Development On the ICO market [Part. 1]

Development within the ICO market is clashing with reality; nevertheless, PayPlus+ has generated functioning 500 million PLUS utility tokens ERC20 compliant on Ethereum as a result of an existing product and profitable multichannel B2B business, PCI DSS 3.2 certified transaction gateway on a cloud network.

Tokens are born as a brilliant new understanding of startup crowdfunding, where corporates offer self-created digitalized units of measurement that represent different rights of the issuing companies; mostly fractional ownership or profit-sharing in case of security tokens, and access to applications or services in case of utility tokens. However, most investments are heavily focused on the development of the blockchain economy itself as new blockchains, exchanges and platforms allow interaction amongst user networks, smart contracts, an endless number of games and various types of IT-infrastructures.

The initial principles of Blockchain were to disrupt and decentralize existing IT processes in the real economy with new solutions built on Blockchain. This is what PayPlus+ is doing with their own open Blockchain ecosystem, which enables — via any smart device — different applications to accept simplified payments with every channel selected by the customer and/or its client.

The ICO market: a “Kuddelmuddel” of chaotic, arbitrary statistical data

Sustained by BTC price-dynamic in 2017 (from $900 to $19.000), greed was the driven motivation of private crypto-enthusiasts when buying tokens representing mostly a concept, without any tangible product or service. In the meantime, the same enthusiasts have become disillusioned with the price-development of BTC, ETH and consequently of the ICO-Market. In 2018 according to Satis Research, the most issuing firms have switched from former major crypto-markets like the US, Singapore, UK, China and Russia to unregulated or less regulated tax-heaven jurisdictions like Cayman Islands (40% of total ICOs) and Virgin Islands (21%), as a result of increasing regulatory pressure in former jurisdictions. These regulatory pressures increased risks for EU token-holders by reducing investor’s protection and transparency. An unprecedented number of issuing companies are not generating any economic results (top 10 ICOs by funds raised in 2018 with negative ROI of -64% to -94%, source ICObench). Many of those firms have shut down or are close to bankruptcy, in some cases regardless of successful fundraising. Moreover, 81% of tracked ICOs were identified as scams, 4% failed, 3% ‘gone dead’ and 15% trading on unlicensed exchanges.

By assessing data on ICO-data, Coindesk, ICObench, Coinschedule along with further common token sale stats and news sources, the actual volume of funds and executed token sales in 2018 remains unclear. According to cointelegraph.com, in 2018 the sum of all token sale hard caps was allegedly $83 billion against reputed $15 billion in 2017; however, all major sources are giving bundles of different figures regarding the final volume of raised funds and executed ICOs. According to icodata.io this was $7.8bn generated by 1257 ICOs, but Coinschedule.com reports $21.5bn and 1076 ICOs, while ICOwatchlist.com mentions $6.2b instead. Or maybe is $11.4bn from 2284 ICOs correct, according to cointelegraph.com? Or, is Cryptovalley.swiss right, as reported in June 2018 for the first 5 months of 2018 raising funds of $13.7bn generated by 537 ICOs? What a confusing hodgepodge! There are too many different tracked numbers of attempted ICOs, executed tokens sales and volume of raised funds. On the contrary, similar data regarding DAX, NASDAQ, and other stock exchanges or listed stocks are readily available at the click of a mouse.

Also the commonly wrongly used term “cryptocurrency” is misleading: a “currency” is a centralized regulated unit, accounting a store of sovereign value based on a productive output of a country and issued by central banks in terms of coins/banknotes, whereas cryptos represent unregulated, decentralized digital encrypted reward-units, powered by randomly solved algorithm tasks on specific hardware by private «crypto-enthusiasts». The improperly used the word provides an appearance of legitimacy and protection, lowering the risk-awareness of crypto-buyers. Currently, 1.800 out of 2.100 cryptocurrencies are dead without any tradeable price, while 300 have rudimentary pricing according to Immutable Insight, including BTC and ETH.

“Regulation is the Enemy of Decentralization and of the Blockchain” (source hackernoon.com)

Security tokens boomed in 2018 to a high number of unprecedented ICOs, which remains unclear in terms of raised fund volumes and actual executed token sales. Some “crypto-experts” foresee these dominant tokens on Blockchain as the near-term multitrillion-dollar market. The crypto-community began to globally rename “STO security token offerings” the same previous “ICOs initial coin offerings”, which were already security tokens at most. I would love to list a breakdown of how many security tokens have been issued to date compared to the total number of ICOs, including the number of utility tokens and other minor forms of tokens’ types — further comparing their performance — but no reliable data is available at the time of publishing.

ICOs were born as the “transparent, trustful, decentralized and disruptive form of easy fundraising for startups”, without following usual rigorous regulations from financial authorities”. Prized as an uncomplicated alternative to regulated fundraising, ICOs aimed to:

  1. Reduce the burden of a time-intensive control system by financial authorities.
  2. Make regulations as much as redundant.
  3. Easier provision of transaction details to auditors and regulators.

In the meantime, the ICO industry is starting to face the reality with an unsustainable, tremendous lack of transparency within a chaotic environment of procedures and data. Too many ICOs have been launched without any business plan and most raised funds have been executed on a simple idea without any proof of development prior to launch. Very few token sales reflect an existing business at a functional stage. Many tokens represent a mere idea of a potential product or service yet to be developed, alternatively a narrow-focus on Blockchain infrastructure. Solutions for the real economy should take priority.

The ICO-setup has become a complicated, time intensive and very costly roadmap, especially considering astronomical high fees for tokenization, marketing and listing on unregulated on mostly illiquid and non-transparent crypto-exchanges. Too many extraordinarily expansive crypto-conferences are still unable to improve market acceptance and the understanding for Blockchain outside the continuously limited crowd of crypto-enthusiasts. With fees of $10.000 to $100.000 to stand on stage, bookable networking opportunities, for sponsoring and being one of the bunch of 50 projects (or more) pitching in front of 5.000 to 10.000 visitors that pay incredible sums of money for tickets. It is not rocket science to deduce the real winners of those conferences — the organizers — with millions of dollars generated in turnover per event. It should also be mentioned that for a simple R&D project by influencers and PR campaigns, a budget of at least $100k to $1m is mandatory. These amounts are ludicrous, unbalanced and disproportioned. Costs produced by addressees of R&D projects to a circle of BTC, ETH, and token-buyers is mostly driven by greed without a regulatory framework.

In the next article, we will analyze the current situation of the ICO industry and showcase reasons why that market is spoiled and populated with people who fail to work within the principles of Blockchain technology. When people seldom act well, authorities bring regulations, and when regulations do their job… weak stories act as a house of cards built on shaky foundations.

Read the second part of this article