Ethbay ICO Review: Buy it Now?

1.ICO Overview

EthBay, built on Ethereum, plays in the crowded Online Peer2Peer (P2P) Marketplace space. Hence the play on its name, after the market leader ‘eBay’.

However, it has one major differentiator from all other marketplaces out there, both centralized and decentralized: it’s 100% anonymous.

2.ICO Proposition

Ticker: EBY

Token Type: ECR20

Token Price: 1 ETH = 5000 EBY or 1 EBY = 0.0002 ETH check

ICO Hard Cap: 16,000/ 15,000 ETH / $10-$11m

ICO Soft Cap: 3,000 ETH / $2m

Total Tokens: 100m

Tokens for sale: 80m

Note: 20% (20m) of total tokens are being given to the founding team, and

• 20% is high. Normally it’s up to 10%.
• None of these tokens is vested. The team aren’t locked in to stay with the Startup after they get their tokens, post ICO.

Investor Proposal:

Part or all of the income generated from the fees charged to sellers is paid as dividends to investors.

How it works:

1. Sign up by creating a password (without submitting any personal data)
2. Save the Account ID Ethbay issue you
3. Browse/search items for auction
4. Place a bid
5. If your bid wins you send money to EthBay’s escrow account
6. Your payment is held in escrow on a smart contract
7. If you’re satisfied with the goods, upon delivery, the smart contract releases the funds to the seller’s Ether address.

Extras - Optional - if you’re happy to share this personal data

• Be updated on your bids (submit your email)
• Add two-factor authentication for login (submit your mobile number)

3.Feasibility of idea/business model in current market

Feasibility of the Idea

Anonymity - good

InkProtocol got millions in funding, as did Monetha, to solve the fraud problem online by taking the approach in which more identity, more KYC, more ratings are needed to create a ‘trust’ system. So it’s very interesting that EthBay believes you can solve the same problem by taking the opposite approach, with total user anonymity, zero user data, letting the smart contract escrow service take up all the slack.

Escrow Solution - bad

Ethbay plan to hold your buyer payment held in escrow, in a smart contract, whereby funds will only get released once you, the buyer, are satisfied. That means goods delivered and as described in the advert.

However what happens if a buyer isn’t happy with the goods and refuses to release the escrow. Who covers the cost of postage to return goods to the seller?

Ethbay state in their White Paper a key problem they solve is the 491, whereby the seller advertises goods he either doesn’t own or doesn’t plan to ship and the buyer gets caught out, having paid in advance. Ethbay state that they solve this but given that they automatically release the funds in escrow to the seller, after 30 days, regardless of whether the goods arrived or not, means Ethbay will have the same 491 problem as eBay and all the other P2P sites.

Disputes

Ethbay is going to approach dispute resolution exactly the same way as eBay and other centralized players. How? It’s going to allow users to complain 30 days after the transaction and then decide in-house, using its own team, which person is right, buyer or seller.

This seems a crazy approach to me when the whole point of building a decentralized solution is to harness the community, via voting and smart contracts.

Expansion Strategy

Ethbay are planning to expand to offer Peer2Peer services and quote ‘upwork’ as the type of service they could cover. Strategically it seems messy to me, to dilute a clear core proposition ( eCommerce) into some sort of employment platform.

I do like the idea of the Classifieds, aimed at developing their B2C offering, at a local level. If their core proposition was eBay + anonymity + ether, then Ethbay Classifieds would be Gumtree + anonymity + ether.

Native Mobile Apps

Ethbay are already in build with Android and IOS mobile apps. I’m always astonished at why Startups want the hassle and expense of building Native when ‘wrapped’ HTML would serve the purpose just as well (if you don’t need tons of advanced native features sets, merely location). Wrapped HTML allows the user to download and unpack the HTML site like an App on their phone, with an App icon on the phone screen (just like native). The key difference is, when you open the App, it opens in a frame (phone browser) as a website. It also seems to make more sense to go the Hybrid ‘wrapped’ route given what they’d effectively be building is a dApp.

Feasibility of the Business Model

It’s not clear, from Ethbay’s White Paper, whether they are planning to give ALL or part of the transaction/escrow fees back to token holders ( investors) as dividends. What makes this question doubly confusing, is Ethbay call it a transaction fee when describing in as eBay’s model but an escrow fee, when describing it as their model.

Either way, the reason it’s not clear is because early in the White Paper they state they will share part of the 1% fee with token holders. Then, later in the White Paper, they state they will share all of it.

So when assessing their business model for sellers, yes, a 1% transaction/escrow fee is a great bargain. But if they are planning on giving it all away to token holders, you’re left wondering how they plan to commercially sustain the business.

Perhaps the answer lies in their exchange plans.

Ethbay are planning to build their own exchange in order to enable their users to buy ether in order to transact with it. Initially I thought, wow, smart idea, exchanges are cash cows. Bloomberg reported in March exchanges are generating as much as $3m a day in exchange fees.

But I crunched the figures, using some assumptions and I still couldn’t figure out how Ethbay plan to generate enough operating profit to sustain their platform, their business.

Let’s break it down.

eBay was founded in 1995. They’ve been operating 23yrs. By Q1 2018 they had 170m active users (25m sellers / 145m buyers). Their user growth from 2010 - 2015 was 80m users (approx).

Let’s assume Ethbay follows the same trajectory and has 80m active buyers after 5yrs. That’s 16m new active buyers added per year. Now let’s assume they charge an exchange fee of 1% (Coinbase is 1.49%).

If Ethbay managed to convert 20% of their buyer base to use their exchange, at an average spend of $20, that would equate to:

• 16m exchange users over 5 years
• Spending $320m, paying 1% transaction fee
• Exchange revenue for 5 years for Ethbay would be $3.5m
• Averaging $640K exchange revenue per annum

Now, it might be me, but I’m not sure $640K is enough income to run a major marketplace half the size of eBay, because according to eBay’s financial report on Nasdaq, it cost them $2.2 billion in 2017 to run eBay.

So based on my quick projections, I’d say Ethbay’s business model was fundamentally flawed.

4.ICO Team

I’ve never seen such an appalling team area on an ICO website before. Out of the three founders listed in the White Paper (Brett Murphy, James Fuller, Phillip Warren), there were only bios about two of them. Nothing had been written about James Fuller but it’s just as well, as when you read the bios of the other two, guess what, they aren’t even about these guys - they are about some other guy called James Garrison.

Who is James Garrison? No idea, given that he is not listed as any part of the team in the White Paper.

What I did find on Brett Murphy was his ONLY career experience is apparently as ‘Chief Strategist’ at Etsy. Sounds important, right? Then how come the guy only has seven connections on Linkedin? Even my nephew, who’s 18, has more professional connections than this and he hasn’t even graduated yet!

Normally, anyone from a major Startup like Etsy, in a middle or senior management role, has 2000+ connections. Why? Because every man and his dog wants to connect with them, to get something out of them. So seven connections looks like Brett created his profile on Monday. Ether Brett has been kissing the ‘blarney stone’ (nod to his Irish ancestry) or this is not what it seems.

The team section on the site isn’t even discoverable from the site’s main menu. I found it by accident while Googling the founders. It's like a buried hidden link.

On the basis of this alone I’d say, investors, run for the hills. Buyer beware. This feels as genuine as Harvey Weinstein’s therapy stint!

5.SWOT

Strengths :

• 100% Anonymous
• No fees to list items for sale
• Low 1% transaction fee for sellers
• Investor share of the profits generated from fees

Weaknesses :

• The business model doesn’t add up. It’s not sustainable.
• Automatically releasing escrow funds after 30 days without the buyer’s permission is designed to perpetuate the 491 problem they state they have solved.
• Awarding the team 20% of the tokens without that team being ‘vested’ / locked in, makes the EthBay team look like they just want to get rich quick. It makes them look insincere in their motives.
• The White Paper is not a proper business plan. It contains no financials, no detailed competitor analysis. It’s not even a PDF, it’s a Word doc. Really amateur.
• The ICO website is one of the most amatuer I’ve ever seen. It doesn’t bode well for the UX of their marketplace.
• The team looks totally fake.

Opportunities :

• Re-do their white paper. Then investors might stop laughing at them.
• Re-do their website, then they might have half a hope of getting their soft cap.
• Re-think their business model, then they might be able to survive long enough to build traffic.

Threats :

• Anyone willing to present their concept in a more credible professional way and take it to ICO (that’s how bad their WP and site were)

6.Conclusion

It’s heartbreaking to see the seed of a good idea so ruined by the incompetence of its founding team, because an anonymous marketplace with no listing fee and low transaction fees feels right. The name ‘ethbay’ was a stroke of brilliance, yet even if you forgave the Founders the website, the White Paper, you can’t forgive them a business model that won’t sustain the business they are proposing.

They want you to give them a minimum of $2 million. Frankly, you’d be better off funding me to have plastic surgery. Why? Because you’re more likely to see the results of your investment.

7.Score 0 – 5

• Idea/Business Model 1
• Scope/Potential 2
• Team/Advisers 0
• Token Economy 2
• Marketing -20
• Community/Communication -10