Aleksey Smirnov, Phenom: The main problems of ICO are jurisdiction and security
The most important things in preparing an ICO project are to provide protection against hacker attacks and to choose the appropriate jurisdiction. This is the opinion of the speaker of Blockchain Conference Moscow, CEO at blockchain company Phenom, Aleksey Smirnov. We talked with him about the legal and technical difficulties in carrying out a token sale and learned his opinion about the importance of bounty campaigns.
Interviewer: Blockchain Conference Moscow (BCM)
Respondent: Aleksey Smirnov (A.S.)
BCM: Hello, Aleksey. Phenom has a solution for integrating cryptocurrency payments. What is your target audience and why does it need such a service?
A.S.: First of all, this service is useful for small business. For example, online shops that can accept payments from bank cards, but also want to accept payments in cryptocurrency.
In order to start using our service, they need to embed our widget or library on their website. Due to this, the buyer will be able to choose the payment method: fiat or cryptocurrency (BTC, ETH). And the exchange rate at the time of purchase is calculated in real time. Whereas, we take care of all payment processing and transaction confirmation. In other words, our customers do not need to have a deep knowledge of blockchain technology, they can just use our library.
BCM: You also offer clients a platform for ICO. But there are cases when hackers intervened with the token sale and stole money from investors. How did you work out the protection from such cases?
A.S.: Phenom pays special attention to safety. Any code that is released goes through a complex analysis not only through automated tests, but also by a group of testers. Several times, we have given our code to third-party companies specializing in vulnerability research. There have never been any vulnerabilities.
As for our ICO platform: we are trying to create the most closed architecture. Even inside the company there is a security protocol, which specifies which employee has access to the servers. We record who and when was connected to these servers. The entire network infrastructure remains closed. We were never hacked, although there were quite a lot of attempts. Our clients have attracted more than $45 million thanks to the ICO.
BCM: How do you think, how important is bounty campaign for the success of ICO in general? Explain your point of view.
A.S.: It is widely believed that the bounty campaign is a weak tool and doesn’t play a special role in the success of ICO. I don’t agree with this point of view, because the effectiveness of bounty campaign depends heavily on how well it is organized.
If organize the process correctly, bounty campaign is a very effective tool, I can say this basing on my own experience. Our platform includes an automated bounty component. We monitor the activity of users on Facebook and Twitter. In addition, we were the first to integrate solutions for social networks built on the blockchain technology – Steemit and Golos, where crypto community is highly developed.
If there is a tool that allows you to automatically track all the activity of users and really stimulate them, then the bounty campaign will be really effective. The size of the users’ reward received for their repost should depend on the number of their subscribers and the quality of the content they provide.
BCM: Which legal challenges did you face when preparing ICO for your customers? How did you cope with them?
A.S.: The main problem I would name is the choice of a suitable jurisdiction for incorporation of a legal entity. We conduct an analysis based on the nature of a token, its functionality and role. Each token is a separate case.
The desire of clients to accept investments from all over the world and in any amount is also a problem. We are working out the procedures of KYC, Anti-Money Laundering, etc. according to the requirements of those jurisdictions where the investments to ICO come from.
Difficulties also arise with the exchange of large funds raised during the ICO, and taxes. If the product is already ready, it is necessary to formalize the relationship of customers with the organizers, management and the whole structure of the organization. It is necessary to prepare a large set of documents, as well as to consult with regulators and state authorities sometime.
BCM: Which technical aspects of ICO is the most difficult one and why?
A.S.: All technical support for ICO is a complex process. First of all, because it is a big responsibility. Huge funds are going through smart contracts and ICO platforms. To ensure the complete safety of all these funds is very difficult. For example, our platform doesn’t provide access to funds and wallets for which investors' money flows. Wallets on which money is arrived are generated on the part of our customers – the organizers of ICO, who independently store private keys. We have only wallet addresses, using which we monitor all incoming transactions. Provision of the security and audit of smart contracts are the most critical steps in the preparation and technical implementation of ICO.
BCM: Tell us more about your report at Blockchain Conference Moscow?
A.S.: I'll talk about Phenom and share our achievements and knowledge learned in less than a year. I will tell about the developments we are working on: ICO platform, blockchain solutions, creation of MVP and smart contracts, as well as security audits.
Within the report, we will delve into the topic of ICO as one of the most popular methods of fundraising and discuss technical preparation of token sales.
Register for Blockchain Conference Moscow and learn more about launching ICO project.