46% out of 902 ICO’s ran out of cash last year — Why we’re NOT doing an ICO
We’re a team at Animoca Brands, a listed company(ASX:AB1) building a gamified crypto wallet to onboard the next billion people to blockchain through games. Whilst building our wallet and token, we kept getting asked when we’re doing an ICO for WalletPet. Short answer: we’re not and here’s why.
Tokendata, one of the more comprehensive ICO trackers, lists 902 crowdsales which took place last year. Of these, 142 failed at the funding stage and a further 276 have since failed, either due to taking the money and running, or slowly fading into obscurity. This means that 46% of last year’s ICOs have already failed.
Bitcoin.com found another 113 projects that it calls “semi-failed,” because their teams have gone off the radar or their community has withered away. Add those, and the failure rate jumps to 59%. Bitcoin.com says the total funding of failed projects from 2017 was $233 million.
How much money are in ICO’s?
With $13.7 billion raised in first 5 months of 2018 ICO’s have pushed marketing costs sky high. Since usually the founding team gets 30% of the coins, this incentives the founders to pump the price and not focus on the product. Stupidly high listing fees, market makers, youtube influencers, sponsored VIP meetup zones at conferences, the list goes on. We believe this is wrong. If we’re not doing the ICO, the team is incentivised to actually earn it by doing real work.
“In total, 537 ICOs with a total volume of more than $13.7 billion have been registered since the beginning of the year. In comparison, in 2017 there were a total of 552 ICOs with a volume of just over $7.0 billion. Also, the average size of an ICO has almost doubled from $12.8 million to over $25.5 million since last year. “
What’s much harder to recognize are projects that are slowly burning through the raised capital with no product to show for it. Less than a handful of projects have gone live and the ones that have gone live have seen very limited use. In the grand scheme of things, blatant exit scams are only a small percentage of the total amount raised through the ICOs. Most invested capital is tied in the largest projects. Diar crunched the numbers for top 10 ICOs whose tokens have been trading for at least 6 months and found that their price fell by 93% on average from their all time highs erasing $22.3bn from the market cap.
Rise of exit scams and lavish parties
So where is all this money going? Some of it is going to lavish parties with naked people and drugs, hiring Snoop dogg for a private club party, 6 hour all booze cruises, and all male beach parties in Phuket. Since ICO’s often have a team and advisory pool. The founding team can get anywhere from 5%–40% of the tokens right after the ICO, making them crypto millionaires.
There are also outright exit scams. In the past week, the largest exit scam yet has reportedly been pulled by Shenzhen Puyin Blockchain Group in China. The company ran three ICOs — ACChain, Puyin Coin and BioLifeChain with the total amount raised of up to $60Mn.
Outrageous ICO marketing costs
For those projects that are serious about building a real company and product, there’s the challenge of marketing your ICO. It’s getting prohibitively expensive to market an ICO. With Facebook, Google and Twitter outright banning ICO advertisements. How much does it cost you ask?
USD$500,000 for a telegram post inside a channel full of “whales” (high-roller crypto investors).
USD$75,000 for a 50 page white paper in 2–3 languages.
USD$105,000 for a tweet from a crypto influencer
USD$1 million to list your coin on an exchange
This is a good guide on how much it costs for an ICO, around USD$500,000. With a marketing team composition like this:
- Copywriter to help with website copy and social media content — native English speaker preferred.
- Community manager — English speaking.
- Bounty/ Airdrop manager.
- Support team (2–3 people working in shifts, 24/7) for Telegram, Bitcointalk, and live chat on the website.
- Email marketing specialist.
- Traffic manager and Advertising Specialist — to run AdWords, display ads and other ads.
- Marketing Assistant to do all the job small marketing tasks like contacting ICO listings.
Tokens without ICO
Our mission to onboard the next billion people to blockchain through games. Based on the perception of ICO’s, the cost and the effort to market an ICO, we’ve decided to NOT do an ICO with our token BitBit.
We were also inspired by the likes of Musicoin and ONO social network. They didn’t do an ICO and instead focused on usage and product. They earn tokens by earning them like everyone else and continuing to work on getting mass adoption.
BitBit token
We believe that to truly learn about blockchain, you need to experience it. That’s why we’re creating the BitBit token. A token you can earn by playing our game. Just like how you earn currency in games by completing tasks.
In essence, we will create a FREE TO PLAY experience. Anyone that plays our wallet game can earn some BitBit and start sending/receiving.
We earn BitBit ourselves by mining it and a percentage of it will go back to an education pool. The education pool will be used to sponsor new players so they can experience BitBit and educate more people about blockchain.
If you’re interested in our mission to bring the next billion people to blockchain through games. Sign up for our newsletter and we will let you know when Walletpet launches.
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