As China and South Korea banned ICOs late last year, we have been faced with the reality which many of us already knew: the topic of ICOs isn’t pretty. It is complicated. While ICOs are a great fundraising tool that leverages the power of the blockchain, it is far from being all good and rosy.
All of us who work on legitimate blockchain projects are being shadowed by questionable companies who are either working on a quick ‘pump and dump’ token, or – even worse – are straightforward scams, with no intention to develop their solution.
It is reported that only in 2017 ICOs raised $5.6 billion. How much of this money went to projects that have the future? Everyone working in the industry knows that there are dozens of ICOs being launched every day, it is just hard to spot a great idea. True innovations and projects with the potential to change the world may simply be lost in the junk.
So, the great side of the ICOs is them being a fundraising opportunity available to anyone. No longer are investments reserved just for the uber-rich and ultra-connected, anyone can get the funding to turn their ideas into reality.
The bad side is -let’s face it – that very few of these ideas are great. And sometimes truly great ideas don’t get the attention they deserve due to the pure volume of projects floating around. For a potential contributor, there may be just too many White Papers to read, too much to pay attention to. Another challenge here is the fact that too many contributors are looking for the ‘next Bitcoin’ – that magical token that now costs a few cents, but comes few years, will be worth tens of thousands of dollars. If an ICO isn’t over-hyped and its team isn’t overpromising, this project is at risk of not getting funded, no matter how good the idea is. This partially explains the latest trends of the ICO marketing and the hoops projects jump through to get the attention instead of doing what they should do in the first place: working on their product. It is my great hope that this is a passing trend of a new industry, and soon the emphasis will shift.
Besides the good and the bad side, the ICOs also have their ugly side. It has become known as an environment ripe for scams, and even when founder intentions are good, contributors are often placing their trust in nothing more than an idea with a shiny website, clever marketing and a dollop of hype.
The ugly side of ICOs has drawn attention from worldwide regulators and the U.S. Securities and Exchange Commission (SEC) has previously warned traders about the financial risks initial coin offerings pose. China’s Central Bank became the first to outlaw ICOs and South Korea followed the suit, having banned ICOs due to concerns over the potential for financial scams.
So how does one choose a good ICO? It needs to have the functionality. The days of Bitcoin are behind: it’s not enough just to have the token: there should be multiple avenues for using it.
Never go for a token that seems to exist in a vacuum. It should have a strong usability potential, well outside of the ecosystem of its native company. Otherwise, it will be limited by its own growth. It all comes down to whether the team can secure long-term partnerships before the actual ICO. Someone should commit to using the product before it reaches the ICO stage! Companies that have a network of Early Adopters and Launch Partners are in a better position for success.
Furthermore, is the promise realistic? If something sounds too good to be true, it probably is. Yes, there should be innovation, but a solid evolutionary idea with a strong infrastructure and support network of Early Adopters is usually better than a promise of the revolutionary conquest of the world.
ICOs are an exciting yet complex process. As we navigate our way through it and try to avoid the ugly side of this industry and focus on the good one, let’s keep those solid good ideas supported.
Originally published on TokenRadar24
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