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

2. 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
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Professor Jim Kyung-Soo Liew

3. Blockchain and Bitcoin Primer
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4. 2nd Generation of the Internet
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Professor Jim Kyung-Soo Liew

5. 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”
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
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Professor Jim Kyung-Soo Liew

6. 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”
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7. 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 “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)
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ICO Defined
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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
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Professor Jim Kyung-Soo Liew

10. 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
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11. 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
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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
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History of ICOs
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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”
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ICO activity over time
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As of November 2017
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Filecoin – Juan Benet
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22. Tezos (TEZ) – Self-amending Crypto-Ledger
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25. Watch for the Telegram ICO!
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The ICO Process
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27. 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
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Avoid the ICO Pitfalls
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29. Avoid ICO Pitfalls: BitConnect -- Ponzi Scheme
Lack credible team
but very loud
Guaranteed returns
Industry suspicious
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30. 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.
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31. 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
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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
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33. 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
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34. Simple Agreement for Future Tokens (SAFT)
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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
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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
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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?
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Contact info: Professor Jim Kyung-Soo Liew and Mobile: Please stay in touch!
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Professor Jim Kyung-Soo Liew