Crypto exchanges are vital to the mass adoption of blockchain technology — But they need to support the innovators
Reality Gaming Group Co-Founder Morten Rongaard challenges crypto exchanges to take their share of responsibility for accelerating the mass adoption of blockchain-based products…
Eighteen months ago, my company, an independent mobile game publisher, successfully raised $3.5m via Initial Coin Offering (ICO).
It was a tremendously exciting way to fund development of our latest mobile game, Reality Clash, and for a number of reasons.
To begin with, we were different from a lot of the enterprise-level blockchain projects that dominated the market at the time — here was a small, independent creative firm with an interesting concept, combining the gameplay elements of Pokémon Go and Call Of Duty with the potential of what we now call ‘crypto collectible’ digital asset trading (in our case, in-game weapons).
But there were also incredibly low barriers to ICO entry that worked in our favour. Today, we are one of the few mobile games firms to have conducted an ICO that have a) survived and prospered during what has been a turbulent 12 months for crypto, and b) actually launched a product that our in-game crypto currency, issued via the ICO, can be used with.
My greatest fear now, however, is whether other creative start-up companies will be able to follow the same path and, perhaps more importantly, see their coins and blockchain-based products flourish in mainstream consumer markets. In short, we are in danger of strangling a market that offers huge opportunity for content-based firms before it has properly started.
The key issue is that the eco-system is now heavily weighted against smaller blockchain-centric companies. The crypto exchanges themselves aren’t doing enough to help, either during the ICO process or in terms of subsequent coin trading — and I believe they are missing out on potentially huge upside as a result.
The biggest issue with exchanges, especially the likes of Kraken, Binance, Houbi and Coinbase, is that they charge huge listing fees. They really don’t look at a company wanting to list a coin in any great depth — they do some due diligence but, ultimately, money talks. If you can pay, you play.
What’s more, if you do get your coin listed successfully, exchanges have a worrying tendency to kick you out after 3–6 months if trading volumes don’t meet their expectations.
The knock-on effect is two-fold: to avoid such a scenario companies who have listed coins hire so-called ‘market makers’ to ensure their currency remains liquid in terms of trading volumes. This means yet more cost (on top of the now significant marketing and legal budgets required to conduct an ICO in the first place). But it’s also not great for the ‘man on the street’, as the practice essentially creates a fake bubble of trades.
The paradox here is that the exchanges always want new coins to be listed — it’s the air that they breath. However, companies like ours that have delivered on the product that we promised in our ICO whitepaper don’t (or can’t) pay big listing fees. And herein lies the issue.
Myself and many of my peers would like to challenge the bigger exchanges to modify their operating practices to increase due diligence and focus more on supporting coins that are actually attached to innovative blockchain-enabled products.
This will surely create a trickle-down effect that benefits all parties — If exchanges can provide more help to companies looking to get coins listed, those firms will be able to generate more awareness for their product, which will in turn see trading volumes increase as the community sees there are new and interesting investment opportunities out there.
Ultimately, exchanges are key for smaller companies to get their amazing products noticed, many of which are going to revolutionise the way digital content is consumed.
But these innovators should be investing their capital in product development and marketing, not on listing fees and market markers out of a fear of being shown the door.
This is a necessary change on the road to mass adoption of crypto and the blockchain.