Futereum is a next-generation Blockchain bank boasting a line-up of cryptocurrency investment professional all-star advisors, such as Nordex Capital’s Daniel Oon and crypto hedge fund whiz Hannah Tilson (formerly of Pantera Capital). The company’s partners are similarly leading global fintech players: Autilla, the provider of the digital trading suite for the London Bullion Market is among the company’s who’s who of top drawer partners with whom Futereum is working on a first class professional crypto exchange presently.
Bitcoin Journal: For those who are not familiar with Futereum, can you explain what it is, and what the team aims to accomplish?
Futereum is the innovation of value into payment utility. This is not to say that it is the same thing as value innovation, which is a matter for those who work in securities markets. Pure value innovation is about stripping away any utility there is and harnessing value. Value innovation that focuses on payment utility seeks to embolden, not to disempower the core utility of the payment mechanism or object.
A good example might be housing. Value innovation in housing is about working out how to securitize entire portfolios of condos in the form of real estate investment trusts (REITs). In other words, it doesn’t care about how or where the money comes from as long as it is streaming through the security. Utility value innovation however does care about such things. It asks questions such as, how do we try and make this innovation more useful to the people whose lives it affects? That often means taking a position which is either new or unpopular. Or it might involve thinking about all sorts of people with vastly different backgrounds.
So a bank might securitize an entire portfolio of real estate and wrap them up for small investors, and not even blink when half the houses in the portfolio default on their mortgage, but for a utility value innovator this would be tantamount to heresy. At the same time, we acknowledge there are some fantastic first principles in value innovation that have taken shape over the previous 3 decades.
Subprime housing is a wonderful innovation – only a sociopath would argue with the idea of the possibility of housing loans for people who cannot afford houses so that they can get started out properly in life, and the sociopath would be wrong since there is inherent value production there. But it needs to go one further than that, We need to keep people who are in those situations in their houses. Futereum principally wants to solve problems like this – problems such as world poverty and natural disaster reparations.
Bitcoin Journal: How does the Futereum token (FUTR) function within the platform and why is it needed?
FUTR is a very complex instrument but then that is because, as I have just explained, the problem it is trying to solve is inherently one of the most complex ones there are in the world. It may sound strange today in the madness and hype of ad-busting initial coin offerings with marketing teams spanning a whose who of Hollywood and within the context of decentralized hedge funds that look more like the hedge fund boardrooms of Wall Street in the 1980s used to, but Crypto is a natural place to turn to solve such problems.
That is after all what Satoshi created Blockchain for (at least it was the start of trying to solve such problems); that is the purpose for which Bitcoin was used originally, what gave rise to its original utility – as a means of getting payment to Julian Assange who was in legal limbo at the time, as indeed he still is today, as a result of speaking out against those in positions of military-backed politico-corporate power structures.
With this in mind we must remember that first and foremost, FUTR, like any and all good ideas, are needed to free those who are financially and politically persecuted. I understand this part of the answer is a little tangential, but I still hope that it is left in the final interview transcript because we are getting too far away from it these days. Crypto is here to help us take our independence and dignity back. How do we do that first? The obvious solution is to make a large amount of money and to use it the right way and change things.
So FUTR is primarily aimed at helping people make a lot of money. That does not make it a security, incidentally, even in the United States, regardless of whatever a wet-behind-the-ears 20-something Securities and Exchange Commission (SEC) associate might conclude for the purposes of having his paper published in the New York Times. We are experienced financial practitioners – we know what securitization is. But it functions more than merely as a product to help make people money – it helps crypto traders hedge against losses too.
Let me try and sum this up: the token, because it swaps back for 500,000 Ether at the end of a 13 month period (assuming all the levels are mined) is inherently “value loaded”. It is a utility token that actually has an identifiable value connection, that being the exchange rate at which it swaps with Ether for at the end of a predetermined period. That is because Ether has a very certain value, at least presently it does. So by always carrying with it the possibility – and that is the key term here – of swapping with Ether in the future it inherently has a value that other utility tokens do not, where their values are based on management performance objectives and so forth.
Why is that needed? Because Wall Street is now turning to crypto. Believe me, the last thing you want is Wall Street quants innovating on the Blockchain before we have had a chance to fundamentally secure core utility with the value we have harnessed in the past 9 years. They would simply tear it all apart.
Bitcoin Journal: Can you explain the FUTR mining process and how it is different from other crypto?
FUTR is an Ether-based derivative utility token. This means that everything about it – its functionality, its value, its core utility – is derived from Ether. When someone buys FUTR tokens, they send ETH to a smart contract address. Immediately, the smart contract address returns FUTR. This process is one the team calls “Proof-of-Ether mining”. There are different mining levels which indicate how much FUTR you get for every ETH you send to the smart contract address. For now, it’s 114 FUTR. next level, which is 999,000 FUTR away, it will be 89 FUTR/ ETH; and so on down by a fraction of about 0.69 or so per level.
At the end of 13 months, provided all the levels are completed (if they are not then at the end of 37 months) you are able to switch back your FUTR with the ETH stored in the smart contract. For providing the technology and future product releases which will give FUTR additional utility, The Futereum Foundation takes a 15% cut of the ETH received. FUTR will be available for purchase on exchange in February; for now it is available for purchase only via going to the foundation website.
Now, here is why betting on FUTR has been so potentially lucrative for the early PoE “miners” so far. Think of the 15% fee as a hurdle for Level 1 buyers: once that has been surpassed, you are basically at a minimum getting 7x your ETH back. That is because, being a Level 1 miner means you have a disproportionate share of FUTR in supply. Therefore, if you own 114 FUTR, the total number of ETH you get back is:
(423,557 ETH / 6.73m FUTR = 0.063 ETH/FUTR) * (114 FUTR)
= 7.17 ETH
Therefore, anyone who has paid 1 ETH today is due for a 700% bonus all things being equal and all levels getting completely mined. That means that ETH would have to fall to $150 or so in order for a purchaser of FUTR today to lose money buying FUTR, assuming they were going to swap back for ETH in 13 months’ time.
However, there is an additional upside that has not been considered in this equation, and that is the potential value of FUTR itself. If you look at the table below carefully you will notice how the cost of mining FUTR rises to $625/FUTR at the current ETH price:
Usually, people don’t sell something for less than the cost at which they pay for it, so it is a fair bet that anyone mining FUTR for $625/FUTR is going to sell for something dearer (most likely, it won’t make sense to swap the token back for ETH but to retain it and buy more in the subsequent first level round).
Therefore, by mining FUTR at the current price of around $11, the potential upside of 5558% is in play while the downside of what you get back at the point of the swap is seriously limited, to the extent that the ETH price would have to go through an 85% correction in the interim period.
For those that mined before this weekend’s price hike, there is not even the concern of the 15% in fees taken by the team. The fees for this absurdly fractional opportunity-cost risk have already been earned out by the underlying ETH price spike!
FUTR is not an ICO, but it uses some of the functionality of an ICO purchasing mechanism to reproduce how returns can be scaled in a fashion that is similar to a leveraged bet on ETH. For this reason, the current price of around $11 looks like one to beat.
Bitcoin Journal: Can you explain your non-premined approach and why it is beneficial?
It’s a very interesting observation that crypto investors are so concerned the whole time about premines in ICOs, whereas in securities markets investors want managers to have as much of the equity as they can possibly get! The thinking in equity markets is that the guy will work harder for his pie if he owns a big piece of the upside. The thinking is the opposite in crypto – it’s that the dev will sit back and sell hard into the lowest bids on offer all the time. And so it has been proven to be the case.
Amid all this confusion as to whether utility tokens are securities or not. it is helpful to keep this distinction in mind. Centrally, the disparity in viewpoints occurs because tokens are not securities, whatever some PR-happy lawyer might tell you in a CoinDesk column. if tokens were for the most part securities then regulators would be all over the place right now, which they are not. Tokens are more like consumer products, except the consumer product concerned is value-based. That’s like saying it is like jewelry, I suppose, is the nearest analogy.
Except the management team’s performance is not intrinsically linked to profit-realization, to the process of goodwill creation, which is founded in Michael Porter’s competitive advantage theory whereby every piece of value has a chain-reaction effect. Tokens are, like the home they sit on, distributed and ledger-based – they are temporary storage instruments of value. There is no value chain driving their inherent worth, merely the distributed protocol of the Blockchain and where they happen to be placed on that protocol.
As a result, what happens when you gift premine to management teams is that it creates a sort of rich person’s welfare effect – it is undeserved and unearned charity. We think this is a horrible premise to base the fastest growing industry segment in the world on. What is much more efficient is to tie the development team’s compensation to the core utility of the innovation. By taking fees whenever anyone mines – note, I did not say trade – FUTR, what we are forced to do is to keep driving that core utility, in the same way that the management team of a public company with quarterly audits is compelled to do the same thing.
Bitcoin Journal: Can you briefly describe level process and how are the contributors are rewarded on level 10?
Sure. There are 10 mining levels within FUTR, By mining, we mean “value mining” – the mining of value with utility value. This is basically the way all ICOs are conducted, except it is more lke mining because it takes place over a longer period of time and with an algorithm that makes swapping Ether with FUTR in the smart contract more costly.
That is because as the levels rise the intrinsic cost (all else being equal) of mining FUTR rises per level. And this is how we employ Fibonacci. Fibonacci is such an elegant algorithm and often used in financial markets trading tools because of the infinite equation inherent in its construct – it literally goes on forever. So in the first level – which is where we are now – if you send 1 ETH to a smart contract then you will receive 114 FUTR. In the second level however, which is after 1 million FUTR have been mined, if you send 1 ETH you get just 89 FUTR; in the third it’s 55 FUTR, and so forth, all the way down to the tenth level, where you receive just 2 FUTR per ETH.
You may ask, “well who’s going to mine the very last levels?” We have answered this in the White Paper, by showing how a major asset management company or an ultra high net worth investor could actually make a massive amount of money by mining the eighth through the tenth levels, not exchanging the FUTR they hold at that point, and then mining pretty much the entire first-to-fifth levels of the next cycle of FUTR issuance right after. If they swapped after the following 13 months, their return increases to something like 2500% extra per 1% gain in ETH!
Because the mining is ongoing, and the smart contract is set never to self-destruct or end, the algorithm returns FUTR miners huge amounts of money over various timelines, depending on where they mined. Those who are mining FUTR now by sending ETH to the smart contract address on our website stand to make about 2,000% in the next 6 months just by virtue of the difficulty of the mining algorithm increasing throughout the various levels of mining. It’s essentially Proof-of-Work (PoW) mining on fast-forward.
Bitcoin Journal: You mention that FUTR holders will gain exclusive access to future product releases. Can you tell us what these future products might be?
Bitcoin Journal: What happens if all levels are not filled after 12 months? Will contributors be able to swap FUTR for Ether?
If the levels are not filled after 12 months the cycle continues on for another 24 months. Irrespective of whether the levels are filled or not after 36 months, at the end of month 37 a week-long swap period is activated in the smart contract. But here is the thing – after the swap period, be it 13 or 37 months – another swap period begins anew again. So it is not like you will necessarily want to swap back for Ether. Holding FUTR for the long term, effectively value loaded as it is by ETH sitting in the smart contract, may turn out to be the wisest bet of all!