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What is SIFT?
SIFT is an ERC-20 token that is used in a number of ways:
It acts as proof of ownership for part of the investment fund. The value of each token has a direct backing with the USD value of the fund divided by the total number in supply. This provides a minimum value to each token. As the tokens are standard ERC-20 tokens, they can be freely traded with others, giving token owners a way to sell their SIFT holdings at any time on the open market.
It entitles the holder to a 50% share of all profits gained every month. Half of the total profits in USD are converted to ETH and then divided by the number of SIFT — this represents a dividend per SIFT. A dividend payment in ETH is then allocated to each SIFT holder based on the amount of SIFT that they hold.
It is an entitlement to vote. Each SIFT token entitles the holder to a vote on any business action relating to significant changes in trading or anything that could affect shareholder value. While we would not vote on day-to-day activities (such as trading or day-to-day administrative tasks), we have expressly stated that we would give votes on any of the following:
— Changes to instruments that are traded
— Raising more money/ETH for the fund — from existing or external investors
— Any decision to shut down the fund
— Decisions that would make us market-makers of our own token (such as offering guaranteed cash-out options)
An alternative to using a token would have been to set up a more traditional structure. This would have entailed developing payment systems, creating a way for worldwide investors to place funds into the investment, managing votes of shareholders globally, and ensuring there was a way to pay dividends in an appropriate way to thousands of small investors. This is much more the traditional paradigm of a fund and why a lot of funds have a minimum buy-in to make the administration worth their time. Not only did it make perfect sense to go the ICO and token route when attracting investors interested in crypto trading, but it also significantly reduced the complexity for both our business and our investors whilst also offering certain confidence to investors based on the known behavior of our smart contracts.
— Guy Powell, CTO of SIFT
The crowdsale has already started and will end on September 15, 2017. Only Ether is accepted and can be sent to a smart contract address found on their website under the “ICO Details” section.
For every 1 Ether sent, contributors will receive 100 SIFT tokens.
Token distribution information
The SIFT token is an ERC-20 token and can be monitored via an Ethereum address on their website during contribution. After the crowdsale has ended, tokens will be distributed. There is an unlimited supply of SIFT tokens.
All of the SIFT tokens will be allocated to the crowdsale and there will not be any reserved for the team or other purposes.
Use of crowdsale proceeds
According to the team, the development of everything required for trading is complete. 100% of the funds raised will be used for trading, but initially 15% of contributed funds will be set aside from the initial investment and used for day-to-day business expenses (paying for external audit, hiring staff, etc.).
This 15% is repaid to investors, as the team will take no management fee from the fund until the equivalent of that 15% would have been paid out.
James May; Trade Systems, Chart and Volatility Analysis
James is an established trader and risk expert. He has three decades of experience in the financial sector building algorithmic systems and automating complex trading methods. James also has over 10 years of experience in payment systems, software development, and market prediction software.
Guy Powell, CTO
Guy has two decades worth of experience in software development and has previous experience working for startups. He has over five years experience with blockchain technologies and is finishing his Ph.D. in robotics and artificial intelligence.
ICO Alert: How close is SIFT to beginning trading, or has it already begun?
Guy Powell, CTO of SIFT: Trading will commence within approximately two weeks of the end of the ICO — we are aiming for the very start of October, with the first dividend payment being available on the first Monday in November. We should emphasize that this is when the fund will begin trading using the money invested during the ICO period. The technologies and trading algorithms behind SIFT have been established for over a decade and are already used outside of the fund. We are calling trades on our Telegram room and indicating where they are successful and where our AI advisor suggests that we don’t take an otherwise valid signal. We’re using the ICO period to give investors a deeper insight into how we actually trade and what the systems that back our trading algorithms show us.
ICO Alert: There are two team members listed on the website who both have extensive experience in their respective fields. Are there plans to add more personnel to ensure scalability, or do you plan on executing the project with two team members?
SIFT: At startups, there is a balance between hiring people that can genuinely add value and the time taken in getting them up to an appropriate skill-level within the business. As founders, we very much want to be focused on establishing and growing this fund for the next six months, rather than spending the time solely focused on HR-related issues. This gives us an opportunity to get the fund into an established working pattern before expanding staffing. As the fund continues to grow, we plan to take on additional developers and traders. From a trade perspective, this will be specifically within SIFT and traders will be directly trained by James. The aim would be to extend coverage of trading hours and to provide business continuity. From a technical perspective, the underlying technologies within Smart Trader will continue to be developed and that part of the business has separate growth plans to expand the development team in 2018. These plans will continue and benefit the technology that SIFT is based upon. We don’t envisage the need for an on-going dedicated development to deal specifically with SIFT’s technology, but would factor knowledge-transfer and continuity into the Smart Trader resourcing plans.
ICO Alert: What will SIFT be investing in, and why should experienced traders use SIFT vs. investing in those same cryptocurrencies themselves?
SIFT: We see our investment for two camps of people:
1. Those who have a desire to benefit from cryptocurrency trading without managing the day-to-day trades themselves.
2. Traders (be it in crypto or other instruments) who wish to diversify a portfolio beyond instruments that they trade themselves.
In both these cases, the fact that we offer dividend payments, as well as long-term asset value increases, means that we can provide regular passive income to investors whilst their assets also grow. We believe this will be appealing to both categories of investors.
There are obviously going to be some traders who only want to execute trades themselves based on their own trading strategies. These are not the core market for SIFT, but they too can obviously benefit from the passive-income, which can then be fed into their existing trading portfolios.
We will open by trading crypto-fiat pairs (BTC, DASH, ETC, ETH, LTC and XRP specifically). Our investments are fairly short-term (hours, rather than days or weeks). Our trading involves taking advantage of our Smart Volume Analysis (see separate point below) and exiting depending on a target level or predicted change in the market direction. We tend to only take a couple of trades a day, but these can often be in the region of 10%+ moves.
ICO Alert: Recently, the SEC has issued some guidance on whether or not some tokens are securities. Do you foresee any issues due to the dividends being issued to users?
SIFT: We had already advised that U.S. citizens and residents should not take part in our ICO, nor are we going to list our token on any U.S.-based exchanges. All of our infrastructure is based in Europe and the company is incorporated in the United Kingdom. This has had some impact on us, as our thousands of customers for the existing standalone Smart product are based in the USA and are not able to invest, but we do not see it being a problem for the fund itself. In the U.K., the appropriate regulator is the FCA, who have not yet come down with a formal view on ICOs as a security. The closest is DP 17/3 (Discussion Paper on Distributed Ledger Technology), which broadly says they may be securities and further work is needed to determine where that fits in the U.K. and how it should work from a regulatory standpoint.
We are actually in favor of regulation — it gives us certainty. We would much rather know where we stand and are keen for the opportunity to register in the U.K. at a future date when it becomes an option through the FCA. We actually chose the U.K. for a number of reasons, including the fact that HMRC’s corporate tax treatment of crypto trading is favorable and the country has a fairly open and well established legal system to give confidence to our investors. Considering the fact that we’ve structured ourselves to be transparent from the beginning, we didn’t feel it would be terribly transparent to base ourselves in an offshore tax haven, that potentially didn’t have a strong legal system to support investors, or somewhere with secretive banking regulations. We felt the U.K. was a particularly good mix for this.
We’re also aware that governments don’t always regulate how you’d like them to. Whilst we believe that the U.K. government is going to want to pull in cryptocurrency businesses after the Brexit talk to reaffirm its financial services sector, the flip side is that to encourage existing financial service businesses to stay in the U.K. they may over-regulate the crypto sector. If this happens, we have plans to move the company to the Isle of Man. The IOM government is extremely proactive when it comes to engaging with crypto businesses and have been pushing for further growth in that sector. The similarity to the U.K. (not just in terms of physical proximity but also legal and regulatory systems) makes it a fairly easy task to relocate to this jurisdiction should it be necessary.
ICO Alert: How does SIFT plan to reduce risk in an inherently risky industry? Will SIFT be branching out to other cryptocurrencies in the future?
SIFT: We have a number of risk-mitigation strategies in place. There are two areas to this — the fund itself and individual trades. The first issue is the fund itself, which we try to provide a number of risk-mitigations for:
— 20% of the fund is held back from all trades at all times. This is the prudent reserve ensuring it is impossible to have the entire fund exposed at any point in time.
— Each currency is then weighted a remainder of the rest of the fund. This particular weighting will vary depending on market conditions that we will review on an ongoing basis, but are loosely based around stability, liquidity, and market capitalization of each currency. For example, we may allocate (of the 80%) 40% to BTC, 30% to ETH, 10% to LTC, 5% to DASH, 5% to XRP and 5% to ETC.
— For each currency’s exposure (so in the example above BTC got 40% of 80%; or 32% of the entire fund), this is the maximum we would expose in a trade, even factoring in leverage used on a single trade. The actual amount we would trade would decrease down from this point depending on market conditions, the trading signal we see, and expected movement of the trade.
— We store all funds in USD when not involved in a trade. We intend to profit off the instability that is known, rather than have any risk that is unknown.
We use multiple exchanges and brokers to reduce the reliance or risk on any one other third party. For individual trades, we also have a number of actions that we take:
— We have a proprietary system (which we discuss in the next section) that provides a high degree of certainty — our analysis can guarantee us 100% success on certain signals back tested across years of data. If we aren’t certain, based on the same market conditions, we don’t trade.
— In addition to trading signals, we have an AI-based advisor that tells us the risk involved in a trade, so we never trade unless the advisor thinks it’s a good idea.
— We have a lot of additional information before we take a trade, including the expected movement, past performance of this signal in a similar market for this instrument, expected draw-down and the win-to-loss ratio. This means we can make risk judgements accordingly.
— Every trade is taken by a human — we have a lot of IT backing this up, but we don’t automate trading and rely on the human touch to open and close trades. This means that we never trade against our systems warnings but will not take a trade unless, even with a perfect setup, we feel it is a valid and accurate trade.
— We never leverage more than the amount allocated to a particular currency.
ICO Alert: For those not familiar, what exactly is Smart Volume Analysis, and how does it generate returns for SIFT?
SIFT: This is our proprietary form of trading. It has its origins dating back to 2007 when we started to create a volume spread analysis trading plugin for the Metatrader 4 trading platform (which is used by many forex trading brokers). Volume spread analysis is an advanced trading technique that is not used by many retail investors but that James had experience with from his days in Wall Street. Rather than looking at price movement it looks at volume to see what the “big money” is doing in the market. The idea is that institutional investors (banks in forex, mining corporations in crypto) are the market makers when they conduct huge moves. Volume spread analysis attempts to identify this activity before the rest of the market responds, but VSA has its own limitations.
Over several years, the original VSA plugin for MT4 turned into a set of completely new trading signals. Some of these are loosely based on traditional VSA, but most are new ways of looking at charts. There are a couple of dozen signals to indicate strength in a market and the same number to indicate weakness. These signals are, ultimately, proprietary, but do use volume of a bar as part of their calculations. Each signal can indicate not just the strength of weakness of a market, but also the quality of the signal (some we would always trade on, others only in very particular patterns).
In addition to dozens of signals, we also have a number of other concepts that make up Smart Volume Analysis — all of these are proprietary to Smart Volume Analysis. These are primarily:
— AI Advisor: This is a set of algorithms that look at the market for a particular asset, look at the chart that we’re looking at, and then make recommendations about the validity of a signal. Whilst there’s an awful lot of proprietary software in here, one example we cite is a more simple alert that can see the market has been going down for a period of time, but a weakness signal is present. In this case, the advisor will say, “This is a weakness, but I wouldn’t trade it if I were you. The market is already going down and it won’t go down forever, leave this one.” There are dozens of different warnings and levels of severity that it can give and these all add extra depth to our projections.
— Expectation of Movement: This tells us how far we think the market will move over a period of time, including the expected target price and drawdown for a bar as well as the win-to-loss ratio for the current market conditions.
— Volume Strength and Resistance: This is similar to normal strength and resistance in a market (in terms of price levels) but we use it based on volume to see numerous bands of strength and resistance simultaneously. This allows us to know where a market will go to when it is going up or down and can be used with the AI advisor to better understand the nature of the market.
These all fit together to tell us exactly when to trade, how long to trade for, expected risk levels and where we see the market going. This gives us incredibly accurate trades based on years of back-tested data and live forward-testing.
ICO Alert: SIFT plans to allow it’s users to vote on the future direction of the fund. How will this voting process function?
SIFT: What voting will involve is an Ethereum smart contract. This contract will get the current token holder list from the SIFT ERC-20 contract at the moment it is deployed, so anybody up to that date will be entitled to vote based on their holding at that date, even if they later divest their holding or add to it. SIFT holders will be shown the question they are voting on within the contract and there will be a method for them to call that casts their vote against one of the options (generally, this will be a binary Yes/No vote on a particular topic). Holders will be able to change their vote up until the vote-end date. The current vote results will be visible on the blockchain at all times. Once the vote has come to an end, SIFT will act upon the result.
This will be callable from any wallet that supports smart contracts, including the SIFT Windows Client, Mist, and MyEtherWallet, among many others. Our mailing list, Telegram room, and website will be notified of any vote along with contract details.
ICO Alert: A variety of different ICOs have been hacked recently. How has SIFT ensured that this is not an issue for their ICO?
SIFT: From an accounts perspective, we take a number of approaches:
— All our online accounts that support it use two-factor authentication. This includes things like domain registrars and hosting providers.
— Passwords for all accounts are different and stored offline.
— We don’t use slack and only use Telegram for real-time chat with our investors.
— Private keys are stored offline.
We also take an approach to our infrastructure on an ongoing basis. Whilst we don’t want to reveal the full nature of our infrastructure, a few things that we do include are as follows:
— The only public-facing attack surface is a load balancer fully segregated from the rest of our network through a number of firewalls.
— The remainder of infrastructure is either in a private cloud or offline.
— There are connections between our own premises and cloud infrastructure using direct VPNs.
ICO Alert: As a non-SIFT question, we like to ask for any fun or unique predictions/thoughts for the cryptocurrency and ICO space — do you or James have any?
SIFT: Smart contracts are without doubt the future of cryptocurrency, but we’re in their infancy. If this is the 1999 internet bubble, we’re still using Gopher and Netscape hasn’t even been invented yet in terms of technology. It’s quite a unique time to be living through. Current smart contract technology stacks have terrible productivity tools, poor times to deploy, expensive cost to compute ratios (compared to say, centralized cloud computing), and are just not fit for most businesses. We’ll see a lot of innovation in this area over the next few years in terms of toolsets and technology stacks, but I think one of the most exciting advances to come will be cracking the link between on and off chain. Ethereum, for example, cannot have a contract “call-out” to the wider world and must be fed data in, which is where every part of a smart contract falls down. Having a way for smart contracts to be directly connected to the outside world will help remove that risk that contract trust is negated at a particular point.
On a wider look at crypto, I personally think PoW is a terrible invention. From an environmental standpoint, the power utilization spent on utterly redundant hashing algorithms is nothing short of insane. It may be the biggest waste of power we’ve ever seen and it is quite literally throwing the earth’s raw resources away. PoS is going to become more and more popular, but other “proofs of” will become interesting too. From further proof-of-capacity coins beyond Burstcoin, to more radical ideas like decentralized proof-of-research. Getting to the point that network “proofs” were actually doing the job they were supposed to is an interesting concept. What if every node in a network ran a part of smart contracts and nothing else, to the extent that every computer in the world was actually running real business logic continuously and the proven processing of that logic was good enough to participate in the network and earn coins for it. This kind of democratized computing is an exciting future direction and I think we’ll look back on the early 2010 crypto market as wistfully as we do blue hyperlinks on a dark grey background.
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(1) SIFT Website, SIFT, (2017)
(2) SIFT Whitepaper, SIFT, (2017)