Recently we announced that Bitrue would be playing host to the world's first Initial Convertible Token Offering (ICTO) in conjunction with FinNexus. But what is an ICTO, and what makes it more attractive compared to a regular IEO?
First, let's look at how an IEO works. An Initial Exchange Offering (IEO) is when a project sells its first round of tokens to the public in conjunction with an exchange. The exchange assures the credibility of the coin and helps promote it, and in return the coin project gets a large amount of exposure to help it raise funds for its continued development. Simple!
An ICTO follows the same principles as an IEO, but the difference is the token that is sold can then be converted to an asset-backed token at a later stage.
For the very first ICTO on Bitrue, users will be able to purchase the coin FNX. FNX is a token that will be used for FinNexus projects in the future and will have an initial value of 0.1 USD.
You can convert your FNX into UM1S at any time during the 3 months from when the ICTO begins. 1 FNX will convert into 0.1 UM1S, and then the FNX that was used in the conversion will be burned. UM1S is an asset-backed token, meaning that it represents an asset that exists in the real world. In this case it is based on assets from the company UangMe, a famous lending platform operating in South-East Asia.
So why does it matter to you which token you hold? Each token has different uses and returns. While FNX behaves like a traditional token that can have significant fluctuations based on the uses developed by its parent company FinNexus, UM1S instead offers a fixed return that will be sent to holders at the end of the maturation period (which is the same time that conversions end - 3 months after the ICTO begins). UM1S will return the principal of the token plus a variable amount of interest that depends on when the token was converted. Early converters will get a higher interest rate and will be able to generate interest for longer. In general, you can expect an average 10% APR on the UM1S holdings.
The fact that UM1S has a fixed return means that it also supports the price of FNX. If the price of FNX were to suddenly fall below 0.1 USD, sharp-eyed investors would spot an opportunity to buy FNX cheaply and convert it to UM1S, guaranteeing themselves a small profit. This effectively ensures that the price of FNX will not drop below 0.1 USD during the period of time that conversion is open, but may rise significantly like any other coin as FinNexus announces further plans, developments, and use cases for FNX.
Ultimately you can choose which coin better suits your own investment strategy - if you're seeking high rewards then FNX has the potential to go up in price significantly as the circulating supply shrinks and new projects are announced. On the other hand, if you're after stable rewards then converting to UM1S guarantees a return on your principal and a certain amount of interest once it matures. The earlier you convert the better as the interest rate will be higher for you, but you are free to convert at any time during the 3 month period. Note however that conversion is one way - UM1S cannot be converted back into FNX.