Most of the estimated $1.7 billion that has been raised this year from ICOs (initial coin offering), also known as token sales, has been from companies or projects built around the blockchain technology that powers crypto coins like Ethereum and bitcoin. Most of those token sales have centered around ambitious products that are not yet assembled but will be developed using the proceeds. The companies behind the ICOs themselves are, for the most part, fairly new, and certainly far less mature than the average IPO candidate.
In short, ICOs have barely touched mainstream tech companies yet.
But that all changes this week as Kik begins selling its Kin token in an ICO targeted at raising $125 million that runs from Tuesday until Wednesday. The sale bucks those ICO trends, and it could prove to be a seminal event for the tech industry at large.
Unlike typical ICO companies, Kik…
was founded in 2009
has mainstream traction via its messaging app, with 15 million monthly users
has raised more than $170 million from investors that include Chinese internet giant Tencent
is valued at more than $1 billion
Beyond the maturity of the company and popularity of its product, Kik’s ICO is a huge test of whether crypto coins and blockchain technology can be implemented within an existing, mainstream consumer internet business.
Applying crypto tokens to an established business
While much attention is given to the capital-raising side of ICOs, the implementation component of a token sale is critical and typically under-reported. That’s perhaps to be expected, given that the flow of capital has taken center stage as the industry has mused on the potential to raise vast sums of capital without the need for venture capitalists.
But there’s a lot more beyond the money; namely, how an ICO company plans to utilize their token within its business. That’s the crucial part to selling a token. Tokens are not equity. They are more like the oil that greases the machine, or a key that unlocks and powers a decentralized network on the blockchain.
For example, Omise Go (OMG token) plans to create a decentralized payment system in which its tokens validate transactions. Qtum (QTUM token) is creating a platform for developers to utilize blockchain tech. And FileCoin, which recently held a record $257 million ICO, is developing a decentralized storage network using the blockchain.
Kik’s approach is evolutionary. It will use its token to create a developer ecosystem for its messaging app. Essentially, it is bolting onto its service a currency float for developments to give those who develop apps and bots for Kik a way to generate money without advertising or relying on users to buy things.
The company tested virtual points within its platform in 2014, and, happy with what it saw, it is now going to the next level with an ecosystem which, if all goes well, becomes self-sustaining. That’s to say that developers could earn Kin tokens based on metrics that reward user engagement — such as time-spent within their app or service — to help focus on building things people actually like and use.
Further down the line, Kik hopes other social platforms and apps may adopt Kin to monetize in a way that is more user-friendly.
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