In the world of blockchain-related users, there is an opinion that "99% of all ICO's are scam". My interest led me to checking it out. The result is either Due Diligence or Fraud Investigation (expose) of one of the blockchain projects. I made my choice in favor of the ZRcoin project with the beginning ICO-date on May 11, 2017.
I do not aim at trampling or advertising the project, I am just thinking out loud and make conclusions if the investment in this project is a "good investment" or not.
 
I've always wanted to analyze projects, putting them into institutions and even making money on it. Telling the truth, I have not yet found out how to make money, although there are some suggestions. But I believe that if you at least start doing what you like and what you are skillful at, then it will lead to something.

I hope these Due Diligence will be published on a regular basis and will help PR-managers to avoid participation in an unequal battle with "qualified investors", answering their tricky and meticulous questions about property, available demand, documents and everything related to the project.

Randomly, I came across a ZRcoin project. The project made me interested, because a couple of years ago I graduated from the Moscow Institute of Steel and Alloys, and for this reason I decided to start checking with the project, related to metals. Having invested a little $, I became a minority shareholder and got not only the moral right to analyze the project activity, but also to request the documents necessary for analysis.

I have written this Due Diligence in three parts. At the end of the third part, I have made a formal rating for this project, which will allow investors to evaluate the project quickly to decide whether to enter the project or not. Looking ahead, I will say that this rating is based on the "Marx institutes".


Crypto currency ZRcoin is an option for industrial product – zirconium dioxide. For those who have absolutely no idea about this project, I will leave this video.
http://Https://www.youtube.com/watch?v=Db8yfr5krVY

Acquaintance with the investment offer begins with the main page of the project website www.zrcoin.io

The project team shares with co-investors the following documents, there are only 16 of them (as of August 14, 2017). We will review all the documents, available to investors, one by one, commenting each of them.
 
1) Whitepaper (https://zrcoin.io/files/Whitepaper_ENG.pdf)
 
In any project that issues own crypto currency through ICO, this currency is considered as an obligation (security, as an option), there is a primary document - whitepaper, where a team describes its "venture". I will begin the analysis of the project with this document.

At first glance, the content is a report, the artistry of which overshadows the argumentation. For example, the authors, reporting on the "huge demand" for their products, forget to refer to the source and bring specific figures, specific customers, which are necessary for the assessment of the actual scale of the needs. Nevertheless, in the project blog, the demand for zirconium dioxide at a rate of ~ 150,000 tons / year is indicated. Let it be as it is, and let’s go further on the content and find the project schedule, which is divided into 3 stages. We will consider it in detail.
 
Stage - 1 "Collection of funds (ICO)". The ICO was held from May 11 to June 9, 2017, following the assets that were collected in table "ICO Analysis of ZRcoin" (lines 1-6).

The total amount of collected investments was $10.2 million, which exceeded the minimum required investment of $3.5 million by 2.9 times. And this is an excellent result ☺.
However, it is strange that crowd-investing company had not stopped earlier, because the team has identified the limit of investments in its blog on the medium.com as $7 million.

Thus, there is an interesting question: how much the planned production capacity has increased, because the project team reported that the more it collects, the more powerful industrial asset will be created. And yet, it is a pity that the amount sent for redemption ($400,000) remained at the same level and did not increase in multiple incremental capacity of the asset. In fact, the more productive an asset is, the more revenue it can generate and the more $ of it can be directed to the ransom.

I have never studied the structure of the ICO before, therefore I was very surprised by the fact that only 8.4% was invested by means of $ (refer to the table "ICO Analysis of ZRcoin ")
 
I have never looked at the structure of the ICO before and so I was very surprised by the fact that only 8.4% was invested by means of $ (see the table "Analysis of ICO ZRcoin"
 

http://sf.uploads.ru/t/eqVZ0.png
 
Sources of quotations: Bitcoin ; LITECOIN ; ETHEREUM ; ETH CLASSIC ; WAVES
Bitcoin - https://ru.investing.com/currencies/btc-usd
LITECOIN - https://ru.investing.com/currencies/ltc-usd-chart
ETHEREUM - https://ru.investing.com/currencies/eth-usd
ETH CLASSIC -https://coinmarketcap.com/currencies/ethereum-classic/
WAVES - https://coinmarketcap.com/currencies/waves/

 

Let's have a look at the economics of the ICO process and understand how much ICO is adequate for the real sector.

First of all, let's consider what volatility of the collected investments was for the last two months (June 9 - August 15).

Let's pay attention to lines 8 and 9 in the table. They show that if the project team transferred (deduces) its investment in $, then, taking into account a 0.2% commission for transferring the collected assets to $, investments would be at the "successful" conclusion - $13.1 million and "unsuccessful "- $5.9 million. Successful and unsuccessful means only one thing - a high and low transfer for a period. Looking at these introductory notes, many financiers will obviously understand how to hedge against such volatility by looking at how this is implemented in the "real sector". I am not going to torture my readers and say that for this you need to sell the futures on the Crypto currency with the execution date to the ICO end date. And, until this is implemented, such a strong volatility is very much frightening and to some extent restricts, and to be more precise - does not even allow non-surplus projects to join to the ICO. Let's go further under the Whitepaper text and move to the 2-nd stage in the planned schedule.
 
Stage - 2 Production, including:
2.1) Acquisition of real estate in the Magnitogorsk industrial zone, Russia (July - August 2017)
2.2) Construction of the building and production of industrial equipment for the plant (September - February 2018)
2.3) Commissioning of industrial equipment and start of new production. (February 2018)
2.4) Starting the first sales and shipments of finished products (Synth. ZrO2). (March 2018)

I propose to check whether the project actually acquires real estate and how it will meet relatively harsh deadlines to create an industrial asset.
In order to understand what kind of real estate is meant, let us turn to the relevant documents in the following parts.
Meantime, let’s move to the third stage in the plan-chart.
 
Stage - 3 Reverse ransom
 
In addition to the information on the $400,000 allocated for ransom and the prospects of entering the IPO, there is no more data on how the ransom will be executed, in particular - how the sequence of investors who have the right to sell their options will be formed.

I would like to see that investors primarily need a calculator for their local currency (for example, rubles). How much will the invested ruble bring in X weeks, taking into account all transactions for transfering to cryptocoins and back).

Moreover, investors need to show the available currency risks, which have not been hedged. This is primarily due to the fact that the investment in the crypt is quite risky for an investor, and investors generally do not have the financial expertise to self-assess these risks.

Thus, in this situation there are 3 (!) Currency risks:

I. Crypto currency risk. Since the investment takes place in the crypto currency with the changeable exchange rate. In the period when it is possessed by an investor, but has not yet been invested it in the project.
II. Currency risk of the pair ruble / $. Since the actual costs of real sector projects are calculated in rubles.
III. Currency risk of liabilities taken in $. An enterprise that is a tax resident of the Russian Federation can receive income only in rubles. The $ liabilities on options are an unauthorized "currency mortgage" and it is dealt in a special way, if you remember what happened recently with those who took a mortgage in dollars. Of course, "entrepreneurs" can come up with a scheme in the form of a withdrawal of zirconium at cost to an offshore trading house, and only deal with export sales of zirconium, that is executed in dollars. But this will only reduce the risk of obligations, but will not remove it completely, meanwhile, a risk of "tax audit" will emerge ☺.
 
By the way, looking ahead, I note that I expected to find "some kind of" risk analysis in the section of risks in the business plan, but alas, there is nothing specific. Let’s continue considering the documents that the project team shares with us in the following parts of the DD.
 

The Securities and Exchange Commission of the United States (SEC) in its press release on the incident that occurred with the THE DAO project equated the ICO issued tokens to securities.

I think this is great news, because despite the number of transactions and restrictions that have fallen off, ICO is on the right path to ensuring that investors' rights are protected.
As a result, the era of savagery and absurdity at the ICO comes to an end, and I congratulate everyone on this.
 

● The author is not a professional adviser on investments.
● Articles are personal opinions of the author.
● The author can have a financial share in the securities mentioned in the articles.
● The reader assumes full responsibility for the actions taken due to reading this information.
● The information presented in each article is incomplete, obtained as a result of working only with open data.
● Publicly available information is the only source of information for this article.
 
If you have any interesting suggestions, you can contact me:
Telegram: Artyom779
Instagram: artyom_fintechguy
Email: artyom.bubnoff@gmail.com

Appeal to the readers :-)
Meanwhile, I continue to collect ZRcoin wallets, to which investors sent their assets, in order to understand if "the funds invested in the ICO were used in a targeted or inappropriate way." Therefore, if you entered on the Pre-ICO, ICO stages, then, please, send the wallet numbers to which you transferred your crypto-funds, to the contacts mentioned above.