Earlier this year, we reported that, for the first time, a major venture capital firm, Union Square Ventures, invested in a blockchain hedge fund. But that’s not all that’s been invested in blockchain fintech. By next year, 90% of central banks and 80% of financial banks will have engaged in some form of investment, programming, or planning to incorporate blockchain into their main business functions and workflows. But with cybersecurity a main determinant in which blockchain fintech companies and cryptocurrencies receive investment, blockchain fintech companies need to be vigilant when protecting their assets from any intruder. In this regard, one such company rises above the rest. Its name is Axion V, and it is currently undergoing its Initial Coin Offering.
An Initial Coin Offering (ICO), similar to the idea of an IPO, or Initial Public Offering, is a transactive event in which a blockchain fintech or cryptocurrency company sells not their shares, but their underlying cryptotokens, in exchange for bitcoin and ether. Like IPOs, ICOs are primarily customer centric, and yet, since not all cryptocurrencies can be considered securities, many ICOs are open to virtually anyone. Axion V, an AI- and machine learning-driven cryptocurrency trading firm that boasts algorithms able to set up, process, and execute thousands of cryptocurrency trades at once on its own, is undergoing its own ICO.
Axion V is unique due to a few defining factors. First, its ICO is exclusive, only including individuals investing a minimum of $19,000. Yet this is done out of a concern for its customers: in an effort to bring AXION, Axion V’s underlying token, to the masses, the $19,000 investment floor is in place to provide token holders with maximum value and convey maximum intrinsic value relating to the legitimacy of the deal. Second, the company’s technology minimizes the use of smart contracts, leading to more security for clients and less risk to the company. This is notable and perhaps counterintuitive because one of blockchain’s most lauded features is the ability to create smart contracts—that is, contracts recorded on the blockchain which execute themselves.
Axion V has a reason for this: the widely reported attack on The DAO. Last year, a lone hacker attacked The DAO (Decentralized Autonomous Organization), the largest crowdfunded Ethereum blockchain organization in history at over $150m. This hacker discovered a vulnerability in The DAO’s smart contract integrity, and isolated and attacked a highly valuable smart contract, siphoning over 3.6 million Ether from the organization into a child DAO with a mirroring structure. Due to this, the price of Ethereum dropped 35% last year. Yet since Axion V mostly excludes smart contracts from the code handling the ICO, the AXION token is far more stable and fork-resistant.
Keeping the ICO exclusive to individuals willing to invest large sums of money increases the intrinsic value of the sale, which in turn helps boost token pricing and long-term value. In addition, doing this helps to streamline the risk profile of the ICO and the tokens associated with it: restricting the investor pool to individuals able to invest over $19,000 ensures a stable funding process, making it orders of magnitude more secure and low-risk than The DAO debacle last summer. From a legal perspective, conducting an ICO in the first place keeps Axion V within the law by allowing AXION to pass the Howey Test, which mandates that the sale of assets of speculative value be registered with the SEC and regulated as securities. Combined with the immutability of the blockchain, Axion V’s ICO is legally and securitistically air-tight.
The legitimacy, legality, and security of the company’s ICO is further compounded by its almost total exclusion of smart contracts from the transaction. To understand the reasoning behind this, we have to step into the technicalities behind how Ethereum, the blockchain AXION is on, works. The Ethereum blockchain is comprised of a system of nodes decentralized across about 6,000 computers right now. Transactions carried out on the Ethereum blockchain are voted on by consensus by the people who operate these computers to determine whether or not a transaction is valid. Node operators have access to everything: every Ether ever created, every balance on every account, and every smart contract ever written. The DAO “hacking”, then, was carried out simply by someone with access to an Ethereum blockchain node who took the contract and executed it on their own. Since The DAO’s hacking is essentially a case study in cybersecurity mistakes, Axion V’s almost total exclusion, and heavy internal regulation of its few smart contracts allows investors the peace of mind to invest without fear of cybersecurity issues.
Axion V’s ICO is likely to become a case study on the future of ICO cybersecurity, and can be read about in greater detail at axionv.com. You can also view their white paper here.
One thing is certain: the future of blockchain is bright.