You probably tried by now to do your own research on an ICO you considered investing in and you’ve already seen how much work it is. Imagine doing the same for each ICO when a new one is announced almost every day! Arseniy Poyarkov is the founder of DigRate, the ICO rating agency that will help any kind of investors with analysis and reports necessary for making a safe investment decision.
Hi Arseny, can you tell us a little about yourself and how you got into the blockchain ecosystem?
I am 36 years old, I was born in Moscow, and I studied at Financial Academy at the Government of the Russian Federation and received a PhD in Economics in Russian Academy of Sciences. I have been working in a financial sphere for more than fifteen years, and my main job prior to cryptocurrencies involved the international distribution of insurance risks between insurance companies (reinsurance,) while my partner has been engaged into credit rating business for almost all his life. In addition to practical work in the cryptocurrency market, I do my best to make contributions to its development:
• I am a member of the Expert group on the Digital Economy of the Russian State Duma, which introduces legislative initiatives
• I give lectures about blockchain technology and cryptocurrencies
• And now, we are creating the company authority of which would be comparable with Standard & Poor’s model on the classical stock market. The goal is that the positive DigRate rating would grant sufficient funds for the projects as well as the maximum possible safety for investors.
How did you decide to found a rating agency?
We have been engaged in the classical financial and rating business for more than fifteen years, and we have been interested in cryptocurrencies since 2012. During the process of market development, when it started growing rapidly people began to become interested in its trends and tendencies more systematically. Mostly, they began to track ICOs. As a result, the analytics have appeared and it began to be shared with our investors in the middle of 2017. The high demand for this kind of data had been noticed, and our investors began to place them via the website in the form of rating reports. That was how the Digital Rating Agency brand (DigRate) appeared – brand of the Russian-Swiss group of companies.
Does the valuation of digital assets differ from “traditional” ones?
The assessment of digital assets and venture investments have much in common:
• The team,
• The market volume,
• The competitive environment,
• The level of attention.
If speaking about the assessment of “adult” assets which are the capitals of banks, insurance companies, etc., it is another world entirely. Everything is much more transparent, adjusted, and estimated. Meanwhile, chaos reigns in the crypto-world.Meanwhile, chaos reigns in the crypto-world. — Arseniy Poyarkov Click To Tweet
As well as in classical rating businesses, projects that want to book independent audits to offer investors an objective perspective are customers of our ratings. If serious flaws are revealed as the result of an audit, the report isn’t published until the main problems are fixed by the project team and then publishedon our website and their Information is distributed on a daily basis because such ICOs have a higher chance to attract more investors.
Periodically, investors looking for an independent opinion on a project are using our services too. We are offering paid listings where the requested information is displayed in a structured and visually attractive way.
In my opinion, projects without a rating from a reputable rating agency won’t be able to count on essential funding anytime soon.
What is DigRate currently working on?
We are doing our best to bring the maximum benefit to the market, investors, and the individuals who are interested in crypto. We have developed and implemented an automated SWOT analysis – a system which will allow anyone to analyze any project and not miss the important points. It uses a questionnaire in a simplified form of our methodology of assessment. Based on these, a one page report with a SWOT analysis is formed. We have about 150 such reports from users in our portal. Of course, no algorithm will replace the work of a professional analyst, but such tool provides a basic idea about the project faster and easier.
In case of full-scaled rating reports, they are done by our team of professionals. A team of about 11 people works on each release of the report for a single ICO, from the analyst to the designer, to the proofreader. It usually takes one and a half to two weeks to form a single report depending on how detailed the data is and how communiсable the team is. We can also involve outside people who have the necessary special knowledge if needed. We ask the opinions of third parties if needed, and we carry out the fact checking.
The rating report is a consequence of project audits during which we closely interact with the team, understand their vision for the market, their plans of competitive strategy, the organization of management, etc. The level of professionalism for the attracted outsourcers is very important as well because it is a rare case when there are enough in-house resources to cover every part at a high quality.
We constantly create a base of partners who:
• Help projects to correct the revealed shortcomings
• And, also, help us to keep in touch with the market even more effectively.
We have made 30 public reports since August 2017, and 16 more are private because projects aren’t complete.
Each assessment includes two indicators:
• Investment attractiveness – the probability to sell a digital asset more expensively than an official cost during ICO in the period of about one year from the moment of ICO.
• Quality rate – the probability that the team will begin to implement the stated plans, however, a high quality rate does not mean high investment attractiveness.
In addition to complete reports, there is an express report where the most general indicators are estimated, and the investor can quickly come with an opinion based of this assessment if the project is worth studying further. You can find such a format on the website.
The current blockchain ecosystem
How would you characterize current ICOs? How did they change in the last year?
The world of ICOs changes rapidly and it is now in a stage of quantitative boom. A large number of projects are trying to raise some capital, but most of them remain unnoticed by the community and investors. People who have heard that it is possible to raise a lot of money via an ICO are joining the market and they are trying to solve their financial problems in this way. In this crowded space, there are really worthy projects who often don’t even launch their ICO, because they are meeting their cap in the pre-sale. More and more of such examples have appeared, you can find the statistics on IcoDrops for example.
In the recent months, the number of successful ICOs decreased significantly. What is the reason for that?
Too many mouths are trying to bite a piece of the investment pie. There is a joke on this subject: “Why is it impossible to divide everything into all? Because there are a lot of all, and there is the only one everything.”On ICOs: Too many mouths are trying to bite a piece of the investment pie. — Arseniy Poyarkov Click To Tweet
Is the number of fraudulent projects the reason for the declining interest in ICOs?
Investing comes with a risk. So, in order to engage in this market you need a good understanding of what you’re getting into. Fraudulent projects will be always present, until the market will self-regulate. Soon, it will be impossible to collect an essential investment without a rating assessment because both little investors and large funds will need external proof of quality. DigRate would like to create the system and make it possible to provide such a service under our rating assessment.
Do you think that the concept of ICOs should change to combat fraudulent companies? For example, should startups move to the model of DAICOs?
The fast development of ICOs is due to the high demand in a large market. There is an international demand for individual entrepreneurship which allows anyone work under his own risks, without the burdens of regulation. At the same time, a failure or even a fraud is the individual’s responsibility according to legal and moral standards. The world develops towards the personalized responsibility and the world of ICO will not be an exception.
It is rather obvious that in the nearest future ICOs would be strictly regulated by law. In this case, what role do you see for rating agencies? Should law depend on ICO valuation by rating agencies, or should agencies only provide advisory services for investors?
Any form of administrative restrictions on legal economic relations slows down the progress. We can see how it is possible to monopolize the local market in an administrative way. For example, in the Russian credit rating business, before the emergence of the “state” agency, there were five players plus the foreign Big Triad. Now, there are only two domestic ones. At the same time, the global market cannot be monopolized, so it is only possible to be fenced off from it by a high wall. Of course I would like to avoid such a fate for Russia in regards to the crypto world. Let all flowers grow, let there be dozens and hundreds of agencies, and consumers will choose the most qualitative and interesting product.
By the way, you are also a member of an expert committee on digital economics and the blockchain in State Duma. Could you tell us more about the current attitude of lawmakers in Russia towards the digitalization of economics and adoption of cryptocurrencies?
Very professional participants gather at the Advisory Council on the Digital Economy of the Russian State Duma Committee. They are the practitioners in the crypto-world, people who work with digital assets on a daily basis. The president gave assignments to provide modification of legal acts which would allow for the regulation of cryptocurrencies by July 1st, however, such a formulation can mean both complete legalization or a total ban. There are several bills at the current stage which, in a varying degree of essential restrictions, can legalize transactions with a cryptocurrency.
At the same time the cryptocurrency will likely not be legalized as money in the nearest future. The Bank of Russia acts against this categorically. If it will be legally possible to buy and sell a cryptocurrency from business bank accounts, then the official status won’t be so important. Though, a lot of things depend on it, from the taxation format to the requirement of licensure.
All practitioners want Russia to become attractive to digital businesses. Unfortunately, several departments offer serious restrictions, implementation of which will make the Russian market of cryptocurrency least competitive in comparison with the Belarus market, for example. I hope it will change and that we will be able to work quietly, buying and selling digital assets from business accounts.
You have noteworthy experience in insurance industry. Do you think that a blockchain integration would help insurance companies?
Certainly. The technologies based on the blockchain will have their place in the insurance industry, and at first, this technology will help to fix a mistrust problem not only to external swindlers but mainly of companies. Many difficulties arise because of the unwillingness of companies to share information amongst themselves. It is possible to create qualitative databases without the fear of missing valuable data by means of the blockchain and the accompanying encryption.
• In the insurance market, it is possible to remember the Tradle startup – the decisions based on the blockchain for the insurer’s personal data verification – either at the selling of the policy or while working on an insurance case.
• Everledger insures diamond buyers against fraud making the “digitization” of gems by entering their serial number into a special registry – in the future with the accumulation of a diamond base with numbers, it will be impracticable to forge gems.
• The Dynamis startup offered unemployment insurance through smart contracts on the Ethereum platform. The system is tuned to the assessment of the insurers’ reputation through LinkedIn.
• The Spanish startup Traity, together with the large insurance Australian company Suncorp, has created a chatbot in Facebook Messenger which ensures buyers’ transactions on the bulletin boards.
• The Blockverify startup allows users to check if products are counterfeit, are deviating from the delivery route, or if they are stolen. The solution can be applied in different fields of activity.
The largest international players have already been on the blockchain for a long time. The European companies Allianz, Aegon, Munich Re, and Zurich have created the Blockchain Insurance Industry Initiative and are actively implementing the technology into their daily processes where appropriate.
Skills needed and hot tasks
What should beginning investors learn in order to conduct their own analysis on blockchain projects?
DigRate suggests using the automated SWOT analysis for beginner investors and to those who need the convenient tool for the assessment of an ICO. It will help to not be amenable to emotions but to approach the analysis with the cold heart.
Speaking of trading, it makes sense to:
The market changes very dynamically, and there aren’t one-size-fits-all solutions for success.
Finally, it is not important how many times you have raised money if you have lost everything in the end.
What should a successful ICO investor learn?
Making money isn’t easy, to multiply them is even more difficult. Investing in crypto assets is a risky investment. It seems for many people, that everybody else earns money except for them, but that couldn’t be further from the truth. Only the success stories are advertised more loudly. You should not risk those funds which are necessary for you in attempt to earn additional income. Do not trade on borrowed money, do not take a big leverage, lock profits, and do not regret that you have missed an opportunity somewhere. Opportunities in the market appear constantly, you just need to be prepared for them.Making money isn’t easy, to multiply them is even more difficult. — Arseniy Poyarkov Click To Tweet
As a summary, could you give some advice for people investing in ICOs or to those who are just now looking to this field?
Everyone is different. Study the market, ask for different opinions as much as possible, and surely visit the DigRate website and the English-speaking Telegram channel. And after it seems to you that you know everything about the project, count to ten and make the decision to invest or not.