Initial Coin Offering By Prof. Jim Liew Founder of SoKat.co March 2, 2018

Professor Jim Kyung-Soo Liew Agenda Blockchain and Bitcoin Primer ICO Defined ICO History ICO Process and Pitfalls Case Studies Prof Liew’s Best ICO Practices SAFT 9/22/2018 Professor Jim Kyung-Soo Liew

Blockchain and Bitcoin Primer 9/22/2018 Professor Jim Kyung-Soo Liew

2nd Generation of the Internet 9/22/2018 Professor Jim Kyung-Soo Liew

1st Internet Revolution World Wide Web provides a browser to easily “see information” on the internet Search allows users to quickly and easily “find information” Email facilitates users to send/receive messages -- “send information” Social media facilitates the formation of similar interest groups -- “social information sharing” The first internet revolution drove down costs for: See, find, and send information (e.g. “double-spend” possible) Collaborate and connect with others Exchange ideas and data 9/22/2018 Professor Jim Kyung-Soo Liew

2nd Internet Revolution Blockchain provides a trusted technology platform to easily create and transfer “value” over the internet (“see and send value”) Best Use Case  Bitcoin is a trusted peer-to-peer electronic-cash. Bitcoin allows users to facilitate transactions and record these bitcoin transactions on an immutable ledger -- “global distributed ledger” Start-ups utilize the blockchain technology to raise capital (e.g. fiat money, BTC, ETH, etc.) to fund the development of their projects by way of issuing a coin or token. Initial Coin Offering (ICO) are extremely early stage speculative investments. The second internet revolution aims to drive down costs by “knocking-out-the-trusted-middlemen” with “transferring value”: Disintermediate the traditional funding sources (Angles/VCs/PEs) for early stage companies et al Record asset ownership and transfers, in secure and transparent way Coordinate transaction of value “quickly” with peers across country boarders Provide the fabric for the digital-economy a.k.a. “sharing-economy” 9/22/2018 Professor Jim Kyung-Soo Liew

Blockchain and Bitcoin Culmination of technology and timing, built upon several existing contributions from distinct fields: (1) cryptography / hashing, (2) peer-to-peer file sharing / network, (3) economic incentives to motivate network participants/nodes, (4) transparent immutable growing ledger database Blockchain would probably not have taken off so quickly if it hadn’t been for “easy-access” to Bitcoins mixed with the greed of investors in 2017 -- “Bring bitcoins to the masses” 2018 will be the years that we search for our 2nd compelling use-case and the 1st $1 billion ICO (Telegram) 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew ICO Defined 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew Definition of ICOs An initial coin offering (ICO) is controversial means of crowdfunding centered around cryptocurrency, which can be a source of capital for startup companies. In an ICO, a quantity of the crowdfunded cryptocurrency is preallocated to investors in the form of “tokens”, in exchange for legal tender or other cryptocurrencies such as bitcoin or ethereum. By Wikipedia.org 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew Definition of ICOs An initial coin offering (ICO) is controversial means of crowdfunding centered around cryptocurrency, which can be a source of capital for startup companies. In an ICO, a quantity of the crowdfunded cryptocurrency is pre-allocated to investors in the form of “tokens,” in exchange for legal tender or other cryptocurrencies such as bitcoin or ethereum. By Wikipedia.org 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew Definition of ICOs ICO – An unregulated means by which funds are raised for a new cryptocurrency venture. An Initial Coin Offering (ICO) is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. In and ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies. By Investopedia.com 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew Definition of ICOs ICO – An unregulated means by which funds are raised for a new cryptocurrency venture. An Initial Coin Offering (ICO) is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. In an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies. By Investopedia.com 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew History of ICOs 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew 1st ICO -- Mastercoin 1st token sale Mastercoin in July 2013, raised $5m worth of Bitcoins J.R. Willett published white paper in January 2012 Duration of the raise 1-month February 2014, Mastercoin was the 7th largest crypto-currency my market cap (as of Feb 2018, 328th) Rebranded as “Omni” 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew ICO activity over time 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew https://en.wikipedia.org/wiki/File:This_is_what_4_years_of_ICO_activity_looks_like.webm 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew As of November 2017 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew Filecoin – Juan Benet 9/22/2018 Professor Jim Kyung-Soo Liew

Tezos (TEZ) – Self-amending Crypto-Ledger 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew 9/22/2018 Professor Jim Kyung-Soo Liew

Watch for the Telegram ICO! https://steemit.com/cryptocurrency/@techblogger/crypto-news-telegram-launches-new-ico-called-ton-token 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew The ICO Process 9/22/2018 Professor Jim Kyung-Soo Liew

Steps to Launch a Proper ICO Step 1: Create a credible “white paper” Step 2: Publish white paper on your website with team info and a countdown clock to your ICO launch Step 3: Market your ICO like crazy! Telegram / Slack / Bitcointalk Reddit / Steemit FB / Social Media / Twitter 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew Avoid the ICO Pitfalls 9/22/2018 Professor Jim Kyung-Soo Liew

Avoid ICO Pitfalls: BitConnect -- Ponzi Scheme Lack credible team but very loud Guaranteed returns Industry suspicious 9/22/2018 Professor Jim Kyung-Soo Liew https://techcrunch.com/2018/01/16/bitconnect-which-has-been-accused-of-running-a-ponzi-scheme-shuts-down/

Avoid the ICO Pitfalls: Token  Security Code written by Christoph Jentzsch and Simon (his brother) DAO launched on April 30th, 2016 with 28-day crowd-funded ICO raised over $100 million by May 15th, 2016. On June 17th, 2016, hack on DAO caused the Ethereum to hard fork Issued a token that should be considered a security. SEC regulates securities. SEC took no action against DAO. https://www.sec.gov/litigation/investreport/34-81207.pdf https://www.sec.gov/news/public-statement/statement-clayton-2017-12-11 9/22/2018 Professor Jim Kyung-Soo Liew

Typical Timeline for ICO 3-6 months ~1 month up to few years Launch! Execution Phase ICO! Marketing Plan Incorporation Alpha Code White Paper Idea and Team Formation Time 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew Other ICO Terms Pre-Sales and Post-Sales, time before and after the ICO period Bounties – rewards given to incentivize other to help the ICO project which includes activities such as: blogging, writing articles, re-tweets, debugging, signing up more users, etc. Airdrops – free coins/tokens used to increase user base and gain exposure Smart Contracts – coded contract proposed by Nick Szabo in 1994 9/22/2018 Professor Jim Kyung-Soo Liew

Prof Liew’s ICO Best Practices Be transparent and honest Tell your own story (sincerely) Be clear about your ICO process Don’t let one investor control the majority of your tokens/coins Help your community understand your business / project, don’t “smoke-screen” them Create bug bounties Make sure your core-team stays together Create a network “culture” that’s lasting and fair Majority of ICOs (9 out of 10) will fail, but not because of fraud, don’t over-promise and under-deliver Be prepared to adapt as these “Best Practices” will change due to new business ideas, processes, and technological innovations https://medium.com/@merunasgrincalaitis/gain-ethereum-ico-trust-credibility-e9e53145c331 9/22/2018 Professor Jim Kyung-Soo Liew

Simple Agreement for Future Tokens (SAFT) https://saftproject.com/#saft-whitepaper 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew SAFT Motivation “Tokens” are digital assets used in decentralized services, applications, and communities ICO is a powerful new tool Early users typically get “discounts” in presales Sellers in direct presales may unintentionally be selling securities, may failed to comply with US laws Path to compliant framework SAFT SAFT is an investment contract Initial sale of a SAFT from developer to accredited investors 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew SAFT Cont’d SAFT obligates investors to immediately fund the developers In exchange, the developers use the funds to develop genuinely functional networks, with utility tokens, then deliver these tokens once functional The investors may then resell the tokens to the public SAFT is a security – has to comply with security laws. However, the resultant token are already functional and need not be a security under the Howey test Tokens are consumptive products, so need to comply with state and federal consumer protection laws 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew Questions What are some benefits of the underlying blockchain architecture? What’s the difference between a “securities token” and a “utility token”? What is the Howey Test? Howey Test has 3 elements: (1) investment of money, (2) expectation of profits, and (3) profits derived from the efforts of others. 4. Why are already-functional utility tokens unlikely to pass the Howey Test but pre-functional utility token sale more likely to pass? 5. What are some benefits of the SAFT? 6. What are some limitation of the SAFT framework? 9/22/2018 Professor Jim Kyung-Soo Liew

Professor Jim Kyung-Soo Liew Contact info: Professor Jim Kyung-Soo Liew Email: jimkliew@gmail.com and jim@SoKat.co Mobile: 1-(917)-733-1150 @ProfJimLiew Please stay in touch! 9/22/2018 Professor Jim Kyung-Soo Liew