Business 16 October 2018

Erik Gibbs

ViaBTC mining pool captures $30M in ICO—and that’s a bad thing

A couple of days ago, word got around that one of the world’s largest cryptocurrency mining pools had conducted an initial coin offering (ICO) and had raised $30 million in a little more than two hours. It was the first time an ICO had been held on the Bitcoin BCH network and should be seen more as a failure than a success.

ViaBTC introduced a new cryptocurrency token, the VIAT, ahead of the ICO. The company has billed the token as a “value-added service privileges” coin that can be used as a tool of value transfer. There will be a fixed supply of 2 billion coins, of which 250 million will be shared among the company’s partners and 250 million will be distributed through community support. The remainder will be released over time to reward miners.

Per the coin’s white paper, “ViaBTC will buy back and “burn” VIAT with 20% of its quarterly revenue at the end of each quarter. This will reduce the total amount of VIAT steadily on a benign deflation model.” It would seem that the minds behind ViaBTC don’t fully comprehend the burn process or, if they do, are prepared to destroy the network. When you burn an asset, it becomes destroyed and, as such, means that any return seen on the asset is subsequently worthless.

The idea of burning is tied closely to the idea of Wormhole, the highly debated omni layer protocol that has already been shown to be less than beneficial for the Bitcoin BCH network. It’s no surprise that ViaBTC got its start thanks to a large investment by crypto mining company Bitmain, which supports Wormhole.

There are concerns that VIAT could be an unregistered security per China’s securities laws. Ultimately, this will depend on how ViaBTC uses funds collected from the ICO and whether or not holders of the digital currency earn dividends that might be considered as giving those investors a vested security interest in the company or its CoinEx exchange.

Referring to the distribution of tokens, there is a glaring red flag that pops up. ViaBTC indicates that it will give 250 million tokens to the platform’s partners. This equates to 1/8 being shared among the individuals. Given that ViaBTC has a substantial connection to Bitmain, it isn’t unrealistic to imagine that Bitmain will receive a significant amount of coins.

There are a couple of issues with this scenario. Bitmain has already been outed for questionable financial stability and, possibly, illegal activity—it announced that it was backed by several banks when it wasn’t and, according to internal documents, lied about its finances to investors. Additionally, any collaboration between Bitmain and ViaBTC can undoubtedly be viewed as collusion and will result in lack of decentralization.

Apart from these issues, in reviewing the white paper, there seems to be one important piece of information missing. Out of everything ViaBTC says of VIAT, there simply doesn’t seem to be any tangible utility of the coin.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

Bitcoin Satoshi Vision (BSV) is today the only Bitcoin project that follows the original Satoshi Nakamoto whitepaper, and that follows the original Satoshi protocol and design. BSV is the only public blockchain that maintains the original vision for Bitcoin and will massively scale to become the world’s new money and enterprise blockchain.

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