It is no secret that the cryptocurrency and ICO (Initial Coin Offerings) market is full of scam, speculation, and uncertainty. The question is, what will happen to the ICO industry in 2019? How much ICO scam is left on the market?
According to the Gartner report, the blockchain has not yet entered the stage of getting rid of scam. This means that the growth of skepticism and a decrease in investments is normal, provided that the technology continues developing and overcoming its own limitations. It also means that not all blockchain projects will survive, but those who will survive eventually will take a confident position on the market.
A similar situation could be observed during the dot-com bubble crisis. Investors with high expectations ignored traditional metrics like price-earnings ratio and made decisions based on hopes and FOMO syndrome, which led to the formation of a bubble on the securities market. Of course, there were fraudsters who took advantage of the situation.
When the bubble burst, only a few projects survived. The survivors are well-known: Google, Amazon, eBay. Online stores used the already existing successful business model – TV shops and catalog sales. Amazon and others intelligently adapted it, automating orders, payment, and logistics.
Too much scam?
What we are observing in the ICO market is a repetition of the dotcom history. A lot of hype, “easy” money
But if the explosion is still to come, then there is too much noise in the present that makes it difficult to discern the future unicorn.
In order not to fall for the scam, you need to understand the reasons why a project may turn out to be a scam:
- Intentional fraud. ICO organizers do not have a goal to make a real product – they just collect money and disappear.
- Victims of fraud. The organizers of the ICO have good intentions, but their website is hacked, and the money of investors is stollen.
- “Easy” money. The product has a weak concept, useless realization, but there are people who have invested in it.
- Incorrect / poor management. The organizers spent a lot of money on creating the hype around the project, but not enough money on the product itself.
As a result, the industry suffers. Good projects do not have access to the audience because of the hype around scam and the rising cost of marketing. Investors instead of consistent investment play the lottery.
How to get rid of scam?
The paradox of many ICOs is that, in postulating the value of decentralization, they give control over their cryptocurrency to a small group of people. There is a need for external control.
For example, in accordance with the proposed amendments to the legislation on combating money laundering and the financing of terrorism, control over the activities of bitcoin-exchanges will be carried out by the Australian Reporting and Analytical Transaction Center (AUSTRAC).
“There is a constant threat of serious financial
Vitalik Buterin, the founder of Ethereum, commented that he would like to see how centralized cryptoexchanges will all “burn in hell” It was said by Buterin during the CCSI Blockchain 2018 on July 6 in Zug, Switzerland.
“I hope that the centralized exchanges will burn in hell, as long as possible. In practice, especially from the point of view of the traditional (fiat) currencies, it is very difficult to decentralize the work, since the world of fiat has only centralized locks. There are valuable services that are very difficult to decentralize, “said Buterin, answering the question of the presenter about whether decentralized exchanges will ever get a larger market share than centralized ones.
2. There is no need for the ICOs
There is a radical opinion that ICOs are no longer relevant, the market has become disillusioned with the tool and it is being replaced by venture investments in blockchain projects.
But common sense dictates that the ICO will return as soon as the market and projects become more transparent. Indeed, after the collapse of the dotcoms (as well as after other NASDAQ collapses), investors did not cease to participate in the IPO.
Considering the SEC requirement to register tokens as securities, it can be assumed that the difference between the IPO and ICO will gradually erase, but the meaning will remain the same – projects will retain the ability to attract a wide range of investors, significantly increasing capital and increasing the liquidity of stocks (tokens).
3. Reasoned investing
4. Manual analysis
There are many checklists and methods for self-determination of scam
You can dig deeper: check for KYC (Counterparty Identification) procedure, multi-signature (transaction reversibility), Escrow (transit account to guarantee the transaction), stabilization fund in case of force majeure, distribution of tokens (what percentage remains with the authors?).
In the modern world many projects make an important decision to run an ICO (Initial Coin Offering). They create a blockchain-based platform which requires a lot of funds and investor’s support. Most projects use Ethereum blockchain in order to make their plan come true – that is why Ethereum is very popular on the market not only as a token, but also as a product. Each project needs to have a well written white paper in order to raise funds and find investors. White Paper is an official document of the project, which incorporates a comprehensive description of the project, technical details of the product, judiciary aspects, team outline, etc. A good white paper should include all important information about a product so the ICO can make a decision based on the info found in it.