A new way for web3 startups to raise funding hopes to avoid the pitfalls of the ICO market

---

For the past few years, Dr. Mohammed Abo Jazar has been fighting crypto scams and unrestrained trading risks with fatwas, but 2023 is different. 

The founder of Crypto Halal, with the help of a team of scholars, has issued Islamic-financial verdicts on thousands of coins and tokens. Now, the team has decided to offer a creative financial model for token listing that applies strict rules and enforces multiple vetting measures. They also took part in establishing a launchpad that applies the model to upcoming web3 projects looking to raise funds and turn ideas into reality. 

“We saw an opportunity within the chaos to introduce a process that addresses the root causes of crypto scams,” Abo Jazar said.  

New tokens are usually offered to investors through the process of Initial Coin Offering (ICO). Research suggests that during the ICO boom in 2017, investors put more than $5 billion in tokens and at least 80 percent of them were scams.  

The suggested alternative model is called Initial Launchpad Offering (ILO), which creates ethical standards with the goal of creating trust in the listed projects. To list a token through the new ILO process, projects must be in a developed stage beyond inception, show a viable use case or have a working minimum viable product.

Crypto Halal teamed up with two other companies, MetaIidentity and TokenBench, to establish an ILO launchpad called Polykick. The launchpad recently went live and aims to turn the ILO model into reality and put it to the test. 

“For a token to have value, it must represent a benefit with a clear utility that can be used to purchase this utility the moment it is bought,” Abo Jazar explained. “No ILO is allowed for mere ideas or future projects that are built on nothing but whitepapers, roadmaps and promises.” 

In an ILO, the initial price of the token must be determined by a third party, like an independent accounting firm. “It does not make sense to ask the project creators to value their tokens,” Abo Jazar said. 

The two criteria are derived from Islamic sharia. Scholars prohibit gambling and betting money on uncertain investments with no defined outcomes. Abo Jazar considers many ICOs to fall under this domain since investors buy tokens with the promise of a future project that usually never sees the light. They are also deprived of any means to assess the fairness of the initial price and whether it is truly representative of the projects’ fundamentals. 

The Smart Escrow 

As investors lost confidence in ICOs, exchanges offered to review projects before listing them for trading, adding a layer of trust between token creators and retail investors, in processes called Initial Exchange Offering (IEO). 

“Theoretically, it is an improvement,” Abo Jazar said. “At least they guarantee the coin will be available once the initial offering is completed. But in reality, it is very problematic.” 

Exchanges are incentivized to accept as many projects as possible since they are the primary source to attract liquidity. Once they have this liquidity at hand, they may invest in the ICO or trade the coins themselves, which has happened on numerous occasions, most recently in the FTX- Alameda saga.  

On top of that, the vetting process before listing might be loose or even nonexistent, yet investors may put their trust in the tokens based on a misguided belief that the exchange has their best interest in mind. 

To launch a new cryptocurrency on Polykick through an ILO, creators lock their tokens in a smart escrow contract. Investors deposit the money in the same contract. 

“This eliminates the conflict of interest. The launchpad does not have access to user funds,” Abo Jazar said. 

If the ILO succeeds in reaching its fundraising goals in a specific time frame, the smart contract releases the tokens to investors. The contract then proceeds to burn any unsold tokens to prevent inflation. If the ILO fails and does not reach its funding goal, the smart contract automatically returns money to investors, and the project creator pays all the fees.  

Not Only for Muslims

The first token scheduled for ILO on Polykick is called Umma. It is the native token for an Islamic-themed social media network called Umma Life. 

Abo Jazar explained that the token could be used right after it’s released for verifying accounts, promoting content, and even paying fees for its marriage agency. 

Polykick adheres to Islamic sharia, meaning it prohibits what its scholars consider usury. Yet, it does not wish to market itself as a service only for Muslims. Abo Jazar said that his main goal is to popularize ILOs as the main standard for offering new tokens. 

“We focus on marketing our ethical standards, security, and quality of projects,” Abo Jazar said. “We believe this is important to everyone, regardless of their religion.”