Home > Nanotechnology Columns > Fullerex > From IPOs to ICOs: The graphene companies raising capital with cryptocurrency.
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Tom Eldridge Director and Co-founder Fullerex Limited |
Abstract:
The amount of money that blockchain related start-ups are raising through initial coin offerings (ICOs) has surpassed funding raised from traditional venture capital, with over $3.5 billion generated last year alone from this new investment model (1)(2). A wide range of industries including finance, healthcare, entertainment and real estate has been experimenting with incorporating blockchain technologies and now it seems that even graphene companies are claiming to have applications. But what is the use-case for blockchain in the world of graphene and should investors be wary?
August 6th, 2018
From IPOs to ICOs: The graphene companies raising capital with cryptocurrency.
Blockchain is the technology behind cryptocurrencies and is a public ledger that provides a permanent electronic record of data operations (e.g. transactions). All the data are stored across a distributed network. When a new operation is completed, like a transaction being verified by the network, this is added to a cryptographically protected group of operations called a block. The validated block is then timestamped and added to the string of other blocks which are chronologically ordered, hence the term blockchain. The blockchain cannot be altered or censored, it is decentralised, and the operations are performed peer to peer so there is no intermediary (such as banks, in the case of money transactions).
Most of the attention surrounding blockchain technology has centred on Bitcoin and other cryptocurrencies serving as a medium of exchange and a store of value. There are potentially much further reaching uses for blockchain including identity management, voting, and international contracts, which might disrupt a whole host of markets. The exact value of blockchain however is rife with speculation now.
An ICO is a new kind of crowdfunding campaign that has grown in popularity among start-ups. It involves a virtual coin or token that is created and sold to investors in order to raise money for the new company. The token might simply be an investment security, or it might behave like a currency which can be used within a particular application the company has developed.
So, which are the graphene companies looking to start an ICO?
Gratomic, which is a Canadian company listed on the TSX Venture Exchange that is a vertically integrated supplier of graphene products, announced at the beginning of the year that they were launching "Gratcoin" to facilitate the distribution and sales of its graphene products and act as an ecosystem for producers and users in the graphene industry (3).
Also this year, the Dutch graphene company GraphenTech stated that they too were creating their own digital currency called "77G" tokens which the company indicates will initially act a security token or "crypto-asset" (changing in value according to the company performance) but later may be used to make actual purchases of their graphene products (4).
Towards the end of last year an organisation called Graphene Power launched an ICO which appears to have raised only 133,628 USD out of a target of 30 million USD for its "GRP" tokens (5). The project's stated ambitions were to use the funds to set up a manufacturing plant in Yecla, Spain for its graphene batteries and to develop an ecosystem called the Nano International Sales platform.
However, since the public sales of its tokens the company website has gone down, and none of the social media channels remain active. There does not appear to have been any company by the name of Graphene Power registered in Spain. Many disgruntled investors who were left frustrated by a lack of communication with the project organisers have left comments on the project's Facebook page, calling the endeavour a scam.
If this was a case of fraud, sadly it would not be the first time that personal investors have been conned by unscrupulous individuals seizing upon the hype surrounding graphene. Back in 2013 the Financial Conduct Authority had to warn people about graphene investment scams, where naïve investors were deceived into buying graphene as a physical commodity for financial speculation (6).
What makes this latest trend with graphene perhaps more deleterious is the added effect of the hype surrounding blockchain itself. The SEC recently issued a warning to investors, urging caution regarding the blockchain trend and has even halted trading with three companies that announced they were purchasing cryptocurrency-related assets (7). In an analogy to the dot-com boom which saw many companies reposition themselves by using any and all internet related buzzwords, so too are many companies today doing the same by pivoting towards blockchain. In fact, last year there were 31 public companies that even changed their name to include the word "blockchain" (8).
Many reputable companies are jumping on the bandwagon, but it is not easy to discern the added value that new blockchain technologies will bring to a business. Eastman Kodak for instance has been planning on launching "KodakCoin" cryptocurrency, which is aimed at helping photographers protect their creative assets and to capture all the royalties they are owed. However, it is still not clear what the advantages are over other methods of monetising digital assets and indeed whether photographers would want to get paid in KodakCoin when it may be difficult to redeem for cash (9).
Meanwhile in the graphene space, the US company Graphene 3D Labs which is listed on the TSX Venture Exchange announced in February that it had developed innovative hardware solutions for blockchain-based crypto currency mining (10).
To add further confusion there is also an open source blockchain technology called "graphene" which was developed by BitShares, a cryptocurrency exchange marketplace (11). The software has nothing to do with graphene the material but is a name the developers chose for their platform. The problem with buzzwords which spring out of technology hype cycles is it creates a real due diligence challenge for investors. It is difficult enough for investors to try and understand the value of a complex technology that is pitched to them. Add two complex technologies into the mix and it is not hard to see how this can lead to inaccurate valuations and in some cases even investors being misled.
Blockchain undoubtedly has its uses and ICOs represent an interesting new way of fundraising for a number of start-ups, but investors should remain highly conscious of the risks involved as the FCA has warned (12).
As with KodakCoin, it is not exactly clear what unique and compelling advantage the graphene related tokens and coins will have on the industry but let's hope the technology is explored responsibly.
References
1. Kharpal, Arjun. CNBC. [Online] 2017. https://www.cnbc.com/2017/08/09/initial-coin-offerings-surpass-early-stage-venture-capital-funding.html .
2. Williams-Grut, Oscar. Business Insider. [Online] 2017. http://uk.businessinsider.com/the-10-biggest-ico-fundraises-of-2017-2017-12.
3. Gratomic. Market Wired. [Online] 2018. http://m.marketwired.com/press-release/gratomic-executes-loi-for-the-creation-of-a-blockchain-based-graphene-ecosystem-tsx-venture-grat-2245216.htm .
4. Bitcoin Exchange Guide. Bitcoin Exchange Guide. [Online] 2018. https://bitcoinexchangeguide.com/graphentech-ico-77g-token/amp/ .
5. CoinGecko. CoinGecko. [Online] 2018. https://www.coingecko.com/en/ico/graphene-power .
6. Clancy, Rebecca. The Telegraph. [Online] 2013. https://www.telegraph.co.uk/finance/newsbysector/industry/10542044/FCA-warns-on-graphene-investment-scams.html.
7. Chaparro, Frank. Business Insider. [Online] 2018. http://uk.businessinsider.com/sec-halts-trading-of-companies-after-diving-into-crypto-2018-2.
8. White, Garry. CityAM. [Online] 2018. http://www.cityam.com/280692/beware-cryptocurrency-hype- .
9. Roh, Chelsea. Cryptocurrency News. [Online] 2018. https://cryptocurrencynews.com/daily-news/what-is-the-kodakcoin-and-how-will-it-change-photography/ .
10. Graphene 3D Lab. Graphene 3D Lab. [Online] http://www.graphene3dlab.com/s/news.asp?ReportID=816956.
11. Mesnier, Phil. OCI. [Online] 2017. https://objectcomputing.com/resources/publications/sett/march-2017-graphene-an-open-source-blockchain.
12. FCA. [Online] 2017. https://www.fca.org.uk/news/statements/initial-coin-offerings.
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