Journalist and analyst Maxim Rubchenko explains why the decrease in investors ‘ interest for the ICO, and offers his solution to this problem.
The winter collapse of the cryptocurrency market not only scared away a lot of newly minted investors, but also caused a serious crisis in the ICO. On the one hand, to raise funds in the bitcoins falling and the air can afford are either very cocky startups, or frankly skimovie projects. On the other — the possibility of quick money on buying tokens during presale or initial placement has decreased significantly. The jump rate of the coins after the listing on the stock exchange are more modest and shorter, and the risks that the newly-minted token will not live to see trading, is steadily increasing.
The situation on the market ICO today eloquently describes a new study of the consulting company Satis Group, according to which 81% of the projects were fake, 6% failed, 5% ICO was frozen and only 8% came on exchange. Thus of the 8% turned out to be successful from 24% to 47% (depending on capitalization). In other words, are successful for only about 3% of all ICO.
As a modest percentage of successful projects makes the investors to draw conclusions from their mistakes and improve approaches to the choice of tokens. If a year ago, investors were willing to buy any coins indiscriminately, by the end of last year formed the standard to which you can only invest in the ICO, where in addition to the white paper there is a clear road map, a skilled team, authoritative advisors and very desirable — a real product, at least at the level of the prototype or beta. If in addition to the project expressed interest in two or three large companies, the success of the investment was considered almost guaranteed.
The winter crisis and the increased level of risk led investors to take the next step — to start to pay attention to project Economics: the real business plan explaining how the project will earn money and thereby will increase the value of the token after the listing on the stock exchange. You can sneer at the fact that the buyers of tokens are just beginning to think about the Economics of the projects. But we should remember that in the history of dot-com investors took 5-6 years to get to this simple idea. That is, the market ICO evolyutsioniruet much faster the Internet market the initial period.
Besides, differently and could not be. While I was working the scheme «bought in the presale is sold after the listing» the main factor for the success of the investment was PR activity organizers. Now, when you purchase tokens during the ICO become too risky, it’s time to assess the prospects of the token already on the entire life cycle. That is, to engage in economic analysis of projects.
The analysis of economic efficiency of the project is a fairly complicated procedure, involving the assessment of parameters such as payback period, return on investment, taking into account changes in the value of money in time, the relationship between the project participants and their economic environment, risks associated with the project, and so on. But for all this from the ICO investors simply no information — format white paper provides nothing of the sort. Therefore, the entire analysis boils down to finding the answer to the question: why would someone need this token in real life?
The first benchmark here may be the survey conducted by the portal DeCenter. Investors were asked about what tokens they consider most promising. 41% of respondents felt such coins, giving the right to purchase goods or services. In second place (19%) were the tokens that give points loyalty programs. On the third and fourth places were coins in the games (13%) and personal tokens popular people (10%). The three outsiders made up the tokens that serve as currency in the community (7%), giving a voice to systems or providing awards to companies/projects (5%). The conclusion from these figures is obvious — the maximum chances of taking off are the coins that can be used as a means of payment, as they cause the most popular with investors.
The next step is to assess the extent of the project, the tokens of which it is proposed to purchase. A significant proportion of all ICO have on the industry or even niche projects — coins for the gaming industry, for producers of organic foods, wholesalers of flowers and so on. Meet and regional projects involving the use of the token as a local currency.
Small scale or specialization of the project are a major limitation for growth of quotations of the token: the narrower the range of circulation of the token, the less chances he has to take off on the exchange. If the project is industry specific and you don’t know what his «trick» that many other investors will not understand, therefore, the demand for the coin will be low.
Another obstacle to growth in the value of token competition from counterparts. Ideas are in the air, and most of the ICO projects are «twins». Ethereum co-founder Joseph Lubin at all sure that the majority of the organizers of licenseyou just copy other people’s ideas. Copying or not copying, but similar projects and tokens on the market more than enough. So, on may 16 in the UAE is scheduled to launch token OneGram, backed by gold. In summer, the Swiss commodities Fund Tiberius is going to launch its own token, backed by gold — tcoin. And this despite the fact that the market has already traded two «gold» coins — Goldmint and DigixDAO.
Analogues occur even when we are talking about revolutionary and breakthrough projects. So, now for the ICO preparing two projects on the organization of air taxi on the blockchain McFly and Vimana. Both of the startups. If you believe in the idea of a flying taxi and the potential of the domestic aircraft industry, the most reasonable solution would be to invest in both projects equally. Because to determine which of them has the greatest chance for success, today it is resolutely impossible. The projects will be to pull each other’s investors, which will slow down quotes tokens and McFly, and Vimana. However, two similar ICO at the same time — a rare enough situation. Most often, when deciding on the purchase token can be found on the exchanges the coin of the same project, to look at the dynamics of its quotations and to draw conclusions about future investment returns. This means that each new analog is less likely to attract investors than the previous, but the leader loses part of potential investors.
Finally, the main limitation to growth in the value of the tokens is that even if a coin is launched as a means of payment for a specific product or service, the project organizers will have to accept payment in Fiat currency. Otherwise, the client base will be too scarce — after all, the vast majority of people still belongs to the cryptocurrencies with suspicion. That is why none of the white paper makes no mention of that token will serve as the sole and exclusive means of payment for goods or services offered by the project.
That is, to purchase a product or service, it is not necessary to risk buying the token on the exchange (and thus paying substantial Commission). You can wait until the project is fully operational, and without any hassle to pay Fiat money. This is the main problem of all the ICO and the main limitation to growth in the value of the token.
Simple and obvious solutions here. It is clear only that the organizers of the ICO it is necessary to increase the economic attractiveness of possession of the token. Investors should be offered some bonuses, at least partly offsetting the many risks and costs to the Commission who have to pay when buying tokens on the exchange. Perhaps it should be dividends, which will be a percentage of the total profit of the project. Dividends on their tokens today already pay some of the crypto currency exchange. Perhaps large investors should be given the opportunity to participate in matters relating to development projects. In other words, the token being a means of payment, should all be more like stock — preferred or voting. This path will provide coins for ICO projects turning into a full-fledged fundamentally new class of investment assets.