ICO used to be a thing in 2017. Tons of projects do ICO successfully. These days we rarely hear about ICO. Why? Instead, there is something new called IEO. It’s a centralized counterpart. and has gained a lot of momentum. Some claim that ICOs will come back when technology has developed however I believe it will never come back at least in 10 years. Here is why.
First of all, we need to understand why ICO exists and what IEO brings to the table that is better than ICO.
ICO or Initial Coin Offering is a way for companies to fundraise by giving coins in exchange to investors. The companies will promise that these coins will be useful or valuable in the future. Compared to traditional investments, investors will get equities, bonds, or future products in return. The concept is applied to IEO as well.
What made IEO gains popularity is that it eliminates two of the biggest problems of ICO.
- Scams: Since anyone in this world can launch an ICO easily. Unfortunately, most of them had bad intentions and delivered anything. IEO stands for Initial Exchange Offering. Exchanges, central entities, will help screen and validate the credible projects. This way, investors will have peace of minds when they invest in the projects.
- Bad user experience: It’s a lot easier to use exchanges compared to invest in existing ICOs. The user experience still needs to be improved a lot.
Here you might think IEO has some cons as well. These are some of the arguments.
Harder for projects to raise funds: Projects need permission from exchanges and even have to pay a huge fee to do an IEO. They might not like your project or it might not comply with a regulation.
The thing is that any projects don’t have to do IEO. They can choose to do ICO if they don’t want to pay or get permission from the exchange. Those who choose to do IEO are willing to pay because they believe that they will get more investment.
Investors who care about privacy won’t join: Since exchanges are centralized entities, they need to comply with a lot of laws. Usually, users need to do identity verification (KYC) to order to participate.
However, I believe most of the people don’t care about privacy, they just want a monetary return. Not only that, most of the ICOs have already required users to do KYC. They are the central entity and need to comply with laws anyways.
Some might say the scams and user experience can be solved in decentralized as well. For scam problem, we can have a better ICO contract that will release the fund over time if the company achieves some milestones they promised, if not the fund will return to investors. For user experience, it will get better as well. Look at how hard it is to use the internet in the 90s. But the more important question is
Who cares about decentralization?
To conclude, there are not many reasons for ICO to exist at least in this decade.
In the far future, this could be possible if there are anonymous companies. Now it’s not possible because companies that do ICO they will get fund in crypto. To use those fund they need to convert into a national currency which will make them not to be anonymous anymore. The conversion is the problem. If they don’t have to convert and spend their fund in crypto, they will remain anonymous but for now, we can’t buy anything much with crypto yet.
This article is based on my personal opinion and not reflex Flipay’s opinion. What do you think about it? I’m happy to hear your opinions. We will never stop learning. Tomorrow I might change my mind. :)
After writing this topic, I want to write another topic explaining that a lot of things don’t have to be decentralized if little-to-no people need it. :)
