A crypto fundraising platform called Legion recently launched a reputation system intended to help navigate the European ICO landscape and make interaction between investors and projects merit-based, transparent, and seamless by nature. If retail investors want to have new ICO opportunities within newly developing regulatory regimes in the rest of the EU, this innovation is bound to change how they approach the European Union.
Legion focuses its approach on reputation systems that filter into startups looking for quality investors. The system uses behaviours including on-chain history, social influence, and developer activities to identify retail investors showing genuine interest in the projects’ long-term success regarding Web3. This is going to focus on merit-based investment that is likely to bring trust and authenticity in crypto fundraising besides offering more effective methods for gauging the commitment of investors towards the starters.
Leveraging the EigenTrust Algorithm for Decentralized Reputation
It uses an EigenTrust algorithm that was initially developed by open-source protocol from Stanford researchers Sep Kamvar, Mario Schlosser, and Hector Garcia-Molina. This is the EigenTrust system, which is specially designed for peer-to-peer networks. Actually, it is highly known to measure trust within decentralized systems. According to co-founder of Legion, Matthew O’Connor, this system simulates trust in human relationships.
This connects the most respected members in the crypto space into a hierarchy of trust, enhancing project credibility by building a network where reputation flows organically. For instance, the influence of a high-reputation individual such as Ethereum co-founder Vitalik Buterin on the perceived reliability of those he has collaborated with can create a “web of trust” that spreads through multiple levels.
A positive factor of Legion’s platform is that it does not permit projects to be overrun by low-value participant types or speculators whose contributions would likely not propel a project forward. Tokens are difficult for startups to sell to investors who can add little value in the long term. Once issued, according to O’Connor, there is little recourse to be taken against investors when they fail to fulfil their commitments.
Such an approach based on reputation helps to mitigate such risks and makes it easier for startups to target serious investors while avoiding anonymous wallets that could potentially hinder the project’s success.
The “Airbnb of Crypto Fundraising”
It looks similar to the Airbnb model, whereby the individual has a good reputation, and the platform links up those people of good repute with hosts. Legion is positioned to be the “Airbnb of crypto fundraising” by linking retail investors with awesome loyalty and community-building capacity to startups hungry to expand their market shares. O’Connor drew on the unique advantages that retail investors bring that venture capitalists cannot always provide, such as valuable product feedback, organic marketing, and community engagement. Examples include these structural components, such as the new markets in the Crypto-Assets Regulation or MiCA in the European Union. Regulation on MiCA sets out rules of clear standards governing ICOs among European member states, ensuring transparency in the issuance of utility tokens.
U.S. Regulations and Global Access
The current version of Legions’ platform will provide access only from retail investors in the U.S., considering that its offering was compliant with some U.S. law regulations, such as RegS and RegD. Yet, this would open access to crypto startups to join Legion from all corners of the globe if these comply with the guidelines stipulated by the EU. Crypto funding remains attractive to entrepreneurs, as startup ventures collected over $2 billion of venture capital in the third quarter alone in 2024. Crunchbase, however, has reported that the figure for this year stands close to reaching $8 billion in total crypto-related venture capital funding. More crypto projects can now have structured access to a diversified set of investors.
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