How ICO Spend Money?
Analysis, based on the Ethereum on-chain data answers this question in a statistical manner
Token and coin crowd sales in Ethereum network collect Ether from the participants in exchange for tokens they issue. In this article we will try to analyze what they do next with the collected Ether.
Depending on the mechanics of the crowd sale, the collected Ether will grow up either on the crowd sale smart contract, or on the special wallet, dedicated to store the funds of the project. it is common, that for large amounts the wallet with multi signatures are used. You can see, that in the list of the top multi-sig wallets there are lot of fat balances on the project wallets.
We analyzed several hundreds tokens, which were sold for Ether on crowd sale. We selected tokens by criteria of collecting more than 1000 Ether and have more than 800 token sale transactions. The transactions for these tokens are explicitly visible in the blockchain, so we can precisely tell how much is collected. From the token sale transactions, we derived where the collected Ether was collected.
Graph money flow analysis was applied to find on which addresses the Ether was later transferred. The maximum depth of 10 “hops” was analyzed for the graph. For most token sale “wallet” that was enough, and most had the less depth of Ether distribution.
The main questions we raised in this investigation are:
‘How much Ether do they transfer to Exchanges?’ , and
‘How soon they are doing this?’
We consider these questions important, as at some extent they show the “believe” of ICO in the crypto currency as the basis for their economy.
In one extreme case, ICO converts all collected Ether to $. Then it has good resources for the salary payments in a fiat currency, buy things, etc. However this at some extent reveals their inability to operate in a true crypto world, where all assets are represented in the blockchain.
At the other side, ICO leaves all collected Ether on the smart contract, or on the wallet and use it as a reserve for the token sold or for further development.
How can we detect the fact, that a project converted Ether to fiat money or to other crypto currency? The approach we used is to look at the money distribution graph, starting from the crowd sale transaction. If then we see that somebody in the graph made the transfer of the money, sourced from the crowd sale, to an exchange, we consider that these money were ‘converted’. This analysis may have inaccuracy due to:
- The money distribution graph analysis is based on the “best guess” of the money source for the destination. Especially in case, when the address already had initial balance prior receiving the money from the source address. In all these cases we take the guess, that the address always spends the latest received money first, Last In — First Out model, FILO.
- We detected money transfer to exchange by the annotation information on addresses, on bloxy.info datasource. The annotations originated from the public sources, from the community of Bloxy users, and from the automated detection of decentralized exchanges protocols.
- We can not detect if the project decided to make the exchange itself, or transferred money to the third party, and it exchanged it.
Collect Money, then Spend Money
Examples from the money distribution analysis for several projects reveal some common patterns.
What is common notable:
- Money is actually sent to exchanges in an amount, comparable with the collected amount during the crowd sale
- Some projects are exchanging collected money in the process of the crowd sale, other wait till the completion
- In most cases, the exchanging money happens in multiple transactions, spread over months.
Revealing Commons by Statistics
As we have all the transaction data in hands, we now can build aggregates over all selected projects ( more than 200) to see the common tendencies and differences.
First let’s normalize the project data on amount. We can do it by calculating percentage of amount sent to exchange, relative to the total amount collected on crowd sale. In average it gives us 27.8 %.
However, the diversity here is quite large — ranging from 0 to almost 100% over different projects:
Some of them exchanged all that collected, some did not exchange anything.
How Soon Money Exchanged
Now let’s try to normalize the time scale, by counting weeks from the first transaction in crowd sale. We then see how fast in average the projects decide to exchange the money:
Maximum is somewhere in 4–9 weeks from the crowd sale start, and the tail is quite long. Projects tend to make several money transfers to exchanges, and this may be distributed in time.
We can also make distribution of the number of “hops” from the crowd sale contract to the actual address. It is counted as the depth of the money “graph”, shown on the following distribution:
Interesting enough, that the crowd sale wallets or contracts almost never do a direct transaction to exchange. Two hops (0 and 1) requirement may be explained by just the technical constraints. However the distribution tells, that almost all transfers happen on hops starting from 4, which is rather far in the graph from the initial wallet.
Money pass a number ( from 3 to 10 ) of intermediary addresses on the way from the crowd sale to the exchange.
How it Works in Time?
There is no raise in the percentage of the exchanged money from ICO over the last months. The graph below shows the start of crowd sale on he horizontal axis. You may even notice some decline. However, it appears rather stable, as you should take into account, that the latest project did not yet have a time to exchange money. From our statistics above, they will need approximately 2 months in average to do that.
Conclusions
- It is common, that crowd sale exchanges the collected money, probably to fiat currencies. Almost one-third of collected money (27.8 % ) from the collected amount, is exchanged
- The exchange process does not happen immediately, In most cases, the exchanging money happens in multiple transactions, spread over months. It takes in average 2 months and 3 to 10 intermediary addresses on the way from the crowd sale to the exchange
- Projects differ a lot in the way they do this, in the percentage of money being exchanged
- There is no noticeable dynamics on this process over the last 2 years.
This article was composed from the data and by analytical tools from Bloxy.info analytical engine.
Bloxy.info web site provides a set of tools for analytics, traders, companies and crypto enthusiasts.
The tools include APIs, dashboards and search engine, all available on-site, providing accurate data, indexed directly from the blockchain live node.
Bloxy mission is to make blockchain more transparent and accessible to people and businesses.
Please, make a reference to the source of data when referencing this article.
