Dividends are an attractive proposition because they provide an income without investors having to touch the underlying capital or asset.
There are many cryptos that offer themselves as a currency with benefits, but blockchain tech has the potential for far more complex business models which enable added transparency, governance and the distribution of profits or dividends through smart contracts.
Organisations that offer efficient value earn profits, these profits are then returned to the investors that own the business.This system functions well in the traditional stocks because of the many checks and balances that exist.
The era where crypto tokens are just currencies is ebbing away, and a wave of different crypto-centric business models is upon us. ICOs are popping around every corner, these ICOs are promising business models which create value to the end user. The idea is that these users will eventually pay for these services, and this is where the dividends will come from.
It’s not all Pollyanna up in the crypto hills. At best dividends in crypto organisations are opaque, the legal grey zone of what is a crypto token allows the founders of these semi “DAOs” (Decentralised organisations) to determine their own rules.
Non-anonymous blockchains offer transparency at the transactional level, but this does not mean that the business that uses them is completely transparent. Dividends are the result of the revenue minus the costs. If this basic data is not laid out in audited documents, investors could be getting the short end of the stick. In addition, token holders are not shareholders, this means they do not have the power to change the board of directors.
Dividend paying cryptocurrencies are interesting because they offer a hint of sustainability and real value.
Staking, Mining and Masternode rewards are not dividends.
When money is created it does not automatically create value. Dividends are the result of profit and money creation is not profit. If we call money printing profit, the FED is the most profitable enterprise in the history of man – some of you will disagree with that statement. Crypto tokens who need only program the issuance of new tokens from PoS, PoW or Masternodes, are not creating dividends.
Staking, Mining and Masternodes are services essential to the token they service. These servicing functions are just servicing and are not in themselves a profit. Issuance of new tokens through minting staking and mining is not a service to a client.
Dividends are the difference between the cost of a business and it’s revenues. Revenues are payments received for a service offered to a client external to the business itself. The important difference between dividends and minting new tokens, is that dividends are a sign of long-term sustainability of an ecosystem creating value.
The token creation system of a token serves the important function of securing the network and fulfilling the specification of the coin. This is not a form of profit. (They do dilute the value of coins by increasing the total number of coins in circulation)
To generate revenue a service must be offered, to generate a profit the costs must be less than the revenue. In order to have sustainable long term crypto-dividends, the value created needs to be competitive and sustainable.
See Also: Masternodes
Different Forms of Crypto Dividends
I categorise crypto-dividends into two broad baskets, those that are generated from the crypto economy and those that are generated outside of it. This distinction is important because the crypto economy is evolving at such a rapid rate that a functioning crypto related business model today can be destroyed through regulation, innovation, competition or a breakdown in technology tomorrow.
As per all investment ideas posted on this website, any coins or ideas listed here are not endorsed by InvestItin.com and are not a recommendation to invest. Crypto Assets, CryptoCurrencies and Crypto Tokens are extremely volatile and the risk of losing all capital invested exists. Invest at your own risk! All descriptions below are accurate summaries to the best of my knowledge as of writing May 2017, this should not be considered as due diligence of any sort.
List of Cryptocurrencies with the potential for dividends
Augur is a prediction market. REP tokens can cast one vote and collect half the trading fees connected to one prediction market.
Darcus is an organisation involved in the “future of enterprise recovery”.The Darcus token represents a business which proposes services in the real economy.
DIGX DAO is a gold vault services firm, each token represents a share of the gold stored. The dividends will come from fees of storage of the gold and these will be distributed to the DIGIX token holders.
Taas is a crypto hedge fund, it’s prospectus/white paper states that 25% of the profit generated will be distributed to Taas token holders on a quarterly basis. Taas will make profits by trading cryptocurrencies, develop a crypto audit system and a Bloomberg terminal for cryptocurrencies. This ICO had its share of controversy an issued ICO-Alert report was quite controversial, Tass.fund has come out and defended itself against it. Time will tell who is right. Although recent blog posts on their ICO participation seem to be encouraging.
PosW is a coin linked to PoSWallet.com. This website provides online wallets for many coins that have a PoS (Proof of Stake) Algorithm. Staking usually requires for the wallet to be online and open, this is a challenge for users. PoSwallet solves this problem by having staking wallets online 100% of the time, for a fee. PoS token holders will receive a share of the fees that PoSwallet charges to its users.
SingularDTV is a Blockchain Entertainment studio, Smart Contract right Management Platform and Video On-Demand Portal.This platform includes 11 modules, many of which have not yet been made public.
Crown is a cryptocurrency that plans to create an infrastructure of nodes which allow for certain services to be easily and cheaply be executed. The Crown nodes will not only secure the network but will also earn fees from servicing dApps (decentralised Apps).
Blockchain Yield although not strictly a dividend, this coin is definitely worth a mention as it provides a real service, in the non crypto economy. Lending capital to property developers.
Ethbits is creating a business model similar to that of localbitcoins.com, but for Ethereum. The dividends will come from fees that the users will pay to use these services. 80% of the profits will be distributed between the ETB 4,000,000 tokens.
Peerplays is a decentralised gambling platform. The system will work through a system of witnesses and oraclws which maintain the infrastructure of the network. Built into the blockchain is the contract of fee distribution to the token holders. The token holders will have their multi-currency dividends deposited in their peerplays wallet.
MobileGo is a gaming platform for Android. Profit from feeswill be used to buy back MobileGo coins and then burn them thus reducing the total coins in circulation. This should have the effect of increasing the value of those coins remaining in circulation.
Iconomi – is a platform which will builds trading systems such as indexes and social trading for the cryptosphere. These funds will earn revenue through fees charged to the users. Iconomi plans to buy Incomi tokens on the open market and then burn them with the profits, increasing the value of the remaining tokens.
If you have suggestions about dividend generating tokens please email me or add them in the comments below.
Conclusion: Coins that promise real dividends, are setting themselves up with clear profit oriented objectives. This makes it clear from the start what are their goals and what is the benchmark that they will be judged upon by investors. The performance of other non-profit oriented crypto projects is much harder to measure. Hopefully, in a decade or two we will have the crypto-dividend aristocrats.