STORJ TOKEN SALE: The Good, The Bad and The Ugly

Company: STORJ
Website: http://www.storj.io/tokensale
Year: 2014
Country: USA, BVI
Blockchain competitors: SIA, MaidSAFE, IPFS Filecoin (upcoming)
Competitors: Google, Amazon, Microsoft
Investors: https://www.crunchbase.com/organization/storj/investors
Ticker: SJCX (old token), STORJ (new token)
Token Sale launch: 05/19/2017
Token Sale end: 06/19/2017 or earlier
Whitepaper: https://storj.io/storj.pdf
Terms: https://storj.io/tokensale#sale-terms

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Storj Token Sale: The Good, The Bad and The Ugly

Storj is a veteran project in the cryptosphere, dedicated to its vision of being the world’s largest cloud storage provider without operating a data centre. The project has already successfully completed an ICO in 2013 (right after winning a hackathon) becoming one of the first companies to use this mechanism to accumulate funds. On May 19th 2017, Storj launched a token sale to inject more funds into the project and gain much-needed exposure. The cap is set at $30MM, making it the largest crowdsale of 2017 so far. As with any crowdsale, the Storj token sale has its upsides and downsides. Tokenguide takes an in-depth look at this token sale, giving a quick overview of both the good and the bad.

Perhaps the most important thing that sets the Storj token sale miles apart from many other ICOs is the fact that Storj already has a live, viable product supported by an active user base. This is further amplified by the fact that Storj aims to raise $30MM, making it the largest crowdsale in 2017 so far, though it will probably not hold on to this title for long. As a product, Storj seems to have a clear development strategy, aimed at corporate clients, rather than retail. From a technical standpoint, the Ethereum blockchain could provide an additional layer of functionality for the product that can be built upon in the future.

Although Storj does have several direct competitors within the blockchain industry (such as Sia and MaidSafe), it is arguably the better recognisable brand name out of all of them. In a sector as competitive and consolidated as cloud storage, Storj seems to tick all the right boxes for success. Although it sets itself in competition with multinational giants such as AWS, Microsoft Azure and Google Cloud, we see a possibility for Storj to work together with them, rather than against them, making this a very interesting project to watch for in the future.

It is also worth noting the Storj is already trading at Poloniex and Bittrex. Liquidity is already there and old SJCX token trades at around 20% premium to an ICO price. This sets Storj apart from almost any other ICO and is a significant advantage as a new token taps into already existing liquidity.

We have, however, identified some serious concerns regarding the Storj token sale. These concerns are related to the way the token sale itself is organized, the current competitive landscape and internal issues within Storj as a company.

The token sale has a rigid lock up structure which Storj introduced in an attempt to prevent pump-and-dump strategies which are spreading through the community. However, it is our concern that this structure will not successfully protect institutional investors, whose lock up periods are perhaps excessively long. As a case in point: people would avoid pre-funding this token sale (despite other attractive conditions), mainly because even 1 month lock up period is considered too long. This means that the token is very likely to experience a decline in price in its first month of being listed on exchanges. This is further overshadowed by the fact that there is no viable economic reason for the token to grow in value, since the economic model does not really explain how the token should appreciate in value within Storj’s current business ecosystem. Within this model, the token can continuously change in value, so there is no reason for it to become scare and grow in price.

From a competitive perspective, it is important to consider the comparative value between the Storj token and BTC/ETH. The Storj token sale only allows for payment in BTC/ETH (or altcoins, using Shapeshift). Both BTC and ETH are expected to grow following high-profile announcements at Consensus and TokenSummit in New York this week. Additionally, we expect the Storj direct competitive landscape to change significantly over the coming weeks. YCombinator-backed IPFS Filecoin is rumoured to have plans to announce its ICO this week, which could severely undermine Storj’s market position and therefore hurt its token valuation.

Internally, there have been some disconcerting news about Storj’s management structure. News of the CEO’s resignation largely flew under the radars, but it does point towards uncertainty in the company’s governance and power struggles within the team. The $30MM crowdsale would be the largest chunk of financing in the company’s history and it could come at a time of internal volatility. it could present a significant risk, since the team should be focused on utilising the investment to their maximum competitive advantage, not on establishing a cohesive management structure.

Our prediction: Overall, we consider the Storj token sale to be a sound short-term investment in today’s ICO landscape. We predict that the price per token will rise twofold right after the tokens are released and then it will set on a path of slow and steady decline.

We would like to remind you that all opinions expressed in this piece are our own and are based on the research our team conducted independently. If you are serious about participating in an ICO, token sale or crowdsale of any kind, we strongly recommend that you conduct your own due diligence by familiarizing yourself with the projects, their background, white papers and the market(s) in which they operate. Stay safe!

Picture courtesy belongs to Cryptojunction
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