The initial coin offering ecosystem is currently flooded with hundreds of different platforms that claim to present investors with highly lucrative opportunities. Initial coin offerings have evolved from a simple method for platforms to generate launch capital into a broad spectrum of different investment platforms.
While tokenization may be an effective alternative to venture capital for some platforms, it’s clear that it does not work so well for many others. In 2017, less than 40% of all initial coin offerings succeeded in reaching their funding goals, a figure that doesn’t take into account the many fraudulent initial coin offerings that exist solely to separate unsuspecting investors from their crypto.
When assessing an initial coin offering, it’s important to develop a clear understanding of exactly what the platform wants to achieve and why it could possibly succeed in the saturated ICO market. This process is becoming increasingly difficult, as some initial coin offerings use confusing terminology to hide the specifics of what their platform delivers.
There are many different terms in the cryptocurrency world that can be used in an incorrect manner. Consensus methods- the processes used by blockchain networks to agree on the state of the ledger- come in many different flavors, such as Proof of Work, Proof of Stake, and more. Without a basic understanding of how these processes work, it can be easy to be mislead by intentionally confusing ICOs.
In this article, we’ll take a look at Libra Coin, which is a good example of an initial coin offering that uses blockchain terminology in an incorrect manner. Libra Coin is essentially a “lending ICO”, which is a new trend in the ICO ecosystem in which high yield investment programs masquerade as coin offerings to gather investor interest.
Libra Coin is not necessarily a bad or fraudulent initial coin offering, but it does serve as a prime example of why it’s essential to understand the basics of blockchain technology before investing. We’ll proceed to highlight the ways in which Libra Coin is poorly represented by its ICO, and provide a neutral analysis on whether it’s actually a good investment opportunity.
What Is Libra Coin?
Libra Coin is a new initial coin offering that claims to be a decentralized peer to peer currency much in the same way as Bitcoin. The Libra Coin platform doesn’t actually deliver anything different from Bitcoin or other high market cap cryptos such as Ethereum, and as it doesn't explain anything about the blockchain upon which it is built, it’s impossible to determine whether it is delivering a unique solution at all.
Libra Coin promises investors the opportunity to generate income by “staking” coins on the Libra Coin network, or “lending”. This is the primary point of contention with this ICO. There are a number of initial coin offerings and crypto platforms that do actually facilitate peer-to-peer lending in order to decentralize the lending industry.
Libra Coin, however, has nothing to do with peer to peer lending whatsoever. Instead, the Libra Coin platform simply offers investors the opportunity to “lend” their capital to the “Libra Coin trading bot”, which then makes trades on behalf of the investor to generate up to “45% per month”.
This system is essentially a high yield investment program, or HYIP. High yield investment programs have a reputation for being risky and unstable, as many of them use new investor capital to pay out older investor withdrawal requests. It’s important to carefully assess whether you’re comfortable allowing an unregulated investment firm to make trading decisions with your capital, outside of your control.
There are many examples of legitimate and profitable high yield investment programs, but it’s essential to exercise caution when investing in them. Another issue presented by the Libra Coin platform is the “staking” process they offer, which promises to generate up to “30%” per year.
Staking is used by blockchain networks that use Proof of Stake consensus to agree on the state of the distributed ledger. It’s extremely unlikely that Libra Coin operates on a Proof of Stake blockchain network, as this would more than likely be mentioned in the white paper. Libra Coin is most probably build on the Ethereum network, as it’s extremely easy to generate ERC20 tokens.
Thus, “staking” on the Libra Coin platform essentially functions in the same way as “lending”. Yet another issue presented by the Libra Coin platform is that there is no information regarding its creators. A good ICO should provide detailed information about the development team and the creators, which Libra Coin does not.
The Libra Coin ICO
The Libra Coin ICO is set to launch on the 11th of December 2017, and will run until the 11th of January 2018. The ICO will sell LBR tokens, which will be available at a price of $0.60 USD. Libra Coin describe their coin as a “PoS Hybrid”, but don't provide any details on the blockchain upon which Libra Coin is built.
Libra Coin Conclusion
The Libra Coin ICO is relatively straightforward when assessed as a high yield investment program, but does lose points for not presenting their concept in a transparent manner. If you’re interested in investing in a HYIP, however, and are comfortable with the concept of allowing your capital to be traded by an automated trading bot, Libra Coin could be worth consideration.