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the Block


the Block


Content, Subscription and Advertising enquiries: atb@trustfractal.com This work is licensed under a Creative Commons AttributionNonCommercial-ShareAlike 4.0 International License or otherwise.

November 2018 ISBN 978-3-00-061283-1 Digitally available at :​ trustfractal.com

Published by : Fractal Launchpad GmbH Managing Director : Nele Wollert Akazienstraße 3a c/o Space Shack Coworking 10823 Berlin, Germany Layout concept and design by : Emilie Chabridon and Danilo Sierra Portrait illustrations by : Lisa Bender Content illustrations by : Emilie Chabridon Printed and bound by : Offset Printing House KOPA (Kaunas, Lithuania)

Around the Block

The Around the Block magazine, published by Fractal Launchpad GmbH, is intended for information purposes only. Nothing in the Around the Block magazine is to be considered as creating any contractual relationship or as rendering financial, investment, legal or professional advice for any specific matter. Readers are responsible for obtaining such advice from their own advisors or counsel. No reader should act or refrain from acting on the basis of any content in the Around the Block magazine without first obtaining matter specific financial, investment, legal or professional advice. Fractal Launchpad GmbH accepts no responsibility for any loss or damage, howsoever incurred, which may result from accessing or reliance on content in the Around the Block magazine and disclaim, to the fullest extent permitted by applicable law, any or all liability with respect to acts or omissions made by readers on the basis of content in the Around the Block magazine.

Authors Elizaveta Shcherbakova Elizaveta is on the Investment Team at coparion, a VC fund accelerating the growth of German technology companies.

Fabian FäĂ&#x;ler Fabian is a Freelance Security Researcher and Penetration tester at Cure53, a technology security company offering classic black box penetration tests & code audits.

Axel von Goldbeck Axel is a Partner at DWF Germany, at the Berlin office of DWF International, the globally recognized legal services firm.

Stefan Mayer-Ehrling Stefan Mayer-Ehrling is the Senior Manager & Business Tax Advisory for EY Leipzig, EY a global corporation delivering assurance, tax, transaction and advisory services.

Christina Frankopan Christina works on special projects at colony.io, and is a venture partner with fabric.vc, investing in scalable decentralised networks.

Christian Clawien Christian is the Director of Digital Strategy at fischerAppelt, the well known Creative Content Firm that focus on digital marketing through content, film and public relations.

Nele Wollert Nele is the Managing Director of Fractal Launchpad at Fractal Blockchain, which offers a user friendly, hassle free token launch and KYC/AML compliancy services.

Kedar Deshpande Kedar is the Head of Operations at Fractal Blockchain, which offers full KYC/AML compliancy solutions, as well as frictionless token launch and payment processing services.

Julian Leiftloff Julian is CEO of Fractal Blockchain, an international blockchain technology company building user-centric, compliant identity & payment solutions for the decentralized web.

JĂşlio Santos JĂşlio is the CTO of Fractal, building critical applications and services for enabling, monitoring and reconciling financial transactions using blockchain technology.

Jennifer Wu-Schwab Jennifer is the CFO & Director of Scantrust, an IOT company providing a cloud based, Internet-of-Packaging platform for product authentication and supply chain visibility.

Kerstin Eichmann Kerstin is the Managing Director of the Blockchain Investments at innogy Innovation Hub, a global VC investing in new technologies redefining the future energy system

Marjorie Hernandez Marjorie is a Founder at LUKSO, a Fashion and Lifestyle Blockchain for the next generation of innovation in the Fashion space.

Fabian Vogelsteller Fabian is a Founder at Lukso & Developer at Ethereum, the platform and programming language enabling any developer to build & deploy next gen decentralized applications.

Ricardo Garcia Ricardo is the Business Development Manager at BigchainDB, a Blockchain technology company delivering blockchain database solutions to Developers and the Enterprise market.

Lars Voedisch Lars is the Managing Director & Principal Consultant for PRecious Communications, the Singapore based Strategic Communications and PR consultancy firm.

Kevin Lim Kevin is Head of Strategic Partnerships for QCP Capital, a full-suite digital asset trading firm based out of Singapore.

Lin Dejean Yun Lin is Managing Partner at RVP One, an investment group of companies based in Singapore & Austria, connecting corporate partners and talent to their portfolio and angel investors.

Florian Uhl Florian is a Banking Services Consultant for ICO companies at Volksbank Mittweida, a cooperative bank located in Mittweida, Germany.

Christian Gorgas Christian is the Co-Founder & CEO of XTECH, a Berlin based crytocurrency exchange using high speed volume trading focused on emergent ethereum based projects.

Bruce Pon Bruce is the Founder of Ocean Protocol, a decentralized data exchange protocol that unlocks data for AI. He is also the Founder & CEO of BigchainDB.

Morris Clay Morris is the Executive Director of Amatus, an emerging technologies company builder, with a focus on Fintech & Global Impact.

Editors Douglas Stewart Senior Editor Douglas is the Head of Content of Fractal Launchpad. He is a Marketing Advisor to 2 startups and in his spare time involved in charity work focused on Education, Technology and Animals.

Charles Ernest Stanley Editor Charles is the Legal Office Manager at Fractal. He is a graduate of Brooklyn Law School, with professional experience in the legal and publishing sectors.

Elliott Perez Editor Elliott is the Business Development Manager at Fractal. He is a graduate of Concordia University, with professional experience at Silicon Valley and Berlin based high tech firms.

Danilo Sierra Project manager Danilo Sierra is the CoFounder and Marketing Director of mimosa agency, which offers full-service marketing, creative and communications assistance for blockchain and crypto spaces.

Emilie Chabridon Designer Passionate about print design and typography, Emilie is a multidisciplinary designer. She provides graphic, editorial design, and illustrations to companies and people.

Lisa Bender Illustrator Originally coming from a fashion design and styling background, Lisa now is working as an Illustrator with a great love for details and a genuine passion to create pieces that are authentic, compelling and relevant across genders and generations.

Index Editorial - Around The Block

Token Design & Economics



1. Token Economics and Valuation


2. How to fall in love with a Token, a 7-step guide


Legal & Compliance


3. Country Cards - Regulatory Considerations


4. The Legal Reality for ICO’s


5. Banking & Regulations : 3 Questions every ICO must ask themselves


6. Assessing and reducing the risks of Token Launches


7. Blockchain Legal Directory


Community 80 8. Why should we care ?


9. Communication for an ICO : 5 things to think about


10. Building Communities  : an Interview with Morris Clay


Token Launch


11. Lukso Spotlight: an Interview with Marjorie Hernandez & Fabian Vogelsteller


12. Ocean Protocol & Fractal: an Interview with Bruce Pon


13. Smart Contract : Design and Security


14. Free Workshop : PLan your Token Launch


Finance 132 15. Investment


16. Investment


17. Investor List


18. Opening a Bank Account for ICOs


19. Treasury Management


20. The World of Token Listings


21. Four tax considerations to heed before launching an ICO


Fractal’s Payment Processing Service


Editorial Around the Block Blockchain is new for everyone and at one point made a big impression. It is emblematic that just like we remember where we were when historic events happen, we share the stories of how we first heard about this new technology. Some of us have been around the block a bit more often than others. But everytime they make a round, the environment changes. Blockchain stays new for everyone. 19

What doesn’t change is the openness for others to join. Blockchain is an open source effort after all : a project without a community and widespread adoption will not succeed. So connecting to others becomes key to success and, interdisciplinarity, mandatory as Morris Clay (Chapter 10) tells us. We would like to take you on a journey that people go through when they decide to start a new protocol effort. We met some new kids on the block, like Marjorie Hernandez de Vogelsteller, who knew a lot about fashion, but little about blockchain when she started. An advantage, as it turns out when persuading fashion companies to join the effort (Chapter 11). Others like Christina Frankopan and Bruce Pon have been around and tell us about their experience. Christina writes about token design (Chapter 2) and at which point you don’t even need a token at all. 20

Bruce tells us about his experience with launching Ocean Protocol. This magazine is supposed to feature interesting people and content that may be helpful on your journey. So we asked people like Axel von Goldbeck (Chapter 4, 5) to cover some of the tough topics like navigating the increased regulatory scrutiny and Kerstin Eichmann (Chapter 16) on what criteria she is basing her investment decision on. Another novelty is this magazine. We hope you find it helpful and we would like to hear your feedback. And if you have something interesting to say yourself, we would like to feature you in the next edition, no matter if you are new or have been around the block. 21

Ricardo Garcia

Christina Frankopan

Token Design & Economics

1. Token Economics and Valuation by Ricardo Garcia

Token Economics and Valuation takes the Token Design as an input and “models” your own mini-economy to understand how this minieconomy will behave and influence the value of your native token. This is particularly relevant when talking to investors. Given your Token Design, an investor wants to understand why he should invest in your project. For this, he needs to understand parameters like the size of the market you are targeting, how big the potential is, how you will get traction, how your supply side is modelled, etc. The investor needs to get a good feeling of how the value of his investment is expected to develop in the upcoming years. The mental model and framework presented here has been inspired by Chris Burniske’s thought leadership on Token Valuation. 25

The following section provides a non-exhaustive list of questions as a preparation guide to use before talking to an investor. The questions are an indication of typical aspects that a crypto investor pays attention towards.

Token Demand Token Demand is relevant for an investor to understand how big the market potential for your network is. From a niche market to a trillion-dollar sector, this is crucial in modelling the value development of your token. 1-W  hat is the potential of your target market and how big is it (in USD)? 2-H  ow much of that potential is addressable for your network (total addressable market in USD) and do you expect to capture it (compared to your competitors in percentage)? 3 - Who are your competitors? 4-W  hat are the key mechanisms through which you expect to gain traction and market adoption? 5- How do you expect your market adoption in terms of market share capturing to evolve over time, and what is the expected on-chain transaction volume results from your anticipated market share capturing (in USD)?


Token Supply Token Supply is relevant for an investor to understand liquidity of your token and expected inflation. This matters because even if you target a very big market with the wrong supply schedule you will drive the value of your token down. 1 - What’s your total token supply and is the supply fixed or variable over time?

a. If it is variable, what is the annual inflation rate?

i. W  hat is the associated minting mechanism to mint new tokens and increase supply?

ii. I s there a mechanism to burn tokens and reduce supply again?

b. If it is fixed, how are the tokens brought into circulation?

i. W  hat percentage of the tokens are reserved for minting and what percentage is held by founders, investors, and advisors?

1. W  hat is the associated minting mechanism to mint new tokens?

2. How does the founding company/ foundation determine the way that foundation tokens are released?

2 - What percentage of tokens do you expect to be hodl’d and in free float? 3-W  hat is the vesting schedule for tokens for founder, investors, and advisors and your forecasted token supply schedule for the next 10 years?


Token Velocity Token Velocity is a crucial parameter in influencing the value of your token. For example, if you target a big market and you have scarce supply, when your token has high velocity then there will only be limited value appreciation potential to your token. 1 - How high is your estimated velocity? 2-H  ow high is the velocity of your peer group and what levers influence your velocity? 3-W  hat mechanisms are you implementing to reduce velocity or lock up tokens? 4 - I s the purpose of your token to act as a pure payment token or does it have other utility aspects? 5 - Does your token design include staking or depositing of tokens? 6-H  ow do you expect your velocity to evolve over time? (i.e. what are the factors or events that could increase or reduce your velocity?)


Token Pricing Given your Token Demand, Supply and Velocity, it is important for an investor to understand how you defined your token pricing to judge if this is a fair investment price. 1 - How did you define the ICO price for your token? 2 - How do you expect the price of your token to develop in the next 10 years based on your forecasted market adoption? 3-H  ave you developed a sensitivity analysis with different scenarios (e.g. varying according to market adoption levels)?

a. H  ow does a lower addressable market impact your token pricing?

b. H  ow does a lower market share impact your token pricing?

4-W  hat discount rate do you apply to account for the risk of the investment? 5 - What discount percentage on the fair price do early vs. late investors receive?

Thinking about these questions will help you get a better sense of the economics of your network. The questions are structured to aid you in framing and telling your investment story in a much more convincing way. Ultimately, this will go a long way in helping you receive the required investment to finance your project.


2. How to fall in love with a Token, a 7-step guide by Christina Frankopan

Stendhal’s book ​‘De l’amour’​1​(On Love) published in 1822 was an attempt to study the operations of love dispassionately and objectively. He envisaged falling in love as a transition between 7 stages of state, leading to an ultimate “crystallization”.

1 2 3 Bologna

4 Rome


Stendhal illustrated the crystallization of love in a visual analogy, where the city of Bologna signifies indifference and Rome stands for perfect love. The traveler begins in Bologna, indifferent, then moves through the stages of crystallization and arrives in Rome in love. As a long-term investor, this is the journey I want to be taken on by you and your token offering. Generally, I’m in Bologna. I’m indifferent. Most token offerings which pass my desk are badly designed and are facile fund-raising toys which don’t need a token, or an ICO. But the journey to Rome can and does happen for me, where the quality signals of your token project pass these 7 stages. So here is my light-hearted mapping of Stendhal’s stages of falling in love, applied to a long term investor and the potential object of her affection, a token. [Note : Just to be clear, mostly when I say ‘you’ below, I mean you as a token, not you as a human...]

1. Admiration ​​(TEAM) It’s a banality of VC shpiel to say it’s all about the team. But it kind of is. I admire your team from the start and their determination to stay the course. I recognise the depth and experience of their technical talent. I research teams, take references and try to spend a lot of time getting to know them. I want to see this as a long term partnership and know that they will also trust me to support the project - not only when you’re worth $1.5bn and your team is stressed about opsec, but also when times get tight in crypto autumn.


2. Acknowledgement ​​(PRODUCT) You exist and you are credible. The platinum standard is to demonstrate that your token mechanics and product design meet ​Mike Goldins​2​Cryptosystems Manifesto of necessary and sufficient criteria for existing. If you succeed in this, you have a chance to actually capture network value, which most tokens are not well designed to do. You may or may not have plans to do an ICO in due course, but if you do, I want to see that your team has put some original thought into a balanced public ​auction 3​ design, you’ve perhaps explored ethical a ​ pproaches​4​, fair distribution, sensible liquidity of circulating supply, considered and learnt from ​past ICO examples​5​, combined with a view to future funding needs.

3. Hope ​​(IMPACT) I need to see the vision and zeal of your mission, and that you are addressing a meaningful market that has potential to have impact. “Meaningful” to me does not just mean “large” (although that will probably excite me). Personally, “meaningful” means a project that potentially impacts the way we societally organise and transactionally engage. For me, if the token project has tangible, potential impact and is well designed, in the long-term it is by definition valuable.


4. Delight ​​(COMMUNITY) Hopefully, it’s not just me falling in love. I need to know that others have fallen in love with you too. This is not (just) about size of community. That can be a hollow metric, and we’ve seen many scam projects spin up telegram groups of 15,000 in 3 days. No. I want to see authentic signs of sustained community engagement and germs of genuine delight in what you are building. Even if you have not yet attained a product-market-fit, the objective once that is achieved should be for your token system to become a self-sustaining network that can and should eventually survive the absence of your team. This can only happen with an active community to sustain and maintain the project.

5. First Crystallization ​​(INVESTMENT COMMITTEE) I’m convinced it’s the real thing. I need to confirm this with trusted colleagues to know I’ve not lost the plot. I will share with them all the information I’ve gathered and adventures we’ve shared in stages 1-4, with as many data points as possible to validate my affection. We will consider various approaches to v​ aluation​6 (although I personally feel this is still an immature art) and whether you are raising the right amount. Too much can seem (and be) greedy and can create disincentives for discipline.

6. Doubt ​​(DUE DILIGENCE) Is this too good to be true? Let me check. There will be quite a lot of legal due diligence, and review of your ​SAFE​7​ / ​SAFTE8​if you have one. I need to confirm whether you are compliant (KYC, AML, security/no security token etc). I will take technical views on your codebase, development architecture and roadmap.


7. Second Crystallization ​​ (PARTICIPATE & #HODL) It’s true love. I’m invested. We’re going to be together forever, perhaps I’ll be staking and running ​nodes​9​, until the network doth us part. Such a romantic view of token investing in crypto winter! But designing a good token that is actually needed, is really just a puzzle. Solve the puzzle, and then, just perhaps, all roads will lead to eternal bliss and crypto nirvana in Rome. Perhaps ;) Disclosures : With credit to Jack du Rose for his ideas in the fireside chat at ETHBerlin​10​“To Token or not to Token”. Opinions expressed are Christina’s own and any omissions, exaggerations and howlers entirely her own fault.

​ ​https  ://archive.org/details/delamour00stengoog/page/n10


​https  ://docs.google.com/document/d/1TcceAsBlAoFLWSQWYyhjmTsZCp0XqRhNdGMb6JbASxc/edit

2 3

​ ​https  ://thetta.gitbook.io/ico-models/

4 5

6 7

​ ​https  ://www.youtube.com/watch?v=bsS0uFCh6N8

​ h​ ttps  ://vitalik.ca/general/2017/06/09/sales.html ​https  ://blockchainatberkeley.blog/todays-crypto-asset-valuation-frameworks-573a38eda27e

​ h​ ttps  ://saftproject.com/


​ ​https  ://blog.colony.io/a-simple-agreement-for-future-tokens-or-equity-b8ef08608347


h​ttps ://medium.com/fabric-ventures/there-has-never-been-more-at-stake-in-venture-capital-f0 1ef44bdd57 https ://ethberlin.com/2018/09/22/to-token-or-not-to-token-christina-frankopan-jack-du-rose-ethb erlin/



Julian Leitloff

Alex von Goldbeck

Kedar Deshpande

Legal & Compliance

3. Country Cards Regulatory Considerations

Important Disclaimer : The below overview is not provided as, nor shall it be used to substitute for, financial, investment, legal, or tax advice or estimation. There are numerous considerations in addition to the information below that one must consider in planning an ICO which must be discussed with qualified professionals. Further, given the volatile and innovative nature of the regulatory sphere of the crypto assets sector, the below overview of the global regulatory status of these countries could (and is likely to) substantially change at any time. This overview hence only reflects the data available in October 2018. 39

GUIDE Regulatory Office​​ :​​ The institution(s) in charge of regulating the country’s crypto market. Token Classification​​ : ​​The scale is binary to distinguish between two regulatory focuses : Expectation of Profit Focus : ​​the predominant focus in ​​the token classification is the buyer's expectation of some kind of profit, leading to the classification of tokens as securities in most cases. Function Focus : ​​the predominant focus in the token classification is on the function of the token and the rights associated to it.

Token classification is a complex matter, influenced and defined by various legal and financial criteria. As such, the nuances of a country's regulatory approach to token classification should be legally established on a case by case basis. Thus the content provided here cannot be used to determine the classification of a specific token. Any token issuer or buyer seeking token clarity and ICO compliance, should obtain legal advice from their counsel and/or the relevant financial authorities on the classification of that token.


Ease of launching an ICO​​ :

• •••

(Presumably weak and non-supportive infrastructure) (Presumably existing infrastructure, but ICOs nonetheless face challenges)

• • • • • (Presumably strong and supportive infrastructure)​. The scale is primarily based on the number of ICOs launched in each jurisdiction. However, the number of ICOs launched in a jurisdiction may not truly reflect how easy it is to launch ICO’s in that jurisdiction, as there are numerous other criteria e.g. the regulatory environment​. Nevertheless, the geographic concentration of ICOs is an objective and relevant indicator. Source : [https ://icowatchlist.com/statistics/geo]

Banking​​  :

Not Friendly (countries where the banking industry does shows signs of not being receptive to crypto)

• • • • • Very Friendly (countries where the banking industry shows signs of being extremely receptive to crypto).



Regulatory office :

Federal Financial Supervisory Authority (BaFin) and the Bundesbank

Token Classification :​​ Ease of launching

Function Focused


an ICO :

Germany is one of the top 15 countries in terms of number of ICOs launched from there, however Germany still falls behind countries with smaller economies, such as Estonia. Banking :

••••• ​​

Numerous banks are receptive to crypto, and BaFin expressly acknowledged that banks are authorized to exchange crypto for fiat currency.



Regulatory office :

Monetary Authority of Singapore (MAS)

Token Classification :​​

Function Focused

Ease of launching an ICO :

••••• ​​

Singapore ranks as the third country with highest number of ICOs launched from there.

Banking :

•• One of the major challenges for crypto firms based in Singapore is to set up a bank account with traditional banks.


United States

Regulatory office :

Securities and Exchange Commission (SEC)

Token Classification :​​ Ease of launching an ICO :

Expectation of Profit Focused

•• Although the United States still ranks first in terms of number of ICOs launched from there, the market is rife with regulatory uncertainty.

Banking :

••• The general reluctance of the banking system towards crypto is now being balanced by positive signs coming from big players such as JP Morgan and Goldman Sachs.



Regulatory office :

Gibraltar Financial Services Commission (GFSC)

Token Classification :​​ Ease of launching an ICO :

Function Focused

•••• Gibraltar ranks tenth in terms of number of ICOs launched in the country, ahead of countries with larger economies, such as Germany. The Government of Gibraltar is developing legislation to regulate the promotion, sale, and distribution of tokens.

Banking :

•• Gibraltar International Bank was accepting crypto firms as clients. However, its British partner (Royal Bank of Scotland) refused to process transactions connected with crypto firms.



Regulatory office :

Securities and Exchange Commission (SEC)

Token Classification :​​ Ease of launching an ICO :

Expectation of Profit Focused

•••• Switzerland is one of the top 5 countries in terms of number of ICOs launched in the country.

Banking :

•• Banks are generally not receptive to crypto, but positive signs of change are coming in the form of several crypto friendly banks such as Falcon and Maerki Baumann.



Regulatory office :

Regulatory office :​​Malta Financial Services Agency (MFSA) and Malta Digital Innovation Authority (MDIA).

Token Classification :​​ Ease of launching an ICO :

Function Focused

•••• Malta currently has relatively few ICOs launched within its borders. However, in July 2018, Malta established a regulatory framework tailored to blockchain, cryptocurrencies and distributed ledger technologies, which includes the Virtual Financial Assets Act specifically regulating ICOs which is indicator of a safe regulatory environment.

Banking :

•• Maltese banks are generally not receptive to crypto. However Binance, the world’s largest crypto exchange, was able to set up a bank account in Malta indicating a positive sign of change.



Regulatory office :

Financial Market Authority of Liechtenstein (FMA)

Token Classification :​​ Ease of launching an ICO :

Function Focused

•••• Liechtenstein, despite being the sixth-smallest country in the world, still makes it to the top 30 countries in terms of number of ICOs launched from there and, most importantly, is working on a Blockchain Act aiming to provide legal certainty to business models on blockchain systems, including ICOs.

Banking :

•​​ • • • • Liechtenstein banks, such as Bank Frick, are receptive to crypto.



Regulatory office :

​Israel Securities Authority (ISA)

Token Classification :​​

Balanced ISA’s Interim Report suggests that Israel will adapt a “balanced approach” that stands between a Function Focused and a Expectation of Profit focused approach. To which side of the spectrum ISA will be closer to is yet to be seen.

Ease of launching an ICO :

•••• Given that Israel is one of the top 20 countries in terms of number of ICOs launched from there.

Banking :

•• Banks are generally not receptive to crypto. However, the Israeli Supreme Court’s decision prohibiting Bank Leumi from blocking activities in an account held by Bits of Gold, a crypto exchange, is a positive sign of change.


4. The Legal Reality for ICO’s by Alex von Goldbeck

Legal compliance with regulations has been a challenge from the outset of the cryptoeconomy. It took some hard lessons for the industry, in particular ICO contributions sealed in bank accounts because zero information on investors could be provided to the bank. It was through these growing pains a general understanding developed a technology based on the belief the intermediaries are dispensable. and that transparency only concerns code and transactions and not the people behind it, will still hit a wall when money laundering is dealt with carelessly. This was the birth of compliance in the token economy. Since then, ICO structures have changed considerably, and compliance has become a vital factor for a successful ICO. In many respects ICO are now taking the same route as conventional public offerings. 51

Here are the legal lessons learned from various ICOs  :

1. Tax is more important than you think Blockchain is about transferring values and tokens are about storing values (an obvious simplification). It was therefore only a matter of time before the tax authorities came up with the idea of demanding their share of the added value. For reasons of equal tax treatment, the token economy could not and should not be a taxexempt area. This concerns both turnover tax and income tax issues. With regard to the ICO incentives, which are typically granted to the participants including the ICO company itself in the form of tokens, each ICO must first be audited for tax purposes   : when do which values emerge, and how is the added value to be assessed for tax purposes? A missing or wrong assessment in this assessment can cost the parties involved dearly. Especially if liquid funds are not available to pay any tax debts and the tokens themselves are also not yet liquid (because they are locked, not listed or cannot be sold for various reasons). Many questions still cannot be clarified quickly because the financial administration lacks the knowhow or — in the case of fundamental questions — only lengthy coordination is necessary. Nevertheless, the analysis of tax risks is necessary.


2. Check on popular myths in choosing your forum Cryptocurrencies are often regarded as ‘wildly speculative’. Regulators, however, have a differentiated view on the token economy. While warnings of the risks of ICO’s dominate the headlines, most regulators (and governments) are shy to take a too restrictive view on token regulations. The token economy challenges them to weigh the risks of strict regulation against the risks of poorly regulated crypto currencies. In fact, most countries want to be the place of business for blockchain companies. However, while some countries are quicker and more aggressive to create favorable legal and, in particular, regulatory conditions for blockchain companies and ICOs, in many cases the supposed advantages turn out to be myths. At least in EU and European Economic Area countries, governments are bound by the EU legal framework which leaves little room for solo runs by individual countries. Advantages are mostly limited to tax, administrative procedures and, in some instances, a safe(r) regulatory environment. These have to be weighed against a number of disadvantages in small countries with, occasionally, a reputation for tax evasion and/or money laundering  : long journeys, high costs of professional advisors and the ongoing tax risk if it turns out that the main place of business is still Berlin.

So, before setting up shop in ‘allegedly favorable’ jurisdictions, ask if there is any real advantage.


3. Regulatory loopholes may prove to be temporary The German financial supervisory authority regards tokens as a financial instrument. Whether this also applies to pure utility tokens, however, is controversial. As financial instruments, tokens are included in the scope of the German Banking Act. In addition, numerous other laws regulating financial instruments, securities, investment funds and money laundering must also be examined. The multiplicity and complexity of financial market regulation is tempting many ICO companies to look for loopholes, especially in countries where financial market regulation is not fully geared for token issues. Such perceived benefits are often only temporary. All governments we know are working to fill gaps in existing regulations. Any remaining benefits must therefore be exploited quickly and are often unique. In the worst case, regulation "overtakes" an ICO and thwarts it. Ultimately Token regulation will most likely be harmonized across Europe. The EU is competent in financial market regulation and is already either exploring or taking regulatory actions. All major countries agree that blockchain regulation (at least in Europe) shall be harmonized. It is likely the views of the major countries will prevail. Not only, because regulation is also a power game, but because the larger EU members have bigger resources to deal with the complexities of blockchain. So, be aware that any regulatory loophole may be temporary at best.


4. L  ocal regulations only cover your business, but not your offering A widespread misunderstanding amongst ICO companies is that the rules are governed by the jurisdiction at the place of incorporation. In fact, local laws can only regulate local matters, e.g. license requirements for ICO companies. An ICO is no local matter. Tokens are distributed across various jurisdictions. Each jurisdiction, even in Europe, applies its own rules. In one country, your token may be classified as security, while in another regarded as a utility or payment token. Targeting the right countries for your offering is paramount. Selling tokens to retail investors in the United States without SEC registration may land you in jail next time you’re there.

5. What to know about KYC/AML KYC is a tricky issue for ICO companies. Firstly, identifying your investors is contrary to the conviction of blockchain evangelists that transparency is great but for the acting individuals. Secondly, KYC is key if your ICO wants to do a simple thing like opening a bank account. If banks are prepared to do that at all (which in a number of countries is difficult), they will ask you to provide information on your ICO investors. Are they allowed to do so? Even this is not entirely clear. Banks need to identify their customers and their beneficial owners. Token investors are not beneficial owners. However, there are many reasons why banks are not only entitled but obliged to identify Token investors. Discussions are futile anyway  : if you don’t cooperate, you will not get an account or your token revenues transferred to your account. KYC is also tricky because most ICO companies often don’t know what they are supposed to do. As a matter of law, only those ICO companies that are obliged to do KYC are “obliged entities” under


KYC/AML laws. As a matter of fact, most ICO companies are not “obliged entities”. That means they don’t need to do KYC themselves. But they have to assist their bank (that is the “obliged entity”) to meet its KYC obligations. This means they have to provide all the information the bank needs to identify the ICO investors. They do not have to identify ICO investors themselves. Collecting information from potentially hundreds or even thousands of investors is a challenge. Most ICO companies do not have the know-how and the infrastructure for such an enterprise. This is why specialized KYC services are required to know what information will be requested and what to do with it.

6. Retail investors are hard to catch A disappointing truth has to be acknowledged in the ICO market  : although blockchain is such a great technology for serving retail investors, from a legal point of view they are almost impossible to target for an ICO. Financial regulations and general customer protection laws in Europe provide safeguards for retail investors that are difficult to overcome. Most prominent are prospectus obligations in the retail offerings of security tokens. ICO that still address retail investors and take their money run considerable risks. More often than not, retail investors are excluded from ICOs, not just US retail investors. It is a open secret that in spite of such exclusions many retail investors buy and receive tokens in ICOs. This is a grey area regulators have not been dealing with properly (so far). As they can only enforce laws in their own jurisdictions it’s harder to catch offerings from abroad. It’s only a question of time until regulators get organized and more efficient in dealing with ICOs only pretending to exclude retail investors.


7. Liability is not only for the CEO Marketing is critical for the success of a ICO. Social media and your website play a big role. Preparing an ICO presents a considerable challenge to the communication skills of a ICO company. Every piece of false information on an ICO is a potential liability claim. Whitepapers must be precise, websites need to meet not only legal standards but must not contain misleading content about your ICO. Presentations need to be double checked. Make sure that your marketing team is fully prepped and informed about the ICO. ICOs walk on uncharted grounds in many respects. The fog is slowly lifting and rules are getting ever clearer. The biggest mistake is to close your eyes to legal and regulatory questions. Involve your tax consultants and lawyers early before it’s too late.


5. Banking & Regulations : 3 Questions every ICO must ask themselves by Alex von Goldbeck

Anyone who wants to induce investors to make an investment must in principle provide information about the opportunities and risks. The crypto community has come to the realization that it’s easier to sleep at night with an ICO that complies with regulatory requirements. Although ICOs initially seemed to run “under the radar� of the financial supervisory authorities, the fact that banks refused to pay out funds of unknown origin at the last mile caused mass disillusionment. Since then regulatory requirements have mostly been an integral part of every ICO project. 59

Thus, every ICO should ask these three questions :

• Do I need a banking or financial services licence for my business activities?

• What informational obligations does an ICO company have towards its investors?

• What consequences do money laundering laws have for ICO’s?

1. Licensing obligations Economic activity generally requires various permits. Simple commercial activities need a simple business license. Activities that entail greater risks require specific permits, some of which are very costly to obtain. The most extensive licensing obligations exist in the provision of banking or financial services, because here the assets of third parties are dealt with directly. The same applies to payment services and the collection of capital from a larger number of investors for investment purposes in the form of collective investment schemes.


Since ICOs are an innovative form of corporate financing​ —​ always aiming to collect capital​ —t​here exists a ‘proximity’ to collective investment schemes. This does not mean that every form of capital collection requires the permission of the licensors. The EU has a set framework for this through the ​Undertakings for Collective Investment in Transferable Securities Directive (​UCITS) for the providers of securities funds and the ​​Alternative Investment Fund Managers Directive (AIFMD)​​ for the providers of so-called alternative investment opportunities. These directives determine which capital accumulation activities are considered "investment funds" and which activities are exempted. The focus here is on the purpose of the capital collection. The collection of capital for so-called "operative" business activities does not require a permit, whereas the collection of capital for so-called "passive" investments, in particular investments in securities, real estate or commodities, do require a permit. Under certain conditions, however, even passive investment activities can be performed free of permissions.


Numerous further licensing obligations exist if ICO companies participate in the trading or use of Coins/ Tokens without using them for their own financing purposes. Coins are generally regarded as financial instruments; as such, investment brokerage, investment advice, the operation of exchanges and other activities are subject to approval. In spite of the numerous and complex regulations, a ‘simple’ rule of thumb can be applied : “Operatively active” is anyone who pursues industrial value creation or offers services around industrial value creation. Other services, particularly in the financial sector, must be checked for compliance with licensing requirements.

2. Information obligations The collection of capital almost always requires compliance with informational obligations. The scope depends on the classification of the tokens, for which the rough classification into payment, utility and security/asset tokens is being established. This is expressly regulated by public law for public offers of securities/ security tokens. Issuers are also obliged under civil law to inform investors about the risks of the investment. In other words, if the clarification is not complete or incorrect, there are considerable liability risks for issuers. As always, there are numerous exceptions to all these principles, but the following applies nevertheless : Anyone who wants to induce investors to make an investment must in principle provide information about the opportunities and risks.


The European prospectus regulation provides for various exceptions, which amounts to the fact that private placements in a small circle of investors, and the sale of tokens to persons who carry out a minimum subscription of €100,000 are free of prospectuses. Small issues up to €8 million are also prospectus-free, but if they are sold to retail investors, At least in Germany a three-page securities information sheet must be prepared and approved by the national financial regulator, the BaFin. In view of the expenditure for the fulfilment of information obligations, in particular the production of a prospectus, ICO enterprises tend to treat such informational obligations casually. Many white papers don’t meet the requirements established by the courts. This carries substantial risks for any ICO. Similarly, the organisation of an ICO's marketing is extremely important for all ICO companies. At roadshows and in social media forums, information is disseminated that could trigger liability obligations in connection with a public offer.


3. KYC/AML obligations The third important task in the organisation of an ICO is the fulfilment of KYC obligations. This must also be taken into account at an early stage for a bank’s ability and willingness to release collected (FIAT) capital depends on this. The exchange of at least parts of the ICO income into FIAT is operationally essential. Ordinary banks are still hesitant however to deal with blockchain business models. As the crypto-economy in some countries has a reputation for being abused for money-laundering, banks fear tighter supervisory control if they start dealing with blockchain companies. Many blockchain enterprises have reported substantial delays in opening a simple corporate bank account. In view of the general caution of commercial banks with blockchain business models, considerable efforts are required to dispel their concerns.


Although ICO companies, e.g. in Germany, are only obliged to identify customers themselves under certain conditions, they are always obliged to support their banks in fulfilling their identification obligations. This means that they must provide the bank with all the information about investors to the full extent that the bank requires. In view of the potentially large number of investors in an ICO, this is a considerable expense for any ICO company. This can be difficult because an ICO is usually a one-off event, the documentation obligations can be complicated for individual investors and all of these activities are not core business practices for many companies. In this respect, KYC service providers have established working business models that efficiently manage the identification process on behalf of their customers, gather experience from many ICOs and satisfy all the banks needs. In addition KYC services can be combined with equally important obligations such as AML and white and/or blacklisting. This relieves ICO companies of a considerable amount of both work and time. In this respect, outsourcing KYC identification obligations should be a priority option for all ICO companies.


6. Assessing and reducing the risks of Token Launches by Julian Leitloff & Kedar Deshpande

Launching a token is not the common way to collect capital (yet) and has adapted and evolved in dramatic ways in just the last year alone. With the increase in funding volume came regulatory scrutiny. We would like to take a pragmatic approach of trying to list important risks when launching a Token and offer effective countermeasures. 67

I. Regulatory and Legal Risks : Collecting funds is a regulated activity in most jurisdictions and failing to comply is a risk to avoid. Regulations are in place to prevent illegal activities such as money laundering and non-compliance can invite regulatory scrutiny and lead to serious legal and financial consequences.

II. Consumer Protection : Consumers are mostly protected by laws that require special care when dealing with retail investors. There is a risk of getting sued, thus leading to financial costs, fines and reputational risks.

III. Data Privacy : You collect a large set of very personal data. If you fail to handle the data in the right way, or if this data gets stolen, you may be sued by the impacted person(s) and fined by the authorities.


IV. Phishing and Scam : Your investors might be scammed by impersonating you, copying your website or using bots in your Telegram channel. You are not directly liable, but you have a reputational risk.

V. Technical Risks : Making sure the technical environment is not compromised and thus funds or data stolen. Smart contracts can contain bugs, log or expose funds.

VI. Physical Risks : Keeping wallets and those with access to funds safe. Making sure that equipment and servers are stored safely.It is not our intention to go into every possible risk scenario. It is helpful to make a list of all scenarios that can happen, and identify the risk to be able to actively decide which ones to tackle.


Our approach to this is pragmatic, and what follows is the most helpful practises that we have seen successful launches apply.

1. Talk to Veterans Companies that already ICOed are a great source for lessons learned. Also crypto VCs know a lot about what can go wrong. These tips will help you save money on ‘overblown’ risk and find the real tricky things you should have prepared for.

2. Dedicate one Person to Security This person should be someone in your team. Having someone early on to focus on security enables you to implement measures from the start and changes the mindset of the team.

3. Get a Lawyer as an Advisor Let’s face it, paying lawyers by the hour is not the best incentive. You want someone to pragmatically evaluate not only risk but also cost and time for you. Make an arrangement with an experienced lawyer to receive a lump sum token reward for being your advisor on legal decisions.


4. Over Communicate Most systems get compromised and issuers defrauded due to social hacks. You can prevent this by over-communication both internally and externally. Set clear responsibilities, practises and scenario plans internally. Communicate in detail to the community how the ICO process will look like, what to expect and what not to expect. Use a live-stream to answer questions during the launch so people know exactly what is going on.

5. Outsource Your core focus is on building a protocol and the community around it to ensure a successful token launch. External service providers have the experience on something that you will ideally only do once in your lifetime. Therefore, it is wise to focus your time on getting potential contributors excited about your project, rather than focusing on compliance and other noncore issues.


7. Blockchain Legal Directory

The following attorneys and law firms have FinTech expertice and are active in assisting local blockchain, ICO, and/or cryptocurrency companies with their legal needs.1 1 This directory should not be considered a reference or review by this magazine for any of the firms listed, and the information listed here should not be considered definitive. The information in this directory is subject to change at any time.


Batliner Wanger Batliner Dr. Ralph Wagner ralph.wanger@bwb.li Liechtenstein Additional Areas of Expertice2  : Arbitration, Bankin, Blockchain, Cryptocurriences, ICO, FinTech, Commercial Law, IP Law Practice Locations  : Liechtenstein

Techlawyers by PBBR Carina Branco cb.techlawyers@pbbr.pt Portugal (Lisbon) Additional Areas of Expertice  : Commercial, IP, Corporate Governance, M&A, Data Privacy, Labor Practice Locations  : Portugal; Techlawyers by PBBR cooperates with international partners.

Dentons Singapore Kenneth Oh kenneth.oh@dentons.com Singapore Practice Locations  : Singapore, global law firm.


2 Practice areas are not exhaustive. A legal practice may or may not be comprehensive and firms may have other areas of relevant expertice e.g. Employment Law and Tax Law.

Osborne Clark Chia Ling Koh chialing.koh@osborneclarke.com Singapore Additional Areas of Expertice  : Fintech, Blockchain, Payments, AI, Cybersecurity, e-commerce, Telco, M&A, PE, VC, Investment Funds, IP, IT, Data, Dispute Resolution, Banking and Finance, Regulatory, and Competition. Practice Locations  : Singapore, global law firm. Consilium Law Corporation Franca Ciambella fciambella@consiliumlaw.com.sg Singapore Additional Areas of Expertice  : Fintech, Blockchain/ICO’s, Corporate & Commercial, Family Law, Civil & Commercial Dispute, Employment Disputes Practice Locations  : Singapore Lindenpartners Eric Romba romba@lindenpartners.eu Germany (Berlin) Additional Areas of Expertice  : Capital Markets, Data Protection (GDPR), Data Use and Analytics, Fund Structuring, Regulatory Practice Locations  : Germany (with Europeans partners)


McDermott Will & Emery Dr. Sebastian Keding skeding@mwe.com Germany (Düsseldorf) Additional Areas of Expertice  : Capital Markets, Corporate Law, Data Protection (GDPR), Employment Law, IP/IT Law Practice Locations  : Germany (and globally)

Simmons & Simmons Alireza Siadat alireza.siadat@simmons-simmons.com Germany (Frankfurt) Additional Areas of Expertice  : Banking & Finance, Mergers & Acquisitions, Regulatory Practice Locations  : Germany (and globally)

Klayman LLC Ms. Joshua Ashley Klayman josh@klaymanllc.com USA Additional Areas of Expertice  : blockchain, digital tokens, cryptocurrency, smart contracts, traditional finance and capital raising Practice Locations  : New York


GÖRG Patrick Smith psmith@goerg.de Germany (Köln) Additional Areas of Expertice  : ICOs, Cryptocurrencies, Banking, Capital Markets, Corporate, Regulatory Practice Locations  : Germany NJORD Law Firm Kim Høibye kh@njordlaw.com Denmark (Copenhagen) Additional Areas of Expertice2  : Banking & Finance, Capital Markets, Corporate Law, Insurance and Reinsurance Practice Locations  : Denmark, Estonia, Latvia and Lithuania GTG Advocates Dr Ian Gauci igauci@gtgadvocates.com Malta Additional Areas of Expertice2  : Blockchain and AI, Technology Law in particular, E Commerce, Cyber Law, Data Protection, GDPR, Gaming, Telecommunications and IT. He also works extensively in issues dealing with Competition Law and Consumer Legislation and lectures Legal Futures and Technology Law and Blockchain at the University of Malta Practice Locations  : Malta, Europe


Ganado Advocates Dr. Leonard Bonello lbonello@ganadoadvocates.com Malta Additional Areas of Expertice  : FinTech, Blockchain, Capital Markets, Banking Regulatory, Financial Markets Regulation, Finance Practice Locations  : Malta DLT Law Leandro Lepori lepori@dlt.law Switzerland Additional Areas of Expertice  : Corporate, Banking and Financial Law specialized in blockchain based projects including ICOs structuring and compliance with regulatory Laws. Practice Locations  : Switzerland DWF Dr. Nina-Louisa Siedler nina.siedler@dwf.law

L & Y Law Office

Germany (Berlin)

Henry Yu

Additional Areas of Expertice  :


Banking and Finance,Capi-

Hong Kong

tal Markets, Private Equity,

Practice Locations  :


Hong Kong

Practice Locations  : Germany (and globally)


DLA Piper Dennis Kunschke dennis.kunschke@dlapiper.com Germany (Frankfurt) Additional Areas of Expertice  : Financial Supervisory Law, Investment Law, Payment Services, Regulatory Practice Locations  : Germany (and globally)

Morais Leitão : Team Genesis Mariana Albuquerque  : msalbuquerque@mlgts.pt João Lima da Silva  : jlsilva@mlgts.pt Luís Roquette Geraldes  : lrgeraldes@mlgts.pt Portugal (Lisbon) Additional Areas of Expertice  : Financial Supervisory Law, Investment Law, Payment Services, Regulatory Practice Locations  : Portugal

The editors of Around the Block would like to thank the lawyers and firms who have dedicated themselves to representing their local blockchain community and kindly offered their contact information for this directory. If you would like to see your practice listed here in future editions please contact the editors at atb@trustfractal.com


Lars Voedisch

Christian Clawien


8. Why should we care? by Lars Voedisch

Blockchain & Cryptocurrency in the age of scams and weariness Blockchain as a technology and its subsequent potential was increasingly recognized around 2014. Let’s face facts—the market does not need just another ICO. To me the hype and excitement around blockchain and ICOs have died down somewhat compared to last year. Regulation has increased with an eye towards scams, phishing thefts, and failed launches—investors, users, and lawmakers are increasingly wary of cryptocurrencies. The burning question then facing ICOs are : How do we rise above it? 83

Credibility building Brand recognition and awareness are of primary importance for all blockchain and cryptocurrency startups today. Projects are new players in a market—seeking to grow and establish themselves. Hence, they cannot draw on a long business ‘tradition’ or a positive legacy. Add the growing wariness surrounding blockchain and crypto into the mix and credibility building rises to the forefront for any new company operating in the blockchain sector. Unfortunately, building brand awareness is often a low priority for many startups and new blockchain ventures as they focus on building new technology. Smart media engagement can be the deciding factor for investors and users when determining which token to invest in, or which company to support.


Finding the right balance between paid and earned media isn’t easy. Earned media brings a hygiene factor to the game : a company can be viewed as more authentic and trustworthy when third-party trusted media write about them. Paid media can be powerful, but it is often expensive (especially for the bootstrapped) and sometimes does damage through ‘inauthenticity’ if it is not handled correctly. For companies running a token sale, it is essential to engage with media pre, during, and post-ICO. Not only will it improve the trustworthiness of the brand, it can positively impact the token sale. The story is n ​ ot just about an ICO or the technology but w ​ hy it is solving a problem. You need to communicate in a practical, problem-focused, way. However, stakeholders and the wider public need to both be aware and agree (or at least acknowledge) that these problems you solve exist in the first place. Without the acceptance that there is an issue, there is ‘no need’ for a solution (and therefore a much harder ‘sell’ to convince them there is a problem they currently don’t perceive)


What is the differentiator? Being able to separate a provider from its competition is another important aspect a startup needs to articulate. In order to succeed in a particular country, the startup needs to understand the local and regional angles. Media will primarily ask

“What is the relevance of the company to me? Why should I write about this company?� Particularly for ICOs, it is key that companies explain their rationale behind offering a cryptocurrency or utility token. Why is it relevant to their business model? Given the dozens of ICOs launching or announcing on an almost daily basis worldwide, it is imperative that companies highlight their unique and distinct difference to other token providers.


Timing and planning are key for success Ideally companies should prepare a complete communications plan aligned with their business plan, including both media outreach and raising both consumer and investor awareness. In the end, public relations is there to sell the solution. Having a good strategy to educate the audience about the product and its credibility is crucial. It is only by taking a long term and steady approach, and investing in brand management, that startups will be seen as credible contributors in and to the space.

In the long term, startups need to establish trust as their foundational message in order to build a successful business.


9. Communication for an ICO : 5 things to think about by Christian Clawien

The Hype is over, show me your idea 2005 and 2006, those crazy years in the beginning of a new web era  : Web 2.0. New technologies like AJAX, RSS or Open API were the new kids on the block and everybody was fascinated. Consumers became publishers. Users got control over the web which was not static anymore. Thousands of startups around the globe were funded. Most of them operated no more than 12 months. But some of them changed our lives forever  : Facebook, YouTube or Wikipedia to name a few. You may think what has this to do with the communication and marketing for an ICO? A lot. 89

New technology often follows the following adoption phases of the ‘Gartner Hype cycle’ for emerging technologies  :

• A new technology appears which triggers innovation and gains attraction within tech media and expert circles

• A peak of inflated expectations is reached, everybody is talking about the technology, but real use cases are rare and first go-live projects struggle with bugs and lower user acceptance than expected

• Through disillusionment  : the interest of the media fades away

• Enlightenment  : a better understanding of the realistic possibilities of the technology leads to better use cases

• Acceptance  : the technology gets productive, benefits are broadly accepted, restrictions are realistically evaluated.

In July 2017 blockchain technology was already above the peak of inflated expectations, heading down to the phase of disillusionment. Gartner expects the productivity to plateau in 5-10 years from 2017 onwards. But if we take a look at the volume of ICOs we see on Coin Schedule 371 ICO’s in 2017 and already 773 in September 2018. While the number has doubled, the interest in the media has decreased drastically. Just 20% of the 2018 ICO’s reached their funding targets. 400 ICO’s realized under 50% of their funding target.


In terms of communication this means, codewords like blockchain or ICO don't work anymore to trigger journalists and influencers. Now the attention comes to your business case. Technology is just an underlying principle. The product or the concept is now in the center. Is there a real need for your product or concept? Do people outside of the blockchain community benefit from your idea? The more questions you can answer with “Yes�, the better the chance is that you will attract the right people for amplification with your ideas.


A matter of trust, trust, trust You cannot buy trust. You have to establish it. Many investors from within and outside the community are aware of the fact that more than 50% of ICOs in 2017 were scam, Fantasy or ponzi schemes. Just think about Bitconnect or BananaCoin. Most of the ICO projects used the same Wordpress-Template, had developers who worked in 15 other projects and created their whitepapers with Copy&Paste from other projects. Or the strange PR stunt from a company called Savedroid who wanted to raise awareness for the ICO funding mania and staged an exit-scam. It’s an irony that a technology which was originally created as a reaction to the loss of trust in finance institutions, now loses the trust of the community again. The good thing is   : the market will regulate those problems. We will see if things like KYC or rating services will help to establish trust back again. And please think twice if you use things like Bounty programs, where people get tokens when they spread news about the ICO. Those programs often feel like spam. If your idea is good, it will spread within the right communities. Talk with multipliers in real life, expand your network. Take care of your LinkedIn Profiles, but use more than this and two lines of copy to introduce your team. Use video. Use third party people and past clients for investors to reach out to. Pro Tip  : watch some Kickstarter videos from successful project teams on how they pitched their project ideas.


One great example of earning trust is the long term evolution of McDonalds in Germany. In the 1980’s for many people it was the ‘atypical’ aggressive US fast food giant, bringing unhealthy products, unknown sources of ingredients and tons of waste from plastics packaging. With several measures, open dialogue formats, origin campaigns, frag.mcdonalds.de and recycled packaging it has become more or less a “german” brand where families can go to. It took them years to change their perception, but now more people trust the brand than ever before and even if there are still critics, they have become far less visible. For ICO communications that means you should think about formats, where founders and team members talk to potential investors and multipliers, digital and physical too.

Create awareness beyond the inner circle Sometimes the blockchain and ICO community feels like an extra bubble within the whole tech- and startup ecosystem. Many abstract shortcuts, many complex concepts and people on their own personal mission for a better world. It’s nice to party at conferences in Thailand, it’s nice to talk about Lambos. But it feels awkward for people outside of the bubble. Mechanisms which work for gaining attention within the blockchain community are not the same ones outside of it. Just try to explain to a nurse your ICO idea or a teacher which have nothing to do with it. If they understand it, you may be on the right track. Narrative matters. Don’t use community slang for your communication. Don ́t use words like “Fast, secure, scalable, innovative”. Establish your own tonality. Be creative. Even if funding and MVP comes from inside of the community, always be aware that the next step is still ahead of you  : going public within mass markets.


A great example here is the beer brand Beck ́s. As they decided to offer a mild beer “Beck ́s Gold”, which was meant to consumed more by women than men, they first served it in smaller pubs, clubs and concert halls and it gained a growing reputation from the inner circle and influencers. Later on they brought the sub-brand into stores. This campaign is already 15 years old but it is still the role model for many new brands. For ICO communication it is important to think about how you can grow your inner circle and use it for making your idea or your concept more visible to people both within, around and outside those circles.

Listen! How are people are talking about your project or other similar approaches? What do they discuss? Are there good ideas around to improve your ICO? Use web-alerts, social media listening tools like Radian6, Talkwalker, Crimson Hexagon etc. Many companies like Telcos or even Google use social listening to support their users. Just a couple of days ago I was very surprised when, asking a question about a YouTube Feature on Twitter, the Google Team responded to me instantly on Twitter. For ICO communications it is important to answer every question people discuss in Social Media and to be aware about those dialogues.


Be aware of context and use it Many people tend to go in “tunnel mode” while creating stuff. They sometimes forget the world around them is moving too. If you listen to conversations about your project or even more importantly, the topics around your project, you are able to setup quick communication measures. Many people think that their own timetable is most important. Big companies want to publish new products according to their interests. This leads to less share of voice. If you want to present a new tool for example IOT gardening, it ́s maybe better to promote it in spring or when a gardening fair happens than in late October. Try to align topics and create topics in actual debates and discussions instead of just pushing “product or launch news”. One brand which uses “Context Marketing” brilliantly is the german car rental service “Sixt”. If there are major events which are broadly discussed in social and online media, they jump on this discussion with a poster which spreads digitally. Example  : they showed the leader of the german railway labour association during a strike and named him “Employee of the month” For ICO communication, startups should look for topics, they can use for setting their agenda very quickly.


10. Building Communities  : an Interview with Morris Clay by Julian Leitloff


Julian Leitloff : ​​I would like to talk to you about building communities and brands. Can you tell me more about Amatus and the Revision conference? Morris Clay : ​​Amatus is a company builder based in Berlin which we founded last year. We build new ventures in the field of emerging technologies working with two verticals : One is focused on Fintech, with Capdax, our crypto exchange fund and Prime Block Capital. Global Impact is the second vertical, where we conduct research on social innovation linked to technology. The moment we started researching those hyper complex issues, we quickly realized, we cannot do this alone and we needed a more interdisciplinary angle and specialists from different fields. This was the reason we started the Revision conference as a network of interdisciplinary leaders from technology, science, philosophy and politics, investors and activists to tackle some of the most challenging issues of today. The network gained so much momentum that we decided to start the Revision foundation, because I think we hit a nerve.


Julian : ​​This 'hitting a nerve' how did that materialize? Morris : W ​​ e didn't expect the feedback from the community to be so overwhelming. Finally somebody is building a bridge between non tech activists, policy makers and tech entrepreneurs, who usually stick very much to their own communities. Suddenly a lot of people approached us and brought their network. The community shaped us.


Julian : ​​Why do you think people are so excited about it? Morris  :​​ ​Nowadays there is a lot of dystopian thinking when it comes to technology : 'The robots are going to kill us all'. But there are also people who want to be part of the decision process on how technology is being utilized. And I think this is very powerful in the realm of emerging technologies, since blockchain and artificial intelligence challenge our ethics. People start forming new opinions and these technologies basically very much politicize people. What we also see is many developers who were primarily interested in creating tech, started getting very hooked on reinventing for example the way how money works or start thinking about better democratic systems. People can see the tremendous potential of technology but also its high risk. That is what we tapped into. Julian : ​​How do open source projects gain momentum, how do you build communities? Morris :​​R ​ evision is detached from any commercial project and we are currently in the process of establishing it as a foundation. So the goal of the community is not to promote a certain project but to generally promote a more open and human centric society in a digital age. It's very much cause-driven. Building a community around a product needs strong believers in this product. You need to attract people, which really want to see this product in the world and are willing to contribute to the mission.


Julian : ​​Can you actively create a community, or do you build a product and the people then join the cause? Morris : ​​If you just want to market your product you will have a hard time building a community and understanding what they really want. The first step in building a truly great and resilient community that carries you a long way is to understand that it is not about you or about your product, but about the community and their needs. I strongly believe in the approach of co-creation. Therefore you need to involve as many people as possible in the creation process of your product. Give something back to the community continuously, even if that just means creating a place where they meet and facilitate the discussion around certain topics. Don't insist too much on your product being the only truth and let the community participate, maybe even in the success of your program. Also, it is very hard to start a community from scratch. There are already great communities out there. You need to ask yourself what is the reason you want to start your own community? If it's only because you want to market your brand I think that's not strong enough to build a community.


Julian : ​​How do I seed a community? Morris : ​​Ask yourself who are the people I want to contribute to this project and to whose voices do I want to listen to when building the project. Then look for an existing community, who can provide this for you. If you don't find this community it's a good idea to start with a meetup or with a round table. Just invite five people for dinner or coffee. Talk to them and get their opinion if you actually can be helpful.


Julian : ​​Can you give us some trade secrets on how to grow a community? Morris : O ​​ k, I’ll share two with you : First one, be the moderator. It is important to constantly be in touch with the community and always create a place where the community can meet. Don’t always be at the front and center, but help to facilitate a space where people can exchange ideas. Foster an ongoing dialogue between the members of the community. It is important to let the community adapt itself. My second advice is to make people speakers. Give your community members exposure. So if you want to control a community and tell them what to it quickly become so aesthetic and aesthetic constructs tend to get cracks and ripples. And if you want to create a strong community then listen to what they have to say maybe create a format for it and be open to adapting your mission. Julian : ​​You had strong feedback on the Revision manifesto. Can you share with us what it is that catches on with people? Morris : ​​So I think first of all the Revision manifesto is still something which we consider subject to change. And we rely a lot on the thought leaders in our communities to help us shape it. This is how the Revision manifesto was drafted in the first place, by talking to people. So instead of going into a discussion with a preformed opinion, I think it's very important to listen first what others have to say concerning your topic. They will help you to shape a lot of the mission. Also you and I both had talks about the manifesto and it also helped to shape the very core of what the vision is about. And so had over 100 members.


Julian : ​​And so it's basically a joint effort? Morris : ​​It's definitely a joint effort. And then you also create a narrative out of this joint effort with which the community can identify. And I think a common narrative is key for any community. Julian : ​​How do you build a team that can handle that? Morris :​​​I think diversity and interdisciplinarity is key. We profit a lot from having super diverse people in our team. They are able to again draw great communities themselves. So I think what makes a community resilient is the possibility to have pluralism and still have a healthy discussion. So we aim at having diverse backgrounds, diverse personal stories and diverse perspectives on projects, topics, issues and life. I think it's relatively chic to say we want a diverse culture, but for us it is more than that, it is a winning culture in the business sense. This diversity is positive at first but it is really overwhelming when the input and output of these diverse communities hit, which never happens in a homogeneous environment. For example, you suddenly have access to communities you didn't know about, which can enrich your thinking to the maximum. For the conference it is of course also great because you get better content and great discussions. Blockchain is about adoption and in our space that means being able to connect with others : A brilliant homogenous team will fail, where a great diverse team succeeds.


Julian :​​ How do you build such a company culture that allows you to deeply connect with several different communities worldwide and solve problems that need input from multiple disciplines? Morris : ​​The first step is to acknowledge the bias we have when hiring people. It takes direct effort to correct this bias. Once you've created diversity through hiring in your team, you've deliberately created a field of tension, so different worldviews, different life stories, different backgrounds. It creates a very healthy kind of tension. It demands to manage this tension and forces you to continuously work on the question of what kind of organization you are. At Amatus – and this is a very clear recommendation – we have a designated role to ensure smooth cooperation between the teams. We call this role ‘agile coach’. The person initiates governance meetings where the team decides how they work together and how they deal with conflicts in the team. It is certainly not a culture of conflict you want to create through diversity, but a culture of debate and continuous improvement of the corporate culture but also of the individual.


Nele Wollert

Fabian Fäßler

Token Launch

11. Lukso Spotlight : an Interview with Marjorie Hernandez & Fabian Vogelsteller by Julian Leitloff

Julian : Marjorie, together with Fabian you started Lukso to bring traceability to the world of luxury. How does Lukso work? Marjorie : LUKSO is the Blockchain protocol specifically designed for the Fashion, Design and Lifestyle Industry. LUKSO does not only bring traceability to the industry, but also focuses in transparency, visibility, provenance, but most importantly is about access, access to the owner of your product, facilitating an unprecedented opportunity to truly engage with your customer. LUKSO builds a decentralized innovation and trust platform for brands, start-ups, and customers, to interact, collaborate and produce, providing the foundation for new forms of automated economic interactions, ownership management, and brand-consumer engagement. We consider ourselves a Tech company, with a strong focus on blockchain and our business is fashion and lifestyle. 109

Julian : The world of fashion is not well known for its ‘techaffinity’. How are you planning to get brands to work with you? Marjorie : Indeed, fashion houses are not known for having great techaffinity, but this mentality and believe within the industry is changing rapidly. There is a broad awareness that technology is relevant for every industry, and fashion is not the exception; I believe, in the future, all companies will be tech-companies, the difference will be “where” they do their business. At this moment, many of the issues the industry is facing can, at least partially, if not entirely, be solved by implementing the right technology and the right incentive mechanisms. We believe in collaboration, and the The industry needs to work together towards solutions, and if they don’t we won’t have the economies of scale; collaboration is absolutely vital.


Julian : What is your game plan to get new industry partners on board? Marjorie : We believe what LUKSO is doing is hugely relevant for the industry, so more than a game plan to “get partners,” our focus is to create awareness within industry leaders of what LUKSO is working on. Our focus is not only to address the world’s top leading brands, but also fashion-tech startups and upcoming designers. We want to facilitate and support cross-pollination between industry leaders, thought leaders, and technologist. LUKSO is not about creating one product or solution; it’s about creating a fashion-tech ecosystem, in which ours and other solutions can run, allowing for the next wave of innovation and collaboration to occur.


Julian : Fabian, most ICOs have barely launched their mainnet and have seen very limited real-world adoption. What is the reason for that? Are blockchain projects doing things wrong to attract partners to come onboard? Fabian : Things take time. Most of ICO projects people are waiting for today got funding not even a year ago. Especially Blockchain tech takes time even if it is probably the fastest evolving space today. We are still in the early days. There needs a lot of base tech and tools to be developed over the next years so that the full picture of most projects can unfold. But if they do, some of those projects will bring huge changes in the way we interact. Additionally there needs to be a balance of traction vs. scalability. See Ethereum. It got so attractive that Blocks are today maximally filled. The tech needs to catch up with the demand. The entry barrier most Blockchain projects have are actually a natural way to keep the influx of non technical users at bay so that infrastructure, tools and applications can be build that work for a mass market.


We have seen a revolution in crowdfunding. ICOs are the fastest and most automated way to collect money and distribute ownership. We have seen new forms of value, from cryptocurrency - the people's money to collectibles that represent a part of history in this new tech epoch. Decentralized prediction markets get increasing traction and new form of games that have no central server create real user to user economies. There are marketplaces, digital and real world property and decentralized governance tools. The possibilities are endless and the EVM (Ethereum Virtual Machine) started the second wave of innovation in Blockchain through “smart contracts�, little programs that live on the Blockchain and can interact with one another.


Julian : You have been an avid supporter of a better ICO framework as a self-regulation effort of the industry. What are your ideas? Fabian : While regulation helps define good rules that make human transactions fair or safe, the systems we use to enforce such regulations is in today's world mostly based on paper documents and enforced by courts. With Blockchain we have for the first time a system on which such interactions can take place while being constructed in a way that neither party of a process is able or incentivized to trick or cheat a system. The ICOs of 2017 could be seen as a test run for automated crowdfunding with automated ownership distribution. We figured that it is possible and works well. Now the community is focusing on a more fair version of ICOs, as we have seen that bad actors came into the scene and try to trick investors with good looking websites and white papers but no willingness to execute. To make such scams less likely we can improve the way how money is raised. For this I proposed the RICO, or “Reversible ICO”. It works rather simple : Instead of giving money to a project over a period of 10-20 days, as previous ICOs have done, we release committed funds slowly over time to the project and letting every investor in control of his funds. This is possible as smart contracts are able to control and release funds to either side based on predefined rules, while being 100% independent. It's a new form of actor, the “digital agent”.


A RICO for example can allow people to commit funds to a project and let those funds dripple to the project over a period of let's say 2 years. Should any investor deem the project to be a scam, or simply don’t believe in it anymore, he can stop his commitment and retrieve his funds which have not yet be allocated to the project. The project itself has no ability to prevent this, which makes the process so trustable. We at LUKSO are keen to use this process for our own ICO in 2019 to set an example and create trust by making our ICO fair by design.

Julian : As the father of the ERC-20 standard, you have observed many ICOs – now you are doing your own. What is the best practice to rally support and have a successful token launch? Fabian : The most important aspect is to have a project, which ​requires​a token in the first place. The second is that it creates an ecosystem which can grow value for​ everybody​, because of its distributed nature. We have the ability in the Blockchain space to give birth to ecosystems that sustain itself purely by the interest of all participants. A good ICO project is able to survive its creator, it should be able to exists whether or not the founding entity is still there or not. If you have those ingredients and a good idea to provide something useful you have a good chance to succeed with your project.


12. Ocean Protocol & Fractal : an Interview with Bruce Pon by Nele Wollert


Nele Wollert​​  : Before we really get to how you did your token launch - give us the quick run through of what the Ocean Protocol is? Bruce Pon​​  : Yes, Ocean Protocol is a data exchange protocol for unlocking data for AI. Nele : A ​ t what point did you realize that a token launch is what you wanted to do? Bruce : A ​ token made sense because the means of value exchange is global. In a global environment, a token allows you to get services that originate from anywhere on earth without worrying about conversion loss. The token in the ocean network allows you to buy services from China, U.S. or Africa with no loss and zero friction in currency.


Nele : A token launch is a big project. How long before the private sale had you actually started planning for it? Bruce :​ ​We made the commitment more than half a year before the actual token launch. We wanted to make sure that we had the technology concept right. Organisational setup was done by November 2017. Nele : Compliance was a crucial factor for you. Why did you want Fractal to handle this for you rather than doing it yourself? Bruce : There are many reasons why we chose Fractal. Our team is based in Singapore and Berlin, but we knew that the more onerous regulatory climate would be in Europe. There were a few suppliers in Switzerland, but almost nothing in continental Europe. The fact that Fractal was based in Berlin was fantastic because we could be assured of very quick iterations on short notice. It meant we could offload the compliance research, KYC & AML checklist and verification to Fractal, saving us time, money and focus. I’ve known Fractal’s founder Julian Leitloff for four years so there was already trust. I was explaining to him our challenges in regards to KYC and regulatory compliance and learned he was building Fractal exactly to solve these problems. We also knew that their tech team had built secure applications before, brought UX knowledge and were very conscious of security risks and attack vectors around the fundraising event. That helped us sleep much better at night. It was also extremely helpful that Fractal has their own in-house counsel, because when you’re handling regulations from multiple countries in terms of payments, data and personally identifiable information it’s crucial you have access to the right expertise.


Nele : Speaking of data handling - When you launched GDPR was not enforced yet but I remember that you brought this up quite early. Bruce​​  : We knew GDPR was coming. This was one of the key factors why we chose Fractal because the data would be stored in Europe, and there is a higher sensitivity in the handling of people's data. We valued Fractal’s early focus on GDPR compliance.


Nele : How did your team and Fractal work together to get this project off the ground? Bruce : We needed to look into the KYC and compliance regulations in Asia, Europe and North America. We talked with a lot of people, including our advisers in our network, our Singapore counsel, and in Germany working side by side with Fractal. We collaborated with Fractal in understanding the developments from the regulatory agencies, both from the Monetary Authority of Singapore, as well as the SEC, CFTC, BaFin and the many other regulatory bodies. We distributed the information amongst our teams in Singapore and in Berlin, and with Fractal’s input and guidance; we crafted something that would stand the test of regulatory inquiries. It was extremely helpful that Fractal had the expertise and a strong background in the banking sector so that we could craft a high quality approach.


Nele : How much did it help that you kind of knew what you were getting into from your experience in the banking sector when you kicked off the project? Bruce : Setting up a bank is not easy and typically takes about two years. This project was aiming to run for six to nine months - a pretty ambitious program. It took its toll on the team, but it was also something that we knew that we wanted to get done. The space moves very quickly. It forces you to act fast because time is of the essence. I think that a lot of people forget that after the Token Launch you’re not finished. Once the money is in you still have to deliver your product, hit your milestones and keep pushing onwards. We now have an exceptional team spread around the world. It’s them and partners like Fractal that give us the capability to fulfill our promises to the community and that's the most important thing.

Ocean Protocol Facts Founded in  : 2017 Based in  : Singapore Industry  : Data, AI Participants  : data providers, data consumers, data marketplaces, service providers and network keepers Amount raised  : Seed (Nov 2017) : EUR 4mio, Pre-Launch (March 22018) : EUR 18mio



13. Smart Contract : Design and Security by Fabian Fäßler

At the heart of each Token or ICO is a smart contract written in a programming language such as Solidity. These smart contracts are just computer programs but very different from regular software. While they can be deployed publicly and everybody can interact with them, smart contracts cannot be altered once deployed. This creates unique development and security challenges. Thankfully the Ethereum environment has matured and projects like the OpenZeppelin solidity contracts make it easier to deploy a safe, simple ERC20 token. These contracts are well audited and widely used. However, simply copying and renaming a simple token contract is often not enough and we want to offer more interesting functionalities. The problem is, once additional features are implemented (by extending or modifying the base contract), functional bugs or actual security issues can potentially be introduced. So how do we ensure with confidence the security of the Smart Contract? 125

Specification and Documentation As security auditors of smart contracts we’re often surprised by the lack of specifications for the smart contracts’ intended functionalities. If you come from a regular software development background it’s quite understandable that these documents might not exist. Maintaining or even just creating these documents is a laborious effort due to the massive amounts of code that are being produced. But smart contracts are very different and the final product often has only a few hundred lines of code. In many ways developing smart contracts is closer to regular physical product engineering than software development. It’s possibly the only software where an archaic project paradigm like the waterfall model. Makes sense. Creating detailed specifications can help focus on security earlier in the process, and avoid a potential security audit later. What a smart contract specification should include  :


• Roles  : Is there a privileged owner? Can everybody or only KYC’d users use certain functions?

• Assets  : Are there tokens or Ethereum that can be stolen?

• Functionality  : Minting tokens? Transfer ether? Time-locked funds?

• Access control  : Can only the owner withdraw ether? Can everybody participate in the ICO or only KYC’d addresses?

• Threats  : What are the threats? Could a trusted role, like the owner, become malicious?

Different Types of Issues There are an array of issues that can appear in smart contracts but usually fall into two major categories  : Design Flaws and Implementation Flaws. Implementation Flaws are what we typically think of as technical security issues. They can occur through genuine mistakes by the developer or because the technical environment was not fully understood. Today — thankfully — solidity and the wider ethereum virtual machine environment is fairly well researched and understood. It’s easy to learn about typical programming pitfalls as these resources are easily available and well curated. Design Flaws on the other hand are harder to spot, as they heavily depend on context. For example, if an ICO advertises a maximum amount of tokens, but the smart contract implements a function that allows them to mint more, then for an investor this is a massive issue. Smart contracts are supposed to be different from regular software by not having to trust a central entity and letting the implemented functionality ‘speak for itself’. So while such an issue might not directly affect the security of a smart contract in the general sense, they can result in huge trust issues. In a worst case example they could intentionally be abused and exploited by one party — and this party could potentially be the owner of the smart contract.


External Audits Not every smart contract has to be audited by an external party. Especially if very well audited code is used without modification. Every human makes mistakes, and after auditing hundreds of software projects it goes without saying that developers are only human. Luckily there are two major variables we can control in order to lower the probability of it happening. The first variable is the amount of eyes looking on the code. Even as a security auditor we sometimes spot flaws that a colleague, who is extremely skilled and experienced, has missed. So creating an environment where each line of code is discussed, analysed for side effects and compared to the well documented lists of common issues, the likelihood of serious issues can be massively reduced during the development phase. The second variable affecting the probability of issues is the complexity and size of the code. Simple smart contracts can be meticulously reviewed, but the larger they are, the more complex it becomes. Both these variables do not necessarily require an external security consultant, and can be handled internally with enough development resources. However, additional professional security teams could offer valuable experience and will carry ‘less bias’ than an internal team.


Thinking about security for smart contracts should happen at the beginning—before the first line of code is written in the form of a specification document. This is the common software industry practice of dealing with security after the first breach. In the blockchain environment, it needs to be done at the start to best ensure a breach never happens, as breaches in Blockchain — and especially ICOs — are usually catastrophic.


14. Free Workshop : Plan your Token Launch Launching a protocol is no easy feat. To pull it off successfully, you need more than just a great idea and solid tech - you’ll need to able to juggle many complex topics all at the same time while finding the right people to ask the right questions and select reliable partners to support you through the thick of it. From our experience, a hands-on workshop resulting in a clear project plan with concrete deliverables and timelines, is an invaluable tool for staying in control of the process at all times, identifying where external assistance is needed and where to get it from.


To you, the readers of this magazine, we’re offering a workshop​for free.

We will discuss : • The business case for your protocol, use cases, target groups • Your token economy • Legal considerations, tax implications, regulatory frameworks • Narratives for PR, marketing plan and roadshow schedule • Realistic timelines and deliverables • External partners and how to find them With the framework for your token launch in place, you can reach out to partners and service providers, communicate your strategy and stretch goals clearly, and start executing your vision. Email us at i​ nfo@frctls.com​with the code “Around the Block” and let’s schedule your workshop!


Elizaveta Shcherbakova

Kerstin Eichmann

Florian Uhl

Christian Gorgas

Kevin Lim

Stephan Mayer Ehrling


15 & 16. Investment

“Coparion​​is looking for blockchain businesses that have stretched goals and a team that can reach them nonetheless. Relevant experience in the field, the ability to hire a great team and sound knowledge of every business relevant aspect are crucial for success. We seek for teams that outlined a detailed market approach and have the ability to sell a MVP to a demanding customer.The product should be able to solve a currently urgent problem while the focus remains on staying ahead of the competition. 134

When it comes to ICOs, we favor businesses that are either network-based and require an ICO as a way to distribute their token among the community or those that use an ETO. As for any serious or regulated investor, a clean regulatory ICO setup is essential. With quick money comes great responsibility, hence the ICO setup should incentivize the team to stay efficient, focused and accountable. A great way to achieve this can be a combination of an ICO and traditional equity funding. The former providing outside support in terms of additional resources and user involvement and the letter providing inside support through strategic advice and a push for the very best a team can do.” Elizaveta Shcherbakova​​, Coparion 135

“At the ​innogy Innovation Hub​​we are a thesisdriven corporate venture fund. We believe that disruptive technologies, new services and business models will ignite convergence and create a new energy system of the future : The future client of the energy sector will be a smart, autonomous machine that is able to engage with other machines such as buildings and buy, generate, aggregate and trade energy autonomously. Thus, we invest in the new internet (Web 3) – one that is more decentralized, driven by autonomous systems and focused on machine-to-machine interactions, with new trustless protocols, distributed ledger technology and tokenized digital and physical assets.


As a strategic Fund with an exclusive network (offices in Berlin Silicon Valley, London, Tel-Aviv and Warsaw) and a complimentary portfolio approach, we work a lot with the teams to increase adoption and help them grow in all fronts. As such, we target early-stage startups and usually invest anywhere between 250k-500k both in equity and tokens.”

Kerstin Eichmann​​, Managing Director, Blockchain Investment Chapter, innogy Innovation Hub Berlin 137

17. Investor List

Right now it is very difficult for many blockchain and ICO companies to find a bank to open a business account with. This is largely due to the fact that the bank needs to be sure those companies comply with a great many global and region specific regulatory and compliance laws. 139



Volta Ventures

FBG Capital



Innogy Innovation Hub


Cavalry Ventures

Cambridge (USA)


General Catalyst

Atlantic Labs

Capetown & San Francisco

Berlin Innovation Ventures Saket Kumar LongHash Germany GmbH HV Holtzbrinck Ventures

Cayman Islands Youbi Capital


Earlybird Venture Capital

CME Ventures (CME Group)

Catagonia Capital

Tally Capital

Point Nine Capital


La Famiglia








Node Capital INBlockchain IDG Capital Ceyuan Ventures


Newtown Partners

Iconiq Lab FinLab

Hong Kong Kenetic Capital

Kyber Capital

Hummingbird Ventures

Argonautic Ventures

Libertas Capital

Origin X Capital


Hash Capital

Mosaic Ventures


Coinsilium Group



Limitless Crypto Investments

Digital Currency Group


Winklevoss Capital

Venturra Capital

Galaxy Digital Investment Partners

LA Wavemaker Genesis

BlockTower Capital


Digital Currency Group

London & San Francisco

Colle Capital Partners

Index Ventures

Bain Capital Ventures



Coinsilium Group Draper Esprit Semantic Ventures Beast Ventures Salesforce Ventures Seed Camp Outlier Ventures

Innovating Capital ConsenSys Ventures FJ Labs RRE Ventures Union Square Ventures Liberty City Ventures Future Perfect Ventures (FPV)



500 Startups



Korelya Capital


CapHorn Invest


AXA Venture Partners Kima Ventures

Perth Kosmos Capital

JRR Crypto Capital

Silicon Valley PNP Ventures

San Diego

Benchmark Ventures

HINGE Capital


Kindred Ventures


San Francisco

Breyer Capital

Polychain Capital

Ribbit Capital

Cathay Innovation

DHVC (Danhua Capital)

Base Ventures

Andreessen Horowitz

Ascolta Ventures

Pantera Capital

Ausum Ventures

Y Combinator

Blockchain Capital

Data Collective - DCVC

Hard Yaka

Lightspeed Venture Partners

Craft Ventures

Khosla Ventures

Valor Equity Partners

Kleiner Perkins Caufield & Byers

8 Decimal Capital


Fenbushi Capital

Boost VC Draper Associates AME Cloud Ventures Sequoia Capital YCombinator Google Ventures (GV)

Singapore NEO Global Capital Hyperchain Capital

Tokyo Sozo Ventures Infinity Ventures

Zurich Lakestar

Many investors listed have satellite offices and are investing in companies globally.


18. Opening a Bank Account for ICOs by Florian Uhl

Right now it is very difficult for many blockchain and ICO companies to find a bank to open a business account with. This is largely due to the fact that the bank needs to be sure those companies comply with a great many global and region specific regulatory and compliance laws. 145

In order to provide accounts for a company launching an ICO, a bank often considers the following aspects to be of great importance :

• A business model that the bank can understand - which can be difficult when dealing with emerging technologies and new business models.

• Payment flows that are plausible in relation to that business model.

• A company structure that is transparent for the bank, and that the so-called beneficial owners can be determined with certainty.

• The ICO can be explained in an understandable way with regard to sales phases, revenues (Crypto & Fiat), blockchain and token type.

• Every token purchaser is demonstrably identified in the KYC procedure and the ICO does not accept any unidentifiable funds.

This means, for example :


• All token buyers must be checked against sanction lists.

• Token buyers are only accepted from countries in which the ICO–as far as can be determined with reasonable effort–is legal. Country-specific particularities must be taken into account.

• The regulatory licensing obligation of the token issuance and the business model are met. Ideally, the financial authority in the country in which the company is domiciled has been consulted.

Further, given the innovative character of ICOs, a bank can be expected to raise regulatory issues and require proof that the above aspects continue to be satisfactorily met after the account has been opened. A bank will expect efficient and uncomplicated cooperation for the whole duration that the account is open. Caveat :​​Due to the highly dynamic nature of regulatory requirements, banks are continuously developing and changing their rules, terms and business practices. This is the current status as of 24.10.2018. Disclaimer​ : Even if the following information offers orientation, it is not to be understood as legal advice. In every case the bank will conduct a case-by-case examination.


19. Treasury Management by Kevin Lim

Most token projects raise large sums of money denominated in cryptocurrency (usually ETH) during their ICO phases, but rarely liquidate the entire sum. They typically convert portions of it to fiat to fund short to medium term operational expenses. While this exposure to crypto can result in an increase in the project’s treasury should the price of ETH rise, the opposite — that their treasuries may be devastated in the event of a drastic drop in prices — is also true. 149

There are a number of ways for projects to responsibly manage the risks inherent in holding large sums of cryptocurrency, such that they can preserve the possibility for gains while limiting their losses. These are typically done through crypto derivatives or structured into a product by specialised firms offering these crypto financial services. The simplest way of hedging out some of the risk in your crypto treasury would be to diversify from only ETH into a small basket of the most liquid coins. If work on the Ethereum network were to stop tomorrow, prices could collapse to nothing, but you would be semi-protected from that through the process of diversification. At the next level, you could set stop-loss orders at a range of key levels so you systematically reduce your exposure as the market moves down. However, sometimes the market quickly rebounds after breaching your stop-loss price, and you might end up selling at a low. In addition, market movements in crypto are sometimes so sharp and fast that, including slippage, you end up with a much lower price than you expected.


More complex means of hedging exist in the form of buying “put options”. These guarantee a minimum price for which you can sell your ETH — called a “strike price” — upon the expiry of the option. The downside here is that put options can be very expensive, especially in a bear market. Buying a put option, while simultaneously selling a call option (selling someone else the right to buy your ETH at a fixed higher price in the future), can offset the cost of hedging. This is called a “collar” strategy, and it limits both the downside and upside at low to zero cost. The examples shared above showcase only a small sample of the wide variety of strategies out there, but should serve to give an idea as to the diverse range of possibilities available to help you manage your crypto treasury. In addition to de-risking, strategies which seek to grow the treasury, such as covered calls, lending, and futures-based collateralisation exist as well. Ultimately, be aware that every project’s timelines, needs, and objectives are different, and there is no ‘one-size-fits-all’ solution.


20. The World of Token Listings by Christian Gorgas

Enter the token listing stage. After or potentially already during a successful ICO, listing your token is the critical next step and one that many projects get hung up on. Initial questions include HOW to list, WHERE and correspondingly WHY to list and also on how many exchanges to list on. 153

Listing your token is not only important because it creates liquidity and forms the financial backbone of your project. It is also an obligation you have towards your early investors as well as an opportunity to access new investors. For investors eager to flip their tokens and move onto the next hot ICO a major exchange listing is the most important post ICO event. The sooner this comes, the better for them. The main reason many projects struggle with listing their token is because it is not their immediate priority. They are often still trying to figure out what to do with all the funds they collected from their ICO. However, this is a mistake because listing your token is crucial to the survival of your blockchain project.

Why should tokens be interested in listing? Listing on reputable exchanges can make the difference between success and failure of a project - regardless of how good your product may be on its own. Many projects hold on to a substantial amount of tokens (often tens of millions) and preserving the value of these tokens is integral to maintaining a substantial level of funds for a project. Some projects require their token value to remain relatively stable if token holders are to use it within the project for specific actions (utility tokens).


Listing on one of the major exchanges directly translates to liquidity and more potential buyers for token. This rings especially true for projects that trade on exchanges which support fiat currency, making it very easy for amateur traders to access the token. When Bitcoin Cash (BCH) listed on Coinbase its value nearly doubled with 24 hours of listing. Investors who initially missed out and where eager to join the party were provided an“easy access� via Coinbase. Additionally, the trading volume for Bitcoin Cash multiplied by 10x in that period. But beware, listing your token on small/ not reputable exchanges with low liquidity and no other enticing factors will almost certainly lead to a dissatisfied and frustrated community. A token’s reputation will be influenced by the exchange it is listed on. Simultaneously an exchanges reputation will be affected by which tokens it decides to list. While this is not the only metric, it is however commonly selected by traders. Certain exchanges have reputations for listing scam tokens, or simply bad reputations due to being bad exchanges. Listing your token on such exchanges leaves investors with a very sour taste in their mouths and they will let you know. Hence, being listed on several trusted exchanges is a good sign to the world that your project is on the right track.


How can tokens get listed? In theory listing your token is very simple. Firstly, you need to get in touch with the exchange. Most use google forms through which you can apply for a listing. The exchange will use the information to review the project and perform a due diligence. Once the exchange decides that your project is a good match the listing process starts. This typically takes around 21 days. Let’s talk about listing fees. While several exchanges have started popping up, offering free listing, they typically struggle with a reputation for being technically subpar and generally unreliable. At the same time established players take advantage of this situation. Binance and other top exchanges have been accused of questionable practices reagrding their listing procedures. Many blockchain startups have voiced unreasonable listing fees and favoritism. Christopher Franko (co-founder of Expanse) claimed that Binance requested 400 BTC (worth $2.6 million at the time) in August 2017 to list the Expanse coin. In October there was widely retweeted tweet-storm from Digibyte founder Jared Tate alleging Binance attempted to extort fees from Digibyte despite the decentralized payment network and digital currency winning a Twitter poll for a DGB listing and having the listing “promised” by Binance.


What can companies do to get their tokens listed? While it may seem that exchanges are holding all cards in their hands, this is certainly not the case. Strong projects with large communities guarantee exchanges volume, which is attractive for any exchange. As a rule of thumb it can be said that the better your project is, the easier it will be to get listed. Exchanges are looking for hyped, popular tokens that will bring positive attention to their platform. By the same token (no pun intended), projects seek the reputation boost and certainly the liquidity reputable listing brings. Finally, a transparent white paper and website is crucial for exchanges to be able to know if they can and want to work with a project. Being upfront about your information is crucial because serious exchanges want to see if projects are trustworthy. This also goes for your communication and your team. Exchanges want to know who is behind a project.


21. Four tax considerations to heed before launching an ICO by Stefan Mayer Ehrling

Initial coin offerings (ICOs) are unquestionably the hottest trend in corporate fundraising, with companies having raised over US$3 billion in 2017. Cautionary remarks to investors are being made by officials in many countries, in addition to warnings made by cryptocurrency executives. Navigating the ‘ICO trend’ is complex for many reasons, not least because most jurisdictions have not yet finalized (or even begun) to regulate and tax token issuers or investors. Individual’s or companies with great business ideas may rush into an ICO without knowing the right questions to ask, especially concerning tax. Careful consideration on tax issues should be done to mitigate the risk of tax errors; or otherwise, it may render at best the venture uneconomical, or at worst illegal. 159

1. Don’t make a bad choice for the country of ICO issuance Despite the common misconception, it is inaccurate to say that some jurisdictions “don’t tax” ICOs. However, the goal of an ICO to achieve a zero or very low tax rate at issuance, during subsequent trading and operations, is not a fantasy. In reality, while most countries have not written clear regulations around ICOs, many have made official statements that provide clues to what those regulations coming down the pipeline may be. This fluid situation can create opportunities for carefully planned ICOs. The objective is to have a proper structure for fundraising that reduces corporate and indirect tax leakage, and the choice of jurisdiction/ domicile for the ICO-issuing entity is all-important. It should be an appropriate domicile for regulatory purposes as well as being tax efficient. Germany is one such example of a jurisdiction with no specific ICO tax rules and as a result, general tax principles and code law provide guidance. Although most of the ICOs are for the purposes of fundraising, different from a conventional IPOs which confer equity interest to the subscribers of the shares, ICOs may give rise to different rights and obligations to the investors.


Examples of questions to consider when determining how tax authorities will decide how to treat an ICO

• What are the motives/intentions of the taxpayer?

• How will the ICO proceeds be used?

• What are the rights and obligations of the parties?

• What is the location of the people performing relevant activities?

• What is the accounting treatment of the ICO proceeds?

Normally, documentation such as a whitepaper, token sales memorandum and other legal agreements are a starting point in determining the answers to these questions and – if applicable - for tax rulings, but ultimately a court or tax authority will make the tax decision with the benefit of hindsight.


2.  Don’t rush through your corporate structure and transfer pricing planning As important as choosing the domicile is deciding the corporate structure, particularly where there are different entities within the corporate group that undertake different activities such as token issuance, platform development, sales/marketing, support functions, etc. The objective is to reduce tax leakage on dividends and capital gain from future divestment, and to mitigate the risk of creating a taxable presence in countries when certain development and other ancillary activities may take place.


Factors to consider  :

• The tax residency and citizenship of the founders/ shareholders

• The location of business substance of the overall enterprise

• The contractual model of engaging service providers

• The post-ICO value-creating activities performed by the respective entities · The relationship between related parties

3. Don’t underestimate the complex, critical nature of taxes on intellectual property The most common purpose of an ICO is platform development, and more often than not, intellectual property (IP) is created. In those cases, the objective is to maximize the use of available tax incentives for research and development (R&D), and assuming the IP ownership is retained, to minimize tax leakage on profits from its future use. Relevant considerations when determining a tax-efficient IP structure  :

• The type and nature of IP being developed

• The location where the IP’s development, enhancement, maintenance, protection and exploitation (​DEMPE​​) takes place, as well as the location of the entity controlling the DEMPE functions · The legal ownership of the IP and any contractual rights to it

• R&D incentives/IP tax regimes

• Treatment of royalties, including withholding tax and availability of tax treaty benefits


4. Try to look far enough ahead to make judgments about “routine” tax requirements ICOs often result in the distribution to investors of another crypto-currency. ICO planners need to consider how the subsequent fair value movement of such crypto-currency might be taxed.

Questions to answer  :

• Will expenses incurred on the development activities be tax deductible?

• How will related parties’ transactions be arranged, priced and documented?

• Will future development activities, if undertaken in different jurisdictions, create taxable presence/permanent establishment?

•W  ill the company’s activities trigger any indirect tax obligations such as goods and services tax or value-added tax?

• What will be the tax filing/compliance requirements for any entities within the corporate group?


All these ongoing taxation requirements will affect not only the administrative obligations to the taxpayer, but also the tax costs of doing business. Because ICOs are new and as yet mostly unregulated fundraising vehicles, the tax considerations for them are actually more complex and require advisors with deep insights into the tax administrations of not only the founders’ country and the country of ICO issuance, but also the many other countries where the founders or investors may have a residence or presence.


Fractal’s Payment Processing Service Fractal’s payment processing services to our clients and partners is fully international, currently supports Eth, BTC and LSK (additional token types supported by request) and we offer the best in class security, compliance and client support. 167

Our ethereum smart contracts and bespoke contract developments support a complete range of transactional services including token distribution, contributions and refunds. Smart contract fundraising with Fractal is straightforward: All investors and donors receive a single address to donate to. We monitor this address from start to end and can quickly transfer the funds at the end of fundraising. For non-ethereum token fundraising we employ a pooling procedure. We issue every investor a unique donation address, all of them owned by the client and monitored by Fractal. When the token sale is complete, our automated script pulls the funds from all these unique addresses quickly and smoothly into a single pool. Fractal’s payment infrastructure is designed to autoscale to demand, whether there be a thousand or a million donors. 168

All financial processes are audited three times: Once, internally through Fractal and (for smart contracts) twice, externally through our trusted partner Cure 53 and finally, by the selected Bank. In addition to our auditing processes Fractal runs an automated financial reconciliation process that ensures our financial and payment database mirrors what is recorded on the blockchain. We run regular ‘penetration testing’ of our systems by security specialists to ensure our services and data are and remain secure. We take pride in the fact that we are fully GDPR compliant in our data handling and protection. This ensures smooth payment processing in EU financial jurisdictions in conjunction with our preferred banking partners. 169

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Around the Block Magazine  

Around the block is a community effort lead by Fractal Launchpad GmbH to gather knowledge about the Blockchain Ecosystem around the world....

Around the Block Magazine  

Around the block is a community effort lead by Fractal Launchpad GmbH to gather knowledge about the Blockchain Ecosystem around the world....


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