the US dollar: as more use cases in transportation and logistics, finance, and energy are piloted, first-generation cryptocurrencies can no longer single-handedly dominate the space.
In fact, bitcoin’s price drop is almost exactly mirrored by a surge in blockchain hiring in Asia. Recruitment firm Robert Walters told CNBC that it has seen a 50% surge in the number of roles related to blockchain and cryptocurrency in Asia since 2017; Python devs are among the most desired applicants.
In the United States, transport blockchain startups are experimenting with different funding models to help mitigate the risk of exposing their tokens to volatile secondary markets. ShipChain was the tip of the spear in launching an initial coin offering for transport and logistics tokens, but since the March token pre-sale which raised $30M, the value of SHIP has fallen 93%, from 64 cts to 1.9 cts. Fr8 Network pushed its token sale to September while it assesses the markets. Slync raised a round of capital from traditional VC funds and other venture investors.
Meanwhile, dexFreight is exploring a new, experimental way to raise money: a security token offering, or STO. The STO structure’s premise is that the value of a token used to power computation on a decentralized network and a startup’s fundraising should be separated. There’s no logical reason why retail investors speculating in the cryptocurrency markets would be able to rationally price the value of a decentralized application’s services.
Recognizing that fact, a number of blockchain startups are separating out the utility tokens powering their network from their capital raises. Where traditional ICOs had to walk the fine line between using the reputation of their team and its vision to sell tokens while at the same time claiming that the tokens did not represent equity and therefore weren’t securities, in the STO model, the tokens are freely acknowledged to be securities. In other words, security tokens represent common stock. STOs are cheaper in terms of cost of compliance than IPOs, which use an average of 13% of funds raised to pay for SEC compliance.
“Since security tokens are actual financial securities, your tokens are backed by something tangible like the assets, profits, or revenue of the company,” wrote blockchain consultant Michael Spencer.
While the Securities Exchange Commission has not yet approved a formal application for a security token offering, dexFreight’s Rajat Rajbhandari thinks that the opportunity will be clarified by the fall. If not, dexFreight, which funded its angel round through friends and family, will pursue a traditional Series A. Some blockchain experts are very bullish indeed on tokenized securities.
“Simply, a tokenized securities market is an improved securities market,” wrote Anthony Pompliano in a Medium post entitled “The SEC will mandate Security Tokens.”
There’s even a company called Securitize which is tokenizing startup equity across several verticals: they’re a fund offering equity in 30 different startups, all alumni of 500 Startups.
“Securitize’s mission is to be the leading platform for enabling compliant Digital Securities issuance and liquidity on the blockchain,” Securitize said in its white paper. “To achieve this, Securitize has built a technology platform that provides the tools to issuers to manage all the elements in the full Digital Security lifecycle, including the smart contracts that actually support the token information on the Ethereum blockchain.”
The fact that blockchain employment has decoupled from the price of the largest cryptocurrencies and startups have moved from ICOs to presales, STOs, and traditional capital raises is a sign of the sector’s maturity.