Spectre ICO Review – SPEC Investment Analysis

https://spectre.ai

ICO Details

Symbol – SPEC-D, SPEC-U (subject to change)

WhitepaperLink

When – November 17 2017

Soft Cap – 750’000 USD

Hard Cap – 30 Million USD

Total Max Market Cap At ICO – 60 Million USD

Exchange Rate: 1 ETH = 2000  SPEC

Total Tokens in Circulation At ICO – 240 Million SPEC (120 Million Circulating)


Overview

spectre4

Spectre is the self-proclaimed world’s first decentralized binary option exchange. While other trading platforms, exchanges, and decentralized apps do exist, there as to date have not been any that port over the binary options business from the traditional finance industry. Spectre uses this as their main niche, allowing investors to make trades in a truly decentralized fashion as opposed to having to trust a centralized service (for example current incumbent options solutions)

Spectre notes several issues with current options programs and services, primarily being game theoretical arguments (that have played out historically). An example of some of these issues are the conflict of interests between traders and brokers in legacy systems. Primarily, the trader is playing against the liquidity pool of the broker – in this example, let’s use eToro:

When a trader places a binary trade, they bet that  the value of an asset will increase or decrease from the current buy in value. If the trader was correct in their assumption, eToro needs to pay the trader out from their own pool of money – if the trader was wrong, they instead give up their collateral to eToro. As becomes plainly apparent, it is in the interest of the broker to make sure the trader loses every time, while it’s in the interest of the trader to do the exact opposite. This means that some brokers will do anything and everything in their power to fudge entries, slow data feeds, or otherwise set the trader up for failure before they even begin.

Spectre aims to change that by making the process fully decentralized, and creating a “liquidity pool” of sorts that has no inherent bias whether a trader wins or loses their bet. This also extends to the Spectre dividend system, where ICO investors will be able to collect dividends on both winnings and losses, thereby removing any inherent bias towards the outcome of a trade.

We forecast combined dividends (eg. normal and special dividends) to dividend-token holders of $4.1m to be paid out in year 1 (or $0.06/token) translating to a projected token-yield of 41%. By year 5, we forecast total dividend payments per year to reach $64.2m (or $0.96/token), resulting in an annual 78% forecasted token-yield for ICO token investors. This compares to a paltry 1-5% dividend yield paid on tech stocks across the globe.


Team

kay_spectre

Karan Khemani

Kay is responsible for overseeing the design, architecture and expansion of SPECTRE into the market. He is a co-founder of Neuchatel Ltd and FIIT, the companies behind SPECTRE and an avid blockchain enthusiast. He started working at J.P Morgan and then went to work for Goldman Sachs as Executive Director in Research and Investment. He started his career by studying at the London School of Economics, where he received a BSc and then an MSc in Decision Sciences.

 

adam_spectre

Adam Dossa

Adam has over 13 years of experience in fintech coding along with extensive Solidity & Ethereum development/deployment experience, including security audits, contract development and strategy. Previously an Executive Director at Morgan Stanley, Adam has spent over a decade working in financial services technology. Adam completed his Masters in Machine Learning from Columbia University, New York.

 

zio_spectre

Zisis Skouloudis

Zisis is responsible for financial forecasting and risk management in SPECTRE’s liquidity pool. He too is a co-founder of Neuchatel Ltd, the company behind SPECTRE and formerly worked at INO SA & Siemens, designing and implementing their ERP software. He is an electrical engineer with a passion for mathematics, modelling, big-data, and is a certified Quantitative Finance & Risk Modeller from Wharton, University. He received his MSc in Decision Sciences from the London School of Economics.

 Positives

spectre2

Spectre’s primary strength is the simplicity of their system – while many other ICO projects to date have complex and hard to understand methods of creating value to investors, Spectre is relatively simple. They have a niche idea in the form of their “Smart Options”, a working product (you can try the MVP at their site presently), and easy to recognize worth in their system and tokens.

Their pre-sale terms were also relatively fair, giving early investors a 33% bonus – similar projects have succeeded with these kinds of bonuses come to mind such as ChainLink, so ICO investors will not feel particularly troubled by the larger bonuses of the presale.

A final positive for Spectre is the way they’ve split up their tokens. Currently, they are selling both Dividend and Utility tokens as part of their system, giving investors an option of which to purchase. Utility tokens unlock many features of the Spectre platform (thereby giving it desireability), as well as Spectre employing a token buy back program (we have seen these before) to lower outstanding supply over time and increase the rarity of these utility tokens.

The dividend tokens on the other hand, do not have as much use as their counterparts, but the value in these lies in the dividends that will be paid to holders of these tokens as part of each traders successful closed position – 2% of wins and losses are paid out to dividend token holders, which means as the platform scales up (and gains more volume) so too will dividend token holders gain increasing returns on their investments.

The average win rate of inexperienced traders is around 35-50%.5 Experienced traders, however, who spend time in learning technical or fundamental analysis in order to gain an edge and be able to beat the market, can at times obtain a 60-70% win rate, although emotions and greed tend to get the better of them, thus suppressing their win-rates below 60%, over time.6 Since SPECTRE’s liquidity pool pays out 75% on winning trades (and as high as 93% in certain conditions) but keeps 96% of all losses, traders on average need to maintain at-least a 57% win-rate in order to break-even.

This is difficult for the masses to achieve and therefore, average win rates in the system are likely to hover  under 48-53%, resulting in perpetual growth in SPECTRE’S liquidity pool andcontractually, the size of special dividend payment to token holders (Exhibits C & F).


Negatives

One glaring flaw that occured to me as I was reading through Spectre’s whitepaper was the mention of their use of services such as CloudFlare to mitigate things like DDoS attacks – taking a further look it becomes clear that Spectre will run their service as a basic web site without creating an Ethereum dapp to cover the same functions. That means that ultimately, this service, while the underlying architecture is distributed, is centralized. This is one of the biggest problems with Spectre and it makes me question whether someone would truly purchase a “decentralized” product such as this when the reality is quite the opposite. Fortunately, this is a problem that can be circumvented, as Spectre will hopefully release a decentralized app or tool to use their service without the need of a web site.

specctre3


Conclusion

Spectre is a great project with solid fundamentals and a great team. Their ICO terms are fair, and they have done a great job of focusing the utility and value of their product by splitting them into two separate built-to-purpose tokens. I’m looking forward to seeing Spectre succeed, and urge any ICO investor to do their own review and due diligence into this project – look to invest and make some great future returns.

Investment Grade: 85%

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6 thoughts on “Spectre ICO Review – SPEC Investment Analysis

  1. Thank you for the fantastic review Global Halo on Spectre.ai.

    With regards to your reservations on Spectre.ai’s trading app not being fully decentralised; the core functions which result in full disintermediation of the broker (thus, financial fraud in trading) is what requires decentralisation. Please note that every action has its costs and benefits. A fully decentralised app (even the trading area) is not logical as scalability issues mean we would dramatically sacrifice trading performance if 100% of it was on the blockchain (we studied this in depth).

    It would be so unusable on a HFT basis that it would truncate the market opportunity for traders. If the ETH blockchain upgrades itself through iterations such that thousands of transactions can be processed per second, then we can of course move forward with that, but we can only move as quickly as the underlying blockchain technology can. Vitalik Buterin himself said the answer is not 100% decentralisation, it is a mix, as there is a tradeoff between scaleability and decentralisation. We agree with this view, not the ‘cryptopurist’ view that everything needs to be 100% decentralised.

    Having said that, the Dapp Store is a major part of the investment case and other deveopers can create 100% decentralised trading apps that can connect to our DALP which is fully decentralised. That is fine with us.

    Team Spectre.ai

    Liked by 1 person

    1. Appreciate the time you took out to reach out! Yes, it’s definitely better to do as many things off-chain as possible with regards to scalability. That being said, it definitely lowers the perceived “hype” of the project, which is something my audience definitely looks for when investing into projects.

      Still, it’s great that you go into detail and are honest about the way you plan to tackle some of these issues compared to other projects which are less transparent. Personally I’m sold.

      Like

  2. I think that EOS or Cardano will be the solution to the negatives pretty sure it will all go that direction since EOS said that there’s will be the biggest product launch in history with no less than a thousand programs launching from their tool kit when they launch in JUNE but I see 10 X the code on GitHub coming from the ada cardano iohk teams they got something really really no hyped huge coming

    Like

  3. Well, since spectre wil run on ethereum, I would say the solutions lies in Raiden Network, wouldn’t you ?
    uRaiden is ready to be launched this month, wouldn’t that do the trick already ?

    Like

      1. Correct, Raiden (mai) network probably 2019.
        MicroRaiden to be launched this month !
        Small payments at almost zero costs.

        Like

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