This story is a bit of a sidetrack for me, but I think it could be interesting enough to know my short involvement in the EOS token market. I had initially bought some tokens at 1.5 euro since Kraken had started trading the coin, and the next day, seeing that the price had more than tripled, I bought some more at 5, at 5.5 and lastly the bulk of my investment at 4 euro. Yesterday I have sold them at a little bit over 2 euro, so it has clearly been a buy high, sell low story. Not very intelligent, you might say.
Why could I not wait a while to see the market recover from some initial fluctuations? What goes down can clearly also go up again. I have visited the eos.io website and saw the presentation that was absolutely impressive. A team with a solid track record in crypto projects would start a new project with a clearly defined usecase: an open source blockchain that could handle a transaction speed comparable to a company like Facebook. Millions of transactions per second. And while I am not a programmer, I have tried to understand the articles of Dan, published here on Steemit, and I understand that they are optimizing the Graphene blockchain, the fundament of Steemit, to allow for a more parallel execution of transactions, and that at the client side they will speed up the system by making use of WebAssembly. So let’s say that I am convinced that the team will bring us a wonderful piece of software, on time, according to our expectations.
So why did I make such an irrational decision to sell? What information do I have to make me convinced that it was the right thing to do? I have no secret sources, I can tell you, it is all presented on the FAQ page of the eos.io website. And I wish I would have read them before I bought any coins.
I do acknowledge that for a company, the sale of coin tokens is somewhat risky, while the whole crypto market is totally unregulated at the moment, but it is clear that in some future moment the SEC will step in and examine the process. Any sale of tokens will be considered comparable to the sale of shares if the value of those tokens have some relation to the perceived success of the company. So it is smart that the company building the EOS blockchain, Block.one, foresaw this problem and prepared themselves.
For starters: Block.one is registered at the Cayman Isles, probably outside the U.S. jurisdiction.
The second step that Block.one took, and one can only thank them for making it clear from the very start, is to make sure that the value of the EOS token has no relation whatsoever to the company building the EOS blockchain. So the value of the EOS token is unrelated to the expected success of the company or of the EOS software, and they can’t be seen as shares in any way.
Problem solved!
They write that the EOS token will not be used on the EOS blockchain, it is a token on the Ethereum chain, without further use or function. Block.one will build the EOS-software but will not even use that sofware themselves. It is up to the community to make use of the open sourced software to build their own projects. Projects with their own associated tokens. The EOS token will never be used.
So what did I buy?
I believe that the sale of tokens is a good opportunity for companies to fund a promising project, and a well lead project team should be able to build the software within the projected time frame. But do they really need one billion tokens to do so? The start of the project was very well organized, the website was professional, and the coin was available on many exchanges from the start, but the enormous amount of coins and the described schedule of bringing them on the market clearly wrecks the situation. If you expect to sell two million tokens per day, (23 hours), for 350 periods, this will clearly strain the market, especially since the tokens will have no use, functionality or purpose. Whatsoever.
The start of the company was well orchestrated and has been a huge success, financially speaking. But the planned sale of such a huge amount of useless tokens is a bit too much. Imho. It has been enough, you have generated more than enough money to finish the project. It has to stop.
And another thing that will not work, I think, is the conditions under which Block.one plans to open source the finished software. If this EOS software, when initialized, installs some smart contracts that will make sure that after one year, ten percent of the associated coins will be transferred to block.one, I could live with that. But if this transfer is done for ten consecutive years, it will transfer ALL coins to block.one, making it impossible to work with the coins at all. At the moment, according to the FAQ, companies can wriggle themselves out of this condition, because they are allowed to delete or modify part of the software. But Block.one still has one year to close this hole.
Finalising this article, I have the impression that the founders have focused too much energy on cashing in, when starting this token sale. Even if the average price for which the EOS tokens will be sold is only half a dollar, it will generate 500 million dollar which makes this startup way overpriced. And I hope the readers will reward and not kill the messenger, while I believe that this knowledge is worth spreading and the article, hopefully, interesting enough to read.