COTI ICO REVIEW – DIGITAL CURRENCY PAYMENT PLATFORM

Project Overview

What does the company/project do?

COTI (Currency of the Internet) is aiming to create a scalable, decentralized payment network for global commerce. They are differentiating from other payment systems by integrating a trust mechanism, decentralized mediation system, multi-currency wallet, and native currency exchange into the network.

The COTI network will be powered by a distributed ledger called The Cluster, based on a directed acyclic graph (DAG) data structure – the same technology that powers IOTA. In DAG-based networks, a transaction must validate the previous two transactions to be confirmed. Using the DAG, COTI is aiming to allow 10,000+ transactions per second on the platform.

The COTI ecosystem is made up of four participants: node operators, end users, mediators, and merchants. The network aims to seamlessly integrate these pieces to create a payment network that is fast, secure, and decentralized.

COTI’s main offering for consumers is a multi-currency wallet providing easy access to the COTI payment network and other payment use cases. COTI will also offer a debit card that links directly to these wallets, where users can specify their preferred currency and benefit from automatic conversion.

For merchants, COTI is developing processing tools that will enable merchants to accept payments from COTI wallets, along with detailed data and reporting functionality.

As a means of combating digital currency volatility, COTI will create an internal derivatives market enabling participants to enter forwards contracts and buy and sell put/call options denominated in COTI coins.

To address the disputes occurring on the COTI network, mediators will benefit from an application where they can accept invitations to receive and review caseload data, place wagers, and receive COTI for mediating outcomes.

To address the volatility of cryptocurrency prices, COTI provides merchants with access to hedging services that enable them to reduce, or eliminate, their exposure to near term currency fluctuations.

How advanced is the project?

COTI was founded in early 2017 and since then, the team has spent most of their time researching the best purpose-built solution for a digital payments network. They have also been working on developing their exchange infrastructure and consumer wallet offering.

The future roadmap is summarized as follows:

Q4 2018

Testnet launch
Consumer wallet, full node, DSP nodes, and trust score server prototypes released (testnet)
Decentralized mediation (testnet)
Payment processing tools and exchange (testnet)

Q2 2019

Mainnet launch
Consumer wallet launch
Trust score server launch
Decentralized mediation prototype
Full, history, and DSP nodes launch

Q4 2019

KYC/AML server launch
Hedging service launch
Recurring billing (subscription services)

2020

Debit card launch

2021

Expansion of merchant services
COTI fund
Mediation SDK launch

What are the tokens used for and how can token value appreciate?

COTI will initially be released under the ERC20 standard but the team is planning a swap with native COTI tokens once the main-net is released. The token is designed to drive the network through interactions between consumers, merchants, mediators and node operators, and will serve the following functions:

Medium of exchange – Used for making and receiving payments in the COTI ecosystem. The network will support other fiat and digital currencies, but people will be incentivized to use COTI due to its transaction speed and low-to-zero fees.

Mediation – Mediators of the network will be required to hold COTI, as stakes and payouts will be denominated in COTI.

Merchant rolling reserve – COTI is automatically accumulated in the merchant’s account for a defined period.

Incentives for node operators – Node operators will be incentivized in COTI and required to hold COTI whenever they wish to validate node activity.

As COTI is an integral part of the network, the value should increase as the network gains more users and payment traffic. However, heavy price volatility is not desired for a currency being used in a payment network.

Team

COTI was founded in early 2017 and operates out of Gibraltar. The biographies of key team members are listed below:

Shahaf is a serial entrepreneur and co-founder/former CEO of WEB3, a multinational digital marketing firm. He received a degree in biotech and economics from Tel Aviv University.

Nir has authored over 14 patents in the fields of data compression, AI, and machine learning. He has 19+ years of experience leading R&D teams at multiple tech companies, and co-founder Infima Technologies, which was later acquired by IBM.

David previously worked as the chief internal auditor at HSBS Israel and as an examiner in the credit risk unit of the Central Bank of Israel’s banking supervision department.

Yair is a financial specialist who was previously CEO and finance director at Plus500UK. He has also held roles in financial planning and valuation and holds an MBA from Tel Aviv University.

Advisors for Coti include

Dr. Matt McBrady, former CIO at BlackRock,

Steven Heilbron, former CEO of Investec Bank,

Gred Kidd, Former CRO of Ripple Labs, and

Lindsey Maule, CEO of Luna capital, among others.

Opportunities

The project is backed by a team & advisors with solid business background.
The platform is gaining traction in user and merchant sign-ups. there were over 50,000 users and 4,500 merchants signed up indicating they want to use the platform.

Concens

The hedging service is not a good user experience for merchants and creates a barrier for adoption.
Derivatives are complicated even for avid investors. Explaining and asking merchants with no financial background to enter into derivatives to hedge their cryptocurrency positions is very difficult in our opinion. Merchants will need to estimate their COTI exposure, length of contract to enter into, etc.
Some of the milestones (debit card, hedging services, COTI) are pretty far out. By the time the projects supported by COTI fund rolls out their products, it might be 4-5 years out from ICO.

Conclusion

Our thoughts of the tokens for short term and long term are as follows:

For short-term holding: B

There were various pools with different bonuses/lock up terms offering COTI. The private sale had been ongoing for a few months. Therefore, we don’t think there would be much unmet demand following listing of the tokens.

For long-term holding: C

There are a lot of DAG projects out there recently. COTI doesn’t seem have much differentiation in our opinion.

We believe the derivative hedging service is bad user experience for merchants. The vast majority of them are not familiar with this complicated financial concept, so it is going to be very difficult to educate them and get them to actually use the hedging feature.