Hollywood Celebrities Invest in Blockchain

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Hollywood and blockchain circles typically don’t mix -- unless you’re Paris Hilton or Floyd Mayweather.

The hotel heiress and undefeated boxing champion recently joined a spate of celebrities to endorse Initial Coin Offerings(ICOs) -- an unregulated new method of raising capital for startups that are choosing to turn away from traditional forms of fundraising, such as venture capitalists and banks. In an ICO, early investors motivated by potential returns get a percentage of the cryptocurrency they invest in, and buy distributed cryptocoins, or “tokens” using fiat or virtual currency.  Similar to a traditional crowdfunding campaign, or an IPO in principle, the ICO offers digital “tokens” to its backers instead of an actual product or shares of equity.  Selling these tokens in turn leads to funding in cryptocurrency, usually in Bitcoin or Ether.

Owing to the lucrative opportunities ICOs present -- the popular cryptocurrency Ethereum alone has a ROI of 84,720% since its ICO -- they’re gaining widespread appeal among celebrities hoping to cash in. Hilton backed “LydianCoin,” a startup providing digital marketing services to blockchain, while Mayweather took to Instagram to promote Stox’s ICO. Stox is an open source prediction market platform which has raised $30 million from its ICO as of August, which will enable everyday people to predict events ranging from finance to politics.

Stacks of bitcoins sit near green lights on a data cable terminal inside a communications room at an office in this arranged photograph in London, U.K., on Tuesday, Sept. 5, 2017. Bitcoin steadied after its biggest drop since June as investors and speculators reappraised the outlook for initial coin offerings. Photographer: Chris Ratcliffe/Bloomberg

So What Is Blockchain?

Blockchain is a database or public ledger that maintains a list of data records or transactions that cannot be altered in any way unless group consensus is given . This makes the blockchain infinitely more secure, removing the need for a central authority to approve transactions. The upsides of this decentralized solution for businesses are many. For one, it creates a proof of history and auditable trail, while decreasing audit and litigation costs and improving trust among partners.

No one understands the outsize benefits of blockchain better than serial entrepreneur Brendan Blumer, whose Cayman Islands-based company Block.One aims to help businesses streamline their operations by leveraging blockchain. Block.One developed the blockchain platform EOS, which has EOS tokens as its native cryptocurrency. Among its other differentiating factors,  EOS is the only blockchain platform with parallel processing, which brings continuous scalability. It also aims to solve major issues that existing decentralized applications pose. Speaking at this year’s Forbes Global CEO Conference in Hong Kong, Blumer demystified blockchain with a simple analogy. 

“ If the Internet was mass, scalable, insecure data transfer, [then] the blockchain represents mass, secure data transfer, and everything that comes with it. ”

While EOS will have its own blockchain, Block.One’s ICO is currently conducted on Ethereum, where profit generation comes from holding EOS tokens slated to appreciate in value. Earlier in July, Block.One set a new ICO fundraising record by raising $185 million in ether -- Ethereum’s native token -- in just five days, beating out the previous record of $153 million held by competitor Bancor. Block.One’s crowdsale, which is another term for an ICO, began in June this year and will continue for 314 daysuntil June of 2018, meaning participants can buy the platform’s EOS tokens anytime within that period. Its crowdsale comes at a time when other blockchain startups have typically released much shorter week-long or month-long token sales.

Floyd Mayweather

Floyd Mayweather claims he's going to "make a $hit t$n of money on August 26th."

Twitter/Paris Hilton

Paris Hilton announced her backing of LydiaCoin in September, but has since removed the Tweet.

“We felt an approximately year-long token distribution was the best method to ensure people receive fair market value for EOS tokens,” Blumer told Crytocoin News. The longer crowdsale period also prevents the network from congesting as investors flock to this opportunity -- which is what happened during Bancor’s ICO. A longer window also prevents quick sell-out and levels the playing field by giving small investors a chance.

The Anti-Cryptocurrency Camp

While some celebrities have been quick to champion ICOs, this enthusiasm is not universal. Jamie Dimon, chairman and CEO of J.P. Morgan, recently took a hit when he called the bitcoin mania a fraud, causing the price of bitcoin to plummet as much as 24%. A few days later, his firm was found actively buying Bitcoin XBT, a Stockholm-based bitcoin tracker fund. Taking a more sympathetic stance towards Dimon, Blumer reasoned, “What would you say if your business was entering its extinction phase? There’s not much of a choice for him [Dimon] and the stance that he’s taken… I think more banks will take an anti-cryptocurrency stance as they realize the threat it represents to their organizations.”

On the other side of the Pacific, China’s ban on ICOs in September this year remains a major roadblock to cryptocurrency’s global fundraising efforts there, and there is speculation that other countries like South Korea will soon be following suit. But Blumer was unfazed. “Hopefully the outcome of this approach will be informed regulation that will foster more mainstream adoption of these projects, that also takes into account consumer protection.”

Original article: www.forbes.com

Written by: Sharon Lam

InsightsShana Grossman