value and opportunity

I’ll promise my readers that this will not turn into an Crypto/ICO blog, but I also must confess that I am absolutely fascinated by what is happening right now with Bitcoin & Co. After briefly looking at the “Nagacoin Doublepump” a few weeks ago I can not withstand to look at the second German based ICO called Wysker / Wys (the coin).

What is Wys / Wysker

As any good ICO these days they have a 19 page whitepaper which looks quite modest compared to the Naga pamphlet.

In short, Wysker aims to be the “Tinder for shopping” (funnily enough, Naga wanted to be the “tinder for stocks”). In order to make this thing more sexy, there is also a block chain aspect and, of course machine learning involved.

How it is supposed to work:

When an advertiser creates a new campaign, they specify who they would
like to reach and how many wys Tokens they are willing to spend to get their
products in front of wysker users matching their criteria. The wys Tokens are
subsequently transferred from the advertiser’s wallet to a smart contract running
on the Ethereum blockchain. Once the campaign fund is established, wysker users
can claim a share of the wys Token reward by completing two steps. During the
first step, participating users need to prove their ownership of eligible data by
means of their cryptographic key. This causes the contract to issue a “lease” that
gives advertisers temporary access to the user’s data and the right to present the
user with product recommendations. Once the user has viewed the product recommendations, they are issued a confirmation code. This code is then submitted
to the smart contract in the second and final step, causing the release of the wys
Token reward. In this setup, the smart contract operates both as an escrow service
and rights management. Once the campaign is over, any unspent funds are
returned to the advertiser and access to all user data is revoked.
All of this happens largely behind the scenes and neither the user nor the
advertiser need to know about the inner-workings of the wysker Platform or the
Ethereum blockchain to use the platform. Stakeholders benefit from the absolute
transparency of a decentralized system and the assurance that their respective
interests are enforced by an incorruptible smart contract that knows no bias.

So the idea behind this is that somehow the user controls his data (via the blockchain) and gets money ähhh Wys if he shares his data with retailers. Which then transfers into discounts with some partner retailer. In short, a shopping app with discounts.

I am not sure if and how successful this could be, but I guess there is quite a lot of shopping apps out there already (Edit: Already in 2014 there seem to have been lots of “tinder for shopping” apps already, so the concept is quite old).

However there is one important thing: Conceptually, inmy opinion there is no need for this business to issue its own token, other than it is easy money for the founders. 

How much do they want to raise:

In total, the wys token will have 3 bn tokens but only 1,75 bn are planned for the sale. The currently sell the wys at 1 ETH = 18’123 WYS. With Ethereum at ~575 EUR at the time of writing,  and a total volume of 3 bn wys, this translates into a total “market cap” of 95 mn EUR. Which is significantly less than the Naga group ICO, but that can change as we will see below.

Some obvious issues:

Other than with Naga, which had a basic trading app running, the Wysker app isn’t even existing yet. They claim to have a prototype, but the “release” of the app is only planned for January 2018.

What is this token ?

Interestingly, the very first point from the wys FAQ website says the following:

Traditional VC funding excludes individuals and smaller businesses, plus it’s a highly centralized method of fundraising. That’s why we choose an ICO. We want to give the entire community a chance to benefit from the growth of the wysker Platform and share the opportunity with a wide range of investors. In particular because we believe in the wisdom of the crowd and the potential of decentralisation.

Reading this, with talking about “Investors” and “chances to benefit from growth”, one could get the idea that somehow the wys represents a share in this company and people who are going to buy wys are investors. However then, a few points down on the same page they state the following:

The wys utility tokens are intended for use on the wysker Platform. Ownership of the tokens carry no rights other than the right to use them as a means to obtain services on the wysker Platform, and to enable usage of and interaction with the platform, if successfully completed and deployed. The tokens do not represent or confer any ownership right or stake, share or security or equivalent rights, or any right to receive future revenue shares, intellectual property rights or any other form of participation in or relating to the wysker platform, and/or wysker and its affiliates. The tokens are not refundable and are not intended to be a digital currency, security, commodity or any other kind of financial instrument. Additional information regarding the utility of the wys Token is available in the terms and conditions.

So here they say clearly that all you get is some kind of prepaid service of yet not existing product which might come into existence or not. And that this is not a share and if you buy this your are not an investor. Interestingly enough, this FAQ point also contains  the legal terms and conditions of the token sale.

The “terms and conditions”

In contrast to the Naga Coin sale we know who is selling the token:

Your purchase of wys Tokens / WYS (“wys Tokes” or “Tokens”) during the Pre-Sale and the Token Sale (as defined below) from wysker UG (haftungsbeschraenkt), a private limited company organized and existing under the laws of Germany (the “Company,” “we,”or “us”), with is seat at Novalisstrasse 14, 10115 Berlin, Germany,
registered in the Trade Register of the Local Court (“Amtsgericht”) Charlottenburg, No. HRB 178023 B, represented by the managing director Tobias Erich Haag, is subject to these terms of sale (“Terms”).

This paragraph contains a few interesting aspect. The seller is a “UG” which under German law is a limited liability company, but in comparison with a GmbH requires even less capital to be founded. Whereas a GmbH requires 25 k EUR as minimum capital, a UG requires only 1 EUR. That’s why this form of company is often called the “1 Euro GmbH” in Germany. Wysker has according to filings 6.000 EUR capital, so at least something.

The founder – Tobias Haag

The founder is a guy called Tobias Haag who “advertises” in his Linkedin profile being an Ex-Google employee. According to Linkedin, he worked at Google for 2 years in Ireland as an AdWords sales manager. To me that doesn’t sound like a major role but who knows ?

The first start-up he founded, Forvm did get around 600 k in funding according to Crunchbase. There is an article about him from 2013 when he got started. But other than that there is little to be found about this company and it doesn’t seem to exist any more.

His next company was “Tipchat, some kind of communication app which again seems to be non-existent today and didn’t make it even into Crunchbase.

The final project before wysker was something called “1K Ventures”, but the link to its homepage shows that the webpage (and maybe the company) has already expired.

So any potential “investor” into wysker should believe that four is a lucky number for the founder & CEO, because the last three projects didn’t get very far.

My favourite part of the Terms:

Now to my favorite part of the “terms & conditions”, article 14:

14. Risks Arising from Lack of Governance Rights. Because Tokens confer no governance rights of any kind with respect to the Ecosystem or the Company, all decisions involving the Company’s products or services within the Ecosystem or the Company itself will be made by the Company at its sole discretion, including, but not limited to, decisions to discontinue its products or services in the Ecosystem, to create and sell more Tokens for use in the Ecosystem, or to sell or liquidate the Company. These decisions could adversely affect the Ecosystem and the utility of any Tokens you owns, including their utility for obtaining Services

So this is at least a very honest statement: The company reserves the rights to do whatever they want with the money and the “token buyers” have exactly zero rights.

So Mr. Haag could for instance decide that after receiving the money that he prefers to buy a tropical island and wants to live there. He can just take the ICO proceeds, liquidate his company and go. It is as easy as that.

Interestingly they also reserve the right to create as many tokens as they want. All in all one could summarize this paragraph into: “You give us the money and we do whatever we want”.

ICO start-up funding compared to normal start-up funding

Reading through the terms of this ICO, it becomes pretty clear that an ICO has several big advantages for founders:

• you don’t have to pay the money  back
• you don’t have to share potential profits with anyone
• you don’t need to listen to the people who give you the money
• you can use the money for any purpose you want, even for private ones (simply by paying yourself a big salary etc.)

Compared to normal startup funding where:

• you have to share future profits with investors
• investors have board seats and can tell you what to do
• the money stays in the company and founders only get money when the company is kind of successful

So for any smart entrepreneur the solution should be clear: If there is a chance to get funding via ICOs, then do it. It is the simplest form of “free money with no strings attached” that I have ever seen in my financial career.

What I find interesting is the fact that the Blockchain would allow easy mechanisms to make the use of the money very transparent and dependent on objective milestones. But it is pretty obvious that in this case the founders are not really interested in transparency.

But why should an investor invest into such an ICO ?

Well, maybe some people believe in the idea and think that they somehow might profit from it. But given the structural issues mentioned above, I guess it is fair to assume that the chances of ultimate success for an “Investor” in such an ICO as wys (or Naga) are a lot smaller than investing in “Normal” start-ups.

But in reality I think that most potential buyers of wys (and Naga coins)  have only one goal: To sell the coin to someone else at a higher price within a very short period of time. “Looking for the greater fool” is most likely the best description for this.

Summary /Recommendation:

My recommendation for anyone interested in an ICO would be as follows: Don’t buy those tokens but try to run an ICO yourself. Every ETH/Bitcoin/Euro raised with this is free money in your pocket and no strings attached.

You only need to write a 10-20 page word document and maybe copy and paste the terms and conditions and off you go and find enthusiastic “donors” !!

There might be projects whose ICOs which might turn into something with value, but chances that the wysker is one of them are pretty low.

I also expect to see more of these ICOs in Germany. Germany is a fertile ground for such stupid schemes because people have money and are fed up by low-interest rates. They see other people making a lot of money with Bitcoin & Co and also want some piece of the action.

And, best of all, the authorities seem to be unable to do anything against it. So the only question I ask myself is: Why aren’t there more German ICOs ? And don’t I run an ICO myself ?