ICO Survival Handbook: Learn from the Tea Party

Blockchain, Meet Ballot Box. Ballot Box, Meet Blockchain

Co-written by Mick Emmett

The Hype Machine has been in overdrive this year for initial coin offerings (ICOs). It’s no wonder given that they are seemingly everywhere. ICOs have pretty much departed the fringe investment world — with authority! — this year; in fact, there have been more than 200 ICOs in 2017 which have collectively raised north of three billion dollars (source: Coinschedule.com). These figures are up from the 46 ICOs and $96+ million raised in 2016. That’s what you call G-R-O-W-T-H.

All that hype and newly created wealth attract attention: investors from the very wealthy all the way down to your Uncle Bill, speculators, regulators, and government bodies. Perhaps most telling of all? Celebrities. That’s right, celebs like Jamie Foxx and Floyd Mayweather have jumped on the ICO bandwagon, and further down the celebrity food chain you get to people like William Shatner, Paris Hilton…you know what, let’s just stop here. You get the point.

Since we wrote previously about ICO momentum and ICO regulation, we’d like to focus here on what the ICO community (for lack of a better term) needs to do to keep on growing. Because It’s not all easy tokens. If the ICO community does not, collectively, play the long game, then the “easy money” mentality of investors risks oversaturation, uninformed issuers, and heavy-handed regulation. In other words, they’ll ruin it for everyone.

From IPO Dreams to ICO Streams

Until ICOs started taking off, the path of a successful startup typically moved from the founder(s) wallet to friends and family to their business network to angel investors to VCs. The path, not surprisingly, getting progressively more difficult along the way. The ultimate goal for many of these companies was (and still is in some cases) to make it all the way to an IPO, just like the Facebooks of the world. Now, of course, IPOs are less common and a corporate acquisition is more likely.

That’s a long road filled with rejection, delays, begging, meddling investors and all kinds of other hurdles. Very few make it to an acquisition or even the parking lot of a VC’s office, but those that do can rake in massive inflows of cash.

Then along come these ICOs, with their crowdfunding and cryptocurrency properties that detour entrepreneurs past the begging VCs and other difficult things. Plus, they are a lot faster to get up and running and don’t have lots of regulatory baggage — yet — to wade through. It’s one of the reasons that investors love ICOs and lawyers don’t.

The result? ICOs are extremely popular with startups in search of funding. Through the first half of this year startups raised $1.27B in ICOs, far more than venture capital funding.

Another telling sign of ICO and cryptocurrency entré into the financial markets is the news that CME Group, one of the world’s largest derivatives exchanges, will launch a bitcoin futures product by the end of this year. This is a big deal for two reasons:

1) It adds a huge dose of legitimacy to cryptocurrencies in general, and bitcoin specifically. The most likely result? More investors will be attracted, more products will be created and more ICOs will pop up everywhere for practically every type of industry and purpose.

2) Bitcoin can be included in Exchange Traded Funds (ETFs), which opens the door to institutional money and significantly expands its investor access. It means investors can take long or short positions and limit their exposure, thereby making bitcoin more attractive.

Someone’s Knocking at the Door

Speaking of threats — actually, let’s call them “warnings” for now — a few recent actions by the until-now-just-observing SEC are worth noting.

In August the SEC issued a warning on ICO fraud risks. The gist of the warning: fraudulent ICOs could be using “the lure of new and emerging technologies to convince potential victims” to invest in ICO-promoting companies. In the same warning they also cautioned investors against “pump and dump” scams.

Given their previous wait-and-see position with regard to ICOs, we thought we might not hear from the SEC again on this topic for a little while, and then, just a month after the fraud warning came news of a new “Cyber Unit” to police ICOs and other Distributed Ledger Technology (DLT) violations. According to the announcement, the cyber unit will go after “misconduct perpetrated using the dark web” and also market manipulation and the theft of sensitive information.

Those are just two examples, and just with the SEC. Expect more.

It’s Getting Hot in Here

You’ve probably heard the parable of the boiling frog, which posits that a frog dropped suddenly into boiling water will jump out, but if it’s put in lukewarm water that is slowly brought to a boil then it won’t notice and will boiled to death. That’s the current predicament of ICOs.

Let’s pause here, take a step back and logically take a look at what the ICO community needs to do to play the long — and successful — game.

1) Jump out of the boiling water.

2) Figure out a strategy.

3) Execute.

Is There a Playbook the ICO Community Can Steal From?

Great (fake) question. The answer is “yes.” The playbook was created by another controversial community, or movement or whatever you want to call it. This community successfully worked the political system in their favor, and, by extension, the financial, environmental, healthcare, social safety net, and myriad other state and federal government functions. In other words, the Tea Party movement.

Regardless of what you think of this movement, it worked. In fact, it’s still working today. What the Tea Partiers figured out was that a focused, vocal and active community that shows up en masse at the ballot box will triumph over other, less-committed communities. Well, that and the fact that politicians will do practically anything to keep getting elected, but that’s an article for another day.

The playbook consisted of showing up everywhere and making the positions clear: town halls, Congressional offices locally and in Washington D.C., ribbon cuttings, rodeos, you name it. If you were a candidate for office in a district identified by the Tea Partiers as in play, then you heard from them. Often. And if your district even held the possibility of going the Tea Party way, like in a swing state or district, then resources poured in.

While showing up and being heard are important, the real power is in voting. And not just in the quadrennial presidential general election — EVERY election. It’s grassroots with a long-term strategy combined with lots of money and bodies in the voting booths.

This approach works because the voting habits and statistics for groups with a less disciplined commitment is pretty sad. When only 60% of all eligible voters show up for a hotly contested presidential election (as happened in 2016), then the more committed group wins even if they have a lot fewer adherents in the grand scheme of things.

The Playbook: Step by Step

So yeah — the ICO community can learn a lot from the Tea Party and similar communities. Since you’re (fake) asking, here’s some free advice on how to ensure the ICO community doesn’t go down in a blaze of greed and undisciplined token grabbing:

1. Fight fire with fire. Or, in this case, money and people. Just as with a political campaign, whether for a candidate or a cause, the ICO community needs to come together and build a centralized function. Without this focus it will remain every-ICO-issuer-for-themselves and nothing of note will happen. It’s just too easy to take the money/tokens while they’re easy and push the work of maintaining a real community to the future. Of course, it will be too late by then.
2. Run the ICO “campaign” like a political campaign. Similar to Democrats and Republicans fighting over swing states and districts, Identify areas where you can gain leverage — and votes — and put money and resources into them. We did just that as an exercise to see how easy it would be to find a good candidate district, and it tooks about five minutes (details below).
3. Create a clear story of what you’re trying to accomplish. It must be something that the Average Joe can understand. Many people know little to nothing about cryptocurrencies, or think they are still the domain of drug dealers and other shady characters. It’s nice if you’re in finance and already know what a big deal the CME bitcoin futures announcement is, but do a plurality of voters? No. That’s why the message is so important.
4. Related to point #3, communicate examples of how ICOs and cryptocurrencies can make the lives of regular people better. For example, small business owners (like a farmer) know the extraordinary hassle of dealing with government fees, taxes, administrative requirements, legal issues, etc. A message that communicates how blockchain applications like bitcoin and Ethereum could automate a lot of that work — making it much faster and less expensive — is a message that will resonate.
5. People with an independent streak (like Tea Partiers and others of a libertarian bent) are likely to appreciate the benefits of blockchain applications, and, by extension, ICOs as a method of raising funds and activity. Decentralized, distributed and, yes, unregulated systems like blockchain align with their way of living. Play to that.
6. Tokenize ICO activism. That’s right, put your token where your mouth is, ICO community. Create a public ICO to incentivize activism on your behalf. Doing so will create a lot of attention. Be careful not to promote the tokens as the equivalent of an investment. Rather, the message to buyers should focus on what the tokens can do, and not on what they could be worth.

Blockchain and the Ballot Box

Given this week’s election results and the nonstop news cycles devoted to them, the time seems right to wade into the political arena. Whoa! — don’t worry, we’re not going on a Republicans vs. Democrats tirades. Truth be told, our approach is nonpartisan. Rather, let’s discuss the role of politics as it pertains to blockchain. While blockchain has generated plenty of recent news coverage itself via the nonstop bitcoin value rise, we bet you haven’t seen much of anything that connects it to politics. No stump speeches about the potential of distributed ledger technology, no big ideas about how to regulate cryptocurrencies, no bills submitted to the House floor about smart contracts…you get the drift.

We think that needs to change. Blockchain is a lot more than just people trying to get rich by speculating on bitcoin prices, despite what the media coverage might insinuate. The impact of blockchain-related applications is relatively small right now, but it is not going to stay that way. Here’s how to expedite that change as you would like to see it happen.

A (Political) Prescription

Let’s use a real example to illustrate how to go about leveraging the ballot box to effect blockchain-related legislation. If you the reader and your like-minded voters don’t do it, then the usual suspects — banks, insurance companies, their lobbyists, etc. — will have it their way. And we’re 99.99999999% sure that’s not going to benefit Average Joe.

Here’s our unsolicited advice on how to get started:

1) Look for a district or state where the voters don’t vote the party line every single time; where the voters at least have a recent history of electing people from both parties

2) Research specific races to see which are projected as close or toss-ups

3) Find out who in these states/districts serves on major committees, like the Financial Services committees in the House and Senate

4) Break the state/district up into manageable sections and set up groups to target each one (e.g., a “blockchain for small businesspeople” Meetup group)

5) Create a story that weaves blockchain’s benefits and capabilities into the narrative of people’s lives in that specific area. Communicate the ways that blockchain makes business processes and financial transactions faster, easier and more secure. That’s a message with some legs!

6) Build free programming — events, online content, etc. — that is easily accessible and non-partisan.

So where do you start? Florida!

I See You, Florida-13

Florida’s 13th congressional district is located on the Gulf Coast, from Clearwater down to St. Petersburg. As of the 2010 census it had just under 700,000 residents. Like many states, Florida has had its share of job losses, natural disasters and economic difficulties.

Florida-13 is represented in Congress by Charlie Crist, a Democrat who is in his first term. Crist is also a former governor of Florida and started his career in the Florida state senate as a Republican. So he’s a guy who knows some people. What’s also interesting about Rep. Crist to us is that his district is seen as leaning Democrat in the 2018 election but it’s far from a sure thing. And last but not least, Rep. Crist is a member of the House Committee on Financial Services. The jurisdiction of this committee includes the economy, the banking system, securities and exchanges, the production and distribution of currency, etc.

So if the ICO community decides to target specific races in the 2018 election to help elect a voice for their industry, then Florida-13 certainly fits the bill. Is Rep. Crist a proponent or opponent of blockchain? Will he champion it in his committees? Some calls and visits to his office or direct questions at his town halls will find the answers.

There are more Florida-13s out there. Find them. Engage them. Teach them.

The Net-Net

OK, let’s summarize.

The thinking here at Realm Labs is twofold:

1) the ICO community needs to play the long game if it’s going to survive

2) it should steal heavily from the Tea Party playbook.

The threats are real, and they need to be confronted strategically. Focusing on legislation at the state and federal level that will keep overregulation at bay (some regulation is a positive, as long as it’s fair and advocates for the consumer not profits.

Keeping a very close watch on bank, insurance companies and other financial institutions is also critical as they try to simultaneously stomp out competition from upstarts while taking advantage of blockchain technologies to further their operational efficiencies and profits.

ICOs have a lot of promise to disrupt financial world and other industries. Disruption itself isn’t good or bad, but different players in the game perceive it differently, through their own biased lens. Now is a critical time to take action to ensure ICO/blockchain applications don’t go home before they go big.

Next article: How to tell the story of public blockchains and ICO’s to prospective voters.

— — — -

DISCLOSURE: We wrote this article ourselves, and it expresses our own opinions. We are not receiving compensation for it. Views shared here are our own and cannot, under any circumstances, be interpreted as an official account of any companies we are associated with — currently or in the past.