December 19, 2018

For some years now, regulators have chosen to ignore, prohibit or downplay the rise of crypto companies worldwide. Some early government adoptions came from the Swiss and Estonians in Europe and Singapore in Asia. As the interest in blockchain and the crypto space doesn’t wear off (even though the market does not show much sign of recovery yet), a different approach has emerged in Europe to leave more room for innovation. In the article we have a quick look at the proposed legislation in The Netherlands and what that could mean in practical terms for our Project THX (DA)ICO.

THX Project: an introduction

GoalGorilla is an Amsterdam based company specializing in launching online social communities for clients such as Greenpeace and the UN. The mission is to build safe and thriving private online communities for any organization. Recently GoalGorilla launched THX, a blockchain solution that will boost engagement in these social communities. In simple terms, it is a decentralized ecosystem that rewards members in online communities for valuable behaviour with a digital currency called THX tokens.

The THX project tackles problems faced by the social technology sector. Although social technologies are quickly becoming a staple tool for individuals and organizations, the adoption rate is starting to level off.

These technologies are struggling to achieve long-term economic sustainability due to several challenges, such as:

  1. A lack of member engagement across all social technologies.
  2. Existing incentives, such as gamification, are too weak to make a significant impact.  
  3. It’s difficult to measure the added value created by social technologies.
  4. Existing reputation systems are limited to single platforms.
  5. Reward systems are often abused because, well, people can.
  6. Also, there’s poor economic sustainability because the resources spent on social platforms are not circular in nature.

Existing online communities can integrate with the THX API in order to benefit from a sustainable and circular economy and the blockchain technology that will solve the challenges outlined above. If you want to read more information about how these challenges are solved, then visit to read our full white paper.

Smart contracts are programmed to distribute THX tokens according to the value of every individual contribution. Communities can determine their own reward rules. For example, content creation might be more valuable for wikis while organizing events is more important for volunteer communities.

A popular way to kick-off these innovation projects and to distribute the tokens is an initial coin offering or ICO. This is derived from a traditional IPO, but there is no equity to gain in the company. There are tokens distributed to its buyers during the ICO. When the innovation is built and put into production the demand for the tokens will increase and thus the price go up. By listing tokens on crypto-exchanges a marketplace of token buyers and sellers is created.

The first Dutch regulated DAICO

Since its rise in popularity, the crypto community has been criticized for allowing various teams to easily raise funds while not committing themselves to timelines or project governance. In fact, according to the 2018 Global Startup Ecosystem Report, 46% of all ICOs done in 2017 have failed to deliver on their promises so far.

More importantly, after crypto trading begins, tokens continue to appreciate in price. In comparison, the appreciation of shares during a traditional initial public offering (IPO) is less common on average.

GoalGorilla, therefore, decided that they needed to create an extra level of trust between their team and their token buyers. They adopted the Decentralized Autonomous Initial Coin Offering (DAICO), a new fundraising model suggested by Vitalik Buterin, the founder of the Ethereum platform.

This type of token generation provides token holders with control over the distribution of the raised funds. This means that members can make decisions about the funds using a democratic voting system.

When an investor places money into a normal ICO, they have no say over how the money is used or which direction the project will take. This means that investing in an ICO is pretty speculative. The DAICO aims for a higher level of effectiveness by reducing this speculation.

The challenge for banks accepting income from ICOs

THX tokens are sold in smart contracts, based in our case on Ethereum. That means after a successful DAICO the company gets an amount of Ethereum each month to spend on staff, offices etc. Unfortunately, we are not allowed to pay our staff in digital currencies (we checked) so we need to exchange the crypto currencies for fiat money using one the exchanges. This is where it gets tricky as exchanges currently have no KYC/AML duty in Europe. They will when the 5th AML Directive is adopted but this hasn’t happened yet, except for Estonia (it’s no coincidence that one of Europe’s largest crypto exchanges Coinbase is set in Estonia).

So how would a bank be able to accept the funds coming in if these can’t be traced to the original token buyer?

A KYC/AML solution

Our case when talking to regulators and compliance offers is as follows:

To start, we voluntary submit ourselves to the 5th AML Directive (new KYC regulations were just proposed in The Netherlands last week, but still have a long way to go). This means we set up an extensive customer due diligence procedure as would be great for any normal financial onboarding. This includes ID verification, sanction/PEP checks, address verification, source-of-wealth declarations etc. All of this is not unfamiliar, except needing good control and understanding of which clients are participating in the token sale.

This innovation comes with the checks of wallets. Fiat money can’t by nature be tracked throughout the financial system without the help of all organizations that are involved in that system whereas cryptocurrency (like bitcoin) can be tracked. This can be done using, for example, an identification software like Elliptic. Elliptic is the global leader in detecting and investigating cybercrime involving cryptocurrencies. Their innovative tools perform an analysis of the source of cryptocurrency for the payments to our DAICO wallet, making use of the transaction history available from the Bitcoin and Ethereum blockchain. Next, this information is combined with their proprietary dataset of cryptocurrency accounts controlled by known legitimate (e.g. cryptocurrency exchanges, wallet services) and illicit (e.g. dark marketplaces, ransomware operators) actors.

So, we argue that performing a (DA)ICO with cryptocurrencies gives you more insight into the history of funds and is possible to perform at a much larger scale. Also, the current banking system has a huge flaw: whenever money is in the bank, it’s considered to be legal even though the origin can’t be traced once it’s in the system. Once a bad actor has been caught (just look at the Danke bank case) all systems need to work together to find out where money-laundering is taking place instead of doing so decentralized on the blockchain where each wallet can be verified and subjected to checks before accepting it.

Once you let this sink in, you will start to see that the future is not so dark after all. The blockchain world brings with it a ton of transparency, safety, and innovation that is impossible to find in the current system. We therefore urge legislators, banks and all of those in the financial industry to work with startups like ours to make sure that the old and the new fintech world learn as partners and make the system better, faster and more decentralized.


AuthorsTaco Potze and Natasha Schön