Should Open Bazar launch it’s own ICO token?

If you follow the world of cryptocurrencies, then you have heard about the recent phenomenon of ICO’s (also called tokens sale). These ICO’s occur when developers of a project announce their intention to create a new currency / token and thus allow the public to buy. The recent ICO’s made headlines for raising tens of millions of dollars in hours or even minutes.

Several projects that focus on creating the infrastructure of a decentralized internet have launched or are launching their own tokens. IPFS will use Filecoin. BlockStack announced that they will use a token. Storj recently did an ICO. All these projects claim to need new tokens for the proper functioning of their products.

(View a list of upcoming Initial Coin Offerings)

OpenBazar.org is also focused on building a decentralized application. So why there isn’t a token for OpenBazaar?

We continually re-evaluate whether a token would or would not make sense, given the rapid change in the crypto-currency landscape.

1. OpenBazaar does not need an ICO token:

OpenBazaar is a protocol and a decentralized commerce network. Everyone can download the software on their computer or mobile phone and connect directly to other people using the same application, in order to make purchases and sales without the intervention of trusted third parties. The OpenBazaar network has been in existence since April 2016 with hundreds of thousands of downloads and users around the world, making purchases between them in bitcoin.

It is therefore not clear how a token would improve this functioning.

It is true that the Bitcoin commissions, currently very high, cause problems for a Bitcoin-based marketplace. We hope that commissions will return to a reasonable level in the near future. Otherwise, the solution will be to allow users to use other widespread crypto-currencies, rather than create a new one.

2. ICO Tokens are a new and untested model

With ICOs and sales of tokens attracting a lot of attention – and investment – it is easy to forget that this is a relatively recent phenomenon. This is especially true for tokens on Ethereum.

It is clear that they are able to get interest from investors, but the clarity stops there. There are several shadows concerning the future methods of governing and using these tokens, as well as the behavior of their owners.

However, it is clear that a considerable amount of investors are speculating on these tokens. During the “good period”, speculation on tokens benefits the creators of these tokens, and it seems currently difficult to argue against the significant investments accumulated by these projects.

When investors choose to take their profits and get their cash out, you need a buyer available. If there is a real demand for the fundamentals of a project and people want that token to use the network, then there is no problem.

Otherwise, if most of the demand came from speculators, then at some point there will be no more speculators available. There is a risk at this time that the owners of these tokens will come out massively, causing the price of the token to drop rapidly.

The ubiquitous flow of person buying these tokens could be seen as a positive pressure on project developers to deliver what they promised. Unfortunately, it is not always clear that the incentives of project sponsors and speculators are aligned. Speculators act globally as public investors in a company, putting pressure on the management of the company, in order to obtain decisions based on short-term profits, to the detriment of what is good for the company long -term.

Since the launch of OpenBazaar in 2014, they have had a committed community of people around the world who believe in a decentralized, no-cost trade. The team is convinced that issuing an OpenBazaar token would increase interest in the project, but we are concerned that it will change the composition of the community of people who share our deepest convictions with a group of people who want to see a return on investment.

And so they do not want to make decisions based on increasing the value of the token, but focus on creating free and global trade.

3. An ICO token could increase barriers to entry

OpenBazaar is entirely dedicated to reducing the barriers allowing a trade between all. All you need is an internet connection, a computer and Bitcoin to buy / sell with anyone else around the world at no cost.

Introducing a token could increase barriers to entry into the OpenBazaar ecosystem.

Wanting to ensure that open and non-litigious trade is always possible on their network is their priority. OpenBazaar currently relies on the most used cryptocurrency – Bitcoin – and are developing a version 2.0 of the software allowing the use of other popular crypto currencies.

4. ICO Token issues are in a regulatory vacuum

There remains significant uncertainties about how governments will regulate ICOs and tokens sales.

If they choose a flexible approach, tokens creators have little to fear. But if they choose to enforce strict regulations, the costs of regulatory compliance could quickly become unbearable, especially if it requires a change in technology itself in order to be fully compliant.

In addition, agency reviews do not only apply to future tokens, but may also apply to emissions that have already occurred. This created a sword of Damocles over these projects until the publication of the regulations.

All creators of tokens do not cross fingers hoping that everything will go well. The “Protocol Labs” team has partnered with AngelList to launch CoinList, a tokens creation platform that attempts to comply with KYCs and ensures that tokens are issued in a manner consistent with Existing rules.

This can work for a few tokens, but compliance is at the price of exclusivity. Only accredited investors have access to the first sales, creating significant barriers to entry. These accredited investors are more interested in speculation than in using tokens, highlighting the potential problem raised above.

Conditions to the emissions of ICO token

It is possible that an OpenBazaar token will be issued one day, but this will only happen if the following conditions are met:

1. A new token is required to provide OpenBazaar users with functionality that can not be assured on Bitcoin or any existing token;
2. The sale of tokens should be an opportunity to distribute tokens to OpenBazaar users who believe in a decentralized and open trade and are not only attracted to speculation;
3. The token will not increase the barrier to the OpenBazaar network entry;
4. If government agencies issue strict regulatory guidelines, this should not significantly disrupt OpenBazaar’s ecosystem, due to a dependency on the token.

These conditions will be, or may never be, met.  If you think that an OpenBazaar token would (or would not) be a good idea, do not hesitate to comment your views below.