ICOs are dead: long life to reverse ICOs

Last 2 years were the ones for launching your ICO: a crazy market growing so fast that absorbed every new project that appeared. That time ended and any ICO that tries to do the same -right now- fails. Now it’s time for a new era, and the reverse ICOs are here to stay. In this post I will develop this concept, I will introduce also STOs (Security Tokens Offerings) and will try to figure a [possible] scenario for the next future.

2016–2017: the ICOs crazy era

Everyone in the crypto industry noticed that things couldn’t be sustainable as they were last 2 years: two newbies, one powerpoint, good copies (“next generation crypto layer for blockchain blabla”) and, suddenly, $20 million raised in a few hours.

I have been building companies and raising funds last 20 years and this scenario was impossible to happen in the real world: but it was. So how could it be sustainable for 2 years? I found several reasons on it:

  • New and fresh money: it was a time when everyone entered in the crypto industry, not only in main tokens but also in ICOs, so the demand was much higher than the offer and everything was bought immediately.
  • High liquidity: it was a period of continuous token appreciation: for 2 years BTC grew from $600 to $20.000, so your tokens (whatever you hodled) grew also at a similar rhythm.
  • Extreme unknowledge: most of the people didn’t understand how tokenomics dynamics worked, but it wasn’t a problem: they saw how their wallets got bigger each day, so they were happy. No efforts to understand business models, products or technologies, things just appeared to work.

The real problem: who cares your token?

A classical evolution of a token postICO: nobody use it so marketcap tends to zero (example: BDG token)

This is, IMHO, the real issue. Most of the tokens have no sense in the real world because nobody use them outside trading reasons. There are only a few tokens that proved they were a must in their business: the ETH (you need ETH tokens to access any kind of ICO, or to execute the EVM over the Blockchain) and, for example, the Binance coin (you need BNB to trade to pay less for your operations). It has no sense not to buy them if you want to sell/buy in Binance, so no matter how the market is (pump or dump): you need their tokens. I need these tokens if I want to transact there.

Most of the projects that raised money have proved they cannot build a community because people that use their platforms don’t have the need to use their tokens. So who cares it?

Other problem that I see is that projects are evolved in “abstract issues”, like future governance decisions, instead of creating real communities and real user cases for their tokens: as they hodled a lot of money during the ICO they weren’t worried for the real product, it’s more interesting to think and discuss in the very-long term, isn’t it?

So the conclusion is that in a high risky period like the actual, with a marketcap 80% lower that the one we had 8 months ago, most of the projects are dumped and marketcaps tends to be zero:

Without enough money to deploy products and real communities, and without real user cases to show, most of the protocols and dAPPs will die.

Why reverse ICOs are the next generation for token offerings?

A reverse ICO is an Initial Coin Offering that has a business model working and a real company behind it and, often, a real community. Tutellus.io is a reverse ICO, a decentralized platform that borns from a centralized one (Tutellus.com) and that tries to solve problems in the Educational industry.

A reverse ICO can prove and validate in the short term the real use of a token, and this is the first difference respect classical ICO models. You don’t have to wait years to validate a token: you can do it in a few months. You can prove the real need of an utility token over a real community. So IMHO these are the most trustful projects to look for.

And from my perspective the war is not between fat protocols and dAPPs: we have too many protocols right now -everyone tries to show the next disrupting protocol for whatever-, the war will be between the tokens with a real usage and the others, the zombi ones.

My prediction: STOs + Utility massive-usage tokens over a few Fat protocols

I’m a strong believer of Security tokens, but I see their future in the mid term, 1–3 years from now on. And STOs will help the crypto industry to boost in an exponential way, because of their capacity to securitize the world. While it happens we’ll have to look for Utility tokens with real and massive adoption, and for before reasons we’ve realized it’s not common to find.

I don’t see a scenario where 100 different protocols could coexist because the cake is not big enough for all of them. And it won’t be (the cake will grow through STO, no to more Fat protocols!). I see a scenario where main utility tokens will run over main protocols (ETH, NEM, Cardano, EOS…), and only a few ones (like Steem, with a proven success) will have the chance to deploy their own blockchains.

Epilogue

Past is past. Things won’t work like before, never and ever. So let’s build real tokens that can work over real communities and let’s concentrate in the ones that could change the world.