Blockchain-based self-sovereign identity company will use SmartCap algorithm.
Blockchain-based self-sovereign identity company Peer Mountain, has today announced that founder Jed Grant has pioneered an innovative new model for capped token sales that creates greater transparency and enables the market to determine pricing.
The SmartCapTM model, underpinned by a price discovery algorithm, enables companies to offer tokens via a capped token sale without running the risk of failure by incorrectly forecasting demand or setting unrealistic pricing.
“Standard token sales fail to offer would-be investors fair, open opportunities to purchase tokens,” commented Peer Mountain’s co-founder and CEO Jed Grant.
“Uncapped sales create an atmosphere that encourages greed, and encourages irresponsible investment. But currently standard capped sales place an unnecessarily heavy burden on the organizers to correctly forecast demand prior to launch, risking either leaving the market unsatisfied, or being deemed unsuccessful if they don’t sell all tokens – even if they do raise substantial amounts of capital,” Mr Grant continued.
In a SmartCapTM capped sale, tokens are made available in sequential rounds. Each round offers a fixed number of tokens, offered at a fixed price. When the order quantity exceeds the amount available, the round closes. Tokens are then allocated by order size, with larger orders receiving priority; unfilled orders receive priority in the next round.
The number of tokens available in the next and subsequent rounds will increase by an algorithmically defined amount. The price will also increase in the same manner, albeit by a much smaller amount.
The sale closes at the first incomplete round, and any tokens sold in this final round are priced at the lower price of the preceding round.
Mr. Grant has also created terms for a SmartCapTM pre-order round, where orders may be accepted from buyers with particular desirable characteristics, such as strategic relationships, order size, or other characteristics that benefit the project. These characteristics will be made transparent to participants, with those who rank most highly for desirability receiving priority for order fulfillment.
“Token sales to date have a very mixed reputation,” commented Grant. “The SmartCapTM model aims to provide significantly greater transparency by taking many decisions out of human hands.”
“Once a company has set its overall cap and token volume, the algorithm means that the rest of the sale can proceed at a pace and price that allows both the market and the company to be satisfied.”
“We are firm believers in transparency and regulatory compliance,” commented Grant. “We are excited to debut the SmartCapTM model to optimize the performance of the sale, and to set a new standard for ICOs both in Europe, and globally.”
The algorithm has been independently validated by Prof. Jos Van Bommel, an expert in IPO securities, liquidity and valuation.