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KIK: Digital currency loggerheads with SEC

 

ICO data

 

Kik is a Canadian enterprise renown for its popular eponymous messaging app. Kik recently made headlines when the company announced its decision to fight the U.S. Securities and Exchange Commission-SEC prosecution of Kik’s ICO, according to a report published by Wall Street Journal. In 2017, according to InWara’s ICO+STO database, Kik managed to raise $100 million through the sale of its native Kin tokens. Kik’s decision to raise funds through an ICO, while ditching venture capital funding which was the norm for high-profile enterprises, came as a surprise for many.

 

Kik claims its digital token Kin is a ‘currency’ for the digital world, but the SEC seems to disagree and this is what landed them in hot water. The SEC believes Kin tokens behaves, akin to how a ‘unregulated security’ would. As Jay Clayton, chairman of SEC was quoted saying on the matter “I believe every ICO I’ve seen is a security.” He added: “I want to go back to separating ICOs and cryptocurrencies. ICOs that are securities offerings, we should regulate them like we regulate securities offerings. End of story”.

 

SEC turned the tables on American ICOs

 

Kik now seems to be mobilizing to fight the SEC on their turf, as founder and CEO of Kik-Ted Livingston retaliated in a Medium post “On page 11 of the 1934 Securities Exchange Act, the very act that created the SEC, it explicitly states that the definition of a security shall not include currency.” He further added “Today you can earn and spend Kin in over 30 apps live in the Google Play and iOS App Stores. Already, hundreds of thousands of people have exchanged Kin for goods and services. Kin is one cryptocurrency that truly is a currency”.

 

The SEC in the past has served several ICOs ‘cease and desist orders’ as their digital tokens, according to the SEC behave and functioned like an ‘ unregulated security’. According to InWara’s litigation and compliance database, in 2018 alone there were 81 filings by the SEC against ICOs who were non-compliant with their regulatory framework.

 

Kin and Kik amalgamation

 

Kik messenger was founded nearly nine years ago by Canadian firm Kik interactive. Since then, the company has witnessed explosive growth, with over 15 million monthly active users in 2018, according to the company’s Wikipedia page. Kin is the company’s ERC-20 cryptocurrency token issued on the popular Ethereum Blockchain. Kik plans on integrating Kin with the messaging platform by introducing a new feature that users can interact with, known as ‘Kin tipping’. Initially, this new feature will allow users to tip admins or moderators of public group chats, for maintaining these domains in the app. Kik will eventually roll out this feature for all 300 million of its registered users.

 

Kik’s migration to Stellar 

 

Interestingly Kik’s team decided to ditch Ethereum, the most popular Blockchain network for startups, and instead adopt Stellar network — stating Ethereum network’s inherent technical limitations that hinder growth and scalability. Ted Livingston believes the Stellar network is more reliable and more specific to apps like Kin, unlike Ethereum which has become general purpose and slow. Ted was quoted saying “Stellar was built by the guys at Ripple and the thing we like about it is it’s custom-built for an application like Kin. It’s not like Ethereum where it’s trying to be everything to everybody, and that makes it general-purpose and slow.”

 

Ethereum is one of the most popular Blockchain networks among startup’s with over 4000 ICOs/STOs using its platform. Stellar network, on the other hand, is still in its nascent stages with a mere 42 startups leveraging its platform.

 

# of Blockchain startups using decentralized platforms

ICO Data by platform

Source: InWara’s ICO+STO database

 

Ethereum made headlines recently when its system-wide update, Constantinople was delayed due to a security bug in smart contracts that could let hackers siphon out other users Ether. As Ethereum’s platform is used by a majority of startup’s this delay has a huge impact on the crypto space, to know more check out InWara’s article.

 

Social media 2.0? Revamped by Blockchain

 

Social media 1.0 has a multitude of inherent flaws. Currently, users and content creators are unequally rewarded for their participation on the platform, as currently all the platforms currently work on an ad-revenue business model. Content that has gone viral on social media is seldom attributed to the creator and they almost never get compensated for their content. A good example would be what happened with artist Helen Green’s GIF of David Bowie that went insanely viral but she hardly got credit for it.

 

By leveraging Blockchain and its inherent Distributed Ledger Technology, social media platforms can easily track content specific to a creator, empowering them. Blockchain enterprises like Kik that rewards developers and contributors for providing valued content to its platform, could drastically change the entire social media ecosystem, as it redistributes wealth and power equally.

 

Funds raised ($MM) by various sectors

ICO Data funds raised

 

According to InWara’s ICO+STO database, social media enterprises that are leveraging Blockchain technology are among the most competitive in the crypto market space with a little over than a hundred ICOs/STOs raising a whopping $1.9 billion. In comparison ~180 ICOs/STOs in the Blockchain sector, has raised an incredible $5.3 billion. The sheer scale of the funding received by Blockchain based social media companies, demonstrates the potential of social media 2.0 and the global impact it could create.

 

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