1. Duke University and NBER
Evaluating ICOs
Campbell R. Harvey
Duke University and NBER

2. Campbell R. Harvey 2019

3. The Bandwagon Investors
Campbell R. Harvey 2019

4. The Bandwagon Investors
…the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while.”
Campbell R. Harvey 2019

5. The Bandwagon Investors
…the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while.”
Buffett not talking about bitcoin – he was talking about gold in 2012
Campbell R. Harvey 2019

6. The Bandwagon Investors
Gold
Campbell R. Harvey 2019

7. The Bandwagon Investors
Gold
Campbell R. Harvey 2019

8. The Bandwagon Investors
BTC
Campbell R. Harvey 2019

9. The Bandwagon Investors
BTC
Campbell R. Harvey 2019

10. The Bandwagon of Coins and Tokens
Most investors and many in the business don’t know the difference between a coin and a token!
It is like the Wild West
Campbell R. Harvey 2019

11. Almost anything can be tokenized
1. First Gen/Gold 2.0: Bitcoin (BTC), Litecoin (LTC) 2. Distributed Computation Tokens: Ethereum (ETH), Tezos (XTZ), EOS, and DFinity 3. Utility Tokens: Programmable blockchain assets: Storj, Golem (GNT), Sia (SC), FileCoin
Campbell R. Harvey 2019

12. Almost anything can be tokenized
4. Security Tokens: Represent stocks, bonds, other assets, ASX initiative
STO=Security Token Offering; ETO=Equity Token Offering
5. Fungible Tokens: ERC-20, Decentraland (MANA), REP
6. Non-fungible Tokens: ERC-721, Dharma debt agreements, Decentraland (LAND), Cryptokitties
Campbell R. Harvey 2019

13. Almost anything can be tokenized
7. Stablecoins:
Fiat Colleralized: USDT, TUSD, LBXPeg, Candy, USDC, PAX, GUSD
National Cryptofiat: Fedcoin, Petro, Eurocoin, CADCoin,…
Natural Asset Collateralized: Digix Gold (DGX), Tiberius Coin (TCX), Swiss Real Coin (SRC), D1 Coin
Non-Collateralized: Basecoin
Campbell R. Harvey 2019

14. Storm of ICOs
Campbell R. Harvey 2019

15. Danger
Campbell R. Harvey 2019

16. Danger 121 projects did not name a single employee
24 promised financial rewards without risk
Freelancers writing “white papers” for as little as $100
Even if employee names are listed, they may be fake
Campbell R. Harvey 2019

17. Danger
Campbell R. Harvey 2019

18. Danger Idan Cohen does not exist It is a picture of Eduardo Carillo
Campbell R. Harvey 2019

19. Danger
Idan Cohen does not exist
It is a picture of Eduardo Carillo

20. Danger
Campbell R. Harvey 2019

21. Danger
Campbell R. Harvey 2019

22. Danger
Campbell R. Harvey 2019

23. Danger
Campbell R. Harvey 2019

24. Danger
Campbell R. Harvey 2019

25. Danger
Campbell R. Harvey 2019

26. Danger
Campbell R. Harvey 2019

27. Campbell R. Harvey 2019

28.
Campbell R. Harvey 2019

29. ICO Future
ICOs are not going away – however, there is greater regulatory oversight now
SAFTs
Blockchain ventures have seen no slowdown in interest from venture capitalists
Expect to see in the near future the mix of funding tilt away from ICOs towards more traditional Seed and Series A funding.
Campbell R. Harvey 2019

30. ICO Future No shortage of venture interest
Campbell R. Harvey 2019

31. ICO Future The a16z crypto fund
Today we are announcing the launch of a16z crypto, a $300M venture fund that will invest in crypto companies and protocols. Our fund is designed to include the best features of traditional venture capital, updated to the modern crypto world:
We are long-term, patient investors.
We have an “all weather” fund. We provide operational support to entrepreneurs. 
We are flexible with respect to stage, asset type, and geography. 
We are focused on non-speculative use cases. 
Campbell R. Harvey 2019

32. A framework for assessing ICOs: 1. Idea
What problem is being solved?
Is the problem an economically important problem?
Does the market already exist or does it have to be created?
Is this problem related to a current layer of middle people? If yes, how thick is that layer and what is the probability of strong resistance from the current actors that will be disrupted?
What advantage does the product offer and is it enough of an advantage to be profitable?
Is the idea a social idea (which involves large scale adoption to work)?
Campbell R. Harvey 2019

33. A framework for assessing ICOs: 2. Technology
Is there a white paper? Did the team write the paper?
Is there a better technical solution?
Is blockchain technology necessary (or even efficient) to solve the problem? (alternatively, it might be solved with regular currency or regular database tools)
Is the solution feasible today – or does it rely on future events (e.g., a technological problem must be solved, like Level 2 or sharding, in order for the idea to be successful)
Campbell R. Harvey 2019

34. A framework for assessing ICOs: 3. Blockchain specifics
Is this a coin or a token? Is this choice appropriate?
Could it use ETH, BTC? (does it need it’s own coin?)
What type of blockchain underlies the ICO – public or private?
Is the type of blockchain appropriate to solve the problem?
If a token, what kind of token, e.g., ERC 20, ERC 721; is this a utility token?
If a coin, what is the monetary policy? What are the incentives to run nodes? What will the distribution look like (how much does management/owners keep)?
If a permissioned, what are the security protocols for the nodes?
Campbell R. Harvey 2019

35. A framework for assessing ICOs: 4. Team
What is the experience of the management team? Do they have a track record in launching a business?
Does management understand blockchain technology?
Does management have the technical expertise to design the blockchain technology?
Is the development team in place?
Is there key-person risk?
Are there advisors and who are they?
Are there any red flags arising from marketing materials that may be exaggerated or even deceptive? Are they hyping?
Campbell R. Harvey 2019

36. A framework for assessing ICOs: 5. Execution
Will there be an ICO or a private capital raise (and potentially an airdrop)?
Is there legal or regulatory risk associated with the ICO? Is the ICO a security? Can the ICO be launched in the US?
Does the business require a money transfer license?
Has there been a pre-sale? What was the motivation for the pre- sale?
Does the company have initial backing and from whom?
Campbell R. Harvey 2019

37. A framework for assessing ICOs: 6. Upside
Is the idea scalable? What is a realistic share of the market?
Is there positive convexity to apply a similar idea in related applications?
Campbell R. Harvey 2019

38. Blockchain applications
2018 Duke’s Innovation and Cryptoventures course: 231 students
Medical records/hospital transfers
Ticketing/Public transportation
Coffee supply chain/Manuka honey
Employment verification
New global entry system
Scientific data for research
Refugee ID
Art and luxury goods registry
Islamic finance
Vaccinations
Workplace harrassment
Solar power trading
STI certification
Campbell R. Harvey 2019

39. Blockchain applications
2017 Duke’s Innovation and Cryptoventures course: 75 students
Entertainment and sports ticketing
Government benefit programs
Humanitarian aid
Identity
Single password for all accounts
Educational and test score records
Agricultural supply chain in India
Aircraft leasing
Digital twins for large medical devices like CT and MRI
Smart guns
Campbell R. Harvey 2019