DESCRIPTION OF BUSINESS

EXECUTIVE SUMMARY

LCX is a FinTech company that has launched a cryptocurrency trading desk called LCX Terminal. LCX Terminal is a multi-exchange crypto trading platform that allows users to trade on various crypto exchanges within a single interface. LCX also plans to launch a crypto custody service called LCX Vault, an exchange for security tokens and other crypto assets called LCX Exchange, and a variety of tokenised securities called LCX Assets.

OBJECTIVES

LCX’s objectives are to be:

  1. Secure while introducing new standards for regulatory transparency and reporting.
  2. Technology-driven while delivering a customer-centric client experience.
  3. Focusing on crypto-assets while offering the full set of blockchain services.

MISSION STATEMENT

LCX will foster the adoption of crypto by helping financial institutions and professional investors understand the potential blockchain holds to ignite global economic reform and financial inclusion.

MARKET AND COMPETITORS

Competitors: LCX Terminal is a trading dashboard connected to 13 crypto exchanges, and the first product released by LCX, reportedly with 10,000 users. They have at least ten competitors within this space, some of them already established and with large user bases, such as 3commas, all of which feature connectivity to less available exchanges. LCX also faces important competition for the products they plan to release. However, our researchers are not aware of any company attempting to release so many products within one solution.

Some of LCX Terminal’s competitors are:

  1. 3commas: https://3commas.io
  2. Kattana: https://kattana.trade/index.html
  3. Getaurox: https://getaurox.com/
  4. SuperOrder: https://superorder.io/
  5. Xray: https://xray.trade/
  6. Cryptocontrol

Additional competitors:
LCX Vault is a cryptocurrency custody service that LCX plans to launch in the future. Coinbase has entered this market and is now dominating it with more than $1 billion worth of Assets Under Management. Other crypto custody services include Gemini Exchange, Bakkt, and ItBit.

CONCLUSIONS

The project is trying to improve upon many existing problems and tries to unify and simplify existing financial services in the blockchain industry. LCX is facing competitors with an established presence in the industry (like Coinbase), as well as established projects like 3commas, which have a large user base.

If LCX manages to execute its ideas successfully, the resulting product can be incredibly useful for financial professionals.

RATINGS

ROADMAP

Although LCX’s roadmap spans across eight years, it is not overly time-specific and worryingly vague. Most project roadmaps are divided into quarters, or even months, detailing and dating specific development events and releases. LCX’s roadmap is divided into yearly sections, presenting an overall poor roadmap.

TEAM

Monty C. M. Metzger is the founder and CEO of LCX. He has two decades of experiences with companies that he co-founded. His first venture was a technology consultancy that grew into having offices in Beijing, Tokyo, Munich, and New York. After exiting that company, he used his wealth to become an Angel investor for technology startups managed by his family office. He co-founded another venture capital firm in 2014, investing in fast-growing technology ventures. He also founded a global network with influential business leaders, called Digital Leaders (run by Katarina Metzger, also a board member), which makes him a very well-connected individual. Monty’s background shows that he has a vast network around the world, but excluding his first business venture (which was a success at the time of his exit 12 years ago), there’s no record of any other successful ventures in his career.

Amanjot Malhotra is Product Manager at LCX. He has a project management record of nine years in Fintech, Banking, Financial services and, now, Blockchain. Our researchers failed to identify any successful ventures in his experience.

Anurag Verma is the Lead Software Developer at LCX. Previously, he was a part of Coss Wallet (www.cosswallet.com), which doubles as a digital wallet and an exchange, a venture that has neither succeeded or failed. He was also employed by a computer software company that, judging by its online presence, seems to have closed down.

ADVISORS

LCX has an impressive set of advisors, composed by thought leaders and globally-known names, like Don Tapscott, Miko Matsumura, Jimmy Wales, the founder of Wikipedia, and (formerly, before passing away) Stanford University professor Dr Shoucheng Zhang.

Not all of the advisors are publicly related to the project, although the most high-profile ones are. The project’s advisors are undoubtedly very competent and able to help improve the development of it. There have not been any controversial events involving the advisors, aside from a single event on Twitter between Binance’s CEO, known as CZ, and Monty Metzger which drew comments from other advisors (that seemed to be out of the loop). In general, the involvement of the high-profile advisors of this project seems to be low.

The Team’s and Advisors’ social media links can be found at https://www.lcx.com/about/.

TWITTER CONTROVERSY

The Twitter controversy arose between Binance’s and LCX’s CEOs, referring to a potential partnership with Binance, which failed, but continued to be used by LCX for PR purposes.

PARTNERSHIPS

The following are the partnerships listed by LCX on their website:

Our researchers have found that the World Economic Forum and the Blockchain Research Institute both charge a yearly fee to be a member of their organisations, which could make them a paid member of these Institutions, rather than a partner.

Ledger is a hardware wallet manufacturer who is providing a service to LCX for their system to be interoperable.

Researchers couldn’t find anything about membership fees for Global Digital Finance without applying. It should also be noted that these institutions are very expensive to be part of, with no apparent use. For example, the Blockchain Research Institute charges $200,000 US per year to get access to research by this Institute.

COMPANY OWNERSHIP

LCX is not a Decentralised Autonomous Organisation but rather a private company. The specific corporate structure and beneficial owners is not known. The researchers consider Katarina Metzger’s presence as a member of the company’s Board a red flag. She is most likely somehow related to the company’s CEO Monty Metzger (by marriage or as a family member), which raises questions about how much control the Metzger family has over the company’s decisions.

LOCATION

LCX’s office is located at:
Landstrasse 60, 9490 Vaduz, Liechtenstein

KEY RISKS

  • Focus on too many products, increasing the chances of failure.
  • Lack of practical software development experience.
  • Failed past projects by the team’s members.
  • Lack of meaningful partnerships.
  • Advisors detached from the project.

TECHNOLOGY

LCX created an ERC20 token and distributed it via a seed phase and an IEO on Liquid exchange, which will serve as the utility token of the LCX ecosystem.

In the future, the company plans to develop tokenised assets, which will make them use other token standards, like ERC721, to create non-fungible tokens on the Ethereum blockchain.

Researchers inquired about 3rd party audits on the smart contract code, and whether there was a security audit for the website/network/servers of LCX, but no public information about this could be found. LCX didn’t reply to any direct questions about this.

LEGAL AND COMPLIANCE

LCX, a private company registered in Liechtenstein is carrying out this project. The Jurisdiction is Liechtenstein which is a friendly blockchain jurisdiction. Specifically, Liechtenstein’s Blockchain Act providing the Token Container model, favors any asset to be tokenized. Ideal for a project like LCX that aims to create a security token exchange. 

Researchers were unable to find any legal compliance audits for LCXs’ jurisdiction (Liechtenstein). Therefore, researchers could not determine the extent of compliance with the relevant jurisdiction.  

Amanjot Malhotra, Director of Product Development answered questions by our researchers regarding the company’s legal advisors stating that ‘We have legal advisors which are based out of Vaduz, Liechtenstein. They advise us in preparing for product launches as well as in licensing’.As of November 2018 LCX has been granted a Business License of the Liechtenstein Ministry of Economic Affairs to conduct its business in Liechtenstein.

LCX intends to apply for the licenses of the Financial Market Authority (FMA) and other regulators Agencies to be able to trade security tokens and offer other regulated services. More information here

LCX is a utility token used within the LCX ecosystem. For example, It will be used to charge a trading fee, subscriptions for the trading terminal. The jurisdiction is at the moment favorable for cryptocurrencies and tokenized assets.

Legal risks identified.

It is worth reiterating that the specific corporate structure and beneficial owners is not known. Additionally, Katarina Metzger (likely related to the company’s CEO)  is a member of the company’s Board, raising questions about how much control the Metzger family has over the company’s decisions. 

In terms of KYC and AML compliance, LCX Terminal asks for Source of Funds evidence besides the usual (Passport, Citizen ID card, etc), which is more than most of the other blockchain projects ask for. 

TOKENOMICS

The LCX token is considered a utility according to the Token Economics paper on their website. It acts as the only payment method for services in the LCX ecosystem. The market will determine the value of this token, but as a payment for services within the LCX ecosystem, it will always be valued at a minimum price of $0.10.

Here is the exact explanation found in the Token Economics paper:

The token is not inflationary in the sense that the company cannot print more of them indefinitely. A substantial amount of coins are in the hands of the company, which could be considered a bad thing. The total supply is of 957 million tokens, with 200 million of them in circulation at the time of writing. The rest are locked in various vesting periods for various stakeholders.

TOKEN ALLOCATION

TOKEN SPECIFICS

Token Name LCX Token
Total Token Supply 957’668’375 LCX
Total Circulating Supply 200 million
Smart Contract etherscan.io
TGE March 04th 2019 at 10:53:48 AM +UTC
Token Category LCX is a utility token used within the LCX ecosystem
Guaranteed Utility Value* 0.10 USD
Token Type ERC-20
CoinMarketCap coinmarketcap.com

VESTING PERIODS AND TOKEN BURNS

The team claims that vesting periods are smart contract-bounded. The initial token supply will be of 50.89% of the total token supply. The LCX Tokens distributed during the IEO (public sale) do not have a lockup.

All other tokens are part of long-term vesting schedules over 4-36 months. The vesting is deployed via a smart contract vesting schedule on a monthly or quarterly basis. The LCX Tokens were created in March 2019 as a part of the Token Generation Event (TGE). The vesting period started on the TGE date.

  • Development: Part of the circulating supply from the listing day, but only available for revenuerelated processes directly on the LCX platform. Mathematically, long-term distribution depends on the growth of turn-over at LCX.
  • Seed Sale: LCX Tokens purchased at the private pre-sale will be released in three steps: ⅓ unlocked after four months, ⅓ unlocked after eight months, ⅓ unlocked after twelve months.
  • Company Reserve: The LCX Company Reserve has a full lockup of three years.
  • Team: The LCX Team Token will be vested over 36 months.
  • LCX Tokens held by advisors are vested monthly over 36 months.
  • Ecosystem: The LCX Ecosystem Token is vested for 36 months.

TOKEN BURNS

As LCX will accumulate LCX Tokens over time, it will implement a transparent and verifiable mechanism to burn LCX to reduce the supply of tokens in the ecosystem. LCX will burn 100% of all “used” LCX Tokens, which LCX receives in the payment process through the utility token. LCX will burn these tokens quarterly and publish the number of tokens burned. As a result, the supply of LCX will decrease over time as the activity on LCX increases.

EXCHANGES

The token is already traded on three exchanges (Liquid exchange, VinDax, and ExtStock) Liquid has a considerable volume, with the other two representing a minority.

SOCIAL MEDIA / VIRALITY

The main presence of LCX on social media is on Twitter, Telegram and Youtube, with a very limited amount of mentions on Facebook and LinkedIn and no mention on Instagram.
Social media links:

Presence and importance of different platforms can be classified as follows:

  1. Telegram: 9207 members – It acts as a second, more direct channel for support for KYC and the Terminal’s issues.
  2. Twitter: 6941 followers – LCX is very active on Twitter with new posts every 1 or 2 days.
  3. Youtube: 2860 subscribers – The channel has 27 videos, mainly announcements and talks by the CEO regarding the project. It has a total of 8457 views.
  4. Facebook: 511 likes – LCX’s Facebook page is not updated as frequently as the above, ranging from 1-2 new posts per month.
  5. LinkedIn: 2825 followers – LCX’s LinkedIn page is also not updated as frequently as the above, ranging from 1-2 posts every four months.
  6. Instagram: 5098 Followers – LCX’s Instagram page has 47 posts and with decent engagement by its followers.

SUMMARY

LCX is a project that has already delivered results. The LCX Terminal is the first out of six planned products to be rolled out, with reportedly 10000 users. It operates in the blockchain-friendly jurisdiction of Liechtenstein, which is ideal for tokenised assets, one of the core products of LCX. The project successfully reached its funding goals, and it is well into development.

LCX aims to become a one-stop financial services tool for financial professionals in the Cryptocurrency industry, but this fact alone comes with an increased chance of failure. The management team has failed projects in their track record and lacks practical software development experience. The project itself lacks meaningful partnerships, necessary for development and longevity. The partnership with Binance fell apart, and existing advisors, despite their high profile, are not engaging enough with the project.

DISCLAIMER

This Report is for informational purposes only and/or all or any of its content thereof, should not, may not and will not be taken to constitute, either as a whole or in part, any investment advice or recommendation or similar, regulated, or authorized advice, and D-Core by producing, disseminating, giving away, or making available this Report does not, should not, may not and will not be taken to advise on investments, or carry out any similar activity, or any regulated activity or any other authorized activity. D-Core is not authorized by the Financial Conduct Authority or by any other competent EU or elsewhere or otherwise competent authority to carry out any regulated activities and/or any activities within the scope of these authorities’ competence.

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