FOAM’s ICO Questionnaire
Although the widely reported findings of a new.Bitcoin.com survey that almost half of ICOs (Initial Coin Offerings) launched in 2017 have effectively died, this method of raising new capital is on the rise. According to CoinDesk, ICOs raised $7.2 billion during Q2 2018 compared with $16 billion raised in the US IPO market during the same period. The two factors that explain why failure-prone ICOs continue to raise significant sums are speculation and hype. In this article, we’ll look at two ways that FOAM, a Proof of Location protocol, has managed to minimize both of these factors during its ongoing ICO.
FOAM is a decentralized location verification protocol that works through time synchronization instead of centralized sources such as GPS. If I lost you at ‘decentralized,’ that goes some way to explaining why FOAM is requiring purchasers to pass a questionnaire before it sells them tokens. As Ethereum’s co-founder Vitalik Buterin pointed out, “there are actually three separate axes of centralization/decentralization,” and the term is frequently misused or misunderstood, especially by investors and speculators.
What drives speculation is a lack of understanding on the part of investors as to the protocol in which they are investing. Investors can easily scan-read a project’s white paper while glossing over the specifics of its protocol. In plain English, FOAM is aiming to help verify someone’s location while preserving their privacy, something that is only possible through blockchain technology. Therefore, a crucial part of FOAM’s token sale is to require potential purchases to take and pass a questionnaire about both the token and its protocol. This precaution is intended to qualify investors and reduce the chances of panic-selling after the ICO by token holders who may invest in something they don’t fully understand.
Proof of Use
Web3, or the decentralized web, requires trust, transparency, and fair trade supply chains if it is to succeed. FOAM’s geospatial blockchain technology is designed to help build the web3 economy by offering a fraud-proof and privacy-minded way of verifying that people or companies are actually located where they claim to be. It plans to do this by creating a virtual map of the world and then using a community of cartographers to curate points of interest based on time synchronization. This won’t work if people are buying the tokens purely for speculation and aren’t actually using them within geospatial applications.
Therefore, FOAM stipulated that buyers had to demonstrate Proof of Use by actually using the tokens for their intended purchase before they became transferable. This decision by FOAM ensures that their consensus-driven map of the world is actually created and that real users, as opposed to speculators, are the ones purchasing FOAM tokens. As with the questionnaire, this requirement helps to reduce speculation and hype as well as reduce the chances of a post-ICO sell-off.FOAM is far from the only ICO project to try and reduce speculation and hype. Metronome (MET) had a descending price auction that let investors buy in at a value they felt was fair, for example. However, while the MET ICO generated over $12m before ending on June 25, investors were angered that just three individuals had purchased over 50 percent of the available tokens. By way of comparison, FOAM’s success in generating over $15m from its ICO shows that implementing checks and balances doesn’t diminish ICO revenue.
FOAM’s ICO proves that token sales can minimize speculation and hype while remaining open, fair and consumer friendly. FOAM has shown that the path towards developing Web3 infrastructure and a tokenized future can be achieved by prioritizing the people who are committed to building and participating in it. Hopefully, future projects will adopt this approach. At the very least, the onus should be on the project’s founders as to why they aren’t choosing a more ethical policy.
You can register on FOAM’s project page here.
