Ivo Grlica
Nov 7, 2018 · 5 min read

Ivo Grlica, LL.M. (Vienna)*

Image for post
Image for post

The end of last year has undoubtedly served with unusually diverse and interesting events in the field of cryptocurrencies. As the latest fad, the blockchain technology regularly filled the covers of newspapers; the general public’s view expanded beyond Bitcoin (as the most known cryptocurrency), and reached other cryptocurrencies such as Ethereum or Ripple.

The new technology promised to radically shake the way business is done, as well as our everyday life — similarly to what the Internet had done two decades ago.

The model of Initial Coin Offering or ICO enabled a simple and global way of crowdfunding, which was received open-handedly by start-ups. Because of the enthusiasm for new technology and the aspiring wishes of investors to make quick profits, also the start-ups, formed by young entrepreneurial teams without any business experience, and start-ups who promised extremely poor, useless or even unfeasible solutions, were successful.

A rising tide lifts all boats…

Many individuals who jumped on the »crypto-train« earned a lot of money, without even having to know much about the technology behind cryptocurrencies itself. A rising tide does lift all boats, and at the end of 2017 it seemed that we had invented a game in which each lottery ticket wins. Euphoric emotions started dominating the market, and the dreams of the bright blockchain future detached from the technological reality on which they were based.

However, less than a year later, the market picture is completely different. Not much has remained from the last year’s euphoria and apathy has covered the market. Conversations about the taxation of crypto profits were replaced by conversations about losses.

The recent report by Ernst & Young (link) states that as many as 86 % of existing crypto tokens are worth less than what they were at the time of issue. What is more, 30 % of tokens are expected to lose their almost entire value. Anyone who invested in the “basket” of the most successful ICO projects in January, would lose 66 % of their investment by October.

In the process of issuing new tokens, start-ups are now confronted with saturated market and are facing more and more difficulties when trying to raise funds. According to ICO Bench (link), which monitors more than 4,500 projects since August 2015, the ICO project’s market — both for the projects themselves and for the raised funds, reached its peak only in March this year, with $ 1.7 billion of raised funds. But even here, the peak could be explained more simply as the “inertia” of last year’s trends, since at the previous peak in December 2017, many warned about the overflow of the market.

As expected, afterwards, the amount of funds raised by individuals started to decrease; gradually at first and then more and more rapidly, leaving »only« $ 400 million in September. From the projects released in September, only 41 % managed to raise at least some funds, 24 % reached the bottom (lowest) funding limit, and only 2 % were financed in full (ICO Bench data).

From euphoria to public tenders

On the other hand, existing projects (successful stories from the last year) face developmental difficulties and for them it is increasingly challenging to navigate in the unpredictable and unclear regulatory and tax environment. The acute problem is also the above-mentioned decrease in the value of the issued tokens.

Instead of words about Slovenia as a “blockchain heaven” and the adoption of the most advanced regulation that will stop the brain drain (or, on the contrary, even attract foreign talents), create new jobs and attract fresh capital into the country, we can now (e.g., at the September conference in Vitanje) listen to speakers presenting how young start-ups can gain funds in public tenders.

It thus appears that the blockchain sector has transformed from the field, which was supposed to stimulate accelerated economic development and thereby also have a positive influence on the state budget, into an industry requiring state aid.

For this reason also, many connoisseurs of the crypto-scene considered the September liquidation of, one of the symbols of the success of the Slovenian crypto-industry, as the herald of the irrevocable end of a certain era.

Nevertheless, the fact is that many projects, including Slovenian, continue to work and silently, but constantly develop their products. Also, the advantages offered by the new technology of decentralized data blocks are still here.

Faster, transparent and secure transactions through data block technology or its alternatives (developed for example by the Slovenian company Hashnet) still offer numerous opportunities that will be implemented in both business practices and public systems (for example public registers, such as Land registry or Commercial registry) sooner or later. In certain areas (crowdfunding and the ICO model) it also seems that the new technology has already shaken the “old” practices so much that a return is no longer possible.

Good practices and trends

A known maxim says, we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. The end of the initial irrational euphoria is therefore a good time for developers to roll up their sleeves and to tackle the development of the products they have promised. In this way, the blockchain sector will offer usable products, that will bring real benefits (and thereby create added value). Now it is also a good time for a realistic assessment of the situation in which the entire industry ended up, as well as the time to correct some of the “excesses” of the previous year. In this way, we can extract some of the increasingly obvious good practices and trends that can become the bearers of the future and gradual development:

- In the field of payment cryptocurrencies: the development of stable coins, i.e. currencies linked to a particular fiat currency (dollar, euro), or a basket of other cryptocurrencies that eliminate the main shortcoming in the use of cryptocurrencies as means of payment — severe price volatility;

- In the field of utility tokens: “ICO 2.0” and “reverse” ICO, which returns the ICO model from the grey zone of quasi-non-regulated investment to the root — massive crowdfunding to support the development of a particular project and its actual use among supporters, not investing or speculating with the price of the token;

- In the field of investment: the accelerated development of tokens that will represent pure financial, equity-like instruments (security tokens) and will enable participation in the profits of the issuer or will be tied to certain real assets (real estate, precious metals, etc.).

*this article was first published in Svet Kapitala — 2 November 2018, in Slovenian language.

** Author is top ICO legal advisor and the founder of international legal agency Nobile Law Solutions. He can be contacted at

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch

Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore

Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store