Can Someone Convince Me I’m Wrong about the Fundamental Problems with the BERRY ICO?

When I first saw the RentBerry whitepaper and BERRY initial coin offering, I was excited. Finally, a long-awaited real-world application of SmartContacts on the Ethereum blockchain, one that deals with real property access, reputation, smart-locks and solves real-world property problems.
 
But my excitement crashed when I realized what these coins really are: Air Miles. Keep this claim in mind as you read: BERRY is just another corporate point system, like air miles or member loyalty points. I invite commenters to prove me wrong with good counter-argument, but today I’m convinced this is just a scheme to get the crypto-community to fund an Air Miles system.
 
Let’s look at the positives. RentBerry is a successful startup. They raised $4M in venture capital, and employ a broad team, with advice from a cadre of legal and real-estate experts. They are solving a real-world problem: renting is a crap shoot, cobbled together with technology and cruft from the 20th century, including checks, credit scores, frozen and illiquid deposits, craiglist ads, bid-wars, and fraud artists. The RentBerry platform solves a lot of this with a trusted crypto-contract framework that ties together physical-access, payments, repair, identity, reduced transaction-friction, and renter/owner reputation. Renting is increasingly a way of life, and the long-term business Roadmap seeks to expand the platform internationally in 2019 and globally by 2020.
 
Sounds like an amazing business proposition with a huge upside right? Sign me up. But wait… sign me for the IPO, not this ICO, because all the positives listed above are only going to generate value for shareholders, NOT coinholders. Holding the coin does not grant a claim of ownership to Rentberry Inc., or to any of the revenue this revolutionary system will generate. And the coin cannot be mined or staked, so what is it then? A token only.  

This is the key difference why this coin is just Air Miles, a token managed by a corporate accounting department as an asset-item on the balance sheet. That’s right: 20% of the coin are held back for the company to use to later influence the market price (and another 10% is held back for the founders and venture capital). Keep these numbers in mind for later.
 
And then there’s the plight of the poor renter. Critics argue that this is only going to worsen bid-wars, worsen systemic racial inequality and drive up prices for all renters, blah, blah. The bad news for these critics is that these things were happening anyway, and technology is simply a neutral tool that cannot bear the blame for this. On the contrary the platform could actually help: the reputation system creates openness and transparency that doesn’t exist in the 20th-century model, and this swiftly and clearly calls out bad actors. But there’s a bigger market-incentive problem to consider: Is a renter going to want to bear the risk of cryptocurrency fluctuations? What about owners, or the repairman? No. The success of the platform depends on coin price stability. No rent-market actor wants to pay rent or receive payment with a wildly fluctuating asset. It’s bad business policy and housing practice in a market where finding good tenants, properties and repair services is hard enough as is.
 
So the people who will use the coin want stable prices. See a problem? This is at odds with the desires and normal behavior of the cryptocurrency market, where parabolic 1000%+ black-swan fluctuations are the norm.
 
So why is there an ICO? Two reasons: They need to get the token up and running on Ethereum for the smart-contracts to work, and the token needs real-world value (Which cannot come from the venture capital; Shareholders first of course!)
 
The Terms of Sale Risk-Section Exhibit-B (pdf), reveals what the coin really is. Items 3-6 all deal with risks inherent to the Ethereum system, including high gas prices, being superseded by a better technology, slow transaction times, etc. The company must have a functioning platform in order to survive, and his opens the door for RentBerry Inc to transition the BERRY coin out of Ethereum to a private-fork. Once the coin is off the main network or even now with 30% of the coin in insider hands, the value of the coin is now at the whim of the CEO and board of directors, and price-control is mandatory for user confidence in the platform. This is identical to Delta’s infamous "SkyPesos", an Air Miles system notorious for losing value at corporate-whim and not spendable on desirable flights, seat-upgrades and routes. As currently planned, BERRY is only 30% SkyPeso-ified. If it ever forks it would be 100%.

In summary, the platform is a great idea, and RentBerry will be quite successful, but I cannot justify buying the ICO for the same reason I never buy air miles: they’re a corporate-accountant’s plaything, not a store of value.

Disclaimer: the author has no position in BERRY as of this writing.