The days of the purely whitepaper based ICO seem to be numbered. Many millions – even billions – of euros, dollars, pounds have been raised through a system which is fundamentally based on trust. But that modus operandi is in serious doubt now.
Traditionally the crypto company puts together a proposal, writes a meaningful prospectus – the whitepaper – assembles a credible team, appoints an assortment of advisors and in doing so attempts to cover all the important points. The project is then offered to potential investors but in the vast majority of cases there is no existing viable product. The whitepaper can be, in effect, nothing more than a sophisticated wish list which will hopefully lead to a product or service that is deemed significant enough that the token offered by the ICO increases in value.
ICOS ARE FACING A MORE DEMANDING AUDIENCE
Fluctuations on crypto exchanges since January of this year and the failure of hundreds of ICOs either in terms of failing to reach their subscription target or simply not delivering on their promises point towards a far more cynical marketplace now and in the near future. A fairly exhaustive list of all the hundreds of crypto failures and frauds can be found at Dead Coins. The creator of parody crypto UET (Useless Ethereum Token) openly said, “You’re going to give some random person on the internet money, and they’re going to take it and buy stuff with it.” Those days are set to disappear.
There is already a developing trend in crypto business that an ICO should be based upon an actual already functioning business model. The product/service is rolled out and presales/sales demonstrate a definitive “need” for this new crypto creation. On that basis the whitepaper can be constructed to demonstrate the real-world function of what is being offered under the ICO. When genuine utility can be established, hand-in-hand with a rational token model, then the potential for such a crypto offering is seriously enhanced.
CRYPTO REGULATION AND CONTROL
Consider also the topic of regulation. Governments across the globe are inexorably tightening their grip on cryptocurrencies, their offering, their trading and their essential purpose. Regulation and control is on the rise as traditional authorities come to adopt an “if you can’t beat them, join them” mentality. But in so doing they are tending towards imposing traditional checks and balances on crypto companies in terms of how they can raise funds, how they control funds and how they report the use and distribution of tokens. In the long-run this will probably be no bad thing as regulation brings with it an enhanced element of safety for the investor.
However, there are still operations out there who are scooping in the money from their less regulated jurisdictions. The Cayman Islands-based block.one has raised over $4 billion although a scam has already been perpetrated on the company as announced recently with millions of investors’ money being stolen in an elaborate hack.
The crypto market still loves a speculative idea but those days are now seriously numbered and “real” projects with a proven track record and assessible metrics are on the march in today’s ICO world.