Why the Gnosis ICO Sold Out in <15 Minutes
Today, after many months of its anticipation, Gnosis held its crowdsale and sold out in under 15 minutes, despite their claim of designing a token model to avoid that very outcome.
It’s clear that this model did not better enable participation, and even some of the more prominent members of the community seemed bewildered and disapproving, going so far as to call the Dutch auction a “failure”.
While I wouldn’t go so far as to call it a “failure”, it certainly raises some questions to mind: did the Gnosis team really believe people would act as in a perfect game theory setting? Or rather, would people acting as so-called perfect participants under Gnosis’s ICO structure even result in a “fairer” outcome?
I believe the answer is “no”, and for a simple reason: the low cap.
According to Gnosis’ argument, “rational” participants would wait until the tokens are the cheapest after several days.
Yet, the existence of a 250,000 ETH cap for the ICO ensured that there would indeed be a special benefit to participating early — a guarantee that you will not miss out.
Thus, it gives people a reason to set a price for an outcome of not missing out. A price that people are willing to pay, even at the risk of losing that investment. And it certainly is a no-brainer that the price may be high for people, given the hype surrounding the project.
For me, that price was around 100 ether. Even if it meant that my initial investment would plummet, if it ensured that I would not miss out on a project which I deemed quite promising, I’d put in 100 ether. To me, it’s money whose value is lower than the cost of missing out. For others, that was 500, 3,000, and for someone, 7,000.
I like to give people the benefit of the doubt, so I won’t claim that the Gnosis team knew this would happen and intentionally structured the ICO in that manner. However, they should have known from the behavior of crypto participants in many recent ICOs, that the cap was too small.
All this makes us wonder: can they truly claim their ICO was a responsible one? I surely hope that future token projects do not follow Gnosis’ model (while certainly other projects’ founders would).
It’ll be interesting to see how things play out. Google also held an unorthodox IPO in an auction format, and its stock price didn’t crash. But then again, Google employees didn’t hold 95% of the shares, a topic which I think deserves its own post.
Good luck to the Gnosis team, the crypto-investors, and the Ethereum ecosystem.
Jake
