My calculations show that InChain profits are overestimated in their
financial model.
'Total amount insured' is set to 150 000 BTC by the financial model author. This is a bit 'optimistic' estimation.
150 000 BTC is approximately 1% of the TOTAL BTC market cap (15,9M BTC according to
http://coinmarketcap.com/). I think if InChain hits 1% of their potential market during the first year it will be a success. But the potential market is far less then the total BTC market cap.
I did my own market analysis (if you are interested I can post the detailed info at some blog later) and the numbers are the following:
- The total BTC amount stored at the exchanges is close to
4M BTC. I mean all the exchanges that exist on the market
- The total volume of BTC stored at web wallets is about
0.65M BTCFinal result:
4.65M BTC is the total potential market of InChain. Please pay attention to the word 'potential'.
InChain team limits its market very striclty.
We can roughly estimate the share of 12 exchanges/wallets offered by InChain.
Exchanges: Coinbase, Poloniex, Kraken, Yobit, Bittrex, BTC-e. No bitsquare here, the reason is in my next post.
My calculations show
860K BTC.
Wallets: Blockchain.info, jaxx, mycelium, electrum, coinomi.
Let's assume their total share is 20%. So their bitcoin market is 0.65*0.2 =
130K BTC.
The sum of the above two markets is 860+130 = 990K BTC that is almost 1M BTC.
The total amount of funds that can be potentially insured by InChain is 1M BTC.
What percent of 1M BTC will be insured during the first year? As I wrote at the top 1% is a success.
1% from 1M BTC is
10 000 BTC.So in the financial model table you should put 10 000 BTC instead of 150 000 BTC.
Total income for the scenario 1 will be
330 BTC ($208 000).
If you think the amount insured will be more than 1%, you can do your own math, it's simple.
I assume $1 750 000 will be collected during the ICO.
That is 208/1750 =
12% ROI for the ICO participants. It will be even less because operational and other expenses are not included. We also don't know how the profits will be distributed because the decision will be voted by the DAO.
If the ICO amount is bigger than 1.75M the ROI will be lower too.
12% yearly ROI for the crypto industry is incredibly low taking into account the enormous risks involved. This ROI is almost the same as the expected ROI for the InChain insurance fund. So why do we need all those insurances, bonds, etc. if we can just deposit money to the fund and share its profits?
It's worth mentioning the total InChain ROI depends heavily on the insurance fund performance. The insurance fund strategy will be defined by the DAO and is fully unpredictable. The financial model gives no information about the insurance fund policies and instruments. Crypto markets are risky, much more risky than the traditional economy ones.
There are more interesting questions about the financial model.
Who and why will purchase the bonds? If at least one exchange/wallet is hacked during a year, the investor loses almost all his profits (10-8.33=1.67%). Nice instrument for the traditional fiat economy but will the crypto world like it? Please remember the bonds are traded for BTC. Bitcoin volatility is high. Does it make sense to add the risks of losing the part of your BTC investment if just holding your funds in BTC makes a great profit in USD?
