ICO as Crypto-Assets Manufacturing within a Smart City
Abstract
:1. Introduction
- To classify the issuance of crypto assets as a manufacturing process;
- To determine the IFRS standards for each type of cryptocurrency issued;
- To estimate each event from the point of view of applied IFRS;
- To evaluate whether crypto assets-based products are fit and proper for the smart city goals achievements;
- To assess the costs and revenues, and leverage related to crypto assets.
2. The Changed Concept of the Product
- Non-digital;
- Digital;
- Crypto-asset.
- The blockchain used: the developers, based on the task, may select the existing blockchain or decide to create a new one for their developing Crypto-asset;
- Definition of all parameters, how the Crypto-asset will interact with the blockchain, and which events this Crypto-asset allows. These parameters are called “smart contracts”.
- When the previous two steps are completed (they may even be carried out in parallel), then the internal information technology tools of the blockchain are used. The initial quantity of the crypto-assets’ creation process is called Issuance. The total amount of issuance and other parameters are the part of the smart contract, and this information cannot be changed after issuing the Crypto-assets.
- Utility tokens: these digital assets are released to grant access to digital services or platforms;
- Asset-referenced tokens: they are digital assets that can be linked to a single or a collection of currencies, other digital assets, a single or a group of commodities that are traded on an exchange, or a single or a collection of stocks. Before the publishing of the proposal mentioned above, certain EEA nations passed local legislation governing Initial Coin Offerings (ICOs), in which the tokens linked to the assets are referred to as security tokens;
- Payment tokens: they are crypto assets that are primarily designed to be used as a form of payment (coin, electronic money tokens, e-money tokens).
3. Methods and Materials
4. Results
4.1. Capital Increase Method vs. Manufacturing for Further Sale
4.1.1. ICO as Capital Increase
- Increase the capital through the issuance of shares;
- Increase the capital by incorporating reserves;
- Increase the capital by debt conversion;
- Initial Public Offer and further value of shares on the stock exchange changes.
4.1.2. ICO as Manufacturing
- Analysis of processes;
- Definition of structure between processes;
- Choice of management method;
- Modeling and optimizing the processes;
- Performance measurement and diagnostics system.
4.2. Crypto Assets Manufacturing
- Definition of a subgroup of crypto assets and development of parameters of a smart contract;
- Determination of the issuance method;
- Issuing crypto assets using specific parameters of a smart contract;
- The distribution model of crypto assets (payment in fiat currency or other crypto assets);
- Circulation of the crypto assets;
- The Disposal method of crypto assets.
4.3. Smart City KPI Assessment
- Streamline and facilitate the interactions between the public sector and private sector to create an ongoing, mutually beneficial discourse that benefits the entire community;
- Encourage firms to be more competitive to increase employment numbers, as well as productivity, efficiency, and human capital;
- Promote the formation and growth of synergies, exchange, and transfer of knowledge by identifying and implementing good practices for entrepreneurship development, which will benefit the region’s overall economic and social structure.
4.4. Crypto-Asset-Based Product Production Accounting
4.4.1. IFRS Approach for Accounting Lifecycle Milestones Related to Event Manufacturing
- TC is Total manufacturing costs;
- LF is License Fee (fixed costs per issuer);
- SF is Salary or supplier fee (fixed costs per issuer);
- TF is Transaction cost (variable fee, depending on the number of issued crypto assets).
- Crypto assets held by the Company for exchange;
- Crypto assets under management (for example, storing crypto assets in wallets for company clients);
- Crypto assets issued or held for sale.
4.4.2. IFRS Approach for Accounting Lifecycle Milestones Related to Event Distribution
- When for crypto assets, buyer pays by “traditional currencies” (fiat currencies);
- When the crypto asset’s buyer pays in other crypto assets.
4.5. Write off Costs for the Sold Crypto Assets
- PWcat is a write-off of sold crypto assets costs;
- Q is the quantity of sold crypto assets;
- TScat is the total value of the crypto assets per type (category) in inventory;
- TQcat is the total quantity of the crypto assets per type (category) in inventory.
- TCcat is a total distribution cost;
- PWcat is a write-off of sold crypto assets costs;
- TFcat is a transaction fee for transferring crypto assets via blockchain. The transaction fee differs per crypto asset since it is determined by the blockchain related to the crypto asset, and used for the transaction.
- Revcat is the revaluation result per each crypto asset;
- Icat is the value of inventory per crypto assets;
- MRcat is the market rate of the crypto asset;
- QIcat is the quantity of re-valuated crypto assets in inventory.
- Revcat is the revaluation result per each crypto asset;
- IAcat is the value of intangible assets per crypto assets type;
- MRcat is the market rate of the crypto asset;
- QIAcat is the quantity of re-valuated crypto assets in intangible assets.
5. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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The Process | Crypto Assets Issuance Stage |
---|---|
Analysis of the processes | Definitions of the following:
|
Definition of structure between processes |
|
Choice of the management method | Definition—how the total issuance and its quality will be controlled |
Modelling and optimizing the processes | Product testing in accordance with the product oversight and governance principles [47] |
Performance measurement and diagnostics system | Product monitoring in accordance with the product oversight and governance principles [47] |
KPI Name | KPI Description | Crypto-Based Products |
---|---|---|
Places used for coworking | The number of coworking spaces. Coworking is sometimes referred to as the “new form of work” and is an example of the collaborative and sharing economy [57]. | The coworking space management has two aspects which crypto asset products may manage:
|
Multiple online services or streamlined procedures for starting a business or engaging in commercial activities | The number of businesses registered online. | Services related to starting a business or engaging in commercial activity from the perspective of the processes, may be divided into three parts:
|
Number of requests submitted online | Business models digitalization |
|
Presence of the Economic Development Plan for at least 3 years | Smart City KPI is not directly connected to the crypto-asset-based products and services. | |
Number of Knowledge Sharing events (conferences, meetings, etc.) | The number of conferences and events organized in the city. |
|
Presence of the city brand on the platforms of e-commerce | The Rome city brand within the payment platforms, payment products, or development of its payment platform for smart city users |
|
Number of participants who support the city’s brand | The presence of the city brand in the image or marketing campaign of the products or services represented by the business forms the city’s economy. | |
Smart city products/service sales volumes | Number of transactions and sales volumes generated by the businesses presented within the smart city |
|
Presence of the server clusters for the economic development (at the level of the city and districts) | Server clusters for the digital economy are manufacturing, management and distribution infrastructure. Their existence, availability and location determine the sustainability and success of the smart city. |
|
Number of initiatives for the development of SMEs (Small and Medium Enterprises) | Achieving a high number of SME initiatives is not the goal by itself. The main target is to achieve an increased number of effective working initiatives, which will help develop small and medium enterprises. |
|
Milestone | Event | Cost/Incomes |
---|---|---|
Definition of a subgroup of crypto assets and development of parameters of a smart contract | Selection of the crypto assets type: | |
For Utility tokens | No costs | |
For Payment tokens | Fees for registering with the AML (anti money laundering) control entity (license fee)—fixed costs | |
For Asset-referenced tokens | Fee for registering as an asset management or financial institution. (license fee)—fixed costs | |
Selection if customers crypto assets will be held in the “accounts” of the issuer: | ||
Yes | Fees for registering as the crypto wallets’ holder (license fee)—fixed costs | |
No | No costs | |
Determination of the issuance method | No accounting related events | |
Issuing crypto assets using certain parameters of a smart contract | If the issuing method provide use of the blockchain: | |
No | No costs | |
Yes | Fees of the blockchain for the issuance (transaction fee)—variable costs | |
The physical crypto assets’ issuance | Salary or contractual fee for the issuance (salary or supplier fee)—fixed costs |
Milestone | Event | Cost/Incomes |
---|---|---|
Circulation of crypto assets | Transfer of the crypto assets by blockchain. | Fees of the blockchain for the transaction processing in blockchain (transaction fee) |
Revaluation of the crypto assets in the Inventory: | ||
For Utility tokens | Issuers shall not evaluate it. Following its purpose, they should not form the market. | |
For Payment tokens | Shall be revaluated against the market price. The revaluation result is analyzed yearly within the annual report:
| |
For Asset-referenced tokens | Revaluation of the assets referenced crypto assets is more complicated than for the payment tokens, since referenced assets shall also be reassessed. The revaluation result is analyzed yearly within the annual report:
| |
Disposal of crypto assets | Lost/stolen crypto assets: | |
Own use (intangible assets) | The total value of the lost or stolen crypto assets shall be written-off to the lost/stolen expenses (lost/stolen product cost). Issuers shall calculate the write-off value based on the inventory/intangible assets value. | |
Crypto assets held for sell or exchange (inventory) | ||
Crypto assets under management (for example, storing crypto assets in wallets for company clients) | In such cases, issuers shall recover the crypto assets; if this is impossible, the customer should receive compensation per market price.
| |
Expired crypto assets | ||
Own use (intangible assets) | The total value of the lost or stolen crypto assets should be written-off to the lost/stolen expenses (lost/stolen product cost). Issuer should calculate the write-off value based on the inventory/intangible assets value. | |
Crypto assets held for sell or exchange (inventory) | ||
Crypto assets under management (for example, storing crypto assets in wallets for company clients) |
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Cernisevs, O.; Popova, Y. ICO as Crypto-Assets Manufacturing within a Smart City. Smart Cities 2023, 6, 40-56. https://doi.org/10.3390/smartcities6010003
Cernisevs O, Popova Y. ICO as Crypto-Assets Manufacturing within a Smart City. Smart Cities. 2023; 6(1):40-56. https://doi.org/10.3390/smartcities6010003
Chicago/Turabian StyleCernisevs, Olegs, and Yelena Popova. 2023. "ICO as Crypto-Assets Manufacturing within a Smart City" Smart Cities 6, no. 1: 40-56. https://doi.org/10.3390/smartcities6010003