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Utility Token: What if they actually did what they said they would do?

 

“The time to buy is when there’s blood in the streets.”

-Baron Rothschild

Have you ever wondered what your favorite utility token would look like if its underlying project were finished and working as intended? Is the speculation on the value of these utilities accurate? Let’s explore the hypothetical scenarios that would play out if these projects actually accomplished what they set out to accomplish.

Billion-dollar valuations are quite common in the cryptocurrency world. We decided to break our hypothetical study into the following main categories: Computing/web, Entertainment, Government regulated markets, Platforms, Gambling, and Banking. Each of the following projects have significant presences within their markets. We used top down calculations for our hypothetical study considering the total potential market segments and token supplies. Market cap and token data is based on the time of writing this article (August 28, 2018). Updated market information can be found on www.coinmarketcap.com. 

 

                                                     Computing/ Web

 

Golem (GNT)

Golem was one of the first popular ICOs to hit the Ethereum ERC-20 platform. According to their whitepaper, Golem aims to create a worldwide, decentralized supercomputer allowing users to share unused computing resources with those participating in the network. In simple terms, you can rent your unused computing power to those who need to perform complex tasks, and vice versa. This concept can be compared with the Airbnb or Uber business model which has shown to be very successful.

By providing necessary computing power in segments like machine learning, analyzing large data, dApps, CGI and large-scale simulations, Golems technology will push through current limitations propelling innovation and efficiency to new levels making this one of the greatest potentials for blockchain technology. Open source, Golem is accessible to everyone and the more users participate, the faster it will perform, creating an organic growth for the Golem ecosystem. Imagine earning GNT while you are sleeping or at work as your gaming computer idles.

Today’s centralized computing resource services offer as much as 128 core, 1952 memory GB for $24/hour rental charge, which is due to the operational cost necessary to maintain these facilities. Considering that the cost for centralized infrastructure for data centers is no longer necessary once Golem has fully launched, can only suggest that the current GNT market cap of $155 million and token price of $0.16 has room for growth. According to Gartner, the worldwide public cloud services market is projected to grow 21.4% in 2018 to total $186.4 billion, and in 2019 to $221 billion. Therefore, we can modestly estimate that if Golem replaces all centralized cloud services in 2019, we could theoretically see the GNT token price reach $221/GNT.

Basic Attention Token (BAT)

If you value privacy and dislike overwhelming push of ads, then the Brave browser and Basic Attention Token (BAT) will be for you. Brave is a fast, open source, privacy-focused browser that blocks third party ads and trackers. With its 2.4 million users, it proves that privacy and ad free browsing is in high demand. Brave has a built-in ledger system using blockchain technology that creates a marketplace changing the digital advertising landscape.

The Brave browser allows users to choose what advertisements they allow, and the data will be anonymously tracked and given to the advertisers. The ecosystem is fueled with Basic Attention Token (BAT), an ERC20 utility token. BAT is considering multiple scoring algorithms for payment to publishers and users by measuring total hits for a minimum of 5 seconds each and/or by measuring time spent on active or open pages. The overall token flow is suggested that the advertiser will pay for ad-space where the user can choose their ad. The ad activity is measured, which will determine the payment amount for distribution to the publisher and user. More detail on the token follow and the project can be found in their whitepaper.

In 2016, the digital ad industry has seen a loss of $15.8 billion in revenue resulting directly from ad blockers. Ovum research group predicts that if the current trend of ad-blocking continues, it could reach up to $78 billion of revenue loss by 2020. With staggering numbers like this, the Brave and BAT ecosystem provides hope to publishers, advertisers and users. If BAT successfully solves the ad-block challenges, and considering their total supply of 1.5 billion, we could see the current token price from $0.23/BAT rise to potentially $50/BAT by 2020.

 

                                                             Entertainment

 

Tron (TRX)

Tron is one of the most controversial projects today. Tron is creating a platform that directly competes with the likes of Netflix and YouTube by giving content creators complete control. Content creators will be able to add their music, images, videos and other media to the Tron platform and users will be able to purchase it using the Tron token (TRX). Additionally, Tron will be hosting other blockchain platforms who have their own tokens. TRX will also be used as a bridge currency for users that want to use any other type of token hosted on the platform.

By eliminating the middlemen and replacing them with blockchain smart contracts, it could reduce purchasing cost for the customers and increase revenue to the content creators. Furthermore, the content published on the Tron platform is completely censor free and can be accessed globally including countries with governments that heavily restricts what is available to their citizens.

With a market cap of over $1.7 billion and a token price of $0.026 per token it puts this project amongst the top 20 projects. With a large community supporting its vision, this suggests that a censor free content marketplace is attractive to our generation. According to Business Insider, Google including YouTube market capitalization is estimated at $742 billion, Disney’s market capitalization is $155 billion, Comcast’s is $150 billion, and Netflix’s is $141 billion. If Tron gains dominance over this market, valued at $1.1 trillion and a total token supply of 99 billion, we could see TRX reach $12 per token.

FunFair (FUN)

Funfair is the first decentralized online gambling project that is not a casino. Their approach is to target already existing casino markets by licensing their technology. By offering blockchain technology, FunFair addresses the growing problem of fraud and trust in the current industry where merchants are struggling to keep up. The saying “the house always wins” may still apply, but cheating will be a thing of the past by immutable transactions supported via smart contracts.

According to their whitepaper, FunFair is built on the Ethereum platform, but to improve fees and speed, FunFair has developed Fate Channel allowing them to operate outside of the Ethereum platform reducing current transaction fees from 10% to 0.1%. The entire ecosystem is fueled by the FUN token, a utility token on the ERC20 Ethereum Network. Game developers, players and casinos will entirely transact with the FUN token, allowing for a healthy marketplace and trusted transaction flow. The tokens will remain in the players’ possession, unlike with current gambling platforms that hold the bets in escrow until the bet is settled.

According to Statista, the online gambling market is estimated to reach $59.7 billion by 2020 worldwide. On average, 70% of online gamblers do not trust the online casinos. Because blockchain smart contracts are transparent and immutable, stronger trust can be established between clients (gamblers) and operators (casino). If FunFair can win over the 70% ($41.7 billion) of untrusting gamblers, the token could show growth to $3.79 per token considering their current circulating supply of 5 billion and releasing the remainder by 1 billion tokens per year over the next 5 years.

 

                                                                Government

 

LOCI (LOCI)

According to the USPTO (US Patent Office), service providing Intellectual Property (IP) intensive industries and the licensing of IP rights drove a market close to $200 billion in 2012. These numbers are hard to put on paper, as many transactions of intellectual property are done privately. Some estimate that the actual value of the market is in the trillions of dollars. Intellectual property is a foundation of the civilization we live in today. Throughout the course of someone’s everyday life, they probably interact with millions of patented products without even realizing it.

In modern times it has become increasingly expensive for the average inventor to participate in the economy of ideas. LOCI is developing a solution to this problem. The first challenge in protecting an idea is making sure that your idea is unique in the first place. According to their whitepaper, the patent process is fundamentally flawed and could cost thousands of dollars to hire an attorney to conduct a search of every patent ever made to determine if your idea is even eligible to be patented. This cost can increase if the patent has revision needs. LOCI has a working (rare for something that started in an ICO) state-of-the-art search engine that attorneys and inventors can use to discover ideas and place their own inventions within the patent landscape. LOCI’s search is better than a typical patent search because it uses a patented Venn Diagram to illustrate your search visually rather than long tedious lists (like most free offerings such as google patents).

In addition to search, LOCI also allows inventors to protect their inventions by “staking” them on the blockchain to prevent them from being patented by anyone else. There are several other big problems with the way intellectual property is managed and LOCI seems equipped to handle them.

They have recently released an Invention Analysis tool which will score each idea according to its novelty and provide inventors with vast amounts of information pertaining to their idea to help them in their search and invention process. All these things are already up and running on the platform, which will soon include a marketplace where anyone with an idea can participate in a true economy of ideas, powered by blockchain technology.

With a current market cap of $1.7 million and a price of around $0.043 per token, considering the size of the patent market, this token could easily be worth more than $5,476 per token. Meaning every $100 put in to loci at today’s price could be worth more than $5 million if it gained complete dominance over the patent industry, more if the trillion-dollar valuations are true.

Factom (FCT)

Factom is an open-source data layer protocol built on Bitcoin blockchain. They are creating an easy to adopt in domains platforms where client’s data is immutable through digitized, hashed and stored records. Regulators are pressuring enterprises and governments to improve the security of Electronically Stored Information (ESI). The addition of technology that can track and record data indefinitely will change the landscape where fraud, corruption, forgery of public records, and data manipulation is a thing of the past.

On June 15, 2018 US the Department of Homeland Security (DHS) announced they awarded Factom, Inc a $192,000 grant to secure the integrity of Internet of Things (IoT) devices focusing on the border for capturing data from surveillance cameras. The joint venture between DHS and Factom to improve border security suggests a potential future strong relationship between Factom and government entities globally.

World data is a large task especially in developing nations who have poor record keeping. But even in developed nations, mismanagement of data has become a costly issue. To enter the data onto the Factom platform, the client must purchase Factoids (FCT) and exchange them for Entry Credits (EC). FCT and EC will be burned after usage and are not recycled. There is no max supply of tokens, but Factom has shared they will release 73,000 tokens monthly. Having no maximum token supply makes it difficult to pin the token price to a value after product completion. In addition, Factom has not determined the EC necessary for each entry. However, according to a report published by Zion Research, the eDiscovery market is projected to reach $15.5 billion by 2020. With a rapid growing industry, there is significant room to grow for FCT with a current market cap at $48 million and token price of $5.51 per token.

 

                                                                  Banking

 

Ripple (XRP)

As the third listed coin on coinmarketcap.com, Ripple has become a highly popular project and part of many investors’ portfolios. Ripple wants to enable institutions, such as banks, to transfer any asset between one another instantly worldwide with little to no chargebacks. According to Stephan Thomas, the CTO of Ripple, international wire transfers could cost more than $50 and foreign- exchange charges can reach up to 3% per transaction.

Ripple aims to replace the Society for Worldwide Interbank Financial Telecommunications (SWIFT). Institutions currently using SWIFT as method of transaction communication; however, the system is flawed with slow speed, high fees and error rates between 3% and 5%. While the XRP token is not currently being used, the Ripple blockchain has the potential to process 1,500 transactions per second. This is considerably faster than SWIFT’s 3-5 days transaction time, Ethereum’s 15 transactions per second, and Bitcoin’s 3-5 transactions per second.

Ripple’s approach to embrace centralized blockchain technology attracts financial institutions who are resistant to the decentralized blockchain technology and feel the need for complete control. 100 billion XRP tokens were initially created, out of which 20 Billion were kept by the developers and 80 billion were given to Ripple labs to establish collaboration with institutions. There are currently 39 billion XRP tokens in circulation, which means 61 Billion XRP are being privately held, leaving investors with a high amount of uncertainty. But the tokenomics of XRP is not the only cause for uncertainty.

According to the U.S. Department of Treasury, SWIFT processes $5 trillion daily transactions. This pushes the annual transactions into quadrillions. Ripple is aiming for 10% of the total banking industry worth ~$24 trillion. It is uncertain if Ripple’s XRP token will have a role to play in the future of the company’s main utility, if it does, and we compare the value in SWIFT transactions, XRP could hypothetically reach over $240 per token.

OmiseGo (OMG)

OmiseGo is creating a Software Development Kit (SDK) that will enable developers to create wallet apps to access and utilize the OmiseGo decentralized exchange (DEX). The DEX is a Proof-of-Stake (PoS) blockchain that runs alongside and on the Ethereum network to facilitate the exchange of any fiat currency or digital asset.

The DEX functions on the OMG network, which is its own blockchain, rather than working on top of an already existing blockchain. The DEX will provide liquidity, act as a clearinghouse messaging network, and enable the issuance of digital currencies backed by assets. These transactions will be validated by stakers of the OMG token, who are rewarded with transaction fees. In addition to staking, the OMG token will also be available as a payment token for merchants accepting the token.

The electronic software (eWallet) will act similar to a bank account, with the added functionality to store multiple currencies and digital assets. Just as a bank account, the eWallet will offer remittances, payroll deposit, asset management, along with many other services that a bank provides. According to OmiseGo’s official guide, those who integrate the SDK will be able to:

● Move money quickly, both domestically and internationally

● Gain a secure ledger for tracking assets across divisions of a large organization

● Adopt next-generation mobile banking solutions

● Enable central bank currencies to be issued digitally and improve the payments system within a given country

● Allow payments and remittances in any type of asset

● Create a loyalty points system for consortiums of brands

● Issue digital gift cards onto a network which can support multiple wallet vendors

Anyone with a cell phone will be able to access banking services including cryptocurrencies. The ability to bank from a mobile device may not seem revolutionary to countries that have enjoyed banking services all their lives, but a large portion of the world population live in countries that do not have the infrastructure to access these services. 73% of South Eastern Asia populations alone do not have access to banking. For these areas, OmiseGo will offer a revolutionary product with the potential to dramatically improve their lives and their entire economy.

According to a report issued by worldbank.org, the estimated officially recorded remittances to low and middle-income countries reached $466 billion in 2017, an increase of 8.5% over $429 billion in 2016. Global remittances, which include flows to high-income countries, grew 7%t to $613 billion in 2017, from $573 billion in 2016. Tapping into this market share could push OMG beyond its current value of $4.38. With only 140 mil total token supply, if OMG taps into only 10% of the $1 trillion market, would it be too far-fetched for the token to reach $1,000?

 

                                                                Platforms

 

EOS (EOS)

EOS is one of the most popular projects of 2018 and the strongest competition to the Ethereum platform. According to their whitepaper, EOS aims to be the operating system for decentralized applications (dApps). EOS uses delegated proof of stake (DpoS) only having 21 block producers. The tradeoffs of more centralization are scalability and no transaction fees. EOS will be able to handle up to 6,000 transactions per second making it possible to create commercial-grade, large scale applications. While transactions do not have fees, holders of the token pay block producers for securing the network through a 1% annual inflation of the token.

EOS token holders own a piece of the network itself. This means the percentage of the EOS tokens you own represents a proportional amount of the processing power along with the ram and bandwidth as well. As the EOS blockchain grows, so does the token holder’s amount of storage, bandwidth and computing power. This strategy is a healthy approach for the token ecosystem.

In comparison, ETH went live on July 30, 2015. On August 6, 2017 it reached a market cap of $90,622 and token price of $2.83. On June 2, 2018 EOS went live reaching market cap of $13.3 billion and token price of $14.89. Clearly cryptocurrency didn’t have nearly the same traction in 2015 as we see in 2018, but it shows an important variable necessary for continued success. EOS could be all the things Ethereum (ETH) hopes to be but its centralization has yet to be disproven as a flaw. If EOS delivers on their estimated 1,000-6,000 transactions per second, is it fair to assume that its current token value of $5.44 could surpass ETHs current value of $474.59.

Icon (ICX)

Icon is often called the Korean Ethereum. Their slogan “hyperconnect the world,” is a good description of what ICON seeks to do, which is to enable users of blockchains such as Bitcoin, Ethereum, and NEO to interact with each other using a shared ledger and Icon token (ICX). Some Korean industries such as banking, insurance, universities, and healthcare companies, among others, are already integrating Icon’s technology, allowing communities on the Icon network to communicate. If Icon is successful, blockchain communities and institutions in major industries would work cohesively. Costs resulting from communication inefficiencies would drastically be reduced. Dominant blockchains would work in conjunction with smaller projects, and blockchains with completely different governance models will be able to transact without a middleman.

Icon is creating a decentralized exchange (DEX) that will enable transactions among different cryptocurrencies by determining the exchange rate through a reserve based on the Bancor Protocol. Communities from various blockchains will be able to exchange different currencies using the native ICX Wallet called ICONex.

Participation in the Icon network requires the use of ICX utility tokens. ICX can be staked to validate transactions and receive rewards (fees) paid in ICX. ICX will be used for transaction fees like Ethereum’s gas. Fees are created when ICX is sent and received, executing smart contracts, and running dApps.

ICON’s governance will be delegated proof of stake, meaning the tokens will grant voting rights that allow holders to choose a C-rep (Community Representative) who will represent you and your Icon community when Icon governance votes take place. Your voting power is based on the Icon Incentive Scoring System (IISS). The Icon whitepaper reveals 5 of these factors, “1) frozen ICX, 2) C-Rep status, 3) ICX exchange volume, 4) ICX exchange volume of the whole community if it has one, 5) ICX volume traded through DEX and so on.” The frozen ICX volume is measured by the amount of ICX you stake.

We have yet to witness what potential synergies society can achieve from blockchain companies working cooperatively. There is no doubt that frictionless exchanges of value would benefit society immensely. Projects like Icon may usher in a new era of potential not yet imagined. Cutting out the middleman will also have huge implications. Avoiding the high fees usually associated with media platforms will reduce costs for content creators as well as the users. ICON is the first mover with their platform, and with no competition currently, it is hard to estimate the top down value potential of the token. However, if we use the current market cap of $368 billion the token could be $320 if their project was in full operation today.

 

                                                                   Conclusion

 

Despite the fact that Utility Tokens, as well as most other cryptocurrencies, have experienced a downtrend in price recently, this hypothetical study has shown that there are currently some incredibly good investment opportunities to be had, assuming any of these projects even come close to achieving their full potential.

 

 

*Disclaimer: The opinions and calculations expressed in this article are the sole and personal opinions of the author. Nothing contained in this article should be considered legal or investment advice. Consult with your own attorney or licensed financial advisor.

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