ICOs have fast become one of the easiest ways to fund start-up businesses, with little to no initial capital required at all. It is therefore no surprise that the industry has boomed since Binance’s success a few years ago. Yet several issues have arisen from this popular practice, some of which will be explored below, with particular focus on reviewing the Huobi exchange. The categories explored are as follows:
1. Team. How strong is Huobi’s advisory team?
2. Token. Role, terms of the ICO and fundraising goals.
3. Code. Information on code used.
4. Reputation. How strong is the community around it?
5. Legal Aspects. Governance and legal statements.
Huobi’s advisory board appears to be very robust, with a wide range of strong experiences across the board. Particular names to take into account are Jihan Wu of Bitchain, as well as Randi Zuckerberg (sister of Mark Zuckerberg and CEO of Zuckerberg Media).1
The aim of the token is to promote economic activity based on the advantages of information and data. Users are given full control over their own data and information, and Huobi aims to use blockchain technology and the token to reshape the current credit system and improve efficiency within the digital economic space.
The focus of the token is to develop a one-stop service platform for all uses from consultation to legal and KYC. It is intended to connect all relevant professional institutions in order the token could be easily regulated.
Huobi intends to implement a two-phase approach to the token’s release, the first of which will be based on the ERC-1404 standard, which will allow a user to implement regulation and restrictions on any transfer which will meet the basic requirements of regulated token issuance. Phase two will then be based on ERC-1400, which will then describe an interface to support grouping tokens into tranches, and therefore achieving partial operational constraints.2
Huobi hit its fundraising goal of $300m back in February 2018, with 500m tokens being distributed for sale at the time of the ICO.
The code used by Huobi is public-chain oriented, and uses a dual-chain architecture which comprises an H Exchange Chain, and an H Contract Chain. The H Exchange acts as a payment transfer mechanism, whereas the Contract Chain supports the implementation and execution of smart contracts.3
It would seem that Huobi is very reputable in the digital space, having been reported on by legitimate cryptocurrency media platforms such as Coindesk, Cointelegraph, Medium, Bishouts and Hackernoon.
5. Legal Aspects
Noted that there are no legal specialists in the team, there is however a legal statement on Huobi’s website 4, which sets out Huobi’s terms and conditions and its domiciled regulator; that being the securities law according to the Republic of Seychelles. In addition, self-governance is explored by Huobi, by way of community governance both on and off the chain, information of which can be found in the whitepaper.5
Upon the whitepaper review, Huobi’s website, together with an online search on the company, we would rate Huobi fairly highly and would say they are a legitimate ICO. Nonetheless, the fact that trade payments are made only via crypto to crypto could be a cause for concern, given the volatility of the currency. Capital may therefore be at risk. In any event, cryptocurrency in itself is a very risky area to invest in, and it could be argued that this is easily expected.
1 Huobi Whitepaper, pages 59-66
2 Ibid, pages 31-45
3 Ibid, pages 4-29
5 Whitepaper pages 47-50