Tokens are undeniably one of the most used ways that popular platforms across the world have used to raise funds, and attract new users, and reward loyal users of the platform. However, at Vauld, we decided to not deploy a token for various reasons, which we will delve into shortly. We get how ICOs could have been beneficial to us, but we feel like we’d be harping too much on the wrong metrics.
Before we get into all that, let’s start with a small introduction for the uninitiated, and then go into detail on why we think tokens are simply not worth it for Vauld.
Utility Tokens And ICOs
Utility tokens are tokens issued by crypto platforms globally, as a way of funding, created on a pre-existing blockchain. These tokens, often referred to as non-native tokens, often act as a loyalty program of sorts, allowing you to be exposed to the platform that you believe in.
These tokens are usually issued through Initial Coin Offerings (ICOs), which is the cryptocurrency equivalent of crowdfunding. These utility tokens can be used in the issuing platform for various purposes as allowed by the token’s source code. This can include exchanging the tokens for a native cryptocurrency which the platform is developing or simply act as a discount voucher for using the platform.
Sounds like a win-win, right?
We don’t think so.
The Cons of Deploying A Token
We believe, that contrary to what the name suggests, utility tokens offer no utility at all. Instead, we believe the concept is closer to a loyalty program. We are not alone in this belief, as the popular rating and research agency Weiss Crypto Rating have put in their eloquently worded article titled “What Gives Tokens Their Value”. They’ve used the commonly used analogy, of comparing utility tokens to frequent flier miles, with the caveat that these utility tokens can be traded. Like us, they also believe that the value of non-native tokens is more speculative in nature, and even refuse to rate non-native tokens which are soon to become native tokens (Utility tokens issued to fund an “under-development” cryptocurrency).
However, even if this were not the case, Vauld wouldn’t still have gone for an ICO.
As a crypto bank and exchange platform that is very serious about getting regulated, an ICO would simply be a step in the wrong direction. ICOs are notoriously hated by regulatory authorities such as SEC, and frankly, we understand why. ICOs are the breeding home for many of the scams which smear the image of cryptocurrencies, like the infamous MyCoin pyramid scheme scamming users out of a whopping $400 million.
It is our belief, that any platform serious about navigating regulations would never deploy a token, as it is basically the equivalent of trading in unregistered securities, according to the SEC and other regulatory authorities. It would be so much simpler for a platform like Vauld, to navigate the regulatory landscape, without having to deal with the scrutiny brought on by an ICO.
Theoretically speaking, it would be possible for platforms to find a sweet spot between token adoption and regulatory scrutiny. However, in the real world, it is simply not feasible, without having to impede the long-term focus of any platform.
This, by no way, means that platforms haven’t tried to take on this challenge hands-on. A good example of what we mean is the attempt made by Ripple, and its failure speaks volumes.
We, at Vauld, have to put our users at the forefront, and it would do them an injustice if we tried and failed in an ICO.
Our goals are clear, and so are our responsibilities. Our focus is on optimizing Assets Under Management (AUM), as it should be, and not on driving the value of a token.
Our goals are to offer our customers the highest yields, at the lowest cost possible, in their favorite cryptocurrencies. Anything else would simply be unfair, especially when trying to deal with multiple regulators across multiple countries. Hope you agree!