From November 21 to 23, the prominent Russian Internet Week conference was held at the VDNKh (a Soviet-era exhibition center), during which the most significant issues related to the development of the Internet and its resources were discussed. Special attention was paid to blockchain and cryptocurrencies, and the Crypto Event RIW conference was organized as part of Internet Week. Crypto industry experts talked about their technologies and, of course, the pains experienced by digital coin holders.
Speakers from analytical companies presented their reports on the past period. In particular, Anastasia Denisova of ICO rating said that the projects had raised fewer funds. The fall period in the third quarter was more than 70%, or about $2 billion. Moreover, as Denisova stressed, the market is falling not by the number of projects, but by their quality: for example, the average check of a project now ranges from $1 to $5 billion.
For the third quarter in a row, projects that want to create dApps on Ethereum are popular and account for 86.13% of the market. 76.15% of projects enter the industry only with an idea without any developments and specialists. “One can see the market’s disappointment in the instrument. Well-known companies started coming to Russia, organizing meetups, and collecting funds here because, in other countries, people no longer believe in blockchain projects. Besides, the trend for positioning as STOs [Security Token Offerings] has now begun, because the ICO is no longer credible,” explained Denisova.
Ignat Bobrovich from Twognation spoke about the disappointment in popular fund-raising. Their team refused to hold an ICO, as it considered this method unprofitable and excessively risky. “When there was the smell of money, people wanted 10x. For some reason, the projects thought (and some still think) that the user wants to understand the complex system of tokens. But this is far from the case, especially since now, these coins are worthless like candy wrappers; no one needs them.”
On a screen, Bobrovich presented a caricature of a typical exaggerated developer who reflects on uniqueness and thinks that their startup will be the most effective and their coin will change the industry: “As developers often think of tokens: ‘They are not candy wrappers. They are utility tokens. Or security tokens. Let’s make two just to be sure! Since we are not going to guarantee passive income, then the token will be a utility one. Although you can make a security one and it is easy (in fact, it is not). Therefore, let there be two tokens, both security and utility. Hooray!’ Admit it. This is nonsense.”
In addition, as Bobrovich noted, user acquisition is becoming more expensive. According to Twognation, more than 75% of investors who are interested in the product and ready to register are eliminated during the registration phase. “People do not know how to use wallets, keep private keys, and bear full responsibility for losses, as well as understand how Metamask, MEW, and so on work. Often, attracting users is four times more expensive than expected. The cost of an ICO on average was estimated at 10% of the amount that is planned to be collected. This amount needs to be invested in advance and without any guarantees,” says Bobrovich.
Regulation & Banks
Julia Demskaya from SBSB told about another existing problem such as the opening of bank accounts on the blockchain and ICO registration. The company representative assures that the project can “please the bank” if the company and office are located in the country of registration and have a full set of technical documentation and explicit transaction scheme with KYC and AML procedures.
Also, if the project organizers have experience in the financial sector, it would not be superfluous to speak about themselves and prepare a cover letter to the bank with an explanation regarding the documents provided and the essence of the project, as Demskaya is sure.
The regulation of the cryptocurrency industry and the fixation of concepts in legal documents were discussed at the panel discussion “International Law on the Use of Blockchain.” Lawyer Maria Agranovskaya believes that SEC sees no difference between security and utility tokens. “The SEC is not ready to accept the token as a utility; therefore, they force everyone to follow the rules for securities. And, for example, in Switzerland or Singapore, this division exists. Everyone is waiting for official divisions. Perhaps, until there is a large billion-dollar trial, jurisdictions will not pay attention to cryptocurrencies. Regarding regulated funds, there is a message to jurisdiction to act. Classic investors cannot operate without regulation. New regulation arises to attract new money in small countries. Serious states do not consider it necessary to regulate cryptocurrencies.”
At the same panel discussion, lawyer Alla Abarysheva from Norland Legal said that banks are not happy to see project tokens. “It’s good that when a country is small, every case is studied individually, and the legislation is trying to help you with regulation. But this is not cheap, as the project should be ready to spend a lot of money on lawyers. In addition, regulators insist that investors be professional.”
Mikhail Chobanyan from the Ukrainian exchange KUNA.io shared his experience in creating legal rules. “Approaches differ from country to country. In my opinion, the main thing is to focus on the person, not on the company. An ordinary person can be forced to pay a tax for cryptocurrencies. Lowering this interest rate is necessary. In addition, people do not want to pay an 18-percent VAT. Cryptocurrency transactions should not be taxed. I also believe that the usual industry should not be using the young and virgin crypto industry. There is no need to create rules for big players. Otherwise, the cryptos will turn into the same industry we have now.”
Asset Value and Behavior in Falling Markets
“Bitcoin will be more expensive because there is demand. Perhaps we made the mistake of treating cryptocurrencies as assets,” says Anatoly Radchenko from United Traders. The expert is sure that it makes no sense to predict what cannot be predicted, and there is no need to wait for this, either. In addition, there is no background on which one can rely in the evaluation of cryptocurrencies.
“There is no reliable data. At each exchange, the price will be different. For example, false news forms the attitude of people to the value of an asset, but in fact, it does not affect the value, because no one knows the real price. Rating agencies and their listings are sellouts. These companies do not understand anything, either,” says Radchenko.
Investor Lenar Rakhmanov from the Inception Fund spoke about how to survive and make money in the unpredictable crypto market. Now with a sharp drop in asset values, the HODL strategy does not work. “Nothing will grow, do not pray.”
Traders who manipulate their assets, however, also face problems. “There is constant knocking out of the pillars. It is not clear when to enter the market. Classical assessment indicators often do not work in a falling market, and even more so, in a flat one. Few people can earn. The entrance to high-risk projects is dangerous. It is impossible to determine the direction of the market. There is no understanding of how the whales think,” as Rakhmanov listed the difficulties of trading.
To survive, one needs to apply risk management. “Even a regular table will help reduce losses: write down the amounts by volume for different purposes and do not spend more than planned. It is also sound to analyze futures reports. After all, they’ll allow you to see inside out. Use margin trading. It’ll let you use leverage for trading on the exchange,” said Rakhmanov and added that the specialists of his foundation defined their own strategy. “Reversal strategy: rebalancing + averaging + diversification.”
Konstantin Plavnik from the Xena Exchange spoke about the development of exchanges and trading platforms. The specialist explained that earlier, when the industry was born, the exchanges were built hastily and now do not meet the requirements of the market. Some platforms did not have stop orders and other tools needed for trading. At the moment, there is little quality analytics in the market because earlier, the teams did not understand the industry. “Until now, none of the users know how the cold storage of the exchange works. Crypto assets are being actively added to the investment model. There is a signal to the development of interest in the market from large investors. The time for this is good,” says Plavnik.
A modern exchange should work with a high class of assets. But this raises a big problem, which is related to the security of storage facilities. Often, no one knows whether it was hacked or not. Many sites hold assets in cloud storage, and this is wrong.
Also, the crypto exchange specialist advised on the selection of high-quality trading platforms. “When choosing a platform, it is important to pay attention to the specification of contracts, how their price is calculated, which licenses are taxed, and in which country they are regulated. After all, times without regulation are coming to an end. It is important to look at what tools for analysis and trading are offered and how the listing process is regulated; who built the exchange and whether there are experts from the financial industry in it are also essential criteria for choosing the exchange,” says Plavnik.
The Development of Blockchain and the Industry Itself
Hype lowered in the information field around the blockchain technology, and now only those who are genuinely interested in the distributed ledger technology have remained. Ruslan Yusufov from Mindsmith.io told about this during his speech. Now blockchain motivation is among the strategic priorities. Business is willing to invest. But there is insufficient information for implementation.
Yusufov cited data from a survey where 1,053 companies from the USA, Canada, Mexico, United Kingdom, Germany, France, and China acted as respondents. 74% of the respondents consider blockchain attractive and see opportunities for its implementation in their business. 43% of companies are afraid of being late with the introduction of blockchain. 68% are confident that they will lose their competitive advantages if they do not implement blockchain. 69% plan implementation with the replacement of existing systems (CRM, ERP, accounting, warehousing, and so on). 39% are ready to invest $5 million in blockchain next year.
Specialists of HR departments and heads of companies spoke of the professional staff in the blockchain market at the panel discussion. Oleg Lyubimov from SONM said that people who willingly go to projects are not the ones he would like to see in companies. “Blockchain has been on the hype for the last couple of years, people smelled money and added a line about the technology in their CVs. Those we want to see are smart and advanced, but they do not risk their main jobs and are simply afraid of coming to the industry.”
Dmitry Marinichev from the Russian Mining Center agreed with Lyubimov and added that it is more difficult to find specialists who would understand the hardware. “This is Russia’s problem. Solid developers can really make money on their own, and they are difficult to buy. Often, however, there are people who want to do quality work. We work with them.”
Daria Platova from ICObench said that now interest in the cryptocurrency market has decreased, but despite that, there is a need for the technology. “Teams need industry experts who are already experienced, and where can we get them if the industry is very young? In blockchain, it is easy to recognize scammers who will not be able to lie about their abilities. There is a problem with trust. We cannot trust all that is written in a resume. A candidate must be flexible.”
Nikolai Velichko from HeadHunter assured that an employer should establish itself as a reliable company that has big goals. “This is the only way to get top specialists—they have to believe you. If you want a professional, then let’s get more transparency.”
Gleb Shirshov from 2Miners told about the impossibility of finding a masternode specialist. “It’s just unreal. Therefore, it is often necessary to take those who are available and then train them inside the project. Indeed, many programmers do not understand the essence of blockchain.” In the end, all concluded that it’s necessary to adapt specialists to the blockchain industry.