While Qtum, an open-source software based on cryptographic protocol that will exist on the peer-to-peer network hosting the public transaction ledger (the blockchain), has raised over $12 million - and c. 9,000 Bitcoins - just a day after its crowdfund started and smashed expectations, it’s not a “risk-free investment” according to the offering prospectus.
Although officially slated to run for another 28 days until April 15, matters around their crowdfund might be wrapped up in next few days if the present level of investment interest and run rate continues.
That would mean the ‘Early Bird’ period from March 16-18, where 3,800 QTUM tokens are priced at 1 BTC (3,800 QTUM and 115 QTUM for 1 ETH (Ethereum) - due to ETH's price fluctuation - might not see downward QTUM ETH price adjustments next week (i.e. stipulated at 3,600 for 1 BTC and 105 for 1 ETH from March 18-25).
At the time of writing on day two of the Singapore-registered venture’s crowdfund campaign, 81.72% of Qtum tokens - equivalent to 41,674,877.4813 QTUM units - had been raised. By 6.40pm GMT today it had attracted investment of nine thousand (8,995.104) Bitcoin (BTC) and 64,728.7538 Ethereum (ETH).
In so doing, the project behind this blockchain project, the source code of which comprises the basis for the cryptographic and algorithmic protocols governing the generation, use and transactions of the Quantum’s native built-in cryptographic tokens - called ‘QTUM’, should have sufficient funds to reached stated goals of public test of the platform in the second quarter (Q2) and launch during the third quarter (Q3) this year.
While the prototype to the Quantum system was completed in Q4 (October) last year it is understood as of this month internal testing remains ongoing.
In order to fund the coding, building the ecosystem, development, promotion and other overheads of the Quantum, the QTUM Foundation initiated its crowdsale campaign to raise funds in crypto-currencies from the backers globally. For Qtum their target was to achieve 100% of the crowdsale within 30 days.
Given the investment interest displayed by Ethereum and Bitcoin enthusiasts from the get go of the crowdfund - now with a little less than a fifth of QTUM tokens remaining in an offering representing 51% of the initial QTUM supply (51 million tokens) - it would seem that the money pledged by the backers is a positive sign for the project’s future success. Or at least it might well give that impression.
And, surpassing the $12m mark in around 24 hours is some going that few had anticipated. But no doubt helping matters is that fact that there are some big hitters in the cyptocurrency space behind the Qtum Project, including one of the biggest bitcoin holders in China and the billionaire founder of the leading taxi hailing firm in the country today.
PwC Support Gained
Add to that it was officially revealed on March 6 that leading professional services firm PwC is supporting Qtum’s efforts to fuel Blockchain adoption across global business sectors. This includes providing comments on a white paper to be prepared by the project team, as well as on their proposed project governance structure.
PwC China’s Fintech and Cybersecurity partner CY Cheung commenting in the wake of its support: “PwC sees enormous potential for blockchain to revolutionize business practices as we know them, and the firm has made great efforts in developing strategic and technical capabilities to adapt existing products and services for the new technology.”
He added: “We’re excited to get involved in the era of innovation and help companies capture the opportunities and benefits brought by the new technology. Working with the Qtum Foundation aligns with our goal.”
Qtum provides what is called a Turing-complete blockchain stack, able to execute smart contracts and decentralized applications, comparable to the Ethereum blockchain. But in contrast to Ethereum, Qtum is built upon Bitcoin’s UTXO transaction model and employs a Proof-of-Stake (PoS) consensus mechanism.
Such augmentations are touted to have “far-reaching implications for the utility of the Qtum blockchain” by the team behind the project.
Both the Ethereum and Bitcoin blockchains are based on a Proof-of-Work (PoW) consensus mechanism, which secures the blockchain by rendering attacks very resource intensive - both in energy and time - due to what are labelled as “artificially arduous computations”, which are demanded from miners participating in the so-called ‘block-verification’ game.
Furthermore, Qtum aims to establish an array of services, designed to bridge the still existing gap between blockchains and the business world. These include tools and methods to standardize the workflow of business smart contract development, and a hub of tested and verified smart contract templates, addressing various specialized business use cases.
Qtum Investment: ‘Not Risk Free’
All that aside, investors are minded to note that they should have read the ‘Prospectus of QTUM Crowdsale’ that details the conditions. In this connection, 51% of the initial QTUM supply of the Quantum will be available for sale during the Campaign. There are a few interesting points in there that caught my attention, if investors have not already seen them.
It states in this 30-page prospectus dated March 13, 2017, that: “Purchase holding or use of any QTUM is not risk-free” and directs potential investors to Chapter 5's ‘Risk Factors’ details. Their website points out too that “Crypto-token crowdsale is high risk by nature”. And, the Agreement will be governed by and interpreted in accordance with the laws of the Republic of Singapore.
The document further goes on to explain that: “Crowdsale will not involve issuance of any currency, securities (whether equity securities or otherwise) or other kind of investment certificate.
In fact, the QTUM to be sold during the Crowdsale are described as being “merely cryptographic tokens usable on the blockchain of the Quantum.” These tokens are not redeemable, associated with financial return or backed by any underlying asset or repurchase commitment. And, “do not necessarily have market prices or transactions between peers.”
Additionally, investors in QTUM are advised through the prospectus that: “You shall not participate in the Crowdsale with a view to investment or speculation or in pursuit of any profit.” Naysayers might ask what one is actually investing in, although it’s a punt on the future.
The prospectus also states: “Being merely the virtual fuel for the running of the Quantum, by nature QTUM is not and shall in no case be understood, deemed, interpreted or construed as: any kind of currency or money, whether fiat or not; equity interest, voting or non-voting securities (or its like) in, or claims against, the QTUM Foundation or any other entity in any jurisdiction.”
Turning to point 19 (‘Liquidity’) among 22 listed risk factors, it goes on to say that: “QTUM is not a currency issued by any individual, entity, central bank or national, supra-national or quasi-national organization, nor is it backed by any hard assets or other credit. The circulation and trading of QTUM on the market are not what the QTUM Foundation is responsible for or pursues.”
It added: “Trading of QTUM merely depends on the consensus on its value between the relevant market participants. Nobody is obliged to redeem or purchase any QTUM from any QTUM holder (including the Purchasers). Nor does anyone guarantee the liquidity or market price of QTUM to any extent at any time.”
In order for an investor for divest their QTUM portfolio, it is pointed out that a QTUM holder would have to “locate one or more willing buyers to purchase the same at a mutually agreed price, which attempt could be costly and time-consuming and does not necessarily bear fruit.” And, there could be “no crypto-currency exchange or other marketplace having QTUM listed thereon for trading.”
Last October the prototype to the Quantum system was completed and of this March internal test of the Quantum is ongoing. The anticipated public test is scheduled for Q2 2017 with the launch set for Q3 later this year, although it is explained that these dates “do not constitute any binding commitment” for the QTUM Foundation or anyone else to deliver QTUM by the respective dates.
In terms of how popular the system could be going forward, point 18 in the risk factors, it is pointed out: “The value of QTUM hinges heavily on the popularity of the Quantum system. [It] is not expected to be popular, prevalent or widely used soon after the launch.”
Based on the “worst-case scenario”, Quantum may even “remain marginalized in the long run, appealing to only a minimal portion of the users and application developers.” By contrast, a significant portion of QTUM demand could be of speculative nature.
Furthermore: “The lack of users and commercial utilization may result in increasing volatility of QTUM market price and consequently compromise the Quantum’s long-term development.” And, it is stressed that the QTUM Foundation will not - nor has the responsibility to - “stabilize or otherwise affect QTUM’s market price if there is any such price.”
Reassuring at least that such aspects have been addressed and made clear, although one would have expected such details to be outlined in the prospectus. Food for thought nevertheless.