We assign the Auctus project a “Stable+” rating.
The current market for managing pension savings is very complex and requires a new approach. The demographic crisis has become critical for pension plans resulting in a huge shortage of cash in state pension funds. Therefore people that seek retirement in the mid-term are starting to search for alternative ways to save and invest.
The Auctus team began developing the project in early 2017 and has already released an alpha version of the platform. We evaluate the team as being professional with a high potential for synergy, and the advisors as highly skilled in relevant industries.
However one key project risk is the lack of a detailed financial model, though we admit that it is very hard to predict this aspect due to the immature state of crypto assets. There are also number of other risks that the team has no current control over, the main one being a lack of legal regulation of cryptocurrency in most countries, which prevents any evaluation of the possibility of implementing the project's goals.
Nevertheless, we evaluate the Auctus project as potentially attractive and we believe that it could be successful given skilful management and the introduction of adequate legal regulation for the crypto industry in the long term.
General information about the Project and ICO
The Auctus platform is a global smart contract-based retirement and goal-based savings platform with specialized portfolio management services for traditional equity and bond investments, as well as cryptocurrency investments.
The platform provides the user with an aggregated view of all retirement savings, from government regulated IRA/401k plans, voluntary traditional retirement plans, to crypto wallets. According to the founders, only with such a holistic view can well-informed decisions be taken and a professional long-term strategy be established.
In addition, the Auctus platform has a marketplace for retirement apps, which enables its users to customize their experience. All transactions on the marketplace will be conducted via Ethereum smart contracts and AUC tokens.
The project has already collected 959 ETH during its pre-sale, and the soft cap was reached within 11 hours.
ICO start: March, 27th 2018, 02:00 PM GMT
ICO end: March, 31st 2018, 02:00 PM GMT
Target cap on crowdsale: 20,000,000 USD
ICO price: 2000 AUC/ETH
Minimum buying transaction: not specified
Maximum buying transaction: Max amount of AUC token available in token sale / whitelist registrants = Max contribution on day 1. On the second day of the token sale, the maximum contribution will be increased to 3x the amount on day 1. For day three and thereafter no restrictions will be in place.
Bonus: no bonuses during the ICO
Accepted payment: ETH
Total emission: to be announced during the ICO
‘Reserve for Future Stakeholders’ means a reservation of 18% of tokens for future interested parties. The decision to implement this was based on the study of other technological projects and start-ups. This reserve for interested parties will be blocked via a smart contract for 12 months. It will be used only if there is a need or an opportunity to accelerate the growth of the company, otherwise burnt.
Allocation of funds:
Token issue date: Tokens will be immediately transferable after the end of the token sale
Escrow: Using escrow smart contract
A smart contract will be published a few days before the token sale which will enable checking of the quality and blocking rules. The address of the contract will also be disclosed using auctusproject.eth, which is already registered in ENS (the Ethereum name service - https://ens.domains/) to reduce the likelihood of phishing attempts during the token sale.
To participate in the token sale, each participant must register on the whitelist. Before the sales start, all registered participants must fill in an electronic form for KYC/AML purposes.
Description of the services and scope of the project
The essence of the Auctus project is to enable users to monitor and manage their own retirement savings independently by providing a transparent and efficient platform with all the analytical and consulting tools that they need to achieve their investment goals.
The platform is aimed at creating voluntary retirement contributions based on goal-based savings. This approach to capital management involves investing in order to achieve specific financial goals such as paying for children's education or creating savings for retirement, unlike other products aimed at maximizing returns on investment portfolios or rapid growth of value.
The Auctus platform also has a marketplace for retirement apps, enabling customization of the user experience. All transactions on the marketplace will be conducted via Ethereum smart contracts and AUC tokens.
Thus, Auctus is expected to be the first investment platform for retirement savings enabling users to create portfolios consisting of both traditional and crypto assets.
Auctus will have the following functionality:
- combining traditional and crypto investment.
- providing each user with a holistic overview of all voluntary retirement savings.
- consulting with analysts and/or robo-advisors available at any stage of savings management.
- adaptation to individual needs with customizable applications.
- ensuring of process transparency and user confidence.
The robotic consultation system on the Auctus platform provides a variety of services such as expert analysis and recommendations based on an optimized distribution of assets taking into account various risk factors. Subsequently users will be able to program the system to execute automatic transactions that follow a set of rules such as tax optimization criteria or portfolio diversification adjustments.
In addition to robotic consultations, users will have access to investment recommendations from human advisors when they feel the need for them. Consultations with professionals who provide their services via the Auctus Marketplace will give users the opportunity to analyze the investment market by paying in AUC tokens only if there is a positive result. Thus, users will have a transparent and economical method for personalized consulting. Users will be able to evaluate the human advisors, thereby increasing the efficiency of the whole system.
To analyze user portfolios, the system will have access to various risk factors and other analytical functions:
1. Risk and return - Portfolio profitability and its volatility.
2. Value-at-risk - Portfolio returns where total revenue received is potentially lower than expected in a minimal percentage of cases.
3. Expected shortfall - Expected portfolio return in a certain low percentage of the worst cases.
4. Maximum drawdown - Maximum decrease in portfolio return.
5. Impact on risk-return profile - Comparison of the risk and return of the portfolio with a fixed, for example, historical risk profile.
6. Portfolio calculator - Modeling the value of the portfolio taking into account the estimated monthly or annual investment or withdrawal of funds.
All indicators will be available based on historical data (retrospectively) or scenarios (prospectively).
Later, the platform will also be able to provide a full range of investment services using both traditional assets and cryptocurrencies, as well as act as a basis for various pension funds.
Engineering features of the project
The overall architecture of the platform will be developed in accordance with the scheme presented below:
Initially the platform will be hosted at Microsoft Azure.
The system will have two interface modules. A web module developed using Angular 5, and a mobile application for iOS and Android powered devices. These modules will contain exclusively client-side rules and exchange data with a marketplace API.
In order to authenticate oneself on the platform, either OAuth2 SSO for platform off-chain access or METAMASK for accessing Ethereum Network integration features will be available.
The API gateway layer will show all the services provided and connect them with the platform backend. The backend will consist of two modules - Platform Microservices and Portfolio Performance Microservices.
Platform Microservices is a backend module which is developed using the ASP.NET Core framework. This module provides services for mobile and web applications. It contains rules for server operations related to the market such as creating a portfolio and tracking performance.
The Portfolio Performance Microservices module will be able to receive information about the market using third-party APIs - for historical currency values and the history of the traditional asset market. The data collected in this module is stored in the same SQL Server database used by the Marketplace API.
Off-Chain Async Transactions Layer integrates web application data into the blockchain system. Using queues in this layer, the developers are planning to improve the user experience by minimizing response time for the application. This approach makes the solution more scalable and tolerant to network instability.
The Ethereum Sync Module will be built using NodeJS and will be integrated into web3.js. Some application information will be stored in smart contracts developed using Solidity. Payments for consultations will be made using smart contracts, depending on realized values of the portfolio. To compare original forecasts with actual results, the system will enable use of, for example, the Oraclize approach in each smart contract. This system will determine whether tokens frozen for payment in a smart contract are transferred to the consultant (in case the advice was good, which means that the results correspond to predictions) or returned back to the user (if the recommendation was unsuccessful).
The Container Management and Auto Scaling Layer will use Kubernetes to manage the Docker containers and provide auto scaling.
The Robo Advisor Public API gateway layer is intended to provide a public API to connect platform users and/or 3rd party financial specialists with Robo-advisors on the Auctus Marketplace.
The technical paper also reflects the codes for the three main smart contracts for the system:
- The AUC token smart contract which defines the AUS is ERC-20 and ERC-223 compliant.
- The AuctusEscrow main smart contract, which is used for locking and redeeming tokens.
- The AuctusPlatform smart contract, which is used for storing advisors’ financial estimations on the platform.
Summing up, the technical component of the project is described in detail, offering a useful idea of how the platform will operate for a potential investor.
In the near future it is expected that many countries will suffer a large-scale retirement crisis. Given the decline in the birth rate and the increasing average life expectancy, emerging markets with public pension systems are forced to drastically reduce amounts for future pension payments, which clearly threatens to undermine pensioners’ standards of living. According to analysts such markets are better protected from the effects of aging populations and yet they also will not be able to provide adequate replacement rates.
According to research on global demographics, by 2050 the percentage of the population at retirement age will double (and in some countries even triple) in comparison with 2010.
Demographics do not determine economic development but they are certainly a key factor for determining the growth potential of the world economy. Aging of the population, combined with a decline in the birth rate in developed countries, indicates a decline in economic growth in the future. Increased productivity can reduce the impact of such factors and technological innovation is an ideal source of productivity improvement.
Unfortunately, the social policies of different countries cannot change demographic trends in the medium term. This is potentially possible in the long term only (mainly due to the creation of favorable conditions for population growth) but much can be done to adapt to demographic changes.
In the US, according to ICI research for 2017, the total amount of retirement contributions has reached $27 trillion:
US Retirement Market
In the EU, the cost of public pensions is also high, amounting to 11.3% of GDP. It is projected that this figure will grow to 12.9% by 2060 which means that pension benefits are likely to fall in real terms during the next half-century in many member states.
Some countries have already begun to create more flexible conditions for citizens paying pension contributions. For example, new rules for retirement introduced in April 2015 in the UK have proved very popular. They are designed to give people the flexibility to contribute to a Defined Contribution (DC) pension plan, according to their conditions and preferences. These reforms led to the treasury receiving revenue of £1.5 billion in the form of tax revenues in 2015-2016, £1.2 billion above the initial forecast.
However, many people do not take any steps to secure a comfortable life after retirement. Undoubtedly, some of them simply hope that the economy will again show significant growth before it will be the time for them to retire. According to social surveys, only 48.6% of respondents answered that they have savings of $1,000 and only 44% have deferred these funds directly to retirement:
According to the same survey, 38% of respondents answered that they did not even have 100 dollars available as savings at the time of the survey, confirming their non-involvement with voluntary savings for their retirement.
In general, we can say with confidence that the market offers huge potential for growth of the Auctus project. Nevertheless, the team will have to make considerable efforts to win any significant market share, since the retirement savings market is not only highly competitive but also significantly regulated in most developed countries.
Competitors and competitive features of the project
In the asset management industry many ICOs have been conducted recently, some of which have turned out to be successful. These include Blackmoon Crypto, Cindicator, DIGIX, Enigma, ICONOMI and Melonport.
Auctus positions itself as a specialized platform for creating and building voluntary retirement savings, integrating the latest analytical functionality.
The project documentation illustrates the competitive environment of existing platforms:
We have identified the main players who in our opinion are potential competitors for the project under consideration: Betterment, Wealthfront, Nutmeg, Blackmoon, and Melonport.
Betterment – a centralized online investment company based in New York, registered with the Securities and Exchange Commission, a member of FINRA. Betterment.com is also a registered investment adviser (RIA) and a broker-dealer. The company is an automated targeted investment service. Betterment invests in a portfolio of passive funds and ETFs and offers both investment and tax investment accounts, including traditional and individual pension accounts. The company manages $10 billion dollars of assets.
Wealthfront has developed a personalized portfolio of global diversified investments for each of its customers. The company has hired world-class financial experts and scientists to improve its strategy, which also includes the use of robotic advice. Established in December 2011, Wealthfront is one of the largest players in the field entrusted with the management of more than $8 billion dollars of assets.
Nutmeg – an online investment management company. The company invests customer funds in accordance with their investment objectives and risk factors in such instruments as securities, liabilities, money, commodities and other investment assets primarily but not exclusively through ETFs. The service provides an online alternative to exchange platforms where customers make their own decisions.
Blackmoon positions itself as a platform that combines both crypto and traditional investments. The platform provides the investor with a set of tools for managing a crypto portfolio. It is important to note that fiat currencies can also apparently be integrated into the system. This clearly gives consultants a great opportunity to develop portfolios that offer diversified sources of income.
Melonport – a private company that is marketing its Melon protocol for managing open source assets on the basis of blockchain. This protocol enables users to:
- Customize the structure of a portfolio using smart contracts.
- Manage digital assets within predefined parameters selected by the structure of the user portfolio.
- Create an audited record with almost no installation costs.
- Invest in other users’ portfolios or attract investments to a personal portfolio.
In addition to the services considered above, it should be recognized that many banks and portfolio managers create online investment tools. Usually this category of companies shifts scope from innovations to business models and medium-term strategies.
Auctus is positioned as an innovative, decentralized crypto service that focuses directly on retirement plans and goal-based savings using the decentralized facility of the Ethereum network.
Investment risk analysis
In the white paper, the founders consider risks potentially threatening the successful implementation and further development of the platform. In our opinion, the main risks are the following:
When considering this project, it should be taken into account that there are very few official mechanisms that enable legitimate investment in cryptocurrencies. At the same time, there are countries in which the attitude to cryptocurrency at state level has not yet been determined, or the use of such currency is completely prohibited. Therefore, it is difficult to predict to what degree the project will become truly global as intended.
The risk of non-acceptance by society
As described earlier in the market review section, a large number of people do not think about how and when to start taking care of their solvency while being retired. Young people think that at the time of their retirement the economy of the country in which they live could change greatly, local or foreign currency will be devalued, tax liabilities will change and so on. The number of users potentially interested in the project is very limited and much depends on the quality of the product being developed. Therefore, there is a serious risk that the platform will not be able to attract its target number of users.
Team and stakeholders
The team consists of 10 people, with backgrounds in engineering, finance and retirement planning.
Raphael Vantroost, CEO - Studied economics at Basel and Yale University and holds an MBA degree from INSEAD. He brings more than 10 years of experience to the project, including that with companies such as UBS Investment Bank and Deutsche Bank. For the past few years, Raphael has been working in the field of Corporate Strategy, M&A and Real Estate Investments. At Auctus, Raphael is responsible for general management tasks such as day-to-day management decisions, as well as implementing Auctus’ long and short-term plans.
Daniel Duarte, CTO – Has more than 7 years of senior software engineering experience, having led multiple projects at DTI Digital, promoting blockchain technology and leading various blockchain initiatives. He holds a BSc in Control and Automation Engineering and has further certifications in Machine Learning and Salesforce Development & Management. Daniel is Chief Technology Officer at Auctus and therefore oversees the technical development. He is working closely with the development team, bridging technical development and general management.
Vinicius Melo, Head of Strategy - brings retirement fund experience, having worked at one of Brazil's main pension fund companies (FUNPRESP-JUD). He is certified by the Certification Institute of Social Security Professionals (ICSS), mandatory for executive, supervisory and governing board members, as well as for investment committee members and other pension fund employees directly responsible for investing benefit plans’ guaranteeing resources. At Auctus, Vinicius is responsible for all strategy-related tasks, such as token economics, token sale related strategies, and corporate strategy related questions.
Other members of the team include Ludmila Lopes (Head of Marketing), Daniel Boaventure (Head of Operations), Felipe Silveira (Project Manager), Thiago Araujo (Senior Software Engineer), Guilherme Gusman (Senior Software Engineer), Ariny Guedes (Lead Ethereum Engineer), Daniel Vitorino (Senior Software Architect), Mariana Azzi (UX/UI Designer) and Samir Taiar (Brand Interaction Designer).
Furthermore, the team is supported by 5 industry experts from the finance, law, cryptocurrency and retirement industry.
Philippe Castonguay, 0x project - is a well connected advisor within the development community of cryptocurrencies. Bringing along experience as relationship manager for developers at the 0x project, he is very familiar with collaborations between cryptocurrency projects, as well as network effects. Philippe studied statistics at the University of Montreal.
Martijn van Eck, Holland Fintech - is engaged in the implementation of a new Dutch ecosystem of the Pension Fund in Holland FinTech. According to the website of the project, Martijn has a unique experience that unites FinTech and Pension Tech which will be able to achieve the goals set.
Eric Paley, Legal Advisor - has been working at Nixon Peabody, a member of the world’s top 100 law firms for 13 years, currently holding the position of partner. Eric will monitor compliance with legal norms.
Adam Greetis, Legal Advisor - has worked for Seyfarth Shaw LLP for over 18 years, heading the Employee Benefits and Executive Compensation department. Has a degree in jurisprudence.
Steven Clark, Financial Advisor - Professor of Finance at the University of North Carolina (USA). In parallel, managing director of Horizon Investments, specializing in managing goal-based investments and developing accumulation investment strategies.
Philippe Castonguay, Development Advisor - Cryptocurrency enthusiast, former Relationship Manager for developers at the 0x Project, holds M.Sc in Statistics at University of Montreal (Canada). Philippe has a good knowledge of the network, and will advise the team in terms of effective collaborations.
In our opinion, the team is efficient and combines knowledge in relevant fields - FinTech and jurisprudence. At the same time, there are top professionals advising Auctus who have substantial experience in providing both legal services and pension plans and investments.
Development strategy and the roadmap
The roadmap includes several versions of the platform that will be released gradually. The latest version will be released in Q3 2019:
Versions of Auctus will be developed according to the table below - with increasing complexity and opportunities:
At the time of this review, the alpha version of the platform has already been released on the Ethereum Rinkeby test network, and already includes examples of Human and Robo advisory services.
Users will be able to set their own goals and receive recommendations for their portfolio with expected earnings in the test mode.
The beta version will complement the previous one with more features including analytical tools and will already function on the Ethereum mainnet.
After the release of the alpha and beta versions, other investment functions such as asset management, automatic portfolio redistribution, the use of digital and traditional assets, etc will be introduced.
The goal of the development strategy is to position the project as a blockchain pioneer in the retirement plan industry and also to maintain maximum potential for the development of a fully integrated platform.
According to the white paper, the target clients will initially be employees and/or users of other cryptocurrency projects, so that there would be no particular barriers for them to start exploring the opportunities offered by the Auctus platform. Their experience will also lead to referrals and word-of-mouth marketing.
The marketing campaign will be conducted with the involvement of Ditto PR resources which previously worked on the promotion of the Monero project. The team has also announced that they are engaging M&A PR agency for the promotion campaign, who led the campaign for the Ripio Credit Network.
According to social media statistics, the project is garnering quite strong interest among the community: The number of subscribers is constantly growing and currently stands at 1700 on Facebook and 5000 on both Twitter and Telegram. Also, according to the founders, the white list had over 7000 potential contributors before the ICO details were announced.
Auctus has already commenced collaborating with a number of popular services such as:
- Horizon Investments Inc. (robotic consultancy).
- Symetrics B.V. (analytics).
- Ripio Credit Network (borrowing).
- Aragon (decentralized technology).
- 0x Project (protocol for the decentralized exchange of ERC-20 tokens).
- Amadeus (a relayer based on the 0x protocol to serve DApps for ERC-20 token exchange).
Auctus has also recently joined the Enterprise Ethereum Alliance, which will help the team to bring the awareness of their idea.
To bring additional attention to the project, the team is planning to launch a game-driven campaign: A kind of alpha platform-based game will enable early users to better understand the platform's capabilities and give valuable feedback to developers.
The team is currently translating the website and technical documentation into Russian, Chinese, Korean, Japanese and Brazilian Portuguese.
The team has a scenario plan with regard to different levels of contributions raised through the ICO. According to the information provided, Auctus has development scenarios for 4 levels of funds raised: $3M, $8M, $15M and $20M.
Overall, this projection looks quite balanced, and the expenses for platform development, office rental, staff and other expenditures depend on the amount raised during the crowd sale. There is also an annual rate, which gives an idea of how long the project could run on the proceeds from ICO. The team estimates that it will take 3 years on average for Auctus to start earning revenue from services provided.
According to the team’s financial considerations, the platform will start charging a fee 2 years after launching. The management fee is defined at a rate of 0.25% of assets under system management. This rate will be constant for every user without any correlation with the volume of his or her investments with Auctus.
In order to hit the break-even point, the project has estimated a yearly amount of assets engaged after the management fee is due for users. As a result, the team plans to manage around 2.5 bln USD within 3 years. This is based on open source information on assets under management by Betterment and Wealthfront, both using the US market only, which are $10 bln and $8 bln respectively. In our opinion, this approach does not take into consideration many factors affecting future performance of the project and cannot be considered as a justified economic model. Therefore, we assume that reaching break-even point could take more than three years.
Investment attractiveness of the token
AUC tokens are an infrastructural element of the platform. Each user will have to hold a certain number of tokens in escrow. A higher amount of AUC will give participants access to additional and/or premium functions, as well as reduce annual fees for using the platform.
In addition, AUC tokens will be used to pay compensation to consultants when revenue obtained due to their recommendations is consistent with forecasts, and volatility does not exceed acceptable risk levels.
According to the white paper, the AUC token is neither engaged for investing in assets through the platform, nor is converted to investment instruments in the future. Users will make any portfolio investment through fiat and/or cryptocurrency balances. Thus, the founders position AUC as a utility token.
In our opinion, token price will fundamentally grow with the successful implementation of the milestones established in the road map, as well increasing user interest in the platform. Currently, it is quite difficult to predict how quickly the project will be able to attract its target audience and how rapidly demand for services will grow.
Nevertheless, we believe that the Auctus project has a moderate potential and in the long term it may be of interest to a significant number of users assuming effective operations management and skilful use of all advantages of decentralized technologies.
The information contained in the document is for informational purposes only. The views expressed in this document are solely personal stance of the ICOrating Team, based on data from open access and information that developers provided to the team through Skype, email or other means of communication.
Our goal is to increase the transparency and reliability of the young ICO market and to minimize the risk of fraud.
We appreciate feedback with constructive comments, suggestions and ideas on how to make the analysis more comprehensive and informative.