ICO Analysis - HeroToken Virtual Perpetual Bond
Disclaimer: I am not a financial advisor and am merely presenting my opinion. Do your own research before investing into any ICO.
Background
HeroToken is the cryptocurrency that sits behind the upcoming ICO proposed by PawnHero, an established Filipino outfit that operates within the micro-credit space. PawnHero is an app-based broker which engages in lending by securing its loans against real, physical assets signed over by the assets' owners who are in need of short-term credit.
Under their current model, borrowers register whichever possessions they wish to pawn through means of the PawnHero app, at which point PawnHero will then expedite a biker to the customer's address to retrieve the physical goods in question. Those goods are then shipped back to a central warehouse where they are assessed for monetary value at which point an agreement is then reached with the borrower in relation to the loan that those same goods can secure.Token-based Expansion
The idea behind HeroToken, then, is to expand the PawnHero concept onto the Blockchain to exploit the inherent advantages that this brings along with the potential it offers up for expansion. However, it is entirely unclear what this means in concrete terms when reading through the white-paper.
Reference is made to the fact that a user's credit history is made more accessible and more transparent when stored on the Blockchain. This, we are told, will bring a more statistically-reliable method of determining credit-worthiness. We also get some of the usual references to the stale practices of traditional banking. Again, all entirely valid but these points are somewhat general. What is not being answered is how this brings benefit specifically to the existing PawnHero model and its potential for expansion.
It should also be noted that, whilst the project explicitly states that it is aiming to make its core market the entire South East Asian region, the general impression that is attained from general research on PawnHero is that the core business will be continue to be limited to the Philippines for the foreseeable future. Now it may be that they see their expansion to the Blockchain as a prime factor in internationalising their model. But, once again, there is no real insight provided as to how this might take place.
White-Paper Contradiction
The white-paper is keen to repeat that the ultimate benefit to a token-based system of micro-credits is the access it will give to credit for hundreds of millions of the non-banked and under-banked out there. Laudable, of course, but once again a question is raised without any real sense of answer in waiting - what will be the driver for adoption?
It may be that PawnHero will simply count on the idea of customers being attracted by rates which undercut less reputable lending houses and who will, at the same time, perhaps be assured by the idea that they are now borrowing from an outfit that will have recourse to due process if they were to default on the loan - as opposed to some of the methods employed by the more unscrupulous players in the pawn market.
That can only be a good thing, naturally, for the many out there who are desperate for access to short-term, reputable credit at rates which are not overly extortionate. It does feel, however, that the people at PawnHero are indulging a little bit too much in their talk of democratising access to credit for the poor when they themselves are limiting access to their own ICO with a 10 ETH minimum buy-in. Not exactly a low-level entry barrier there.
Virtual Perpetual Bond
Our general feeling, then, has been one of underwhelming enthusiasm for this project. There is one caveat to that statement, however. According to the white-paper, it is envisaged that issued tokens will be guaranteed a share in up to twenty-percent of the income that derives from interest repayments. That now essentially makes the token the digital equivalent of a perpetual bond.
The concern here, of course, is the specific use of the term up to within the phrase up to twenty percent. There is no elaboration as to how that specific percentage will be determined. Will up to mean something more like one percent or twenty percent in practice? There is no way of knowing - we have tried to reach out to PawnHero to get some more detail here. Frustratingly, however, they have been one of the few ICOs out there from whom we secured zero engagement.
There is, however, a second aspect to the distribution of revenues from the interest pool. PawnHero outline that the interest aspect of any loan (which is comprised, of course, of both principal and interest) will be underwritten so as to remove any risk associated with the revenue from the interest stream. What isn't clear here, however, is the implication for how the principal itself will be underwritten.
This presumably places more risk on PawnHero's doorstep as opposed to the token-holder's revenue. The sentiment will be appreciated by token-holders but, since PawnHero is itself the structure which underpins the token, it sounds like we are robbing Peter to pay Paul. Risk may be allocated to another area of the business, but it is still risk for the business itself.
Further Details Needed
It is our feeling that no real, definitive decision can be made on the ICO proposal without further information in relation to the expansion model that the HeroToken is seeking to initiate. With very little detail forthcoming on these revenue stream aspects to the token, our scepticism is only enhanced at this stage.
That said, we hope our criticism is unjustified here, and we still harbour the suspicion that the issues outlined here likely derive more from a lack of communication than a lack of direction. Any project out there that is seeking to promote a fairer and more transparent system of micro-credits can only be applauded. We would simply ask that such a project be accompanied with a little bit more clarity.
For more information on herotoken, you can visit their website here.
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