Does buying into a project and its coin or token with sentiment over pragmatism - heart over head - inevitably lead to buyer's remorse in the crypto world...?

This is a bit of a long one guys 'n gals but please be patient with me - I'm still new, this is my second posting and I've got a lot to get off my chest... If you make it to the end I'd love to hear any comments, observations or constructive criticism that you might have...

BitMinutes: A Better Bitcoin for Billions!

BitMinutes is potentially a game changing ICO – a utility application with an "asset backed" token built on the Ethereum platform that will offer access to credit for the billions who today may own, or have access to, a mobile phone but have no bank account or access to credit facilities.

BitMinutes will give customers the ability to:

(a) purchase a unit of airtime that is transferable across multiple platforms in multiple countries (currently 70 and growing) - the monetary value of the airtime will act as a financial asset against which a "nano loan" can be offered;
(b) in-application / in-wallet cross currency exchange of fiat and crypto currencies, together with credit card functionality on the Mastercard and Visa platforms;
(c) transferability of funds to third party receivers, including in other countries, for minimal fees, which should be of interest to all users, particularly frequent travellers and third country nationals travelling, working or living in countries other than their own and wishing to remit funds home.

That’s the 30 seconds “elevator pitch” and it pretty much sums up the essence of the project. The combination of Blockchain and FinTech appears inescapably to be the future path that commerce is hotfooting it up and looking to play a part in rolling out that future is BitMinutes with their upcoming ICO.

For purposes of full disclosure I’m declaring an interest in that I’ve spent a lot of time living, working and travelling in developing countries and the utility value that being able to access even a minimal amount of credit would bring to a large number of people cannot easily be discounted – so I was essentially an easy “sell” when it came to “the idea” behind this project and despite my many misgivings I have put some money, or to be more precise, a little Ether, into it as an early doors investor. So with that in mind I completely acknowledge that there’s a fine line between drawing attention to the merits and demerits of a project and loudly shilling something in the hopes that I won’t be left bag holding.

In fleshing out the 30 second elevator pitch it should be noted that there is the added functionality that the platform intends to offer “nano-loans”, and provide access to affordable credit and finance for the more than 2 billion unbanked people in the world, who although unbanked are now more than likely to own, or have access to, a mobile phone and concomitantly have a requirement to buy airtime to utilize that phone. BitMinutes can offer these mobile phone users airtime if they just want to make calls, however, it also affords them the added functionality of access to the financial markets should they wish to make use of that facility.

Watch a short explanatory video here: https://www.facebook.com/bitminutes/videos/2006178066297373/

BitMinutes proposes to offer a guaranteed minimum US$5 nano-loan to 2 Billion mobile consumers. US$5 may not seem like a big deal to somebody living in London, Paris, New York, Berlin, Tokyo or Hong Kong but to somebody living in Kitwe, Zambia or Davao City in the Philippines, it could enable them to make an investment into improving their economic situation by buying a chicken to sell the eggs or giving them the extra money to pay for some school books for their children. This is a facility and ability they would not otherwise have access to as they most likely have no bank account or access to credit facilities. The amount of "nano-loan" available scales up as the user builds their credit profile. There is also the facility to become a TAN (trusted agent network) agent, or distributor, for both the BitMinutes airtime and to act as an agent for offering of “nano-loans” allowing for the development of a healthy passive source of income.

Unlike the vast majority of ICOs currently coming to market, or even already in play, BitMinutes has the added value that the project already has a working platform, is already offering cash transfers via the "P2PCash" platform which has been incorporated into BitMinutes as the cash transfer function, and has already entered into partnerships with a number of financial institutions with negotiations underway with several others. Currently they’re partnered with MasterCard, Equity Bank, eWay and Bitso on the distribution side and AuthenticID, IDology and Socure on the KYC client verification and identification side. The functionality of what is being offered is scaleable and compatible with current transfer technology used by Mastercard/Visa and with SWIFT bank transfers as well as with the developing blockchain financial transfer technology of Ethereum and Ripple. The platform will offer real-time currency conversion (FX), instant clearing and settlement, counterparty identification and blockchain encrypted security as well as an “in application” Mastercard and Visa credit card facility. The in-built personal identification cryptography and imbedded KYC functionality will also be able to meet anticipated future governmental regulatory requirements which many in the crypto space believe will be a matter of when, not if, such demands will be forthcoming.

The BitMinutes management team has a solid background in tech and finance and Tom Meredith, the CEO, was one of the first people to file a blockchain patent back in the dim mists of time before blockchain became the buzzword that it is now. Morris Mwanga participated in the very successful implementation of Mobile Pay in Kenya which has now been used as a template by many others looking to implement a mobile phone based payment platform.

The advisory team in crypto projects are often brought on-board merely as “show and tell” participants and I don’t know whether that’s the case here but they do have some good financial industry and crypto currency experience who have taken the time, and put their reputations on the line, to make themselves available to the BitMinutes project. Leonard Schrank is the former CEO of SWIFT. Brian Smith is former in-house counsel at MasterCard. Tim Draper is founder of Draper Associates an early stage venture capital firm that has made some pretty interesting calls in the past including investments in Ledger, Coinbase and Korbit. David Drake is the Chairman of private equity firm LDJ Capital who have been involved with crypto projects such as Eos, Aeternity, Antshares, Peercoin and Firstblood.

Finally, there is the BitMinutes crypto-currency token and the upcoming fundraising ICO itself. With the project being on the Ethereum platform the BitMinutes token (BMT) is an ERC20 token that will be tradeable on crypto-currency exchanges and storeable on wallets such as MyEtherWallet, Trezor and the Ledger Nano S. The first phase pre-ICO sale price of US$0.0075 has recently sold out. The current level of buy in is US$0.01. The ICO issue price is likely to be US$0.02 or above – so there is an automatic built in discount with a purchase at the current level. The most direct way to buy into the ICO can be made with ETH or BTC. However there is a facility for US residents, who are physically located in the US, to purchase via checking accounts drawn on a US bank or to send USD by bank transfer.

So that’s all the “rah rah” good stuff out of the way. Now for the “head scratchers” and the things that, in my opinion, could be fundamental problems if not addressed and addressed quickly. Two areas that the project and management need to put some significant effort into are their marketing in general and their messaging in particular.

Firstly, they need to grow the project’s social media presence and develop a more effective marketing strategy. There is so little buzz around this project that it is almost indiscernible and that is not good. You can’t find it listed on any of the usual upcoming ICO listing sites or blogs. There is no YouTube presence. There is no Reddit chatter. Nobody is talking about this project. A Telegram group finally appeared last month, February, which has now gained 5,500 followers – nothing to be impressed about in the current environment where mediocre projects can seemingly grow their Telegram communities to upwards of 30,000 followers inside three or four weeks. They also now have in the region of 3,500 followers on Facebook and 3,800 followers on Twitter – the majority of whom will be platform crossovers. There have also been a small number of posts (about 40) on Bitcointalk since that forum was opened up in December. Given the profoundly beneficial social effects it could bring to bear in many countries, that is something of a shame – especially as this would seem to be an easy sell to the altruistically minded crypto generation. Some might argue that “flying under the radar” is no bad thing and that unrealistic expectations are not being built up. That’s a valid point of view but in this media driven age a successful ICO and fund raising exercise is hugely dependent on the marketing leading up to it. If snake oil salesmen can successfully market bogus ICOs and then disappear leaving behind nothing but a middle finger on a computer screen then the important work the team at BitMinutes is doing deserves to reach a wider audience who will help facilitate the project’s success.

Secondly, aside from the issue of marketing, the project needs to address its actual messaging. They must nail down exactly what information they are putting out. There currently appears to be two or three different versions of their Whitepaper in the public domain – and the official line is currently that an updated Whitepaper is forthcoming “soon”. There have been two or three dates given previously as to when the ICO will be. The latest date is now for 30th April. There have been various prices indicated at various times as being the proposed issuing price for the ICO. At one time it was $0.01 then $0.10 was floated in one version of the Whitepaper and in a version of the Terms & Conditions under which they were accepting contributions for the ICO although the current indication is “$0.02 or higher”. Yes – that’s correct: “$0.02 or higher” is the official position as to the potential pricing of a fast approaching ICO. Higher meaning what exactly? At this point we can only speculate.

Additionally, they should give an indication as to which exchanges BitMinutes (BMT) will be traded on. Oh, and that’s another issue, is their moniker going to be “BMT” or “BTM”? Both are currently out there in various iterations of their paperwork, or on their website, as being what they will be trading under. The Terms & Conditions under which you can buy into pre-ICO (found on the landing page of the wallet) refer to the token as BTM. The ability to buy and sell the token on a respected platform is always a major boost. Being listed on an obscure platform will immediately relegate the project to the ranks of also-rans and make it a whole lot harder to gain credibility, traction and wider accessibility. Understandably it could be the case that they are still in negotiations with various exchanges and therefore cannot make any announcements that the public might jump all over, however the one exchange that apparently has been confirmed, Smart Token Exchange (STeX), is not yet actually operational. While we’re on the subject these are the same T&C’s, by the way, that still stipulate that the ICO ends on 1st March in one paragraph and also states that it will be beginning on the first of March in the very next paragraph. This is while at the same time those very same T&Cs are categorically stating that the ICO price will be US$0.10 – this is while they are in the process of taking pre-ICO contributions. Firstly at the price of US$0.0075 and currently at the price of US$0.01. I’ll just leave you guys to think about that for a minute – you don’t need to have gone to law school to see what a monumental cock-up and hostage to fortune that could be. Suffice it to say that there are clearly items of substantial confusion that have not adequately been addressed in what is supposed to be a binding legal document stipulating the Terms & Conditions under which investors are purportedly buying into the ICO – and by which BitMinutes are taking their money. An offhand attempt at a “get out” out clause purporting to bind investors into accepting any post ex facto amendments to the T&Cs is spurious at best and a prima facie abrogation of the possibility that they have disseminated incorrect and misleading information to which they would at a later date attempt to bind who took their statements at that face value.

Then there’s their strategic objective as set out on their published roadmap. They have previously stated that there will be an IPO in 2019 – 2020. Then that idea was shelved. However, as of last week, it is now back on their official timeline. So anybody buying into the project needs to understand that the management apparently intends to take the company public within two years. One can argue whether that is brave or delusional – I’m just drawing attention to what they have put out there.

Then there’s the issue of their wallet / app. In trying to gain any level of understanding as to when and/or within what timeframe their wallet or the proposed application that will integrate, administer, co-ordinate and execute the various moving parts, will be released, is simply not possible. Other than an indication on their roadmap that a “Guaranteed Loan App” will be released shortly after the ICO I can find no other information about it. There’s no coding progress on Github – nothing. As already mentioned there are various discrepancies in the ICO’s Terms & Conditions and this is where another one comes to mind because they state clearly in those T&Cs that: “Purchasers of BTM in the ICO will be enabled to claim their purchase of BTM from BitMinutes once the ICO ends on March 1st, 2018. All BTM sold in this manner will be minted by the BitMinutes Project’s initial Block -- the initial block of the BitMinutes Team’s blockchain which constitutes the inception of operation of the system.”
If there’s a blockchain that “constitutes the inception of operation of the system” – where is it? I may have misunderstood the process but I cannot see how this makes a whole lot of sense.

I also don't understand how they propose to be able to offer zero fee transactions given that they will be an ERC20 compliant token sitting on top of the Ethereum platform that requires “gas” or the payment of transfer fees to initiate any transfer of any token. Unless what they’re saying is that they will essentially subsidise the transaction fees at the BitMinutes end? I'd also like some clarification as to what steps are being taken, or will be taken, to persuade multiple airtime carriers in multiple jurisdictions to “white label” BitMinutes – i.e. by my understanding, buy supplies of BitMinutes at some sort of negotiated discount (airtime – not the token itself) and then slap their own brand labelling on top of the product. If they’re doing that with the airtime then how does that tie in to the trading of the token on which ever exchanges they will appear on? The ephemeral nature of such intangibles is compounded when reading the future valuation they put on their token: “Based upon the total addressable market,” (their analysis of which is: Global Consumer Lending Market; Pre-paid Airtime Minutes Market; Global Money Transfer Market; Investment Demand For Crypto-currencies) they state that: “the maximum potential value of BTM token is US$2,912 using current market facts and statistics. With native BTM demand based largely on BTM escrowed loans, we estimate BitMinutes will reach a value of US$500 within 5 years.”

The logic used to reach this conclusion is a little flawed when talking about a future valuation based on their own figures, in the same document; that they expect their market capitalisation to be determined by the issuance of 3 billion tokens (out of a maximum potential supply of 10 billion) at an issuance price of US$0.01 to give them a valuation of US$30 million once trading restrictions are lifted after 18 months. Even with the greatest will in the world, how could BTM achieve a potential price of US$2,912 with a market value based on the issuance of 3 billion coins – or indeed have a value within 5 years of US$500?
Using their own numbers with an issuance price of US$0.01 that would require BTM to increase 4,999,900% to have a value of US$500 per token within 5 years based on a distribution of 3 billion coins. In addition to which its market cap at that point in time would be around US$1.5 trillion.

Let’s put that in perspective. Ethereum was launched on 30 June 2015. There are currently just over 98 million coins in circulation, with today’s price hovering at US$779.10* and a total market cap of $76.379 billion (*Etherscan on 7 March 2018) – (Edit: $743.17 and market cap of $72.870 on 8 March 2018).
Happy days – I’m glad I’ve bought myself a ticket for the star ship USS BitMinutes because I want to hitch me a ride on this parabolic growth curve – never mind the crypto cry of “rocket to the moon” – I’m riding this bad boy and taking up residence in orbit around a celestial body in the next galaxy.

Warning: a boring economic equation used in valuations is about to follow, that elaborates on the same point. Valuation models for crypto currency are still very much in their early stages and have less than half a dozen years worth of data to work off but analysts are using the equation of exchange, usually used in quantifying money supply in monetarist economic theory that holds that money supply is the main determinant of economic activity, as one of the better ways of trying to reach consensus on the value of any given coin or token because at this point in crypto development it is the growth activity of the coins and tokens that determines value, not necessarily any underlying utility or use adoption of the platform or application generating the coin or token. The equation of exchange is MV = PQ (M = PQ/V).

M = the money supply (the value, in this case, of all the BitMinutes in circulation);

P = the price level index (the price of the goods and services provided, in this case that would be the price of the underlying BitMinutes airtime as supplied to consumers and used by the consumers – although BitMinutes claims that there will be no correlation between the underlying price of the airtime being sold and the market value of the token on the exchanges);

Q = the index of real expenditures (i.e. the cost of what is spent on newly produced goods and services in this case the totality of all the services that BitMinutes will be offering including the loans; servicing of any loan defaults; marketing the provision of loans; guaranteeing and securitising the loans; compliance with regulatory requirements in different jurisdictions especially in the case that BitMinutes should eventually be deemed to be a securities token; amount of airtime to be bought and distributed with different carriers in different jurisdictions – etc. etc. etc. most, if not all, of these criteria are currently unknown if not unquantifiable);

V = Velocity (the number of times BitMinutes airtime would be spent and the number of times a BitMinute token would change hands over the course of a one year period. For example the V of the US$ M1 is currently 5.487*
(*Velocity of M1 Money Stock – YCharts.com source: Federal Reserve Bank of St. Louis).
Before the financial crash of 2008 M1 was almost double that at 10.5 – i.e. there was a lot of turnover in the money supply.
NB: M1 includes all of the USD in circulation: bills, coins, deposits, traveller’s cheques etc.

We can determine a reasonable valuation for BitMinutes if we can determine a reasonable value for M (the money supply or all the BitMinutes that will be in circulation) if you multiply P by Q and divide by V.
The only problem is you can’t do that because if you refer back to the above you don’t know the value of P; you don’t know the value of Q and you certainly don’t know and can’t estimate the value of V so you can’t begin to quantify a value of M and/or the value of the BitMinutes that will be in circulation.

Again, I’m happy to hold my hands up and say that I am no doubt missing something – but it would be wonderful if these matters were a little bit clearer.

Still on the subject of messaging; if Tim Draper, a very well known crypto evangelist, is on the BitMinutes advisory board and, indeed, David Drake who has been involved with some pretty high profile crypto projects, then they should be out there trumpeting their involvement. That would pretty quickly raise the project’s profile. At the moment they don’t seem to be doing that which is another head scratcher. To be blunt the BitMinutes messaging needs to be sorted out, and quickly, because currently it is lacking in coherence and it gives the distinct impression of there being no small amount of disorganisation and/or a lack of focus.

Finally, let’s not forget about whether, with all the scrutiny being brought to bear by regulatory authorities in various jurisdictions – not least the SEC in America, one should question the wisdom of trumpeting the benefits of being a “utility token” that is offering a financial service (by way of credit facilities and loans) on the back of a collateralised financial asset (monetised airtime)? In the current atmosphere it very well might behove the BitMinutes team to start looking pretty quickly, and looking pretty hard, at partnering up with one of the nascent “securities and securitisation compliant” projects such as Polymath Network, tZero, Open Finance Network, Harbor or Circle, the Goldman Sachs backed company, that recently purchased Poloniex, the crypto exchange, for US$400 million. Circle’s reasoning for their purchase: “to provide the US’s first regulated crypto exchange and to enable Circle to list and provide a platform for all forms of emerging crypto tokens, including tokens that would be deemed securities.” As I understand it if a crypto token’s value is derived from an external tradeable asset (in this case the collateralisation of air time which is both tradeable and clearly an asset because it has quantifiable units of fiat value attached to both its sale and its use) it is deemed to fall within the classification of a financial asset and is classed as a security token and is then subject to securities laws and regulations. That should be a serious cause for concern going forward given all the possible issues surrounding upcoming regulation of the crypto currency space.

As I write this, overnight 7th / 8th March, the SEC declared that: “platforms serving as venues for digital assets that are securities will need to register with the agency as a national exchange, or qualify for an exemption.” (Camila Russo: Bloomberg March 8). This was followed within hours by Japan’s Financial Services Agency ordering two exchanges to halt operations for a month and penalized four others for breaches of their licensing system. The crypto markets are currently a sea of red - BTC is off 15% in 24 hours; ETH is off 10%; Neo has been haemorrhaging for days now but is off another 14% overnight; LTC is off 10%; ADA is off 16% - in short the fix is in and regulatory oversight of some sort would at this point in time seem inevitable and not to take that into consideration would be short-sighted in the extreme.

In conclusion, there very well could be gold in “dem thar hills” as the concept behind the BitMinutes project is one that fills a genuine requirement with a hugely scaleable target audience that’s currently ignored. The humanitarian positives are genuinely to be commended. Blockchain technology is changing the economy and the way we do business, it can bring in whole new markets that have previously not been viable, or been badly or inefficiently served. If BitMinutes can make inroads into providing accessibility to credit for the unbanked via the medium of using airtime as a collateralised asset then I’m all for it. At the same time good intentions are all well and good but it doesn’t bring home the bacon. The ICO may, in the nature of these things, give the project a quick sugar jolt but there are clearly some issues that need to be addressed both for the ICO to be a success in the short term and for BitMinutes, as a viable project, to be successful in the medium to long term. As mentioned at the beginning of this piece, in the interests of full disclosure, I’ve put my hands up and declared that I’ve already put a little Ether into the project but I’m possibly letting sentiment and my heart run ahead of pragmatism and my head. I hope not.

As always, the content herein is based on my subjective analysis and is an opinion piece provided for informative purposes only and is not in any way meant to be taken as the provision of investment advice or as an offer for sale of, or a suggestion or inducement to make a purchase of, securities or financial instruments of any kind. Remember, as with all things crypto related, DYOR and only commit funds that are not integral to maintaining your quality of life.

For more project info and to read the Whitepaper: http://lddy.no/33mj
For ICO information: https://btm.bitminutes.com/auth/register/PYhrasMGN4Ua