Category: Knowledge

Making sense of the Crypto M&A wild west world

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“It is a wild wild west out there right now; there’s no framework” – Vanessa Grellet, Managing Partner of Aglaé Ventures at Permissionless 2022


The M&A scene in the crypto market is relatively young. Nevertheless, the industry has witnessed an ever-growing number of deals over the past few quarters. While the crypto M&A industry is still evolving, analysis of the current state of the industry can give readers a basic framework and thought-starters to comprehend this nascent phenomenon.

Market conditions favor a Crypto M&A boom

In the past several months, the entire crypto market has weathered storm after storm, which, although not necessarily started by Luna’s collapse, was definitely exacerbated by said collapse. Nevertheless, many seasoned Crypto Believers remain hopeful, as true innovations are born in crypto winters, learning from the past and paving the way for the next crypto summer.

As the market retreats from the high-yield gold rush, innovators must develop sustainable innovations with real use cases, such as decentralized identity solutions or blockchain security and protocol audits, making the crypto market, or the general Web3 industry as a whole, more appealing to institutional investors.

Institutional investor’s appetite for engagement in crypto manifests in many forms, including building a dedicated team to develop solutions in the crypto space (for example, KBank’s Kubix), investing in crypto tokens (an emerging area still under consideration by some regulators), investment into crypto native VC funds (such as Pantera Capital), and conducting Merger & Acquisition transactions (“M&A”).

Despite being a staple in the TradFi industry, M&A in the crypto market is a relatively new but robust phenomenon. According to Blockworks, M&A activity in 2021 tripled to 180 deals from 59 deals in 2020, and the industry already has seen over 92 deals in the first half of 2022. Many industry experts believe that industry participants will witness even faster growth of M&A activity over the next year as crypto winters present an opportunity to shop for companies or projects at a very low valuation.

Crypto M&A helps accelerate innovation within the industry

At its core, decentralization promises the elimination of intermediaries, and Crypto Believers see this as a very important evolutionary step in our civilization. With the industry being in its early days, full decentralization requires a massive attempt to build necessary infrastructures, develop appealing products and services, recruit communities, and unite ecosystems. For these to happen, innovation within the Crypto industry must occur not only for Crypto Believer’s hedonism or altruism but also for economic and financial reasons.

As many people believe that innovation is a way out of this crypto winter, M&A can accelerate the rate of innovation within the Crypto space expanding the possibility for innovators to get incentivized for their endeavors, which is especially important during this turbulent time. More M&A activities in the space create a positive feedback loop for more innovation. In addition, having M&A as one of the exit goals, innovators are required to think about the monetization, economics, and risks of their projects early on, giving the innovation landscape the ability to withstand shocks in the long run.

What types of M&A can the industry expect?

Traditional reasons for M&A typically fall into four categories, corresponding to that industry’s life cycle: capability acquisition, market access & customer acquisition, promoting economies of scale, and market consolidation.

M&A objectives by industry life stage

Source: Beacon VC internal analysis

Despite the shrinking market capitalization during crypto winter, many Crypto Believers think the market is still in the early or growth stage, meaning that most upcoming M&A activities within the crypto space will be for capability acquisition or market access.

Strategic Motives behind M&A in the Crypto Market

Strategic motives seen in crypto M&A transactions can broadly be categorized by who and whom the acquirer and target are (Enterprise vs. Protocol). To clarify, Enterprise refers to companies with a conventional equity structure (either TradFi or CeFi), managing the organization using a centralized top-down approach, while Protocol refers to Decentralized Applications (D’Apps) or decentralized autonomous organizations (DAOs) with governance tokens representing ownership in a decentralized protocol.

The list of strategic motives below is a sampling of what the market has seen, and is by no means meant to be totally conclusive.

Overview of Crypto M&A transaction motives

Source: Beacon VC internal analysis


Given regulatory uncertainties, especially for DeFi, not all enterprises are ready to offer on-chain DeFi products or services, but many see the opportunity to capture the value created in the crypto space. Enterprises looking for a less risky way to engage with the crypto market are eying infrastructure provider/ enabler play, which is achievable through acquiring existing infrastructure, blockchain enablers, or CeFi companies. The types of services that will be provided by enterprises for the crypto industry include wallet and custodian services, auditing services, or blockchain-as-a-service, similar to what AWS does for Web2. Paypal’s acquisition of Curv is a great example of this strategy.

CeFi companies can also be acquirers, especially large CeFi exchanges looking to enter new jurisdictions. The target would likely be existing CeFi exchanges with local licenses and hopefully good relationships with regulators. FTX’s acquisition of Liquid Group, then rebranding it to FTX Japan, reflects this strategy.

Innovation Leapfrogging

Innovation happens fast, often faster than blockchain-native CeFi companies can keep up. Acquiring frontier protocols allows companies to leapfrog their competition. In fact, many industry experts expect that CeFi exchanges to be the most active acquirers. Coinbase, for instance, has made more than 20 acquisitions since its inception, accounting for over $800 million in acquisitions.

Traditional enterprises are also developing a clearer picture of their long-term strategy and crashing the protocol acquisition party to accelerate innovation. For example, eBay recently acquired NFT marketplace KnowOrigin as a part of its ‘reimagine eBay strategy’.

Real-world Capability Cultivation

Successful decentralized protocols rely heavily on their communities to push out innovations and build infrastructure. As these projects tend to scale rapidly, many lack sufficient resources to handle the ecosystem. 

Many successful protocols that are cash-rich may take crypto winter as an opportunity to develop internal capabilities for the next crypto summer, by acquiring traditional companies to develop real-world capabilities. The acquisition target for these protocols would likely be an existing vendor or supplier to that protocol, as the community already has buy-in for the value that the target is able to generate. Sandbox’s recent acquisition of Uruguayan tech firm Caulit is a great demonstration of the attempt.

Synergy Building

As previously discussed, successful projects place high importance on their communities and the platform’s ability to maintain the community. During crypto summer, investor goodwill is high, and funding is easy to come by. When investor money is tight, however, projects and their communities turn to each other in the hope of sharing resources and growing their footprint in a more cost-efficient manner.

The acquisition motive for synergy can take many forms. One can be product-driven similar to Uniswap’s acquisition of Genie, an NFT marketplace aggregator, to complement its existing NFT liquidity pool – Unisocks. Another could be efficiency-driven similar to the Rari-Fei protocol merger to create a mega $2B liquidity pool.

Possible Structures of Crypto M&A

There is still very limited disclosed information on the deal structure, therefore the structures described below are solely based on market observations and internal analysis. In addition, there are still several challenges in executing a crypto M&A, and there is no standard playbook. In general, however, the Equity/ Token Direct Acquisition is the default method of M&A for its relative simplicity for all types of M&A motives, while Token Swap and Token Merge happen exclusively within Protocol-Protocol acquisition.

Level of control associated with transaction structures

Source: Beacon VC internal analysis

Equity/ Token Direct Acquisition

The direct acquisition method involves purchasing a controlling stake of the target’s equity or governance token, usually aiming to acquire total operational and directional control of the target. The process is executed similarly to traditional M&As, where both parties agree on the transaction price, draft legal documents, execute the agreements, and transfer the securities (or tokens). 

Unlike traditional M&As, there are still several challenges in crypto M&A such as token valuation, legal recognition of governance tokens as an acquirable asset, governing jurisdiction, and the absence of a legal entity for many crypto protocols. With these complexities, it is not surprising that the deal structure for direct acquisition will vary greatly, depending on the specific challenges of the deal.

Token Merge

Token merge happens when the acquirer and acquiree merge to form a new entity and issue a new token. Under this structure, both parties have approximately similar bargaining power, knowing that each party cannot succeed without the other party’s strength. The aforementioned Fei-Rari Merger is a great example for this case. Token holders of Fei and Rari would exchange their respective tokens for a new TRIBE token, under the project name FeiRari. 

Some other remarkable token mergers include the WRAP-PLENTY token merge into PLY to provide a more comprehensive all-in-one DeFi experience on the Tezos blockchain. More details on the merge mechanics are available here.

Token Swap

Token swap usually happens when the acquirer has a larger market capitalization compared to the target, and is looking to acquire smaller projects to complement or help complete its current product or service suite. Unlike total acquisition, the acquirer wants to allow the target company autonomy to operate and innovate. To put it in simpler terms, as Cointelegraph has put it, token swaps can be viewed as a crypto partnership on steroids, to drive the stickiness of the main ecosystem. TNC’s, a blockchain network company, announcement of 4 token swap transactions is an example of this pursuit.

Executing token swap transactions requires multiple smart contracts to manage both parties’ tokens staking into each other’s platforms, or through a shared wallet. The swap itself is a smart contract design problem, but the real challenge happens pre-transaction, similar to the token merge structure, as successful conclusion of the deal involves an extensive community buy-in program for both parties’ stakeholders, not only to align at the financial level, but also to align on project directions. 

Some Areas with Still More Questions than Answers

There are still many questions in the crypto M&A space that need to be answered. Most remaining questions are related to the execution of transactions, since there is still limited understanding of blockchain economics, and an unclear regulatory framework surrounding the space. Below are some of the biggest questions by stage of transaction that deal practitioners are trying to answer.


Valuation: How to value the project as a basis for acquisition? 

At the moment, there is no definitive approach to value crypto-based companies for general investment or M&A, creating tremendous difficulties at the negotiation table. 

Some of the methodologies being used to uncover ‘fair value’ of the project include:

  1. Market Approach – use comparable tokens and respective market price/ capitalization ratios;
  2. Cost Approach – approximation of input cost to create that specific token or project as a lower bound of valuation range;
  3. Income Approach – discount the future economic benefit or utility of such protocol at an ‘appropriate’ discount rate; and
  4. TQM or Quantity Theory of Money approach – approximation of equilibrium market capitalization value in the future, discounted to estimate the present value of the project.

These approaches are inherently subjective by nature, and the characteristic of tokens in each project also brings tremendous complexity.  For a deep dive into crypto valuation, follow the link to EY’s report on the valuation of crypto-asset or’s guide to crypto valuation.


Utilization of on-chain transparency: How to best leverage the abundance of on-chain data for deal-making?

On-chain data promises to help investors make smarter and more well-informed decisions. However, only a handful of investors really understand how to mine insights from the blockchain. Most investors lack the right tools to conduct on-chain due diligence, and further development of the market requires investors to explore how best to leverage on-chain data.

During-transaction/ Deal-making

Agreement drafting and enforceability: How to ensure that the transaction is legally enforceable and minimizes counterparty risk?

The difficulty of enforceability arises from the discrepancies in how different jurisdictions recognize digital assets or DAO entities, or the lack of recognition in several jurisdictions. Cambridge Judge School of Business provides a deeper analysis of the legal and regulatory framework of different nations. In addition, many institutions are subject to anti-money laundering regulations, requiring that any transactions or activities be free of potential money laundering activities. As decentralized blockchain transactions are anonymous in nature, such institutions may be unable to participate in these transactions. 

Legal practitioners and deal makers have been trying to popularize provisions, which protect both parties, including adverse materials, definitions of digital assets, and agreement termination clauses. Bloomberg Law has published a great analysis piece on crypto drafting trends. 


Means of payment and volatility hedging: How to shield parties from the volatility of digital currency as means of payment?

While there is strong demand to use digital currency as means of settlement for crypto M&A (either for tax, transaction speed, or any other reasons), the high volatility within the market prompts both acquirer and target to question how to best shield their position. At the current stage of the market, there aren’t many cost-effective hedging options available, even for institutional investors.


Integration of technologies and communities: How to ensure successful post-merger community and technology integration?

Many M&A transactions ultimately fail due to a lack of compatibility between entities. Integrating two blockchain projects and work processes is a major problem, as currently there is no standardization between projects. Another problem is how to best handle the two communities, whose interests and passion for the projects may not fully align.

Closing thoughts – the beginning of beginnings

With the industry learning more about crypto M&A, we hope that industry participants are working to close the industry’s understanding gap in good faith and for the sake of innovation, and not in an exploitative mindset. 

While many people hope that decentralization would become one of the most prominent turning points of mankind, there are several pieces of evidence suggesting that M&A activities can adversely affect the rate of innovation in a monopolistic or oligopolistic market environment. Acquirers must strive to remember that these transactions must be done for the sake of value creation for all stakeholders, and in pursuit of the betterment of society. Only with the joint hands of institutions and innovators to lay the groundwork and create meaningful solutions, the pursuit of decentralization dreamworks can be realized.

Author: Woraphot Kingkawkantong (Ping)
Editors: Krongkamol Deleon (Joy), Wanwares Boonkong (Pin)

Cryptocurrency Fundraising for Dummies and Why It Matters to Startups and Investors

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Finding funding to start new ventures has long been a difficult task for entrepreneurs, even those with great business ideas, as the traditional fundraising process requires significantly more effort, time, and money. Cryptocurrency fundraising offers an alternative that is best suited for blockchain-related projects. This article will walk through the emergence of various forms of cryptocurrency fundraising, how the fundraising landscape may continue to evolve, and the role financial institutions can play in this area.

The Past Experience of Traditional Fundraising

In the traditional finance textbook, there are two primary sources of funding: debt and equity. Companies can raise debt funding by asking a bank for a loan or issuing corporate bonds. Equity fundraising offers a different set of options. Companies can bootstrap, ask friends and family for small investments, or raise funding from private investors. Startups are typically tech-heavy and require time to generate a positive bottom line, and therefore may require multiple private equity funding rounds over several years before they can access equity funding from public market investors via an Initial Public Offering (IPO).

Following the development of blockchain technology in the late 2000s, Decentralized Applications (dApps), which are web services that use blockchain as a base infrastructure, gained popularity in recent years. The most widely mentioned use for dApps is financial services, referred as Decentralized Finance (Defi). In normal cases, the trustworthiness of the dApp project (also referred to as dApp protocols) will depend heavily on the project roadmap in the white paper, the code presented, and the owners’ background. However, dApp projects do not need to be a registered company and the project owners can be anonymous.

As traditional fundraising can be slow and costly, particularly for entrepreneurs without existing investor networks, an alternative source of funding for dApps has emerged: Cryptocurrency Fundraising (also known as Token Fundraising), where the project owners offer its dApp project’s tokens to interested investors at a relatively discounted price in order to raise funds to run their business. This fundraising method has rapidly gained its popularity due to its benefits relative to traditional fundraising especially for fundraisers, which will be discussed later in this article.

Image source: Maketecheasier – Decentralized Applications (dApps) are digital applications or programs that exist and run on a blockchain or peer-to-peer (P2P) network of computers instead of a single computer. dApps are outside the purview and control of a single authority.

Types of Cryptocurrency Fundraising

There are several ways people categorize the types of token fundraising. One of the easiest ways to understand cryptocurrency fundraising is to break it into Private Placements and Public Offerings. Please note that each country’s regulations might have an effect on the nature of fundraising.

Private Placement

A project owner may decide to conduct a Private Placement in which tokens are offered to a select group of investors prior to a public offering. This is known as a “token presale,” where the startup or project sells tokens while the project is still being developed. The goal of the token presale is to either raise funds for the project’s early development, or for business growth accretion that will eventually lead up to the Initial Coin Offering (ICO) launch. Since token presales are highly risky and investors may lose their entire investment if the project fails to deliver the intended outcome, tokens are usually sold at a huge discount compared to their expected exchange listing price. However, given the cheap price, if the project succeeds, investors will be rewarded with a huge profit. Due to the high risk/high return tradeoff, token presales have gradually become the main event before a new protocol’s public offering as speculators gamble on being rewarded with a satisfying profit.

Public Offerings

There have been three main types of public offerings.

Initial Coin Offering (ICO):

By definition, an ICO refers to the first time when a project raises funds by selling its token to public investors. However, over time the word has taken on another meaning, and now typically refers to any token offering where the project has organized the sale of its tokens by itself. The majority of tokens raised via ICOs are utility tokens. These are tokens that can be used to access and obtain services and products within the protocol. The project may also issue governance tokens in an ICO, which represent the right to vote for the project’s direction. For avoidance of doubt, a token can have both utility and governance features. Unlike an IPO where all fundraising documents are submitted to and evaluated by the Securities and Exchange Commission (SEC) before the company is allowed to issue shares to public investors, in an ICO, the project owner creates a whitepaper which covers all the details of the project. The purpose of the whitepaper is to provide enough details to obtain investor trust, as there is no regulator responsible for verification. One of the most well-known ICO projects was the launch of Ethereum in 2014.

Data source: Coinschedule – According to January 2021 ICO market report, there have been 5,728 ICO projects launched in total. These projects had acquired a market value of $ 27 Billion.

That said, due to the lack of regulation, many projects raised funds but never developed the project promised in the whitepaper. Many of these projects turned out to be scams created by anonymous project owners who ran away with investors’ money, which caused ICOs to lose popularity. Consequently, the undesirable image became one of the major downfalls of this method, along with the need to conduct its own marketing expense to raise funding awareness into investors’ ears. In Thailand, government regulators have stepped in to mitigate some of the trust issues in the ICO market, but two other token fundraising options have also arisen as an alternative to ICOs: IEO and IDO.

Initial Exchange Offering (IEO):

IEO is an improved version of ICO created to address the problems found in the ICO market. An IEO is an ICO where the projects are thoroughly screened and analyzed before tokens are sold on a cryptocurrency exchange. The exchange is responsible for evaluating the credibility of the project, and therefore will need to thoroughly verify the token issuers in order to maintain the credibility and trustworthiness of the exchange. As a result, cryptocurrency exchanges can prevent scams and suspicious projects from raising funds through IEOs. Further, as exchanges act as mediators, projects can get significantly more exposure, interest, and credibility. After a successful IEO, the token issuers pay a listing fee to the exchange, along with a pre-determined amount of tokens for the use of the exchange’s platform services. IEOs gave birth to some of the most well-known blockchain projects of today including Polygon and Elrond. In Thailand, as of March 2022, there is no authorized digital asset exchange which is granted permission to conduct an IEO.

Initial Decentralized Exchange Offering (IDO):

While IEOs solved some of the problems which existed in the ICO market, proponents of dApps faced a dilemma, as the IEO process is a centralized process, relying on a centralized exchange such as Binance or FTX. Proponents of dApps claimed that decentralization could remove human fraud and error, speed up the process, and lower fundraising fees. Consequently, they needed to find an alternative to IEOs.

IDOs, which are a decentralized version of IEOs, originated in 2019 when Decentralized Exchanges (DEXs), a blockchain-based peer-to-peer exchange where transactions occur directly between crypto traders, gained popularity. IDOs use a DEX to facilitate the token sale via the DEX’s IDO launchpad. IDO launchpads are fully automated and run on blockchains using smart contracts. The most popular ones include BSC Pad, Polkastarter, DAO Maker, and Solanium. In order to raise funds, a fundraising project is submitted to an IDO launchpad. If the project meets the launchpad’s standards (as assessed by the community, the launchpad team, or the 3rd party auditor), the project owner(s) are permitted to issue their tokens on the DEX. These assessment processes usually cover only the project code and whitepaper, and do not require disclosing the identity of the project owner, making the process substantially less strict than the IEO process.

Image source: NGRAVE – The Crypto Funding Hype Cycle. From the first ICO in 2013 to the first IDO in 2019. Crypto funding models are continuously evolving to improve upon inherent pitfalls. Initially introduced by Ruben Merre in a 2019 article.

One of the most successful IDO fundraising cases conducted by a Thai dApp is GuildFi project. GuildFi is a Play-to-Earn (P2E) Game-Finance (GameFi) community where players, NFT owners, and game developers are connected. As GameFi requires a player to own NFTs to play games, GuildFi helps players who don’t own an NFT to borrow it from NFT owners. After a player earns income from the game, the income will be shared between players, NFT owners, and the platform. GuildFi also acts as a venture builder and invests in high potential GameFi projects before uploading the game to its platform community to bring traffic into the new game.

Apart from ICO, IEO, and IDO, where the majority of tokens raised are utility tokens, the fall of ICO also created another form of regulated fundraising method: Security Token Offering (STO). STO is an issuance of securities in the form of digital tokens on blockchain, backed by a real-world asset such as stocks, bonds, REITs, or commodities. Such digital tokens are called security tokens, and are a digital representation of the asset to the holder. Since security tokens need to be backed by real-world assets, they are deemed to be a security and are highly regulated by the SEC in many countries. The STO market is therefore relatively small and less liquid compared to ICO, IEO, and IDO markets. In Thailand, STO and security tokens are governed under a Securities and Exchange Act and regulators are in the process of developing the necessary infrastructure to support STO activity.

What Type of Fundraising Method is Suitable for Startups?

Blockchain startups and projects should perform token fundraising via private placement since the companies can gain instant funding and other benefits from investors without giving up ownership or voting rights. The token fundraising process is also substantially more efficient in terms of cost and time since the companies do not need to pay for investment bankers fee or spend time restructuring the organization and preparing tremendous documentation as required for the traditional IPO. The company or project owner can approach several angel investors or institutional investors to gain advantages such as increasing the project’s credibility, providing operational support, or helping the company grow its network and ultimately developing a concrete protocol. By taking these actions in the private placement stage, the company or project owner can later execute an IEO/IDO at a higher price compared to presale round, or raise funds via traditional debt or equity as needed. In general, it is still not recommended for dApp startups to execute an ICO, as ICOs are less credible and more costly compared to IEO/IDO. Low credibility and lack of investor awareness could prevent startups from raising sufficient funding. Thus, ICOs require the projects to pay a significantly large sum of marketing budget to build their trustworthiness and raise funding awareness, whereas IEO/IDO can utilize their own credibility and existing customer base nearly at no cost. Nevertheless, this is subject to each country’s regulations. For instance, in Thailand, as of March 2022, there is currently no digital asset exchange that is permitted by the SEC to perform an IEO and most of the tokens must be raised via authorized ICO Portal.

Further, startups should be wary of raising funds via both equity and token, since it may create a conflict of interest between equity holders and token holders. This conflict of interest occur since the causes of appreciation of equity and token are completely different. The appreciation of equity value is subject to generated cash flow and expected growth of the company. On the other side, the appreciation of token value is tied to the pure demand of the token. To illustrate, there might be a case where a token holder attempts to convince the company to spend unreasonably expensive investment just to increase the traffic and the demand of the token. Thus, to remove this conflict of interest, a dApp startup should either raise funds via token or equity. Otherwise, it needs to manage majority of the investors to hold equal amounts of tokens and equity.

What Type of Fundraising Method Is Suitable for Investors?

In general, dApp startups want funding from institutional investors, as these investors can offer a business instant credibility, operational support, and extended connections. This equips the institutional investor with high negotiating power. Thus, institutional investors who believe in the roadmap of a project and its team should invest in private placements in order to maximize financial return, as tokens are offered at a discount price. Retail investors are usually unable to access private rounds unless they have a good network with the project owner, but may still find upside in investing via IEOs or IDOs.

Token investments provide a crucial benefit to angels and institutional investors who invested in the private round: the ability to turn over cash flow. Unlike an equity investment, which requires an extensive holding period, token investments allow early-stage investors to exit at a significantly shorter investment horizon, since pushing a project through IEO and IDO, where these investors unload their token to realize their profit, is considerably easier and thus faster than traditional equity IPO. In addition, the token can be staked, during the holding period to gain more return along with, of course, risk. These benefits allow the investors to realize their profit quicker and manage their limited cash flow more flexibly.

Opportunities of Token Fundraising for Financial Institutions

Though equity and token fundraising will continue to co-exist in the future since the causes of capital appreciation are different, token fundraising may still heavily disrupt existing financial institutions’ services, particularly as a lender or underwriter. However, there is room for financial institutions to engage with the token fundraising process.

Loan Provider

In a similar fashion to how financial institutions provide lending to traditional small businesses, financial institutions can provide financing to registered dApp startups or individuals who want to create their dApp projects. Financial institutions have much financial and business expertise where most of the dApp projects are running their business. This could include business loans, project financing, or even sponsorship of activities such as gaming, in exchange for interest and/or other types of dApp incentives.

ICO Portal Provider

One of the major weaknesses of ICO and IDO is the lack of trustworthiness. Financial institutions have credibility in the eyes of consumers and could create their own ICO portal to act as a lead underwriter for any token fundraising projects. In addition, there is a growing trend where regulated firms wish to initiate project financing by raising funds via the token. For example, GDH 559, a leading film studio in Thailand, raised funds by selling utility tokens via Kubix, Kasikornbank’s affiliate which operates an ICO Portal, to fund the movie “Bpoop Phaeh Saniwaat 2”. The utility tokens not only provide monetary return to token holders, but also provide special privileges, such as the right to attend the movie premiere and the right to receive special souvenirs. Another use case is the issuance of investment tokens. For instance, in October 2021, Sansiri, one of the largest real estate developers in Thailand, raised 2400 million Thai Baht by selling Sirihub investment tokens backed by the cash flow generated by its real estate, providing up to 8 percent annual return to the token holders. Unlike security tokens, investment tokens do not provide ownership over the asset, but rather the right to receive the cash flow generated.

In accordance with the Emergency Decree on Digital Asset Businesses B.E. 2561, the Thai SEC currently only regulates raising funds via investment tokens and non-instant utility tokens (utility tokens which investors cannot use immediately), both of which must be raised via authorized ICO Portal only. However, it has not yet regulated fundraising via instant utility tokens (utility tokens which investors can use immediately). As of March 2022, the SEC is considering requiring any fundraisers who want to list instant utility tokens on exchanges to seek SEC approval or use an ICO portal. This potential regulation could create more traffic for ICO portal providers.

KYC Information Provider

When regulations mature, regulators may begin forcing registered dApp startups to KYC their users. Since financial institutions have extensive customer data and expertise, they can help dApps comply with AML regulations by acting as an information provider or consultant for startups to conduct KYC and onboard customers who want to use dApp service.


Lastly, financial institutions (FIs) can invest in and support dApp projects by purchasing tokens. dApp and blockchain protocols will contribute a considerable role in financial and other sectors in the future, and financial institutions can capture capital gains by investing in these technologies while they are still in their infancy stage. As providing funding to these startups allows them to kickstart their ideas, FI investments can help shape how this industry develops. In addition, financial institutions can impact the growth of these startups by providing operational support, expertise, insights, and connection to other institutional investors.

Token fundraising will be a large part of company funding and project financing in the future, and financial institutions should take the opportunity to gain knowledge and build up their capabilities in this industry now. This will enable them to better assess the next investment potential in the dApp industry. Perhaps, this could become an origin of a new business model where financial institutions could advise retail investors on investing in dApp startups, or provide tools to help investors evaluate proposed token fundraising deals. By doing so, financial institutions can utilize their credibility and provide other investors with a safer and easier way to invest.

What’s Next?

Token fundraising grants dApp projects, as well as traditional companies, a new source of capital; faster, cheaper, more flexible than ever before. IEOs and IDOs have emerged to mitigate many of the problems seen in the ICO market, and in the future, will co-exist as an alternative funding method alongside traditional fundraising. However, the traditional ICO method will continue to lose popularity and shift to a credibility-upgraded version, the ICO portal. Further, the development of the token fundraising market is not yet mature; new methods may continue to emerge and be further developed, including the use of NFTs for fundraising and the tokenization of real-world assets.



Author: Pobtawan Tachachatwanich (Pob)
Editor: Krongkamol Deleon (Joy), Warittha Chalanonniwat (Paeng)
Special shout-out: Wanwares Boonkong (Pin)




NFTs – Simple Guide to the World of NFTs and Its Potential Beyond Art and Gaming Industries

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This year’s hottest emerging use case of digital assets, particularly in the art and gaming industries, is the use of non-fungible tokens, or NFTs. NFTs as a concept are not something new, but recent explosive popularity in 2021 put the market in awe, from the sale of Jack Dorsey’s first tweet at $2.9M to Beeple’s digital artwork at $69M. In this article, we will take you through the world of NFTs, including current use cases beyond the art and gaming industries, and opportunities and potential to transform the financial sector.


What Exactly is an NFT?


An NFT is a unique digital asset token that represents ownership of digital or physical assets. You can think of NFTs as digital certificates of authenticity and ownership.

Generally, tokens traded on any blockchain fall into two categories, fungible and non-fungible. Fungible tokens, like Bitcoin, are those that can be traded interchangeably. This is similar to trading a one-dollar bill in which all one-dollar bills contain the same nominal value. On the other hand, NFTs fall into the latter category, as each NFT is distinct and therefore not interchangeable – no two NFTs are the same.

Despite the growing hype, NFTs are encountering three key challenges:

  • expensive transaction fees stemming from the nature of the blockchain layer used by the NFT project;
  • ongoing questions on the legal enforceability of the NFT, such as what the buyer actually owns when they buy an NFT; and
  • environmental impact due to high energy consumption in proof-of-work blockchains.


A Quick Overview of NFT Landscape


Sales Volume

NFT sales volume experienced tremendous growth to $2.5B in H1 2021 from $94M in 2020 as more participants such as celebrities, artists, and companies are joining the space. It appears to have potential for future mainstream adoption.


Fundraising Activities


In terms of funding, according to CB Insights, in the past year roughly 15% or 18 deals of blockchain funding deals by top blockchain investors are digital collectibles and NFTs compared to only 2 deals in the previous year. The top blockchain investors include but are not limited to Digital Currency Group, Pantera Capital, and Andressen Horowitz (a16z).

Diving into the top-funded companies in this space, many NFT marketplaces have emerged to serve the rising demand. Dapper Labs, an NFT development platform, raised a total of $635.6M and was recently valued at $7.35B in September 2021. Additionally, one of the most well-known marketplaces, Opeasea, recently closed a $100M Series B round led by a16z in July 2021. Other marketplace players include  Sorare, SuperRare, Rarible.


Thai NFT Landscape


We also see growing adoption in the Thai NFT market. Several NFT projects have emerged, ranging from local celebrities to pageant fans. Bitkub Group partnered with Miss Universe Thailand to bring NFTs to pageants to stimulate fans’ engagement both before and after the competition. In addition, Jay Mart plans to launch JNFT marketplace and collaborate with celebrities to introduce its NFT collection in order to boost the use case of JFin tokens.

However, mass adoption of NFTs may face challenges on the regulatory side. In June 2021, the Thai Securities and Exchange Commission prohibited digital asset exchanges from offering trading of fan-based tokens and NFTs. The regulator aims to stop the trading of digital assets which have no clear objective and whose price could be manipulated by social media trends.


NFT Ecosystem Stakeholders


The main stakeholders of the NFT ecosystem are the creator/artists, the collectors, and the platform providers. Benefits that these stakeholders could receive from NFTs include:

Creator/Artist: The creator/artist could be anyone who owns a digital asset, e.g. artwork, music, or tweets, and wants to monetize it securely. Tokenizing the digital asset into NFTs can help keep the artwork safe, differentiate the original from the copies, and create value from scarcity, resulting in a higher asset value. Retail businesses can expand their product range to include NFTs, creating new revenue streams.

Collectors: Those who are looking to own a valuable digital asset. They could benefit from NFTs in several ways, such as supporting their favorite creators, holding a piece of history, capital gains from market fluctuations, or keeping money protected from inflation.

Platform providers: Providers can generate revenue from transaction fees; for example, OpenSea, the largest peer-to-peer online marketplace for NFTs, makes money by collecting fees from successful transactions. OpenSea is free for NFT buyers, but it charges sellers of NFTs a 2.5% commission on any transaction made through the platform. Different platforms have different models for how they charge fees.


NFT Use Cases Across Industries


NFT applications serve well in any industry where authentication and proof of ownership are crucial. We can observe many real-world use cases of NFTs across different sectors including art, gaming, retail, supply chain management and logistics, and real estate.



Opportunities of NFTs for Financial Institutions (FIs)

  1. How FIs can get involved or provide support in the NFT ecosystem


Some marketplaces, like Mintable, allow their users to pay for NFTs using a credit card. These users can purchase NFTs on the marketplace without needing any digital assets in their wallets (they still need to have a wallet to store purchased NFTs). Financial institutions could enter the NFT space by partnering with NFT marketplaces to allow their users to use credit cards on the platform. For example, Visa has taken steps in this NFT universe by making it convenient for users to convert and spend digital assets with a Visa card.


NFTs transactions can involve large amounts of money, posing risks of money laundering, malicious transactions, illegal activity, or scams. Financial institutions can take part in the space by conducting due diligence on customers involved in NFT and digital asset transactions.

NFT Market Operator

FIs can take part in the NFT market by participating as an NFT marketplace to capture the growing demand and explore new space while leveraging their trusted brand. FIs can support the creators to help launch new NFTs on the platform and earn a fee or percentage cut from each peer-to-peer transaction.

NFT Fund

FIs can also launch NFT funds for investors to have exposure in digital art, digital collectibles, and metaverse, and to own a part of several NFTs without direct exposure to the NFT market. FIs can leverage their existing large customer bases, as well as drawing in new clients to invest in their NFT funds.

  1. Application of NFTs in the Financial Sector

Application of NFTs is still in a very early stage for the financial services sector but it has the potential to be integrated deeper into the space to improve operational efficiencies as well as create new revenue models.

To improve efficiencies for FIs, NFTs can be used to record ownership and transfer of assets. They can be utilized to ensure the provenance of goods (point of origin), for fraud protection, and for debt management, including tracking and managing debts. On the potential revenue-generating side, it is possible for FIs to explore the convergence of decentralized finance and NFTs by allowing the holder of the NFTs to earn yield (staking) or use their NFTs as loan collateral.


How to Get Involved in the NFT Market


This section will guide you through the general process of how to create NFT collections and store and sell NFTs to have a better understanding of how the process works.


Step 1: Determining an appropriate blockchain


Every creator will start their NFT journey by deciding which blockchain they should adopt. Most NFT activities we observe today are built on Ethereum, due to its capability to attract a broad set of users and developers. In the future, we can expect to see more blockchains entering the market. Users should consider tradeoffs and pick one that suits well with their objectives.


Step 2: Minting NFTs


After picking which blockchain to use, the next step is to transform the digital assets into NFTs. This process is called minting. Several platforms can help with minting, such as OpenSea, Rarible, or Bitski. One important thing to keep in mind when deciding on what platform to use is controllability. We should pick one that gives us as much control over NFT features, such as provenance, attributes of the NFT, or storage of the underlying asset. Once NFTs are minted, they will be stored on the blockchain, unchangeable and tamper-proof.


Step 3: Storing digital content file


During the minting process, users will have options to store their digital content file either on the blockchain itself, or in other places. While storing files directly on blockchain (e.g. on Ethereum) may limit storage space, some users might find it more convenient to use third-party storage as it is more reasonable in terms of price and storage space. Currently, both centralized and decentralized storage options exist. Centralized storage makes NFTs more dependent on storage providers, and if such a provider is out of the business, the NFT will link to nothing. Decentralized storage has evolved to mitigate this issue because the architecture of this method completes the full circle of blockchain principles and operates without the intervention of any intermediary.


Step 4: Storing NFTs


Once the creators successfully mint NFTs, they have to keep them in a digital asset wallet like other digital assets. There are two models of wallets, custodial and non-custodial. For the custodial solution, third-party providers will store private keys of wallets on behalf of customers. Creators should only use a custodial service from a trusted brand with strong security. In contrast, the non-custodial solution is that customers are responsible for storing their own private key to access their wallets.


Step 5: Distributing NFTs across the marketplace


Nowadays, we have many NFT marketplaces in the space. Well-known players in this space include OpenSea, SuperRare, Rarible, Nifty Gateway, Foundation, Enjin, and many more.




By considering its underlying technology and current use cases, mainstream adoption of NFTs may be in the foreseeable future. Big brands and public figures in the traditional world are joining the NFT ecosystem which then stimulates and increases awareness among the general public. Nevertheless, regulations related to NFT, including the classification and anti-money laundering need to be monitored, as this type of digital asset is still in the early-stage, and regulators may attempt to closely monitor and control it as it grows. Looking into the future with proven technology, NFT has the potential to go beyond what we see today in the digital art and gaming industries. It could potentially transform existing sectors from retail to financial services, which may present an even greater opportunity for NFTs in forthcoming years.



Author: Warittha Chalanonniwat (Paeng), Wanwares Boonkong (Pippin)

Editors: Panuchanad Phunkitjakran (Pook), Woraphot Kingkawkantong (Ping), Krongkamol Deleon (Joy)


From Internet Banking to Blockchain Finance, What’s Next for Financial Institutions?

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The concept of banking first emerged sometime around 2,000 BC in Mesopotamia, where merchants felt the need to give out loans to farmers and traders who roamed the different cities. From then on, as trade and the economy grew, modern financial institutions were built to consolidate the scattering of economic activities and provide trust.


For centuries, the financial system has been heavily centralized. Along with other government entities, financial institutions joined hands to govern almost all transactions, from money issuance to lending and investing. They have this power to centralize because they alone can keep track of all financial transactions. The invention of blockchain will change the fundamental mechanics of how this new era of the financial system operates with its decentralized record-keeping feature. Once this technology fully matures, traditional financial institutions as we know them will have a lesser role in the financial system.


Blockchain and Its Promise to the Financial System


Blockchain is a decentralized record-keeping system that documents all transactions that happened on it. In other words, it is a bank book that everyone can possess and whose content is self-updating with all new transactions and the change in ownership of any assets. It defies financial institutions’ fundamental role as the centralized record keepers who prevent the same money from being spent twice or the same asset being transferred repeatedly.

Fully mature blockchain technology promises to provide greater efficiency, lower transaction costs, better transparency, a speedier rate of financial innovation, and a much lower carbon footprint (still heavily debated) compared to the traditional financial system.


The Inception of Blockchain Finance


In the early days of blockchain finance, Satoshi Nakamoto (pseudo name – actual identity remains unknown) invented Bitcoin (whose underlying technology later became known as blockchain), a digital currency to aid in the decentralized transfer of money. The transfer data stored in Bitcoin’s blockchain is static – meaning that the blockchain can only record that Entity A transfers B amount of money to Entity C.

Ethereum then came along and introduced smart contract technology, which allows blockchain to be programmable. Ethereum blockchain can instruct that only when Event D happens, Entity A can transfer B amount of money to Entity C. Any transactions can become fully automated upon a defined set of rules.

Both technologies were the foundation of the concept of what is now known as Blockchain Finance.


The Blockchain Finance Dilemma


While groundbreaking, current blockchain finance is not without limitations. The challenge lies in the Blockchain Dilemma – that blockchains may only choose up to two qualities to achieve: Security, Scalability, and Decentralization. The limitation is the mechanism to how each party in blockchain finance agrees that a transaction is legitimate and therefore should get updated in everybody’s copy of the bank book (referred to as the “Consensus Mechanism”).



Source: Original framework by Certik, adapted by Beacon VC


Since both Bitcoin and Ethereum prioritizes Security and Decentralization, scalability is a challenge for both blockchains. In order for a new transaction to be recorded in everyone’s copy of the bank book, someone who holds a copy of the bank book must confirm that the transaction is legitimate through the computation of a complex mathematical equation. That person is referred to as a miner, and the first miner who gets the equation right wins a monetary reward. This process of solving a mathematical equation to confirm a transaction is called the proof-of-work consensus mechanism (PoW).


Other blockchains prioritize Decentralization and Scalability, giving birth to the proof-of-stake consensus mechanism (PoS). Blockchains that adopt PoS include Polkadot and Vechain. Under the PoS concept, a miner can be eligible to confirm a transaction by putting down a ‘ stake’ in the form of coins belonging to that blockchain (think of it as a refundable deposit). The more coins put down by a specific miner, the more eligibility that miner has to validate a transaction. This consensus mechanism works because the miners who are not validating any specific transactions are obliged to check the work of the validating miners. Faulty confirmation of a transaction is penalized by confiscation of stake.


Finally, other blockchains prioritize Security and Scalability. While many blockchains use the PoS to validate transactions, we have seen a rise in the proof-of-authority consensus mechanism (PoA). In this case, new transactions are confirmed by a few authorized players in that blockchain. These players are incentivized to keep transaction data legitimate and enjoy the monetary benefit for that blockchain growth. Examples of blockchains that prioritize security and scalability include blockchain consortiums formed by financial institutions (JPM coin), and the Bitkub chain. In reality, there are many other ways that a blockchain can achieve scalability and security, as we also see cases using a hybrid model between PoS and PoA – the delegated proof-of-stake mechanism (dPOS), which we will leave for another discussion.


The Two School of Thought of Blockchain Finance (CeDeFi/ DeFi)


There are big debates in the blockchain finance space whether blockchain finance should be centralized (CeDeFi or CeFi) or decentralized (DeFi).



CeDeFi is an evolution of the current financial system where an intermediary helps manage the transaction and regulate the users’ activities in that ecosystem. Under this scenario, if a user wants to make a transaction, the user needs to create an account with the company, deposit cash or any assets into the company’s custodian, and use that company to execute the transaction. In this case, the customer would need to reveal their personal information to participate in the ecosystem. Great examples of CeDeFi platforms include Binance and Coinbase.


Conversely, with the growing need to protect own data and distrust in institutions comes the demand for DeFi. Users are required to manage their own funds and financial activities. They must have a personal wallet where they store their assets and use that wallet to carry out transactions by connecting it with decentralized service providers. Since these decentralized service providers execute trades based on smart contracts, the transactions automatically occur when conditions are met. There is zero need for human intervention. This gives flexibility for DeFi users to select service providers whose set of rules they like the most.


Which School of Thought Will Prevail?


Although there is no guarantee which school of thought will prevail, or that there will be any clear winner, we anticipate that CeDeFi will gain mass acceptance and adoption for real commercial purposes first, despite the current boom in DeFi which has been driven by speculative forces.

It is all about the evolution of public trust. CeDeFi is, by design, a bridge for general customers to start exploring the blockchain finance ecosystem and shifting their trust away from financial institutions/centralized governing entities to service providers (think of Binance, Bitkub, Zipmex, Satang Pro, etc.). These companies excel in replicating the same user experience a customer would have if they were to interact with general fintech that people know and have grown accustomed to. Once more people start adopting CeDeFi, and the infrastructure and interface for DeFi are in place, the public will soon learn to shift trust from said service providers to algorithms (code and rules of how transactions are made), leading to the potential mass adoption of DeFi. It is impossible to say when mass DeFi adoption will happen, but we can definitely see both CeDeFi and DeFi co-existing in the foreseeable future.


Such co-existence can take place in a number of manners:

  • Gateway: Since value creation in the economy is still largely driven and transacted in the physical world, CeDeFi can exist as a gateway for users to convert traditional assets (such as fiat money) into decentralized blockchain finance. We are already starting to see this symbiotic relationship between CeDeFi and DeFi, in which users convert their money into digital assets using CeDeFi and then transfer it to their personal DeFi wallet. (think of Fiat -> Binance -> Metamask wallet)
  • Market Segmentation: It is possible that CeDeFi and DeFi can co-exist by serving different markets in the economy. Segmentation can be based on the need for governance. For instance, CeDeFi can serve segments where visibility and governance are critical, such as corporate clients, while DeFi can serve the retail market. Segmentation can also be based on the type of trust users require. Conventional users can use CeDeFi because their trust system is based on having a single entity to point to when things go wrong, while DeFi users can be more comfortable with the algorithm.
  • Business Extension: CeDeFi organizations can use DeFi as a place to experiment with financial innovations and later acquire the know-how to build or integrate similar services to their platform. This is the same model that we already see in the financial industry, in which big financial institutions leverage the capability of startups to enhance the robustness of their offerings.


While this migration unfolds, regulators and financial intermediaries incumbents will likely try to slow the migration rate to a minimum. This is because they will first need to find a satisfactory framework to thrive in an entirely DeFi environment. After all, there are certain benefits to centralization, such as the ability for the government and banks to control fund flow, regulate the market, and effectively pull monetary levers to protect the economy or national interests.


What’s Next for Financial Institutions?


There is no telling when mass CeDeFi or DeFi adoption will happen, but it is paramount that financial institutions start finding their role in this emerging ecosystem. To start from an inside-out perspective, financial institutions were built upon trust and efficiency through consolidation. The critical area of exploration is where financial institutions can continue to deliver benefits both in the CeDeFi or DeFi context. From an outside-in approach, financial institutions can navigate through different blockchain layers and access points in the ecosystem to identify a natural fit for their current products, capabilities, or future strategy and monetization models.


While we are racing towards what may be the most significant overhaul of the financial system in modern history, we must strive to remember that different populations adopt technology at different rates and that meaningful innovation must not further marginalize anyone.



Author: Woraphot Kingkawkantong (Ping)
Editor: Krongkamol Deleon (Joy)
Special shout-out: Wanwares Boonkong (Pin), Phanthila Saengthong (Mook), Panuchanad Phunkitjakran (Pook), Napat Nantavechsanti (Jum+), Phongsuphat Kanchanakom (Monn)