ICO Status: Ended
Cobinhood is a zero-transaction fee cryptocurrency exchange. The problem Cobinhood is trying to solve is providing cryptocurrency traders with a better, fairer experience by reducing fees to zero, providing better platform uptime, better security, and lower transaction latency through the ability to process a million transactions per second with sub-millisecond latency.
Offering cryptocurrency exchange with zero fees begs the question “but how will they make money?!”. The answer is that Cobinhood will provide margin trading loans which will be subject to interest.
Cobinhood offers promises to have security features which will be atractive to cryptocurrency traders. For example, Cobinhood stores cryptocurrency assets in an offline multi-signature vault which requires 5 out of 8 geo-distributed hardware security modules to open. in addition, cryptocurrency assets stored in online wallets will be backed by insurance.
Another interesting aspect to the Cobinhood proposition the intention to become an ICO underwriter providing ICO Due Diligence, smart contract code review, and legal compliance review for ICOs. ICO tokens underwritten by Cobinhood will be immediately tradable on the Cobinhood exchange right after ICO – something which Cobinhood hopes will solve the low liquidity issue for ICO tokens in secondary markets.
This is a difficult aspect to determine. The cryptocurrency market is so volatile, that people tend to talk more about HODL than trading at this stage. With that in mind, the main activity across exchanges will be ‘buy’. Trading margins and spreads will likely become necessary in the future, so a platform that provides the necessary speed of transactions like Cobinhood promises will be viewed favourably.
Do we need an ICO underwriting service? Well it certainly couldn’t hurt! There’s no doubt that if the cryptocurrency industry is to become an attractive investment landscape for traditional investors, then some degree of regulation and protection will be needed. Whether that comes in the form of underwriting services such as those proposed by Cobinhood or via government regulations is hard to forecast. In the absence of any regulation however, this service should be assessed as having utility – at least for the time being.
Only a tiny fraction of the world’s population are aware of cryptocurrency and actively engaged in buying and selling. Trading cryptos feels a long way off – and when it does kick into gear, the market size of participants is likely to be a fraction of the consumer market in much the same way as currency trading is today.
Cobinhood are expecting the value of COBs to increase as people require more of them in order to conduct trading activities across the platform. Despite the relatively small size of market given the number of people likely to engage in this activity, this does represent an opportunity. After all – it’s probably fair to say that more people lose money through trading than the other way around! And it can be addictive.
If these factors hold true, then increasing volumes of COBs will be required across the platform which should influence the price. The part that’s unclear for me is ‘if I trade using COBs on the platform and my trade loses – don’t the tokens just become the property of Cobinhood?’ If that’s true, then I struggle to see how this will affect supply and demand and therefore the market value of COBs. After all – it’s not as if COBs are being burned thus reducing the overall number in circulation, is it?
Cobinhood list over 30 representatives on their website spanning all areas of business and technical expertise. Reading their Linkedin profiles raises a two main concerns: dedication and experience.
For example, CEO POPO Chen describes himself on their website as a “26-year-old serial entrepreneur who skipped one year of senior high school and entered NTU (National Taiwan University) as an Electrical Engineering major, and earned an Electrical Engineering master’s degree at the age of 22.” So he’s clever, but also young. And Popo’s Linkedin profile shows no history before his current position as CEO of Cobinhood.
CTO Wei-Ning Huang is also young, having graduated from university in 2014. LinkedIn describes him as having spent 4 years at Google as a software engineer. This is promising news, but how dedicated will Wei-Ning Huang be to the Cobinhood project? Everyone knows how much time Google demands of it’s staff; surely that can’t leave much left over for building and leading a team responsible for an enterprise grade trading platform?
Despite my observations about the commitment from the Cobinhood team, they have posted a roadmap which is certainly optimistic in terms of time to market with an expectation of having their platform live in November 2017 – just one month after the end of the ICO sale. Margin trading is scheduled to be live one month later in December, with thier ICO underwriting service being available in Q1 2018.
With 40% of the ICO sale budget ear-marked for ‘product development’, this timeline just doesn’t seem feasible. Either the budget is intended to repay developers for work already completed, or they intend to get an awful lot of work done in a very short space of time!
The Cobinhood ICO finished in October 2017, with 244,773,856 out of a maximum of 500,000,000 being sold. This raised over $13.5m making it a successful ICO.
Participants in the Cobinhood ICO will be granted several privaledges such as a 50% discount off margin trading loan interest, and a reduced rate when purchasing ICO tokens from any ICOs underwritten by Cobinhood.
Decentralised exchanges offering zero-cost transactions seem to be popping up all over the cryptocurrency landscape. Providers such as Lykee already off zero fee transactions. What is difficult to determine at this stage, is what the difference in experience will be like between service providers and how valuable these points of difference will be.
For example, what does low latency mean in real terms? Does this mean that with Cobinhood traders will be able to effect more of a ‘day trading’ approach compared to platforms like Lykke where transactions are ‘processed in minutes’? How will margin trading loans benefit users, and is this a bonafide reason to use Cobinhood thus making the ownership of COBs more valuable? And what will the differences in user experience be like between the various platforms currently offering similar services?
From an investment perspective, it remains unclear how the value of COBs will increase beyond that of other tokens. In spite of this ambiguity though, Cobinhood managed to sell out there ICO raising over $13.5m.
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