Author: Kaloyan Roussev
Do not make investment decisions based on this article – read the disclaimer before you proceed and leave the website if you disagree with it.
It is 27 August 2017 today. This review takes into consideration investing in LKK at its current price at $0.34
Lykke might change the world of finance
How do I rate an investment in this project at the current price? (TL:DR)
Mid-term I think this might be the among the best investments I will make, under the condition that I take my profits and run before 1 billion+ more coins potentially flood the market at some point. This project can literally change the world, if it comes through and gets regulatory approval. And if no “its a scam” fiasco occurs, like Veritaseum.
The company was founded by a serious Swiss guy (Richard Olsen), whose previous international success is called Oanda.
So basically this new type of semi-decentralized (refer their white paper) exchange with improved security using multisig wallets (refer their white paper or FAQ), uses the additional info field in a bitcoin transaction, to attach any digitalized asset or financial security to a single satoshi, creating a Colored Coin, and this colored coin becomes an I Owe You (IOU) derivative, allowing anyone to trade anything – issuers (banks), exchanges and traders can meet on Lykke to transact literally anything. They also provide better liquidity by matching not only by time and price, but spread too. This is amazing. Currently into Forex, Bitcoin, Ether, C02 certificates and Sheela assets (Musical IP rights tokens), they are planning on adding many types of financial securities as tradeable items on their marketplace.It can lower the barrier to trading stocks tremendously. I might have been wrong or slightly inaccurate in this description, so take it with a grain of salt.
The first thing I did, while researching the coin, was to read this in their whitepaper, and I immediately fell in love with the concept, and started thinking of 100x+ returns over their current price at $0.34. However, reading further, I realized that the situation here involves almost the same central problem as with Veritaseum that I wrote two days back – the asset (Lykke Coin) that represents a share of the company, is absolutely centralized – only 2.33% of Lykke Coins are sold via ICO, the rest has been retained by the issuer – Lykke Corp. (I might be wrong on this – https://www.lykke.com/city/invest says 75% is in private wallets, but whose private wallets?) They even admit that the value of the coins can be diluted whenever they decide to issue more coins (They also use the coins for liquidity and for funding their development so that they don’t have to rely on external financing. Which is good because that way they can turn profit more easily and the entire venture can be successful). So there are 98x more coins waiting to be unleashed into the world. Another big problem is that the total amount of coins is 1 billion 280 million. I am not a fan of anything over several million.
Now, first of all, the act of issuing more shares (Lykke Coins), is not guaranteed, will not be sudden and may not happen in the near future. We will have at least 6-12-18 months to cash in on our investment, if it turns profitable, because it will not make sense for Lykke Corp to sell more tokens at such a low price as the price is, currently. But when it surges, beware. Secondly, with only 30 million coins in circulation, and with this great product, the same situation can develop, as with Veritaseum – the limited amount of coins in circulation (2% of all) skyrocketed (Veritaseum went from $1.5 to $200 within months). So mid-term, there is still great potential. Coin can easily surge to $2-10 which would be a 8x-30x ROI.
In their FAQ they say that the issuance of more tokens will be subject to voting from the shareholders, but I don’t know if that means those 2.33% or the company owners as well (the other 97%) because if it is the latter – the outcome is certain. No one should dare call any aspect of the operation a scam, like they blatantly did with Veritaseum, because it is all publicly disclosed and there is nothing scammy about it anyway. However, it’s a matter of time before some dumbass comes out and does it – because a few people on the bitcointalk forums are already implying it.
Make sure you read their whitepaper and their FAQ section. It is very advanced, very innovative project and I will not try to embarrass myself by trying to interpret here whatever they had to say, and in the same time not losing its original meaning. Just read for yourself.
Some other things to note – the Lykke tokens represent both a share in their corporation (I don’t know how is it possible, how it has been institutionalized, and what are the legal implications of this) (100 coins equal 1 share) and a tool for providing liquidity on their platform. The Lykke Coin can only be bought on the Lykke exchange, although they have said on their site that this might change (hopefully it does, because listing the coin on another exchange will both surge the price AND provide external validation of the currently self-righteous project). Here is a memorandum about the company with interesting details about it – https://www.lykke.com/Lykke_Corp_Placement_Memorandum.pdf
- Website: does it look good/presentable – yes, the website looks good. I was unable to find how to trade on it, although I clicked on Exchanges, and then on one of the asset pairs. Strange, maybe trading is done on the mobile (really bad idea, especially Android). Will check it out later.
- Website: Does it have a roadmap for the cryptocurrency development – there is a brief roadmap in the whitepaper. Here is a roadmap I got off their bitcointalk thread
Actually I found something even better – check out this Trello board https://trello.com/b/IV0PH2gs/lykke-roadmap
- Website: Does it have a whitepaper – yes, https://www.lykke.com/media/Whitepaper_LykkeExchange.pdf – one of the best whitepapers I’ve read. It explains the ways blockchain and exchanges work, it lists all the shortcomings and security risks, and lays out what improvements are made in their own system. It also tells us about the fascinating Colored Coins which are a way to wrap a financial security and trade an IOU on it using their exchange. Somehow reminds me of Veritaseum
- Website: Is the domain name and TLD good – the project name + .com – best combination ever.
- Website: Is it a quick wordpress template, a 2-hour html job or a custom design with lots of work, money and thought thrown at it – looks custom. Simple, beautiful and useful.
- What new does this cryptocurrency bring to the world, what problem does it solve, what does it stand for– semi-decentralized marketplace for any type of currency and financial security with enhanced security
- How does the cryptocurrency name sound (does it sound legit and like a good brand name) – I don’t know how to pronounce it and I think this will be a big problem with mass adoption.
- How does the logo look – fresh colors. I like it.
- Is it a PoW, PoS or PoW/PoS coin, what is the mining difficulty or APR, does it suffer from inflation – pre-minted. No mining, no staking. It is not a cryptocurrency, it is a token that represents ownership in Lykke Corp.
- Who is behind the cryptocurrency – are they shady figures, or have they placed their names and pictures on the website; what is their track record and reputation; do a quick google/github research on them – the project belongs to a public company, registered in Switzerland, and you can find all the information you might need on it, here http://lykke.world/ – you can also find the amounts of money they’ve raised so far. The founder has been a public figure in finance since at least 1985. Here are the team members https://www.lykke.com/leadership A quote from a bitcointalk user: “I’ve been doin some research on the Lykke team members. These kind of qualifications are seriously rare in the world of crypto. Haven’t seen such qualified team since the launch of Stellar and Ripple. 100% experienced and reputation in the sector that is being adressed. Really promising.”
- What is the limit on supply of coins in circulation – 1 billion 280 million. Issuance of more coins possible after a shareholders’ vote.
- Is there a link to the source code – since the project is mainly crowdsourced, and they use an innovative way of distribution of rewards, incentivization and recruiting, you shouldnt be surprosed to find 170 repositories and many contributors in their guthub https://github.com/LykkeCity/
- When was the last commit made, and how frequent are commit – 12 minutes ago. On a Sunday. How bout dat?
- How many developers participate in the coding process – many
- What the project survival relies on – Bitcoin blockchain. They realize this risk, so they are also porting to Ethereum blockchain. Regulatory permissions in the USA and UK mainly.
Exchanges and trading
- Which exchanges (and how reputable they are) is the coin traded on, what is the daily trading volume and market cap Lykke Coin is only traded on their own exchange. DTV is $400k, market cap is $91 mio. The fact that it’s not listed anywhere else makes it obscure, hence potentially undervalued.
- Are there buy (support) or sell (resistance) walls – logged into their Android app (oh, how I hate to use Android for stuff that is prone to security breaches) and took a screenshot of the market depth for you – seems there are a lot more buy orders (purple) than sell ones (yellow) – a good indicator
- How does the chart look – nothing out of the ordinary. There was a surge at some point but the price is suffering a setback now, and it might be a good entry point.
- Does the chart contain patterns that look like pump and dump actions or trading by bots – I don’t think so
- Has the coin spiked on one exchange after being added on another exchange – N/A
- Is there a Bitcointalk forum Announcement thread – Yes https://bitcointalk.org/index.php?topic=1402110.0
- How many pages is it – 93 pages. Looks like a long read, so let’s get to it.
- History of the coin according to the forum and general public impression of the coin throughout – LykkeX is a team member, participating in the discussion. People like the project. Some users ask clarifying questions about it. Some are concerned about the founders’ enormous stake in the coin. Another concern is about the mobile-only wallet (same as me). On the matters of whether they will be listed on another exchange, their official spokesperson said it wasn’t likely, as they themselves are an exchange. An interesting pessimistic opinion here worthy of examination: https://bitcointalk.org/index.php?topic=1402110.1720 Community member tempus has taken on the role as a voluntary spokesperson for quite some time now, he is very familiar with the entire operation. Recently there’ve been many arguments over the valuation of the company, the token and the marketcap. Rumors that the Pillar project and the Mothership project have copied Lykke’s business model.
- Do they have a blog, anything interesting on it? – https://www.lykke.com/city/blog biweekly updates
- Is there a slack channel – http://lykkecommunity.herokuapp.com/
- How many members in the slack channel – 600+
- What is the public sentiment in the slack channel – constructive and speculative conversations
- Is there a Twitter profile for the cryptocurrency and does it post regular updates, how many followers https://twitter.com/LykkeCity 3k followers. Daily tweets
- Is there a Facebook page for the cryptocurrency and does it post regular updates, how many likes – https://www.facebook.com/LykkeCity 500 likes. Daily activity, possibly coordinated with the Twitter activity
- Are there any known problems with the source code, the wallet or something else regarding the coin (transactions, mining, efficiency) – mobile trading only, prone to security issues
- Is there an active development for fixes on the way – a web terminal for trading is on the way
- Has the wallet been under maintenance for prolonged periods of time on some/all of the exchanges Is any government planning on banning the coin (or similar coins) or putting heavy restrictions towards its use – there is a long ongoing process for regulatory approval of their activity. Could take up to late 2018
Popularity and perception
- What does a quick google search tell us about the coin – nothing particularly interesting. Some news articles.
- Are there youtube videos about the coin – mainly introductory and onboarding videos from Lykke itself, some speculation.
- What is the general sentiment in the comment section below the videos (constructive, fud/hype, calling out scam etc) – almost no comments below videos (and not many views either).
- Is the coin associated with illegal/criminal activity or the dark web – no
- Similar cryptocurrencies/projects – Veritaseum, Pillar, Mothership
PS: In their FAQ, they say the following: “Lykke bridges conventional finance with digital assets on the public Blockchain. To ensure this, we plan to be fully compliant with the regulatory regimes in all jurisdictions where Lykke operates.” – however, the world “will” does not guarantee anything. We don’t know what has been done in this regard and to what avail. EDIT: from the bitcointalks, a quote from a teammember:
Michael Klena, Director of Lykke US:
US has fragmented regulations, in that different products are overseen by different regulators. And each regulator has different levels of approval, depending on trust/experience with the regulator and capital segregated.
Lykke’s approach is like climbing a ladder. We will get approval for the lowest levels first. Then we can apply for higher & higher regulation approvals. This takes time, but it is the best way to achieve our goals.
Applications have already been submitted to SEC, US Treasury and IRS with CFTC and OCC to follow shortly. We expect our first approvals for a very limited set of products by the fall. Each quarter we expect to add more & more products as approvals come in. By the end of 2018, we expect to be able to trade everything that Lykke offers.
I am sure I might’ve made some mistakes in this post or in my research. Please, forgive me, if I have, and contact me to tell me where I went wrong. It takes about 4-5 hours of my time to do a full research on a cryptocurrency, and I try to do at least 4 per week.
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