With the current frenzy over bitcoin and the accompanying initial coin offering (ICO) hype, the most well-funded project of the year, EOS token sales by software startup Block.one, has caught the attention of The Wall Street Journal.
On Dec. 18, the financial newspaper published a story on the controversy surrounding the startup and its co-founders, as well as the nature of its tokens.
According to its website, EOS is designed to be the infrastructure for decentralized applications on the ethereum blockchain network, akin to Google’s Android operating system.
Launched on June 26, the ICO of EOS tokens elicited great interest in the cryptocurrency sector, raising US$185 million in just five days.
Block.one is the software company that produces the EOS.IO software, the decentralized application platform, as a free, open source software.
According to the Journal, the software startup has raised about US$700 million (around HK$5.4 billion) and counting, amid a boom in this fast-growing fundraising method as a reult of the cryptocurrency mania.
That is larger than six of the top 10 biggest Hong Kong initial public offerings this year, just trailing the HK$6.8 billion IPO of Tencent-backed Yixin Group.
According to data provider Autonomous Research, 165 firms have raised more than US$4 billion this year, up sharply from just $225 million in 2016. And the block.one offering is by far the largest to date, boosting its market value to about US$4.5 billion, according to the WSJ report.
EOS’s website explains that its ICO process is expected to last 341 days, with two million new tokens sold every day to investors who sign up for the auction.
The offering will be completed next June and is expected to raise “well north of” US$1 billion, its co-founder Brock Pierce said in a panel discussion in October, the Journal reported.
Brendan Blumer, co-founder and chief executive of Block.one, has said that the funds raised will be invested in companies that could develop the EOS code into products.
Yet, the company is nothing close to a well- established business. It only has about 50 employees, with no central office; developers work on their codes via an open-source development website, the WSJ said, citing a person familiar with the matter.
Block.one is planning a full rollout of the EOS software code next June. However, the company plans only to write the initial code for EOS and then release it publicly, the Journal said. It won’t build or develop the platform itself, leaving that task to unrelated third parties.
Because of that, the EOS tokens sold have no actual relationship to the software. The WSJ noted that investors of the tokens must sign a purchase agreement beforehand that states the tokens “do not have any rights, uses, purpose, attributes, functionalities or features”.
Before starting Block.one, Blumer, then aged 18, skipped college in the United States to work at a video gaming company in Hong Kong named Internet Gaming Entertainment (IGE), which is run by Pierce, the Journal said.
Around the same time, IGE sold a small stake to Steve Bannon, then the chief strategist of US President Donald Trump, and brought him in as an adviser.
In 2007, Bannon replaced Pierce as IGE’s chief executive, the report said.
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