There is no threat to blockchain reputation despite some of the countries slapping a blanket ban on the initial coin offerings (ICOs). Xunlei, an American listed technology firm, CEO, Chen Lei, believes that the recent crackdown could only help blockchain rebuild its reputation. He defended the actions taken by various governments across the world. However, the technology is gaining traction beyond the fintech sector going by the recent announcements. The recent government actions followed after a number of cryptocurrencies plunged in the current year after hitting a life-time high towards December end last year.
Bad Name for Technology
Chen has told SCMP that “ICOs are terrible, and give a bad name to blockchain technology.” Xunlei is a tech firm using the cloud-based network for delivery of digital content. In October last year, the company has issued or rather swapped digital tokens, which is known as Wankebi, in return for idle internet bandwidth contribution from its users. Its blockchain is a proprietary one and known as “thunder chain with a maximum limit of 120 million Wankebi.
Interestingly, the company’s Thunder Chain is essentially meant for bookkeeping, as well as, tracking the amount of bandwidth a specific user contributed to its cloud computing network. The users are allowed to use the tokens to exchange third-party live video services in return. The company also enables the tokens to be used for other services like online games and auctions that were developed on blockchain platform.
Xunlei is taking advantage of the current market perceptions. For instance, online video platform iQiyi and internet companies like Xiaomi are using paying customers as a tool to fund their content delivery networks, which are cloud-based one. However, the company’s tokens are not traded in any of the cryptocurrency exchanges. This led to a charge that its Wankebi token was a kind of “disguised ICO.”
The company was also charged that it resorted to misleading or false statements on the kind of businesses thus dragging down its share price in the NASDAQ. Following the distribution of the token, Xunlei shares surged close to $25 in late November. However, the stock failed to hold on to its gain and dropped to $11.90 on Tuesday though it gained 3.57 percent for the day.
Facing Class-Action Suit
The company has introduced its token as part of an expansion into the blockchain technology. The normal practice for any ICO is to swap digital currencies for Ethereum or bitcoin or fiat currencies. Such promoting firms would then use the funds to develop block-related projects. As Xunlei entered the fray, some of the investors were not happy with it thus dragging the company to a court through a class action suit.
Investors’ primary concern was that the company’s share price dropped significantly after its entry into blockchain technology. Reacting to complaints of misleading statements, Chen believes that the company played straight on its business practices. He was clear that Xunlei was not selling any tokens. He added that its objective was to move closer to crowdsourced computing by competing directly with Tencent Cloud and Aliyun, both are cloud-based units of Chinese firms.