CoinSchedule.com reports that there were 235 ICOs raised more than $37 billion in 2017. It reached its peak in September, when it raised over $800 million.
The Top Ten ICOs in 2017
|3||EOS Stage 2||$185,000,000|
Initial Coin Offering is an abbreviation for Initial Coin Listing. You can also call it Initial Public Coin Offering (IPCO), or Initial Token Offering.
ICO can be used to raise funds for blockchain-related projects. Startups use it to bypass the lengthy and highly-regulated capital-raising processes required by financial institutions. An ICO campaign is where a portion of cryptocurrency is offered to supporters early in the project’s development. This can be exchanged for fiat currency, other cryptocurrencies or Bitcoin.
A whitepaper is used by startups to present their business plans before the ICO. It includes details such as the goal of the project and distribution of funds. During the Initial Coin Offering, supporters of the company will be able to purchase coins using fiat or digital money. If the ICO fails to raise the required minimum funds, it is declared unsuccessful. The funds are then returned to their supporters or buyers.
Investors buy coins from ICOs in the hope that the project will succeed after it’s completed and the price of the coin will rise. Many ICOs are profitable for investors. Ethereum raised $18 Million in Bitcoins, or $0.40 per Ether (Ethereum’s currency). The Ether value soared from $18 million to $14 after the project launched in 2015.
While there were many successful ICOs over the years, there has also been many scams and unsuccessful ICOs. ICOs do not have to be regulated. In September 2017, People’s Bank of China ban ICOs. They claim that they are disruptive to financial and economic stability.
Vitalik Buterin (co-founder of Ethereum), believes that it is a fact in cryptocurrency technology that many token startup will fail. Buterin believes that at least 90% of token startups will fail. Buterin said that there were some great ideas and a few very bad ones. He was speaking on a panel about decentralized technology. There are also a lot of scams.
The analysis by Bitcoin Market Journal shows that a high number of ICOs have not provided such information. The analysis included more than 600 tokens sold and found that 394 of them were completed or had reached their expiration date.
Out of the 394 completed ICOs only 35% reported on how much they had raised.
Is this a sign that 65% of the applicants failed, or just that they didn’t publish funding numbers?
Christopher Keshian is the Managing Partner of Neural Capital’s blockchain asset hedge fund. He stated: “As a investor, I presume that an ICO choosing not to report its token sale means they weren’t able to reach their target raise.”
However, the lack of a report doesn’t mean that there aren’t any results. We cannot conclude that ICOs failed simply because they chose not to disclose funding numbers.
It could also be due to other factors.
- No regulatory reporting standards. ICOs do not have to disclose funding amounts or economic health. This makes it difficult for analysts to understand ICOs.
- No reporting experience. A lack of experience in reporting may make teams feel awkward, as tokens can be traded on the stock market with high volatility.
- The lack of know-how. Many teams don’t have the know-how or know when to announce a profit report. Some teams may have focused their efforts only on the ICO documents and not considered the labor division required for the wrap up.
- Time constraint. Only one-third of ICOs were not highlighted in a funding report within the first two months after their ICO ended date. The companies may need to take longer time in order to finish their fundraising reports.
These are not good justifications for Yazan Barghuthi. According to him, the absence of reports on funding serves a purpose: it distracts attention from the fact ICOs heavily rely upon institutional investors for discounts and good deals in order to sell their tokens. Funding is so important in project management that a company must be able at all times to give you +/- 0.5% how much funding they have. Barghuthi stated that the +/-0.5% allowance was generous.
The worst thing about not reporting raised funds is the possibility that this could conceal more serious problems. The latest research shows that over 90% of all ICOs are likely to fail. There are many possible reasons why ICOs fail, including project management problems, project technology difficulties, and unclear project direction.
Startup companies must issue quarterly and regular profits reports in order to achieve greater transparency.
Grant Blaisdell (co-founder, CMO, of Coinfirm) stated that while it is easy to understand the logic behind not broadcasting bad news, these teams need to think again. Does Apple report bad quarters? They do. It’s carried on every channel. You would share your mistakes with them if you are serious about creating a business.
You should exercise caution if you’re considering investing in ICOs. Do your research on the startup, go through their whitepaper, and then decide whether the project is feasible. You can also search the internet for reviews about the company. You can find many websites that cover initial coin offerings.
While some ICOs are likely to be successful, their token value will rise. However, it is possible that more ICOs fail.