Why we should look for founder integrity when investing in token launches and ICOs
Quite often I’m asked for feedback on white papers by Token and ICO founders while also being asked for my opinion on potential investments. I’m not an expert in blockchain technology — I’m still learning, every single day. I’m learning from team members and moderators at MyEtherWallet, SingularDTV, Omise, Golem, ICOAlerts, Brave, HelloGold and many more individuals working on crypto solutions that are enabled by blockchain.
But, I do have personal opinions based on my experience as an entrepreneur and as a pioneer behind the creation of numerous Internet and mobile technologies and standards.
This post was inspired by an exchange I had recently with the founder of an upcoming Token launch. The thought of vulnerable people becoming more vulnerable as a direct result of a new token really upset me. I realize this might be a little controversial but the founder is a banker who hopes to make loans more accessible to more people. I don’t have any sympathy for bankers — truth be told. I don’t assume all bankers are bad. But when I see one doing something bad and it’s inside an ecosystem that I’m involved in, and where people ask for my opinion, I’m going to write about it.
You can tell a lot about the integrity of a company by looking at the integrity of the founding team. Think Facebook, Uber, Secret or on the flip side, Ethereum, LinkedIn, Salesforce. All technology can be used for good and bad, while some implementations of technology can be used for bad and good. See what I did there?
I predicted early on, that anonymous apps such as Secret, would likely be used for more bad than good. People don’t typically give positive feedback anonymously but they find it easy to provide negative feedback anonymously. It didn’t take a rocket scientist even back then, to predict that such apps could be used for bad. Yet it took quite a while for the media to report on the matter.
After starting this post I decided to search for opinions on anonymous apps and found this on TechCrunch:
To Whisper CEO Michael Heyward, who brought up an example of a potential suicide prevention on Whisper, Andreessen responded, “How do you decide who to protect and who to out?” with a link to our story about Whisper gossip and Gwyneth Paltrow.
Today we have blockchain technologies that help to decentralize solutions that take advantage of the fact that security and anonymity are some of the key benefits. Anonymity is important. In some cases it’s critical to people’s safety — depending on your opinions and where you live. But anonymity can also be a cause for concern — depending on the motivations of a founding team.
I had a recent exchange with the founder of a new ICO. I’m not going to write about every Token launch or ICO that I like or dislike. But rather, write about the ones that stimulate very strong emotions — good or bad. In this instance, bad. Very bad.
It all started with the tweet above. My opinion was based on my hope that anyone going into the blockchain business to solve a lending / borrowing problem would be driven by a desire to help both lenders and borrowers. You know, everyone within the ecosystem. And with that, the single most important element to measure in my opinion, is social impact. Blockchain enthusiasts are after all, mostly about changing the world for the better by helping everyone become more equal — decentralize power.
@thecashdab replied to my tweet, (my original tweet didn’t mention them by name):
Here’s what followed directly:
This doesn’t answer my question about interest rates that impact the borrow.
In 80% farmer-suicides due to debt, loans from banks, not moneylenders.
Free market you say?
LOCAL MONEYLENDERS are usually portrayed as the villains in India’s farmer-suicides narrative, but government data shows that 80 per cent of farmers killed themselves in 2015 because of bankruptcy or debts after taking loans from banks and registered microfinance institutions.
I’d like to emphasize the fact that there is no cap on interest rates. And they believe a “free market sets rates”. Before you read any further, read this, this and this; “A Wake-Up Call for Humanity”.
As a result of these deaths, the Indian Government capped the interest rates that could be charged by Microfinance Institutions (MFIs) to 26%. This has since been lifted but there are strict guidelines put in place. I disagree with the cap being lifted.
I understand that in an ideal blockchain implementation there shouldn’t be a central source of trust. So you could argue that it’s not ideal to have one organization determine a cap. But is that in the best interest of society?
Disclaimer; My wife Sheetal and I cofounded and continue to run a low-interest Microfinance charity where our interest rates don’t go beyond 12% (the lowest we have seen in the MFI world). We are also grassroots so we fully understand and appreciate the entire ecosystem. You can watch Sheetal’s TEDx talk on the subject here.
So, back to our conversation on Twitter.
I have no idea how this is connected to the conversation. It sounds like they’re trying to justify the use of a blockchain / token.
Let’s revert back to the fact that they believe 65% interest on a loan for a poor person is ok. This alone, tells me that either;
- the founding team has no experience in this space and one should not invest in them or;
- they have experience in this space and they don’t care about the social impact that their technology has — good or bad.
I’m not sure which is worse. I don’t care what anyone says or thinks, 65% interest on a loan — especially for the poorest of the poor, is NOT ok — not under any circumstances.
When you allow “free markets” to dictate terms between the richest and the poorest (many of whom are desperate and financially literate), what do you think will happen? Will everything balance out ok? Fuck no!
I’d rather lose business for MetaCert by not protecting a Token launch or ICO from phishing attacks if I feel strongly that the founders lack basic integrity and are prepared to standby and allow the most vulnerable people in society be taken advantage of by the 1%.
Isn’t that the complete opposite of the intentions behind blockchain implementations?! Isn’t this what the founders of Bitcoin, Ethereum and other enablers believe in?
I agree that to truly decentralize the process, people and technology, you shouldn’t ideally have a single entity capping interest rates or a single entity where there is a single point of failure. But can you? I say you can if it means society wins in the long run.
Making money is a good thing. But money should never be the only driving factor for a founding team. Focus on addressing a problem in an ethical way where you take into consideration the people you work with, the people you impact outside and the environment — the money will follow.
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