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The Evolution of ICOs

ICOs went from being a new phenomenon to the next big thing in the tech space. How have they changed in five years?

The “what”

ICO, (Initial Coin Offering) is an alternative means of crowdfunding for a blockchain project. Think of it as an IPO that raises cryptocurrencies like Ethereum and Bitcoin instead of money or fiat currency. In return, investors will receive the project’s utility token, stored in their personal crypto-wallet.

In the beginning

2013 was the year when we witnessed Mastercoin (renamed to OMNI) hosting the first ICO, followed by MaidSafeCoin in 2014, raising around USD$7M as soon as the token sale commenced. In the hall of ICO fame, you will certainly find Ethereum’s sale in 2014. This prominent event raised more than USD$15M, making ETH one of the biggest ICOs at that time and the great pioneer of cryptocurrency. Through the tremendous success of these pioneers, the ICO became a popular way to fund projects.
In 2016, 54 major ICOs raised almost $103M and the year after, 92 major ICOs raised a staggering USD$1.25B. If that sounds astonishing to you, the ICOs have broken their own record this year by raising USD$6.5B in a mere 5 months!

Road to ICO Stardom

During the pre-announcement stage, information of an ICO project will be released in order to gain traction and create awareness in the crypto community. Potential investors will then look at the project’s whitepaper to assess the viability of a project. Just like any other business, an ICO begins with an idea, a solution to solve an existing problem. The whitepaper describes the solution, introduces the initial product (called Minimum Variable Product) and explains the technical details.
To add credibility, the team’s background, token allocation and use of funds are also found in the document.
As the community plays a huge role in hyping up a project, ICOs will grow and engage their communities on social platforms like Consentium, through group chats and channels.

It is important that the whitepaper provides a roadmap that has a clear five to ten-year vision for the business. The roadmap is a document that explains the timeline of the ICO’s activities from project development to launch, as well as future project stages. A brilliant idea without a long-term roadmap could be detrimental to the development of the project and thus, turns potential investors away.
It is also important for ICOs to explain their token’s utility, token lock-up period for certain investors and any bounty or airdrop campaigns.
During the offering state, token sale details are provided:

  • Soft cap
  • Hard cap
  • Total Supply
  • Token Price
  • Payment Accepted
  • Restricted Countries/Age

-Marketing/PR Campaign
The hype for an ICO can be the difference between success and failure. A good project without a solid marketing campaign cannot gain the backing it deserves. Through a good marketing campaign, an ICO project can attract attention from the community, helping to put the project on the radar of potential investors. As the ICO market is driven by one powerful force, FOMO (Fear of Missing Out), the possibility of a successful ICO is higher if the hype around it is so powerful that it makes investor believe they’ll miss out on an amazing opportunity.

-Token Sale
Once the token sale is launched, most ICO projects offer an early bird bonus, usually around 25% to 30%. Some even offer up to 100% bonus to encourage more investors on board.
To participate in the token sale, investors are usually required to complete KYC (Know-Your-Customer) before sending supported cryptocurrencies (usually ETH or BTC) or fiat currency in exchange for the ICO’s tokens. Investors will usually receive the tokens after the sale ends.

Cookie Cutter ICOs

As the ICO market matures, investors become more knowledgeable. ICOs have been launching every other day since 2013, resulting in an over-saturation of projects. The same ICO structure has been used time and time again, making it harder for new projects to stand out. In addition to the bear market in 2018, investors started to lose confidence in ICOs as the profits have not been as lucrative.

Smoke and Mirrors

Investors have become more discerning not only because of market forces but also as a response to scams and failed projects over the years. In 2017, Benebit, one of the most hyped ICOs for that year, faked team photos and still managed to raised $2.7M to $4M in an exit scam. In the same year, PlexCoin misled potential investors by advertising a return of 1,354%, an irresistible profit that raked in at least USD$13M. And of course, how can we miss out BitConnect, one of the biggest cryptocurrency Ponzi schemes ever? BitConnect offered a too-good-to-be-true 1% daily compounded interest through their MLM (Multi-Level Marketing) structure, resulting in a plunge of their token price, from USD$463 to USD$5.92 within a month.

ICO on Steroids

By the final quarter of 2017, gaining traction for an ICO was no longer as simple as having a small team with a big idea and promising whitepaper. To counter that problem and regain investor confidence, new ICO projects strengthened their business proposition by assembling teams of advisors across different functions like finance, sales and marketing.
This led to the popularity of the PAICO (Professionally Advised ICO), the kind of project that was backed by business experts even before it announced a token sale.

What it takes in 2018

The cryptocurrency regulatory environment is still uncertain internationally. However, there are still many new and promising ICO projects that deserve a chance. Investors that believe in a decentralised future should do their due diligence and research thoroughly before participating in token sales. While investors are busy avoiding scams, ICOs now have to work harder to prove they are not one of the bad apples. Through increased transparency in token structure and development plans, ICOs of today can still gain trust and support from the crypto community.

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这些年来,由于市场力量,及为了应对诈骗和失败的项目,投资者们变得更有洞察力。2017年,其中一个大肆宣传的首次代币发行 — — 贝尼比特(Benebit),伪造了团队照片,并在一次退出骗局中筹集了270万到400万美元。同年,PlexCoin通过发布回报率为1354%(这是一个让人难以抗拒的利润率)的广告误导了潜在投资者,并至少捞取了1300万美元。当然,我们不得不提BitConnect,有史以来最大的加密货币庞氏骗局之一。BitConnect通过MLM(多层次直销)结构提供了难以置信的1%的日复利,导致其代币价格在一个月内从463美元暴跌至5.92美元。









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