Horizon State (HST) exit spells out warning for many other cryptos
Using blockchain for voting – sounds like a great idea… and it IS.
Voting is most definitely a legitimate use case for blockchain technology and Australian company Horizon State looked like they had the makings of a great system, a blockchain voting system which has actually already been used.
The problem for Horizon State and their HST token “Decision Token” was that their blockchain did not need a token for it to work. Their cryptocurrency got in the way of progress. And this is exactly the same problem with 99% of all cryptocurrencies which actually have a use case for blockchain. The blockchain itself could succeed but there is no point in having the token.
HST peaked at over 5 dollars shortly after their ICO. 1 year ago the price was at 18 cents and shortly before their exit the price was down to under 3 cents. The price started dropping drastically in the hours before their official exit announcement and currently stands at just over half a cent.
The reason for closure
Horizon State announced they were shutting down due to a lawsuit against the company. Many media sources have speculated this was a court case by Australian authorities due to HST being classified as a security token. While this may have been a future lawsuit – and is bound to happen to many hundreds of other cryptos in the coming years – in the case of HST the lawsuit was actually from a former CEO of the company. The court filing can be found here.
Most cryptos have no incentive to actually succeed
Whether or not a crypto has launched via an ICO or IEO, the capital raised has more often than not been vastly more than any small team can reasonably be expected to spend on developing their product. Particularly in the case of the older cryptocurrencies which experienced the massive highs of the 2017 bull market and post-ICO continued to sell into the market. The companies behind these projects managed to raise so much money that even if they didn’t intent to exit scam, their company was worth thousands of times what it would have been worth had they not been selling their token. With that much money available to pay out in dividends, where is the incentive to actually make the company and product work?
In the case of Horizon State things already started going south back in 2018 with numerous concerns raised against them with concerns over market dumping of their coin, customers failing to materialise, staff leaving the project and technical progress stalling. And if the numbers available on the coin market are correct, they sold at least 32 million of their tokens before closing their doors and it would be a fair guess to say they raised anywhere between $30 million and $100 million (USD) through token sales over the course of their existance depending on exactly how much they sold when prices were between $2 and $5.
Let’s take the most conservative estimates and say they raised just $30 million through token sales and had no other VC investors. Let us also go to the maximum extreme in costs and say they had 20 full time staff on board for 2 full years of operation at an average salary of $150,000 per year. And let’s say their office rent and other operating costs were $50,000 per month. That is $6m in salaries and $1.2, in other costs. Actually let’s throw in another $5m in costs to exchanges in listing fees, discounts, etc.
At the most extreme guess the company would have made pre-tax profits of $17,800,000 over 2 years. The real figure is likely to be much higher than that. Even if all my guesstimates are well off base and I have missed something big out, I have gone with the most conservative numbers to take that into account.
Why most cryptos are going to exit scam or just die out
Horizon State is just one example yet their are countless hundreds of others in the same situation. HST was always a very “low cap” crypto. It’s glory days saw it in the top 200 by market capitalisation but mostly it resided in the 3-500’s. Considering they made $18m plus profit over 2 years, exactly how much profit have hundreds of other tokens made?
There are cryptocurrencies out there which have a white paper, a website and a roadmap. But no working product. All those crappy tokens on the Ethereum platform for example. If the company has already raised say $5m then why bother making the product? Have some “unforseen circumstances” or a random lawsuit, then dump another 20% of the remaining supply a few hours before announcing closure.
What are you hodling? Go crunch those numbers
Are you a long term holder of some low cap crypto you think has a wonderful idea, team or product. Run the numbers yourself for that project. Be critical but be honest with yourself. Work out roughly how much they have raised, work out their costs and calculate a rough pre-tax profit for them.
Now are they investing heavily to build out their ecosystem, customers, userbase, product or use case? If not then think long and hard about your investment.
Are they staying consistent or have they for example joined the Binance Chain crypto graveyard and dumped an extra load of tokens on the market to capitalise on the Binance pump?
Are they staying loyal to their token or are they creating more and more tokens for every additional use case rather than using these use cases to fuel their existing token (think how Tron would look had they actually kept faith with TRX instead of creating BTT, WINk, etc and rendering TRX virtually useless).
Are they following their road map? Are they true to their word? Is there real progress?
Be careful, be critical and be safe!
Announcement: Horizon State is ceasing operation
August 19th 2019, via Medium
It is with heavy heart that we have made the decision to shut our doors.
While we can’t reveal many details of the cause, we can at least say that it has nothing to do with the business — which has been taking consistent strides forward to new heights — and everything to do with a recently-served legal case in Australia.
The estimated costs to challenge this case, and potentially proceed through the mediation process to reach a settlement is an eye-watering expense will see the business become insolvent, and ultimately force its closure. We have in good faith explored all possible avenues to resolve the issue outside of the legal system in good faith to this time.
While we have made our sincerest and best efforts to make Horizon State self-sustaining on client revenue (which has included great personal sacrifices operating on a very lean budget to achieve), we simply can’t absorb this expense being forced upon us at this time.
We are very proud of the work we have put in as a group over the last 24 months, and recognition it has earned, which makes it all the more heart-breaking that circumstances outside our control have forced our demise. This is one of the most difficult decisions we have had to make in our lives, but we simply have no options available to us to fight this further.
We would like to thank our amazing community who have supported and journeyed with us over the last two years. Without you, we could never have achieved the milestones that made Horizon State a technology pioneer, and put Australia and New Zealand on the map as destinations for blockchain innovation.
The Horizon State team.
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