According
to Tokendata, in 2017, 902 ICO took place, with 142 projects closed at the fund raising stage. In addition, 276 startups died because the founders simply ran away with the money, or failed to fulfill their promises and gradually ceased public activity. As a result, by the beginning of 2018, almost half (46%) of the projects that had completed an ICO in the previous period were dead.
In reality, the situation is even sadder - the researchers counted another 113 projects in the "zombie stage." They are not active on social networks, and the community of followers is so small that it excludes any chance of future success. Taking into account such projects, the number of failed blockchain startups using the new mechanism for attracting funding will be 59% already.
Despite the fact that many of these projects were doomed from the very beginning, and their unenviable future fate was evidenced by a lot of signals, investors invested a total of $ 233 million in them. All this seriously undermined ICO’s reputation as an instrument for raising funds.
As a result, the new generation of blockchain startups has become more difficult to raise funds. Researchers at Fabric Ventures and Tokendata
note that “most of the fees through ICO are for projects launched in the first quarter of 2017”. That is, despite all the news about the growth of the cryptocurrency market and the market for millions of crowdfunding campaigns, in fact, almost all the money went to a small group of the most successful projects launched on the HYIP wave last year.
It is much more difficult to succeed in this direction today, and the reason for this may be not only the lack of quality projects, but also the disadvantages of the traditional ICO model as a whole.
Useless "useful" tokens
The main ICO model at the moment is the release of so-called utility tokens (from the English utility - benefit). In general terms, they are necessary for the granting of the right to access the company's products or services in the future. The meaning of their existence is to serve as a crowdfunding tool, while allowing the company not to fall under the rules of state regulators in the field of finance.
And this is exactly the main point. Start-up teams simply do not want the extra problems and paperwork that will follow if a conditional commission on US securities and exchanges recognizes a token as a stock. Therefore, they officially declare only that they provide only a tool for payments within their service.
However, at the same time, in many ways they hint to potential investors about the possibility of not only obtaining a service or product in the future, but also income from the rise in the cost of the token - for this, almost every white paper has sections on increasing the capitalization of the project and even calculations of the future value of the token.
Moreover, all this is officially no investment. But this is not true.
Shares need to be called stocks
SEC Chairman Jay Clayton stated that all the tokens analyzed by the commission are actually shares. “You can call them co-ins or something else, but if something functions as a stock, then it’s an action.” This is more like the truth.
The token utility model is characterized by a minimal level of responsibility - the project team takes money, and in return offers only informal hints of future profits from the growth in the value of the token. All this only masks the fact that in most cases no tokens are needed at all, and the main purpose of what is happening is to collect money for the founders of a new sports car. However, gradually the awareness of this simple fact comes to the founders of new projects.
More and more teams understand that they will have to be honest with investors. Such projects call their tokens with shares - security tokens. So does, for example, the
Pinkdate project. In its white paper, the team directly states that no tokens are needed in their niche, but only funds are needed for the development of the project, and the company is ready to pay dividends in the future to attract them. Thus, users who decide to participate in the ICO receive not useless tokens without any prospects, but the opportunity to rely on real payments.
Several other major blockchain projects have also
taken this route - for example,
tZERO ,
KODACKOne and
Polymath . They represent a new wave of startups who are trying to transform the discredited model of the traditional ICO. Only time will show how successful this attempt will be, but in its current form, cryptocurrency crowdfunding is unlikely to become a serious tool for attracting investment.