CREAM ICO Review And Token Analysis
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The CREAM ICO has it all. The hype-by-association of Ghostface Killah. An advisor from the legal weed business. A business model that seems to suggest a target audience comprising (or at least including) the intentionally-unbanked.
CREAM Capital, which intends to issue the $CREAM token, appears quite willing to court attention; and seems equally well aware that this attention will include the authorities. More on that to come.
The goal of the CREAM ICO appears to be simple: to raise $30M and spend it on building a network of ATMs, from which the company intends to derive millions of dollars in profitable commissions. They claim to have 800 locations across California, Nevada and North Carolina, of which 100 should be ‘operational’ by mid-2018.
As of the time of writing, we have six ATMs operational in North Carolina in a partnership with The Bitcoin Dispensary. (From whitepaper.)
So could it be that the poet has realized the new cash will be crypto? Could it be Crypto Rules Everything Around Us, and the banksters just don’t know it yet? We believe this is the question explored in the CREAM ICO, whose whitepaper was just published October 10th, and which is authored by Narcis Ciobotariu and Brett Westbrook.
In a clear indication of bubble tendencies, the uptick of interest in cryptocurrencies (and specifically tokenized systems of value), has thrown up plenty of the old “plumber talking about a stock” routines. The hype has been particularly manifest in some of the less savory offerings recently: Paragon Coin perhaps foremost among them, in its ridiculously lean offerings.
The authors open the CREAM ICO whitepaper by noting a problem, but it’s unclear from their language who they view the problem as affecting. They say that mass adoption has yet to happen in cryptocurrency due to volatile markets and difficulty of access. This much is true and is being addressed in many offerings.
Their goal, essentially, is to build a large-scale cryptocurrency ATM network complete with an ERC-223 token. (ERC-223 is a later token standard whose primary innovation is the ability to allow token transfers to be securely executed in singular, rather than multiple transactions as currently takes place. This is explained by a developer clear on the matter here. Use of ERC-223 is not overly relevant; it is assumed that over time it will become the de facto standard. However, it is used as a point of promotion in the whitepaper, based on the fact that it’s much more difficult for investors to lose money than with the ERC20 standard.)
The simplicity with which they view mass adoption and the simplicity of their approach make this an easier ICO to analyze. Our consideration is singular: what is the purpose of fund-raising for an ATM network that can be privately owned?
For the sake of being thorough, we can further consider the performance of Bitcoin teller machines and their permeation through general society. While we’ve seen multiple companies start out with great intentions (there’s a few, right there) the margins for buying futuristic money are much friendlier when on the Internet than at the would-be bank teller, so the physical locations don’t do as much as we’d like to hope. They can only do more, of course, but what we’re calling into question right here is the notion that the CREAM ICO is an effort which should be funded through an Initial Coin Offering.
Not to be the bad guys, but let’s consider the values of the ICO funding model and then let’s consider what we’re hearing from CREAM – is this funding model a hammer or a precision tool? As the saying goes, when you have a hammer, everything looks like a nail. We contend that the ICO model is a precision tool. It is most effective when used to develop systems where the token born of it has an undeniable use case, and a realistic strategy to create more value in its network.
$CASH Token versus CREAM
Having established that a pre-requisite of their success is creating the largest network of Cryptocurrency ATMs ever seen, there is a lot of justification needing to be done if we’re going to assert that we see a need for the CREAM ICO token here.
The CREAM $CASH token is intended to ensure liquidity and stability between a deposit into the network and a withdrawal.
Cream Cash (yes, we’re tired of capitalizing everything in the ICO workd) is developed strictly as an exchange of value. The 1:1 value synchronization with US dollars ensures that Cream Cash value is as familiar as possible so that the value of funds spent at grocery stores, restaurants, or with your friendly unbanked-by-choice individual are simple to conceptualize as soon as possible.
Some justification for the token is written in the next section. To paraphrase: banks are not serving everyday people sufficiently. A focus on “financial freedom” is stressed. Yet, we in the cryptocurrency community are no stranger to what this language actually amounts to: a call for privacy in transactions. When a person is arrested in the commission of a crime, regardless of the nature of the crime, their assets are on the line.
When a person encounters police, as everyday people in depressed neighborhoods the world over often do, holding funds over a certain amount can result in being charged with a crime and having your assets seized without much due process. Money laundering is not the same thing as securing funds from seizure, either by thieves (another risk more prevalent for the poor) or corrupt authorities.
All cynicism aside, there is a genuine and valuable use-case here; the fact that it is likely to be almost entirely overlooked by those who might benefit from it, and over-employed by those who shouldn’t, is immaterial.
Since CREAM focuses heavily on compliance with regulatory authorities (see next section), it seems evident that authorities could have access to some identifying information about account holders. However, through the nature of cryptographically secure smart contracts, actually seizing the funds from the individual might become a more difficult process for the government. In the same way that the government failed to compel Apple to break its own security protections to give them information about alleged terrorist activities, a company like CREAM Capital *might* find ways to respect both its customers and the government.
If this is the net effect of their offering, then we can see value in their offering itself, but we continue to question the value this token will actually present to the ICO investor. Luckily, we are provided an answer.
One thing that will be overlooked in most investor reviews of the CREAM ICO offering is that there is a difference between CREAM and CREAM CASH. The latter will have no fixed supply. While it will be represented in a smart contract, its supply will always be directly tied to the amount of liquid capital actually represented by deposits in the network of ATMs.
People are meant to insert dollars and receive dollars as necessary, and presumably CREAM cash will also be used in regular transactions by merchants who wish to accept it. Cream Cash purchases will always be made in Ethereum, which means the cash value of Ethereum plays an important role in the CDAX or Cream Digital Asset Exchange.
Here is the best way to understand the relationship between Cream Cash and Cream. Cream will have a 100,000,000 fixed supply. Cream Cash holders can earn Cream by staking their cash to receive it – during these holding periods, the value they’ve put into the system can be used to honor withdrawals elsewhere in the system. Cream itself is the gold, Cream Cash is the gold certificate. A $CASH token can be worth 1, 100, or .001 Cream, depending on exchange rates, but a $CASH token will only ever be worth $1. This is a similar model employed with the Tether USD scheme – a scheme which has been called into question.
CREAM’s Regulatory Gamble
What CREAM is attempting to do has been done in legacy ways. The Green Dot Card, among other prepaid card options, have for decades allowed the “unbanked” to get their funds into the banking networks through prepaid debit cards. CREAM is offering more of a train-ticket station approach to the same issue: you can buy your tokens with cash and then you can cash them out for the same amount of cash.
The regulatory implications on the Green Dot model should not be understated. Green Dot, like any large outfit, has run into various problems. Notable is the contention that their “new internal risk policies and procedures” were “negatively impacting Green Dot’s growth in new account activations.”
This reads to the authors as a complaint that the process to get a Green Dot card now had so much red tape that it was no longer growing at the same pace. This case was dismissed, but we can see that this market is underserved.
As we stated in the introduction, CREAM Capital seems well aware of the attention the CREAM ICO will garner from authorities (we’d assume FBI, DEA, SEC – a veritable launderer’s list of law enforcement) and that they are therefore intending to be as friendly to regulators as they can be:
Cream ATMs are fully compliant with Anti-Money Laundering and Know Your Customer laws. We work closely with the Financial Crime Enforcement Network to meet compliance. […] Cream Capital meets and fully exceeds anti-money laundering regulations from FinCEN and the federal government. (from the whitepaper)
We are of a mind that solutions can be introduced to the private market which enable private citizens to have more protection against unconstitutional asset seizures. We note that methods like Green Dot, mentioned above, are being seized in the same manner as cash at this point.
In some ways it seems as though Ghostface Killah and his friends want to have their CREAM pie and eat it; they advance the cause of the unbanked, yet in the same breath vow to cooperate fully with authorities if the people who might benefit most from their system attract unwanted attention. Who does this reassure, exactly?
Why Should Anyone Invest In The CREAM ICO?
We can see this being a successful venture in some ways. We can see the tokens having a utility for the people that need them. We can imagine CREAM Cash machines at corner stores the country over, especially in places where personal security is hard to come by and people would prefer a small amount of cash and a ticket for more cash as opposed to unreliable or expensive bank accounts and other seizable assets.
We understand there is a potential utility here. What we have yet to answer for ourselves is how much incentive the CREAM ICO investor is being presented.
100 million $CREAM (not to be confused with $CASH) tokens will be issued during the token generation event on November 11th. A total of $30 million is desired, with a breakdown as follows:
- $20 million to launch ATM operations in the US and globally
- $1.5 million for their legal department (we find this a wise cost to assess at this stage)
- $2.5 million for C-DAX exchange (the mechanism used to facilitate funds between ATMs, the Ethereum network, and fiat cash)
- $3 million each for debit card integration and initial liquidity of the exchange-to-ATM network
48 million of the tokens will be generated immediately, 40 million of them being sold to the public at a target rate of 75 cents USD each. The other 52 million will be issued dependent upon the money flowing in through the CREAM $CASH network. We see this fluctuating supply (within limits) as interesting but perhaps not fully thought-out.
We find it too hard for the investor to predict how his funds would perform if locked in $CREAM tokens. We are incredibly intrigued by the notion of CREAM CASH terminals but we are not sure we can imagine a scenario where it will definitely play out in the ICO investor’s favor. The ability to purchase CREAM at the C-DAX and the ability to interact with the $CASH tokens in person will be an interesting prospect, but does it represent a genuine investment opportunity, or merely an interesting business plan?
$CASH Liquidity & Card Access
When buying Cream Cash, the price will be always $1 worth of Ether as determined by the market. The sell price would be $1 worth of Ether which would be calculated and determined by the market. When selling Cream Cash for Ether through C-DAX we will take a small withdrawal fee. (From the whitepaper.)
We feel the system is cleverly designed to actually work for the consumer. Unfortunately, we believe there is too much focus on the consumer, and not enough actual benefit is derived by the ICO investor to justify the significant risk of an ICO.
Everything else could be the same and the initial operating funds could simply be raised privately from company representative Ghostface Killah’s colleagues, whose assets must collectively total enough to leverage traditional equity methods or even more modern answers like Bank to the Future for this project.
We’d feel much more comfortable purchasing tokens if the proposed network were already in place.
Hype Will Play A Role
Dennis Coles, stage name Ghostface Killah, is part and parcel of this offering. He is a member of the infamous Wu-Tang Clan, a rap group who once partook in the following satire on the Dave Chapelle show.
Coles has yet to give an extensive interview on the subject. (CryptoBriefing is open to this interview, Mr. Killah.) Lending his name to the project gives it significant street credibility. Co-founder Brett Westbrook says of Coles’ involvement:
“I personally connected with him during a Reddit AMA on /r/hiphopheads last year when he was seeking tech-inclined people to work with in future technology focused projects. Dennis is a very forward thinking person and has a keen interest in emerging technologies. It’s hard to ignore blockchain tech today even when you’re a busy, touring hip hop artist. […] He doesn’t have any technical background with cryptocurrencies. However, remember that Wu-Tang is for the children. He is very focused on what the youth and millennials are interested in. He is a very solid businessman and has surrounded himself with bright individuals with a hunger for bring new, groundbreaking technologies to market. […] Ghostface is one of four co-founders and will serve as the company’s Chief Branding Officer. The hope is that he will be able to help transition the niche technology into a mainstream environment.”
Given the above, we understand that the structure of the company is like this: Westbrook is focused on business, Narcis Ciobotariu is on top of the technology tree (at least as far as keeping it in tune with reality), and Dennis Coles is in charge of creating the buzz and hype around it. Coles has so far done the best job, as the business strategy may lead to a failure on launch – although, we want to keep the assertion clear: the product can work, and can work extremely well for consumers.
Once again, we reiterate that we don’t see this as the sort of token that holders will be eager to get into before it has actually proven its abilities to return value. One thing that has to be noted is the faulty revenue projections made in the whitepaper, as follows:
Lamassu reports that machines move an average of $30,000/month in volume. At a 5-8% commission, we are estimating $1,500 to $2,400/month/ATM in profit. With 800 locations utilized, we estimate $1,200,000 to $1,920,000/month in profits. In other words, anywhere from $14,400,000 to $23,040,000 per year in profits. (From the whitepaper.)
That’s not a revenue projection at all. It requires that you successfully license and launch 800 locations, that they all achieve ideal profits, and that obvious pitfalls are avoided at every step of the journey. Then again, it doesn’t matter.
We’re calling this ICO as we see it: an innovative and interesting use case for cryptocurrency, and portentous of wider adoption of a cashless solution to a specific problem.
But there’s no getting around the fact that the initial fund-raising has the whiff of a money grab, and we feel the business could be privately-funded without the need for the CREAM ICO.
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ICO Review Disclaimer
The team at Crypto Briefing analyzes an initial coin offering (ICO) against ten criteria, as shown above. These criteria are not, however, weighted evenly – our proprietary rating system attributes different degrees of importance to each of the criteria, based on our experience of how directly they can lead to the success of the ICO in question, and its investors.
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This category accounts for the leaders, developers, and advisors.
Poor quality, weak, or inexperienced leadership can doom a project from the outset. Advisors who serve only to pad their own resumes and who have ill-defined roles can be concerning. But great leadership, with relevant industry experience and contacts, can make the difference between a successful and profitable ICO, and a flub.
If you don’t have a team willing and able to build the thing, it won’t matter who is at the helm. Good talent is hard to find. Developer profiles should be scrutinized to ensure that they have a proven history of working in a field where they should be able to succeed.
What is the technology behind this ICO, what product are they creating, and is it new, innovative, different – and needed?
The IOTA project is a spectacular example of engineers run amok. The technology described or in use must be maintainable, achievable, and realistic, otherwise the risk of it never coming into existence is incredibly high.
Tokens which have no actual use case are probably the worst off, although speculation can still make them have some form of value.
The best tokens we review are the ones that have a forced use case – you must have this token to play in some game that you will probably desire to play in. The very best utility tokens are the ones which put the token holder in the position of supplying tokens to businesses who would be able to effectively make use of the platforms in question.
There doesn’t have to be a market in order for an ICO to score well in this category – but if it intends to create one, the argument has to be extremely compelling.
If there is an existing market, questions here involve whether it is ripe for disruption, whether the technology enables something better, cheaper, or faster (for example) than existing solutions, and whether the market is historically amenable to new ideas.
Most ideas have several implementations. If there are others in the same field, the analyst needs to ensure that the others don’t have obvious advantages over the company in question.
Moreover, this is the place where the analyst should identify any potential weaknesses in the company’s position moving forward. For instance, a fundamental weakness in the STORJ system is that the token is not required for purchasing storage.
With many ICO ideas, the timing may be too late or too early. It’s important for the analyst to consider how much demand there is for the product in question. While the IPO boom funded a lot of great ideas that eventually did come to fruition, a good analyst would recognize when an idea is too early, too late, or just right.
Progress To Date
Some of the least compelling ICO propositions are those that claim their founders will achieve some far-off goal, sometime in the future, just so long as they have your cash with which to do it.
More interesting (usually) is the ICO that seeks to further some progress along the path to success, and which has a clearly-identified roadmap with achievable and reasonable milestones along the way. Founders who are already partially-invested in their products are generally more invested in their futures.
Community Support & Hype
Having a strong community is one of the fundamental building blocks of any strong blockchain project. It is important that the project demonstrates early on that it is able to generate and build a strong and empowered support base.
The ICO marketplace is becoming more crowded and more competitive. While in the past it was enough to merely announce an offering, today’s successful ICO’s work hard to build awareness and excitement around their offering.
Price & Token Distribution
One of the biggest factors weighing any analysis is price. The lower the price the more there is to gain. But too low of a price may result in an under capitalized project. It is therefore important to evaluate price relative to the individual project, its maturity and the market it is going after.
The total supply of tokens should also be justified by the needs of the project. Issuing a billion tokens for no reason will do nobody any good.
Communication is key. The success of a project is strongly tied to the project leaders’ ability to communicate their goals and achievements.
Things don’t always go as planned but addressing issues and keeping the community and investors in the loop can make or break a project.