Blockchain version of «Alibaba» – The Bitcoin News

Perhaps
the blockchain revolution is yet to happen and the distributed ledger
technology, as well as cryptocurrencies, have not integrated into our
daily lives fully. But for the last several years we see different real
sector companies and startups try to tokenize, integrate with
blockchain — or simply put, sugarcoat and sell their product (even if
nobody needs it) through various methods, like ICOs (initial coin
offerings), TGEs (token generation events) or even simple exchanges or
swipings of their product tokens for much more valuable and circulated
cryptos.

How does it work, what are they in a nutshell and what are the drawbacks of such offerings?

It
all began with the crypto hype of 2017: many real sector manufacturers
and sellers have got an idea to make a quick and easy buck via trendy
blockchain projects. Disguised as startups tons of various things went
through ICOs: coal and gold, diamonds and granite, natural resources,
car services, co-working space spots, hotel rooms, waterparks and other
stuff without number. In short, a lot of things that had nothing at all
to do with blockchain suddenly acquired their own blockchain-protocols,
crypto tokens and teams of international advisers as members of of the
Expert Council for an out-of-town carwash.

Some
people would consider this approach rather ridiculous, and yet some of
these ICOs were pretty successful and raised more than a million dollars
each. Perhaps this is the future of cryptocurrency funding? For better
or worse, time has put everything in its place. None of the real sector
projects managed to bring their investors interesting and functional
business models, token price growth and, most importantly, profit.

Let’s
look at several main problems that stood in the way of the projects
that tokenized real sector products and conducted an ICO.

1.The biggest problem. Project tokenomics.

Creators
of these ICOs have chosen three main ways of using tokens in their
businesses. The first one is exchanging products for tokens, where a
product costs more than the token in the real world, thus forming the
price difference that will allow the buyer of these crypto assets to
profit. The second way is the exclusivity right, when without owning the
token a user would not be able to use some special services of the
token issuing company. And the last one is the right to dividends, a
share of the business or the right to make certain company-wide
decisions.

In
the first case the problem is not the idea of earning money via the
difference between the prices of the asset and the token, but the buyer
or sometimes ICO investor himself. The vast majority of token buyers are
not at all interested in receiving the physical product, since there
are no infrastructure or instruments in place for its further use and
sale. In other words, if you let’s say have a GOLD token that gives you
the right to receive a bar of gold, it’s not always possible to
physically get to the place where you’d get it or there is no delivery,
finding a buyer for the asset might also get difficult when it stops
being digital. Not to mention all the legal consequences, like proving
ownership and the right to sell. In reality, the majority of buyers are
forced to not utilize their ownership rights, but sell it on
cryptocurrency exchanges, where the possible price growth is not
transparent. 99% of token buyers look for 1% of real world product
buyers to sell them the ownership, which deflates the trading volume and
stunts the price growth of the token.

With
regard to the means of selling the real sector asset token as a way to
receive exclusive products or services, there are two main problems. The
first one is that, as we mentioned previously, in the majority of cases
the buyers are mostly people who want to profit off of the token and
its price growth, not the people who want to receive the final product.
The second one is that a company simply cannot offer a sufficient amount
of truly exclusive and competitive products and services while
competing with the non-exclusive ones and maintaining viability and
profitability. Imagine that half of your clients will come for the
service that they payed for yesterday at a lower price, while your new
profit is formed by today’s clients that don’t have equivalent ownership
of products or services. In this case there is no way for a business to
be self-supporting in the long term.

With
regards to dividend rights, business shares or decision making rights
within a company, it is pretty simple. According to the laws of most
countries this type of token would be considered a security. The
founders of similar crypto projects, with the goal of making a quick
buck, either deliberately misled their investors or did not understand
the legal consequences of their actions. In the best case scenario,
these projects should have simply registered their tokens as a security,
but sadly the majority of them had not pursued any other goals except
for fraud and misleading investors.

2.The
second major problem that real sector asset tokenizing crypto projects
face is that they tend to maniacally try to implement blockchain into
their business processes. One needs to understand that
blockchain can be really helpful to some entities, like banks, insurance
companies and governments, to process large quantities of data. Data
storage, user-friendliness, security of information — all of this is
really important for them. But many of the project founders seem to
think that to make an ICO much more attractive, modern and interesting
they have to integrate blockchain into it. And so they added blockchain
to a car wash, a pizza delivery, a water park or to a coal mining
operation.

There
is nothing inherently bad about trying to optimize your real sector
company business processes. But to successfully integrate blockchain you
need the know-how, professionals, time and money, to say nothing of the
justification of such integration. You cannot turn a non-core business
into an IT startup. All of this is pretty funny, but sad at the same
time. Instead of focusing on the main business of “coal mining”,
entrepreneurs try to create something completely different like “coal
mining data storage and transfer”, thus raising and spending funds on
the wrong thing and turning a business with clear vision and ambitions
into another incompetent and useless IT startup.

3.Excessive ICO costs

Cryptocurrency
price growth and increased interest have caused the prices of services
related to ICO tokens marketing and sale to rise. Many have heard that
creating a website and investor personal account would cost about
$50,000, legal services services for ICO registration may cost up to
$100,000, and the price of marketing and social media promotion would be
no less that a $1,000,000; while a real sector company would need much
less money to create and develop their business and services. To build a
real sector business or raise funds for an existing one, you’d need
more money than previously mentioned to make an ICO. Even if diamond
mining is already really costly, conducting an ICO could potentially
kill your project on an early stage, since no one can guarantee that by
spending large amount of money you will find investors for your project.

It’s
ironic that by trying raise a rather small amount of funds for your
project’s launch or development and expecting to not have to spend tons
of cash on marketing your ICO, you are most likely doomed to fail. Token
buyers need to see the potential breakneck price growth of your
cryptocurrency, and thus a small financial goal could deter potential
investors. A small project with little ambition is unlikely to provide
large trading volume, worldwide expansion and high ranks on the top
crypto exchanges.

Because of this a real sector ICOs become either outright scams or illogical enterprises destined to fail.

What is the Product Protocol Platform solution?

By
analyzing the real sector ICO market and evaluating the amount of funds
raised via selling various cryptocurrencies by businesses unrelated to
the development of technological blockchain solutions, we have reached a
conclusion that existing ways of crypto fund raising for such projects
are ineffective. We identified a number of features that subsequently
lead to the idea of the Product Protocol project.

1.
While the Soft Cap and Hard Cap goals of raising funds for a project
usually were around $2,000,000 to $10,000,000, in reality, when not
taking into account ICO cost recovery and the unreasonably increased
ambitions, these companies needed much smaller amounts of money. About
$200,000 to $1,000,000 by our estimates.

2. The
majority of the projects have raised funds not to create revolutionary
solutions, but to produce comprehensible products in their respective
countries. In other words, there was no need to create a technological
startup, just get the financing.

3.
In many cases the companies had already been prepared to supply their
products to the interested buyers, the ICOs were a way to finish
capitalization of these entities or, in some cases, a way to communicate
information about their product.

4.
In rare instances there were audits, legal and financial evaluations of
the product manufacturers. Sometimes token buyers had doubts if the
people mentioned on the ICO website even existed.

Can
we, bearing in mind everything previously mentioned, conclude that real
sector business crypto financing as well as tokenized product and
blockchain asset creation is meaningless and has no value?

We do not think so. There are undeniable upsides to real sector manufacturers creating their own tokenized assets.

1.
Transnationality and fast exchange and sale. By creating a token that
gives the right for a real sector asset, let’s say a bar of gold, you
just need to embed its features (weight, price, location and means of
obtaining) on the internet. The token transfer itself takes a fraction
of a second within blockchain. A Florida resident can transfer the
ownership of a bar of gold to a California resident in mere fractions of
a second, and the final buyer, that perhaps lives in the country where
the gold mine is, can exercise this ownership right to receive the bar
of gold without even ever knowing the previous token owners.

2. More
favorable terms of purchase in some cases. Generally, during the ICO,
the product is sold to a large number of buyers for a more attractive
price.

3.
In the case of selling a tokenized copy of a digital asset, like
software, blockchain allows to store the data about the owners, use and
transfer of such assets, which will solve the problem of piracy and
theft.

4.
Means to receive funding from other countries. Companies in countries
with less developed economies will be able to sell their product to
clients from countries with higher economic status — a great opportunity
to expand the pool of potential investors, buyers and clients for any
business.

5.
Crypto financing can also be a good alternative to the more traditional
bank financing. In some cases it can be less expensive and regulated
and more fair and fast.

We
have decided to create the Product Protocol project to combine all
these undeniable advantages of tokenization for manufacturers and buyers
of tokenized assets, and to get rid of the obvious obstacles that stand
in the way of blockchain revolution.

Product
protocol consists of several services for asset manufacturers and
buyers, which will be expanded upon and updated in the future:

1. Asset Tokenization Service

2. Tokenized Asset Sale Service

3. Proprietary Marketplace

4. Tokenized Asset Commodity Exchange

5. Guaranteed Product Realization From the Manufacturer to the End Customer Service

In
a way, the idea of Product Protocol is to create a blockchain based
equivalent to the well-known ‘Alibaba’ services. But through
implementing blockchain into the b2b and b2c trade systems with our own
marketplace, we want to revolutionize the world of transborder trade,
just like Apple revolutionized phones years ago.

Let’s
look at the Product Protocol services by using an example of a real
sector software company issuing a token. Let’s call it ‘Newsoft’. We now
know all the risks and obstacles such a company would face without the
Product Protocol platform.

Newsoft submits
an application for the tokenization of some of the digital copies of
its software. The goal is to raise $500,000 to finish the development of
their project. The software is expected to revolutionize work for
designers across the world. The retail price of a digital copy is $10.

After
receiving the application, the Product Protocol specialists conduct the
formative evaluation of the Newsoft company, as well as verify the
existence of the company and its product. In a way, Product Protocol and
its partners act as a guarantor of the formative evaluation of the
assets on the platform. The owners of the PPO (Product Protocol Tokens)
are encouraged to vote whether the Newsoft product is interesting for
them and other platform users and whether it should be tokenized.

The
tokens of the Newsoft digital copies (A portion of which are sold via
the PPA program) are released on the platform for a price of $5 per copy
and are offered to the platform users as part of the initial
tokenization lot. At this moment only the PPO token owners are allowed
to purchase the tokens by using the deposit feature. In the event of the
total buyout of the lot, the funds are transferred to the manufacturer
to fund the development of the software. The platform users now can
trade the tokenized asset.

The
product development nears the end and soon enough Newsoft begins
selling digital copies on its website for $10 per digital copy. Once
this day comes, the Product Protocol platform users that own the
software tokens receive their digital key codes for the product. Some
can redeem these keys and install the software (end users), others can
resell them on the internet, and those who managed to purchase the
initial tokens via the PPA program receive guaranteed payments from the
Product Protocol platform for each token purchased. Unclaimed copies can
still be traded within the marketplace or the PP commodity exchange.

With
this example we looked just at the fund raising and product sale
features. Newsoft could have used tokenization to expand its client base
or to simply bolster security via blockchain, or as a marketing
measure. There are many more ways to use the platform while the user
friendliness and the modern solutions will allow the platform to compete
with the titans of the b2b and b2c trading.

website: https://pprotocol.io/

Telegram: https://t.me/pprotocol