Is it time for ICO 2.0 or we should wait for the shit to hit the fan?
“Give me control of a Nation’s money supply, and I care not who makes its laws.” — Mayer Amschel Rothschild
Almost $5 billions have been raised in crypto ICOs this year. Accountability is close to 0. Delivery rate remains to be seen.
If in the startup world, 90% of the startups are expected to fail. What could be the rate into the crypto startup world?
- Well, conventional startups often bootstrap the project with their own money. They have their own skin in the game and that alone can change the motivation of people a lot!
- Usually they have a team that is already working together.
- They always have at least a minimum viable product.
And fraction of those get any VC funding and only after rigorous due diligence by seasoned serial investors.
The little that do get funding, get it in rounds. The first seed if often $200,000 to $1M for the lucky ones. If they deliver, they might get another couple rounds for several more millions. So, even though they have passed all the checks, they still get funded in stages, based on performance. And funded modestly compared to what we are used to in the crypto world.
So, what is the worst case scenario in a crypto startup?
- $12 wordpress theme
- 8 pages whitepaper with great idea and bunch of buzzwords.
And BOOM, they get $20 millions. At once. Upfront. What could possibly go wrong?
Of course I’m giving the worst case scenario, but just to make my point obvious.
Most ICOs have much more than that, great teams, and actual strong intention to deliver.
However, many things can go wrong until they are production ready. And they have already cashed in, regardless of delivery. They will not get more upon delivery. It’s quite likely that there will be no consequences whatsoever for them if they fail, intentionally or not. Investors are mostly regular people from all over the world with no regulatory framework. Money can mess with human’s mind. Especially over time. Especially when you realize that it’s much harder than you thought and there is no reward waiting for you at the end.
So, you gave them the carrot and they ate it. Who is to blame?
While most people have good intentions it’s good to have economic initiative aligned with those intentions. Just in case.
Real world example.
If you hire a contractor to build you 10 story building, would you give him all the money upfront and just make him promise that he will build it?
You will most likely have a contract and will give him the funds at pre-agreed stages.
Too bad that isn’t possible to be done online. Or wait…..is it?
What if we use smart contract which holds all the money like escrow and when a pre-agreed milestone is reached all the token holders vote with their tokens if another round of funds should be released?
And if for some reason the majority of token holders think the team is not doing ok, they can initiate a refund process for the remaining funds? Thus minimize the damage.
So, you keep the motivation of the executor and actually have a way out if things go hairy?
Ok if it’s that easy why nobody is doing it? Oh, wait the DAO tried something like this and they got hacked.
We are in the very first phase of the new trustless, decentralised world. It’s common for 1st phases to be quite irrational, to follow the path of the least resistance. Until you get burned and then, just then, you see what went wrong in hindsight and propose a new way to do it.
Your grandmother told you to not touch the hot stove, but you did anyway, right?
Well, should we wait for the shit to hit the fan again or we can learn from past experiences and skip the mess this time?
Why not start the wave of ICO 2.0, before all the mess from ICO 1.0 becomes obvious?
But how can you have any control over that?
- You vote with your money. So vote only for ICOs, that put their promises into code. Because code is law in our new world.
- Vote for ICOs, that allow you to control their spending.
- Vote for ICOs, that take smart contract security seriously and have independent outside audits.
It’s true that the more complicated a smart contract is, the greater is the risk of a bug or hack.
It’s hard to make them bullet proof but not impossible. Hard shouldn’t be a problem when you are asking for $50M, actually even the impossible should be just hard with that amount of money. The mantra is: Code. Test. Test. Test.
So, allow me to revise the Rothschild quote a little, to make it relevant to the ICO craze:
“Give me control of a Startup’s money flow, and I care not about their promises.” — Vladimir from Ethearnal