FIC Network Rating Review

Rating

Based on the results of the analysis performed, we assign the FIC network a “Stable +” rating.

FIC network is a decentralized platform for trading traditional fixed-income debt instruments, creating derivative instruments (ECF), thus creating a crypto market for fixed-income debt instruments as well as providing related services (audit, insurance and other services). The platform is aimed primarily at institutional investors.
The product is being developed by Factury Inc., a company existing since 2016. The concept of a blockchain platform for the trading and placement of financial instruments was formulated by the company in the second quarter of 2016. They have received seed investment from Startupbootcamp NYC, Boost VC and Bialla Venture Partners, starting in the second half of 2016. In the 1st quarter of 2017, a full-time team was put together, which then launched a test network and an alpha version of the application in Q3 2017.

We see a high market potential for the ecosystem, potentially high demand for services from users and the urgency of the problem posed. The founders and the team, which includes a large number of professionals who have the necessary relevant experience, together have the competence to implement the project. The team wants to bring ideas from the traditional investment world to the crypto industry, and bring the crypto industry into the traditional market. Both eminent advisors (Ismail Malik, Jon Chou) and venture institutional and private investors (VC Boost, Bialla Partners, Startupbootcamp NYC, Jed McCaleb, the founder of Stellar) have demonstrated their interest. Venture investors have participated not only via equity (open sources show at least $20,000 of investment from the start-up accelerator) but also in tokens: Astronaut Capital fund invested 100 ETH at the stage of the private sale, as mentioned in the corresponding press release.

We also note the absence of direct competitors at the time of analysis (April 2018) and fairly clear tokenomics. The use of the time-tested Stellar protocol for the development of the FIC network is a technically sound reliable solution.

However, we draw attention to significant risks that could affect the project’s success, and factors that must be taken into account by investors, namely:

Business and commercial risks – the relative conservatism of the intended ecosystem users, and a strong dependence on the direction in which legislative regulation of the crypto market develops, may pose a threat to the success of the project’s ecosystem. Given the introduction of appropriate regulation, there is a risk of large players (investment banks, brokers, etc.) entering this market with their platforms and significant financial resources.

Legal risks - the need to introduce legislative regulation of the crypto market for the project’s success, and the conservatism of supervisory authorities in different countries could remain the case over a long period, during which the project will be obliged to function in a rather narrow market. In addition, the need to meet the requirements of legislation in all countries planned for the project’s introduction, carries additional potential financial and time costs in resolving legal issues.

Regarding the two factors above, the question arises as to whether the project’s financing or self-sufficiency is enough for this period until the necessary legal nuances in different countries are settled and the project can fully function in its operational space.

Taking into account all identified risks and significant factors, we see a certain potential for the project and assign it a “Stable+” rating.

General Information about the Project and ICO

FIC network is a decentralized platform for the placement, trading and securitization of fixed income financial instruments. The main users of the platform are intended to be institutional investors - financial institutions, asset managers, investment funds, hedge funds, insurance companies and investment banks. A platform for individuals is planned to created in the future. The company expects that the use of blockchain technology will reduce operational and financial costs for users, ensure the transparency and reliability of operations in the traditional debt market and will allow the creation of a debt market based on cryptocurrency rather than fiat. In fact, this will be a completely new market, as such a market does not currently exist, with the exception of debt financing on exchanges and Bitcoin futures.

The FIC network is creating an ecosystem in which institutional users can place, buy and sell fixed-income financial instruments such as bonds, loans, collateralized loans, syndicated loans, credit default swaps (CDS), futures and asset-backed liabilities (ABS). Access to the platform will be provided to companies that provide financial services - auditors, appraisers, legal and insurance companies.

The token will be used for the purposes of implementing activities in the system, such as placement, trading and possession of financial instruments (a utility token).

Purchase of financial instruments using FIC tokens is not provided for.

Website: www.ficnetwork.com
Whitepaper: https://s3.amazonaws.com/factury-public-files/FIC+Whitepaper.pdf
Twitter: https://twitter.com/ficnetwork
Telegram: https://t.me/ficnetwork
Facebook: https://www.facebook.com/ficnetwork
Bitcointalk: https://bitcointalk.org/index.php?topic=3084150
YouTube: https://www.youtube.com/channel/UCm8N9-wdiM8RQ0XRLev7_gw
Medium: https://medium.com/fic-network
Reddit: https://www.reddit.com/r/FIC_Network_Official/
 

 

Private sale

Presale

ICO (public sale)

Start date

no data

09.03.2018

07.05.2018

End date

no data, finished

07.05.2018

15.05.2018

Token

eFIC (ERC-20)

Soft cap

3 500 ETH (reached during private sale)

Hard cap

16,000,000 USD

Token price

0.10 USD

Bonus

60%

30%

-

Minimum investment

10 ETH

10 ETH

-

Maximum investment

-

-

-

Accepted currencies

ETH

Lock-up bonus for the investors (number of days from the ICO end date)

0% (0 days)

35% (90 days)

70% (180 days)

Restricted list

United States

Tokens will be sent to investors after the end of the ICO. Bonus lock-up tokens will be sent to investors’ wallets within 90 (bonus + 35%) or 180 (bonus + 70%) days of the end of the ICO, depending on each particular investor’s choice.

eFIC will be issued in the amount of 316,500,000 (three hundred and sixteen million five hundred thousand) tokens. At the same time, no more than 160,000,000 (one hundred and sixty million) tokens are offered for placement during the ICO. The remaining 156,500,000 (one hundred and fifty six million five hundred thousand) tokens are reserved for bonus. After the ICO, unplaced tokens and bonuses will be burned. After the launch of the FIC network (later in 2018), token holders will be able to convert eFIC tokens into FIC tokens (after which all eFIC tokens will be burned) for use in the ecosystem. Holders of eFIC will receive FIC in proportion to their share of eFIC.

The total number of tokens remaining after the end of the ICO will be distributed 1-to-1 in such a way that their final distribution will be as follows:

According to the team’s plans, 30% of tokens in reserves will be used to stimulate use of the platform by institutional investors (investment banks and fund managers) through discounts and marketing activities; 20% of the team’s tokens will be locked up by the smart contract, to be released within 4 years.

The company does not disclose data on the proposed cost structure or the planned targeted use of funds raised arguing that “they need to respect the compliance and to do this they cannot reason or make promises about the future, including the proposed cost structure”.

Description of the Services and Scope of the Project

The FIC network uses its own distributed registry (blockchain) based on the Stellar protocol. From a technical point of view, Stellar consists of "native currency", "accounts" and "assets". Accounts and assets are abstract objects in this network. The FIC network does not change the Stellar protocol, but defines various special agreements and conditions in such a way that these objects ultimately represent financial instruments, loans, users, etc.

According to the developers, the launch of a separate blockchain for the FIC network is a necessary step to meet the needs of the fixed-income debt financial market, the adaptation of this market to the crypto market, the effective distribution of tokens and the prevention of scaling problems.

Currently, the FIC network provides three components: the FIC ledger, eDepository and infrastructure, which create a self-serving, self-adjusting and self-regulating network of participants. This allows assets and asset investors to buy and sell assets / liabilities in a simple, transparent and economically attractive way.

The FIC ledger is cryptographically protected and acts as a single permanent source of consistent information on registered rights to assets and liabilities without involvement and / or participation of third parties.

eDepository – a software solution that interacts with underlying nodesof the FIC Network. It enables network members to publish, update, manage and verify asset information throughout the entire life cycle of each liability and to exchange information using the P2P protocol.

Infrastructure provides a range of services such as trade in instruments, analytics, audit, insurance.

In the abstract, the process for creating financial instruments in the FIC network ecosystem is as follows:

Users never create ECF (Expected Cash Flow, the key asset in the ecosystem) within the framework of the platform. They can create only financial instruments which, in turn, create ECF. Typically, when a user creates a financial instrument, he becomes the owner of all the ECF from this tool.

Users never buy financial instruments as such within the framework of the platform; a user can only buy ECFs of the instrument. From the point of view of blockchain, the owner of an instrument is the person who can sign it.
Following this logic, the loan owner (who signs it) is a service provider, but who owns the money can change without restriction. From a technical point of view it is very important to distinguish between the creator of the instrument, the owner of the instrument and the owner of the cash flows created by this tool.

When a liability is declared default, only its owner can make the appropriate changes to the FIC network, obliging it to issue default tokens in exchange for a small amount of FIC. A default token serves as provable signal that a default was declared on the instrument and it can be used to trigger other conditions, such as claim under a credit default swap (CDS) contract.

Added one by one, it will be possible to create the following types of financial instrument within the framework of the ecosystem: Loans, corporate bonds, syndicated loans, credit default swaps, futures, and asset-backed liabilities.

The current ecosystem assumes the following roles:

  • Node Holders
    Can be any participant who wishes to check and maintain complete integrity of the network independently and/or register his actions on the FIC Network without intermediaries, having a dedicated server to run the node. A node holder can  optionally turn on validator mode or archivator mode or both of them.

  • Gatekeeper
    A Gatekeeper supports the FIC Network user base exclusively for qualified participants. The founder of the FIC network (Factury Co.) temporarily acts as Gatekeeper to ensure a maximum degree of network security. Factury conducts KYC procedures and assigns rights to users on the network. This does not prevent owners of FIC tokens from owning or trading tokens from their accounts.

  • Observer
    An Observer has the right to read the registry only, and may request extended data from other participants. It can be an analytical company, government agency or an investor prior to investing in an instrument.

  • Trader
    Traders have the ability to own both types of network assets (currency tokens or ECF (internal derivative assets based on existing debt instruments)), trade freely with assets and receive payments for any ECF that they own.

  • Originator
    An Originator is the only user who has the right to publish a financial instrument. Such a tool also emits tradable assets (ECF) when created. The initiator can sell individual ECF to traders in exchange for currency tokens.
    The FIC network monitors performance indicators for the instruments published by originators, including expected repayment rate of the borrower (this is referred to as BERR in the white paper, but in fact it is the usual effective rate on a loan) for the lending market.

  • Servicer
    A Servicer is the only user who can modify existing debt instruments; he is responsible for sending payments to the system. A servicer can own currency tokens, trade them freely and also use them to publish repayments to instruments he services.

  • Gateway
    A Gateway user is the only party that can issue currency tokens to the network and register them in the registry. Gateway can distribute tokens to everyone with whom they have an agreement. This is the only member responsible for the integrity of tokens issued.

 

Above and beyond the market and other risks (see the ‘Risks’ section), platform products could be of interest to a fairly broad range of participants in the crypto market:

  1. Traditional institutional investors

  2. Crypto traders and traditional traders

  3. Investment funds and crypto funds

  4. Hedge funds

  5. Investment banks

  6. Insurance companies, auditors

  7. Individual investors (when granted access to the ecosystem)

Currently (April 2018), the alpha version of the product enables creating initiators, service providers, users, financial instruments and portfolios. Although the functions of the alpha version are rather limited and do not reflect the full functionality, speed and convenience of the platform, the availability of a workable alpha version of the program is an encouraging factor.

The potential of products and services offered by the project can be estimated as high. Demand for the services and functions is likely to be significant, subject to the creation of a legislative framework and the introduction of necessary regulation.

Market Review

4.1 Market analysis

The global corporate debt market reached $127 trillion as of June 2017, surpassing the stock market by almost 2 times ($67 trillion as of June 2017).

The currency market as of April 2018 reached a capitalization of $0.4 trillion which is circa 0.3% of the capitalization of the corporate debt market.

As of April 2018, there is no analogue of the fixed-income corporate debt market in the crypto economy. Factury, the company developing the FIC network project, aims to create such a market with the launch of their ecosystem.

The market for traditional debt instruments is highly regulated; mechanisms of regulation are strict and differ from country to country. In order for the debt market to become a full-fledged aspect of the crypto economy and attract the attention of traditional investors, it should be regulated at the legislative level of all countries where the market will operate. This is an intractable objective that requires not only the efforts of the Factury team, but the entire financial world in cooperation with regulatory bodies. Given the complexity of regulatory mechanisms and the caution of regulatory bodies, the risks for the FIC network project are quite high.

Taking into account the high volatility of the crypto market, creation of the fixed-income corporate debt market can be considered as promising, but it will be difficult to take a share of the traditional debt market without attracting traditional institutional investors, as crypto investors are used to high yields of cryptocurrency and the possibility of a low income albeit a fixed one may interest only the most conservative ones.

In general, we cannot deny the prospects of such a hybrid of blockchain and the traditional debt market, and the company believes reasonably that their technology will find its users. The main negative factor that could affect the team's plans is the lack of legislative regulation of this market and the obvious need for such regulation, the introduction of which could take quite a long time.

4.2 Competitors

As of April 2018, there are a number of projects in varying degrees of elaboration that focus on the creation of trading platforms and ecosystems, but the overwhelming majority of them are focused on the cryptocurrency and token markets. Some projects, such as Polymath or BlockEx aim at implementation of traditional tools in their system but they may face the above mentioned legal problems and regulatory framework. The Lendingblock project also tried to develop the idea of fixed-income debt instruments, but initially they only considered tools linked to crypto assets, which limits their audience exclusively to crypto investors.

The FIC network considers BlockEx and Polymath its main competitors.

 

FIC network

BlockEx

Polymath

Wanchain

Players of traditional market

Project Type

Ecosystem/platform

Ecosystem/platform

Ecosystem/platform

Platform

Any

Basic Functions

Trading platform for creation and listing of instruments

Trading platform with the ability to create and list tools

Trading platform with the ability to tokenize tools

Exchange of digital assets

Anyone at the discretion of the initiator

Instruments

(basic claimed)

Bonds, loans, credit default swaps, futures, syndicated loans

Bonds, mortgage loans

Shares, venture capital, real estate

Crypto assets

Any at the discretion of the initiator

Key users

Institutional players

Institutional players/individuals

Institutional players/individuals

Crypto investors

Institutional players/individuals

Degree of development

Alpha

Unknown, there is MVP

Unknown, there is a demo access

Unknown, there is demo version

-

Legal risks

High

High

High

High

High

ICO

Pre-sale

ended

ICO is ended

There was no ICO

ICO is ended

-

Capitalization

(as of the ICO/hardcap date)

3500 ETH (~$1.8 million)/$16 million

~$28.4 million/$43.9 million

- / -

$10 million/$10 million

Substantially higher

Product Launch

Q4 2018

Q4 2018

Developers do not announce the date

August 2018

Any

Risk degree

High

High

High

High

Low / Medium


Currently (as at April 2018), the peaceful coexistence of all these projects is quite possible, since each has its own target audience.
The big players in the traditional financial market (exchanges, investment banks, brokers, etc.) might present a greater threat to the FIC network, since they know their market well, have large financial and administrative resources and if they are interested in segmenting in the market under consideration, they will be able to seriously compete with technical startups, which could create serious commercial risks for the FIC network.

Team

Given the essential complexity of trading systems, the development team looks somewhat understaffed. The development team has to solve a rather complex task with very limited time, taking into account the company's ambitious plans to launch the network in Q4 2018 and the absence of a beta version of the product at the beginning of Q2 2018.
In addition, due to the product’s orientation to the traditional market and the complexity/conservatism of this market, the lack of real experience within the team can be felt both in terms of technical competencies and in terms of business processes in the corporate debt market.

The team does not include a professional who would be responsible for resolving and coordinating issues with regulatory and supervisory bodies. Given the close attention regulators pay to the traditional debt market, we can assume that the same attention will be paid to the prospective crypto debt market.

Arturs Ivanovs - Founder & CEO
Has worked in the Ministry of Economics of Latvia; he was involved in the regulation of online lending. Arturs also worked as a senior project manager at Porter Novelli Latvia, representing the interests of large companies such as the European Investment Fund, Mercedes Benz, Z-towers. Specialist in Economics and Jurisprudence.
Graduate of Riga Graduate School of Law

Alvaar Soosar - Co-Founder & COO
An experienced executive director for the structuring and management of securities with fixed income and portfolios. Previously managed a portfolio of securities with a fixed income of $7.8 billion. He is an investor with more than 20 years of experience working with various types of asset.
He holds an MBA from the University of Oxford's Saïd Business School and a bachelor's degree from the University of Virginia.
Aigars Staks Co-founder & Senior FIC Network Architecture Advisor
Aigars has top level management experience, and at the beginning of his career worked for Microsoft and PwC. He built his career managing large IT projects and strategic planning.
Received a master's degree in Informatics from the University of Latvia and also has a MBA degree from the joint program of the Riga Business School-University of Buffalo.

Kalvis Kalnins - Co-founder, Software Developer
Kalvis has been involved in IT, AI and educational start-ups since high school, and more recently, in the field of finance and blockchain. He is one of the founders of Stellarmus, a blockchain-based interbank payment network. Has a bachelor's degree in economics and business from the Stockholm School of Economics.

Anatoly Ressin - Temporary Head of Technology
Anatoly has extensive experience in software development, worked as a leading developer and held senior positions in software development. Currently, he is the general director of BlockVis, a company involved in the organization of blockchain competencies and education, and also structuring the blockchain market in Latvia and abroad. He is one of the founders of several companies including Fastr, a software development firm for training reading, and AssistUnion, which creates smart web systems. He received a master's degree in computer science from the Transport and Telecommunication Institute. We draw attention to the fact that Anatoly does not indicate his affiliation with Factury / FIC network on LinkedIn profile.

Peteris Ratnieks - Backend & Blockchain Developer
Peteris is a software developer with experience in Python, C/C++, Javascript, Matlab/Octave, Pascal and Bash. Previously, he was involved in a start-up which developed a payment system for banks on blockchain. We draw attention to the fact that Peteris does not have profiles on professional social media .
He received a bachelor's degree in mathematics from University of Latvia.

Agnese Kerubina - Chief Scientist & Product Support Manager
Agnese worked as a laboratory assistant in the research group of theoretical quantum nanoelectronics, University of Latvia.
She has a master's degree in physics from the University of Latvia.
Aleksandr Borovenskis Head of Communications
Aleksandr been working in his field for more than 10 years.
Co-founder of the TEDxRiga movement. Conference organizer of Startup Pirates.

Valters Grisans - Lead designer
Valters is a developer of digital products. He has worked with numerous international companies in DDB Latvia. On his LinkedIn page Valters does not indicate that he is working on the FIC network, but states that he is a freelancer. We do not consider this a significant risk for the project since the designer is not a key member of the team for this project.

Key advisors

Joseph Guagliardo - Advisor
Works as a non-legal advisor at Factury. Joseph is a partner at Pepper Hamilton LLP in New York and Philadelphia, where he leads the Technology Group and is chairman of the Blockchain practice. Previously, he worked for more than ten years for an international venture financial company and participated in the development and implementation of software for trading in fixed income instruments and for mutual settlements for banks worldwide.

Matiss Ansviesulis - Advisor
Entrepreneur, investor and advisor of many tech startups. He is the co-founder and CEO of Creamfinance, founded in 2012 and which then grew to a company with an annual income of 35 million euros, employing more than 300 people in eight offices. In 2016, Creamfinance was recognized as the fastest growing fintech company by the Magazine Inc.

Angel Colon - Advisor
Experienced financial professional from New York with more than 15 years of experience in negotiating and marketing financial products, risk management and operations with fixed income and equity securities. The co-founder of Public Offering Corp., which is the engine of BANQ, an electronic trading and financial platform.

Ismail Malik - Advisor
ICO strategist and chairman of Blockchain Lab in London, UK. Blockchain Lab is a specialized partner in the development of cryptographic projects using distributed registries (DLT). Blockhain Lab pays great attention to research and development, primarily by studying the built-in execution environments for smart contracts on Ethereum, Bitcoin and Corda.
Ismail is considered one of the most influential people in the global Blockchain industry.

Jon Chou - Advisor
Co-founder and CEO of Bee Token. Bee Token, a decentralized Airbnb, has one of the most active channels on Telegram with more than 40,000 subscribers. John has been active in the crypto market since 2012 and is an advisor to Solve.care and the FIC network.


Marcus Spillane - Advisor
Marcus is co-founder of a number of businesses. A commercially oriented dealmaker, he has attracted more than 20 million dollars of investment in a number of enterprises from various industries. He is both an investor and consultant and focuses on strategy, commercialization, management and business development. Member of the Association of Certified Accountants of Ireland.

Anthony Georgiades - Advisor
Anthony is a partner in Innovative Capital, a leading technical fund from New York, where he focuses primarily on early stage Blockchain investments. Previously he worked with First Round Capital, a venture capital firm, and worked as a product manager at COZY Robotics. Has deep technical knowledge in the fields of cybersecurity, big data and fintech. He was an early investor and developer of the Golem Network, the first global market for idle computer power built on the basis of the Ethereum transaction system.

Joon Pak - Advisor
A global blockchain leader at ComplyAdvantage, engaged in AI in the field of regulatory technologies, who works with global financial institutions, Fortune 500 companies and leading financial companies to combat money laundering, terrorist financing and human trafficking. Has more than 5 years of experience in business intelligence and compliance, Joon was an early investor in various cryptocurrencies and ICOs.

The composition of the advisory board is diverse and competent in various fields directly related to the product being developed. The presence of well-known ICO professionals such as Ismail Malik and Jon Chou inspires confidence in the seriousness of the project and an appreciation of the industry participants.

We also note that at an early stage of the concept’s development, the company received funding from Boost VC, a well-known accelerator for blockchain, which at one time invested in such projects as Coinbase, Etherscan and Tezos. This may indicate that Boost VC sees potential demand for the platform in the market.

Token Analysis

The FIC network project will use its own eFIC ERC-20 utility token onEthereum platform, and later move to its own blockchain based on the Stellar protocol.
The founders state that the FIC token has a triple role.

  1. Utility-token. FIC will be required to access platform services. It will be necessary both to pay commissions for selling / buying instruments listed on the platform or placing financial instruments, and will be accepted as a deposit for the use of services and access to the system (deposit is returned after the completion of an operation / service). The average useful value of the token will be reflected in its stock price.
  2. Technical purpose. A limited number of FIC tokens limit the number of financial instruments that can be stored on the blockchain simultaneously. Since the fixed income market is estimated at almost $90 trillion worldwide, and if currently computers and overall internet infrastructure cannot cope with these figures, a reasonable solution is to determine the upper limit for how many instruments can be held on the blockchain at any particular time. The Stellar protocol involves measure how to raise this limit once underlying internet infrastructure is able to cope with it.
  3. Cryptocurrency. FIC is most similar in function to XRP from Ripple and XLM from Stellar.

From our point of view, the FIC token primarily has a utility function, its speculative function as cryptocurrency and technical functions are secondary.

Prices for services (transactions) and deposits in the FIC network ecosystem are denominated in FIC tokens. The network part, like any other blockchain network, has an inherit risk of being abused, spammed and DoS-ed, for that it requires network fees to safeguard against that. Those expenses are by design only in FIC coins, and is meant to be punitive to abusers, but in the same time miniscule for users.

On the one hand, the listing of FIC on exchanges and the market creation of its value will inevitably lead to volatility in prices for FIC network services, given the strong volatility of the crypto market. On the other hand, technical costs are estimated to be the smallest of total costs - there’s also business costs with each other party involved - and thus real users would feel the volatility only partially. Tokens spent on payment for transactions / services are to be burned; the FIC network will not receive them

According to the team’s comments, they plan to monetize not at transaction level, but via native applications, the global exchange (as soon as established) and stock brokers. That said, by providing Gatekeeper services and also other services like other users could. For example, n the White Paper, the company states that deposits for investment banks will be proportional to portfolios of these banks.

In general, the introduction of tokens can be considered justified. Theoretically, they could be replaced with Ethereum; however, given that currently (April 2018) Ethereum emission is unlimited, the chance of reaching an equilibrium price for FIC network services and deposits will be restricted, which goes against the basic idea of the FIC network ecosystem. FIC tokens and the use of smart contracts enable capturing important parameters of financial instruments, whilst limiting the FIC emission is intended to maintain a delicate balance of demand / supply / price in the market. Tokens spent by users to pay for transactions will be burned, but the underlying protocol has a mechanism for the subsequent additional emission of tokens into the system to compensate for burned tokens in such a way that the average balance of tokens in the ecosystem remains unchanged.

Participants in any market, especially the stock / debt one, prefer transparent and clear rules for the game.

Analysis of Factors Affecting the Future Price of the Token

Among factors that may affect future price of the token, we note the following key ones:

Factor

Description

Impact on the price

Sufficient number of financial instruments for listing / use.

There are a large number of debt instruments from different providers in the traditional market, and the more institutional players placing their instruments on the platform, the greater liquidity and greater demand the token will have, which in turn will affect the price.

 

 

 

Listing on major exchanges and liquidity of the token

Since deposits, the cost of transactions and other services will be denominated in tokens, an important pricing factor is listing on large exchanges, where users will not be afraid to keep funds and sufficient liquidity will be provided, albeit on a small scale only. This is necessary for easy "entry" to the service without volatility or long transaction times.

 

 

 

 

The success of the ecosystem as it develops and releases new products in accordance with the roadmap / team plans.

The launch of a trading platform (exchange) with the full functionality as declared in the WP and additions to the product line, for example by creating proprietary applications or introducing new services for users are particularly promising for the token price. The successful introduction of new services will positively affect the price of the token in the medium and long term.

 

 

 

Degree of demand for platform services (transactions).

Demand for the platform is very difficult to assess, especially considering that the niche for the product includes both the crypto and traditional debt markets. The key factor will be the availability of a regulatory framework and market regulation for all instruments offered by the service and, therefore, the degree of trust afforded by institutional players.

 

 

Sales of tokens in the market by the team and advisors.

The team is allocated 20% of the total crowdsale. These funds are vested by the smart contract over 4 years, this is a large amount. Gradual vesting should ensure gradual sale of tokens over 4years, unless the team sells its stake in whole or part at the end of the three-year period.

 

 

 

Sales on the part of investors at the private sale / pre-sale stage

Traditionally venture investors want to sell a portion of their funds when listing on exchanges occurs. This will put pressure on the token price.

 

 

 

The discount factor

Large discounts at the stage of the private sale / pre-sale and significant additional bonuses for the lock-up for investors could lead to a significant drop in the price of the token, when investors who receive such bonuses will begin to record profits.

 

 

 

Inflation, limited emission and the burning of tokens

As noted above, tokens spent on paying for transactions are burned, but the protocol has a mechanism for subsequent inflation to compensate for burnt tokens. Thus, total FIC emission will remain largely unchanged which, given sufficient demand for the ecosystem and its services by the market, will lead to an increase in the token price over time.

 

 

 

Risks

Given the extensive regulation of the traditional corporate debt market and conversely, the weak regulation of the crypto market, the project has many risks over which the project team has no influence. The main risks that could affect its future development are the following:
 

Risk

Description

Level

Business risks, commercial risks

The developers consider the traditional corporate debt market and its players an essential aspect of the niche of the FIC network’s product. However, segmentation into the crypto market and the idea of ​​hybridizing these markets / instruments could scare off conservative and risk-sensitive institutional investors / financial institutions, which may lead to inadequate coverage of the potential audience for the project and / or inadequate representation of different types of instrument within the ecosystem.

In addition, intended target users of the product (institutional investors, banks, brokers and asset managers, insurance companies, etc.) demonstrate a significant interest in blockchain technology, and competing in this market is quite possible for them given their significant resources for development and the lack of any barriers to implement such a platform (no need for know-how).

High

Legal risks

Since bonds are securities, transactions around the relevant cash flow are also regulated by a legal framework that differs significantly from country to country. The FIC network ecosystem must meet the regulatory requirements of each country in which it will operate; this could lead to slower development for the platform and a slower increase in the number of users / instruments. Given the need to undergo regulatory procedures and formalities in each country where the FIC network plans to operate, and taking into account the length of such formalities, market expansion and the creation of a user / provider base could take longer than the team expects. Given that the company itself regards institutional investors as key users, it is for them that legal aspects are the most important, which further increases risk for the project.

High

Dependence of service cost on the dynamics of the crypto market

Since the main project services / deposits are denominated in FIC tokens, volatility and change in exchange rates could significantly affect transaction costs for the placement of instruments / trade for end users of the ecosystem, which creates additional exchange rate risk for them and will affect demand for the ecosystem.

Low

Staffing

The team has ambitious plans: According to the roadmap, in 4Q 2018 the FIC network and proprietary software will be launched; however the team released Alpha already in 4Q 2017. At the time of writing (April 2018), a beta version of the product is not yet available, there is only an alpha version which could be an indicator that the team is exposed to a risk of delay in developing and debugging the working version of the ecosystem within their stated deadlines.

Medium

Sufficiency of financing and unclear sources of profit

The project is planning to primarily generate revenue from commissions for placement / trading debt instruments. Furthermore, the team is planning to monetize the project through proprietary software, exchange services and brokerage services. At the same time, the size of the reserve fund, provided that the hard cap is reached, will amount to $4,800,000 (with a token price of $0.1) which will also be frozen for 3 years by the smart contract. Thus, sufficiency of sources of financing the project's cash flows is not obvious in terms of covering the operational costs of supporting all products, staff salaries, marketing and other administrative and operational costs of the project.

Medium

Exhaustion of the reserve fund.

The team does not disclose the projected cost structure or the intended use of funds after the ICO. Therefore, it is difficult to assess whether the hard cap of $16,000,000 is adequate (including a reserve fund with a 3-year lock-up for of $4,800,000) and whether it will be enough for development, support, marketing etc., subject to the expected difficulties with legislative regulation and coordination with regulatory authorities.

Medium

Roadmap lacking detail

The team does not detail the key milestones for project development. As of April 2018, the only future roadmap milestone is the launch of the network and applications in Q4 2018; from an investor's point of view it is necessary to understand when the project will have a beta version in the public domain, when beta testing begins and how long it will last, when negotiations with regulatory / supervisory authorities and providers of financial instruments begin regarding legal recognition of such transactions, etc.

Medium

Possible lack of team experience

Despite a formal correspondence of the team's competencies to the goals and objectives of the project, the complexity and formalization of the task may require specific experience in the sphere of trading systems in traditional markets due to focus on the traditional debt instrument market.

Medium

Token price reduction

Large discounts at the stage of the private sale and the pre-sale (60% and 30% respectively), and additional lock-up bonuses (35% for a 90-day lock-up and 70% for a 180-day lock-up after the end of the ICO) create increased risks of significant pressure on the token price after listing on exchanges. This situation is somewhat compensated for by a lack of bonuses at the ICO stage and a limited emission, which will push the price of the token up in the long term, provided that there is sufficient market demand for it.

Medium

 

 

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.