What is an ICO?
Initial Coin Offerings (ICOs) is a fundraising method in which companies and projects issue digital tokens structured like Bitcoin or Ethereum. The new way of crowd-funding startup projects called Initial Coin Offering has become extremely popular over the previous years. ICOs can be broadly classified into three categories; Utility Tokens, Payment Tokens, and Security Tokens
Why Should I Care?
ICOs have become very popular due to two reasons; the first being the increased adoption of cryptocurrencies and the second being that the ICOs as compared to traditional fund-raisings are very simple. The successful ICO’s are progressed to trade on the market as successful cryptocurrencies and will also get listed on exchanges.
A study conducted by the Statis Group in New York found that 81% of the ICOs are scams. Also, new evidence suggests one in 2 ICOs failed in the 2nd quarter of 2018— and those that succeeded suffered huge losses. However, all is not what it seems.
Trend of ICOs
2017, especially at the end was the best year for ICO’s; however a whopping $2.4 billion hits in ICOs in the month of March 2018 alone. This figure is more than the funds raised in December 2017 and January 2018 combined.
Funds that are lost perhaps seems to be the largest issue with ICOs. The worrying trend of these ICOs is that not enough of the projects are leading to success. And ICOs, as a result, have picked up the bad rap in the market. The best example is the Tezos ICO which suffered a slew of lawsuits after infighting between the members shattered its progress.
Another example would be an ICO in Vietnam which rose over $660 million before the team disappeared, the largest ICO exit scam in history. The list for failed ICOs or ICO scams goes on forever.
Why do ICO’s Fail?
There are numerous reasons as to why ICOs fail, the main factors include:
- No unique vision and non-existence of target groups
The products, services or solutions don’t have a real market demand no matter how exciting the vision might sound.
2. Objectives pushing the limits of your capabilities
All ICOs have big promises and ambitious projects, however, sometimes the bar for the project is set too high. Also, to realize this project a lot of resources needs to deploy, however, failing to achieve this goal, the coins will not roll into the market and ultimately turn into a failure.
3. Poor branding and marketing activities
Investors and the public will scrutinize every single platform that the ICO is on. Even the slightest of the mistakes, like grammatical errors, poor website design, graphic design and the activity of the devs on the project and also the communication with the public via the social media, failing which the investors lose trust and the ICO fails even before it starts.
4. Non-transparency is a No-Go
The investors are usually wary and always seek full transparency, by following the project developments on GitHub. So increased transparency builds trust in the investors.
The whitepaper is essentially the road to your project and has to specifically mention how the ICO plans to realize its goals. Hence whitepaper is required to be easy to understand, logical, realistic, and to concisely explain every single detail.
Owing to the above-mentioned facts and reasons there is a sharp decline in the ICOs and even the governments all over the world are imposing regulations to prevent scams.
If you want to know in details about ICO, here’s a tutorial for you:
Image Courtesy- Blockchain Hub, Insider Pro