ICO Avenues of Opportunities
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ICO As an Avenue of Opportunities
Since the first appearance of blockchain technology, people have been debating the continuing preeminence of fiat currency. Pro-crypto analysts argue that cryptocurrency has the potential to replace fiat as the currency of the future. Cryptocurrency is aided by the fact it transcends national borders, and it can transform and innovate quickly in response to different situations in a way that fiat currency cannot.
One of the most valuable innovations of blockchain technology is that it renders intermediaries unnecessary and obsolete. Middlemen acting as trusted third parties between unknown participants in a transaction will simply not be essential in the future. Banks have always been the safe storehouses and trusted channels to transfer money up until now. But the blockchain provides a secure, decentralized, and tamper-proof ledger which poses direct competition to the traditional banking system. Transactions are executed quicker and at lower comparative costs.
MoneyGram has been a major player dominating global money transfer services. Blockchain start-ups are coming forward with competitive platforms that offer faster, cheaper, and more versatile methods of international remittances. After witnessing the exceptional performance of bitcoin, a vast number of new currencies have sprung up that also base their platform on the principles of blockchain technology. The potential applications of blockchain technology have been most notably demonstrated in the financial sector. The real estate industry, for example, was disrupted by the introduction of Rentberry. The marketing and advertising industry was disrupted by Gnosis, and a host of others as well.
“We saw an explosion in the use of the ICO fundraising method in 2017. In May, the ICO for a new web browser called Brave generated approximately $35 million in under 30 seconds.
Having previously issued $50 million tokens called “”Kin”” to institutional investors, the popular messaging app developer Kik’s ICO sought to raise an additional $125 million from the public, on top of the close to $100 million they had already raised.
By the end of 2017, ICOs had raised close to forty times as much capital as they had raised in the previous year. But this amount is still less than 2% of the total capital raised by traditional IPOs, just to provide a degree of context. This comparison is not necessarily fair because most IPO companies already have a functioning, profitable business in operation. But it does give us insight into the sheer depth of our capital markets, and shows us how far the ICO method of fundraising can mature from here.
According to industry newsletter Cointelegraph, companies raised around $6 billion via ICOs in 2017; 37% of that amount was made by only twenty ICOs. By February 2018, there was an estimated failure of 46% of the 2017 ICOs. Crowdfunding and syndication lawyer Amy Wan described the coin in an ICO as “”a symbol of ownership interest in an enterprise — a digital stock certificate”” stating that they are likely subject to regulation as securities in the USA.
“The Most Successful ICO Industries When ICOs First Launched
Mastercoin was the first project to introduce the ICO model. They secured $5 million worth of BTC during their ICO, and that was certainly a big success at the time. After that, various companies realized how the ICO model can ease the difficulty of fundraising by avoiding regulatory hurdles. Vitalik Buterin’s Ethereum was also one of the projects that utilized the ICO fundraising method. And then, Ethereum was quickly followed by Waves. Both of these projects raised over $10 million each.
The crucial factors to think about in the success of an ICO have been the following:
-Is the technology new or inventively applied?
-Are reviews on ICO rating sites such as ICO Drops positive?
-Does the project clearly solve a problem?
-Is there a distinguished team behind the project?
-What technical edge does the project have over similar projects?
-What is the community sentiment and marketing situation?
The Most Successful ICO Industries in the Present Days
Some of the recent projects that have experienced tremendous success are BAT (Basic Attention Token), Rentberry, and EOS. We will examine BAT and Rentberry as our examples.
“Present Days: BAT (Basic Attention Token) — Advertising Industry
The Basic Attention token revolutionizes the advertising sector by improving the efficiency of digital advertising. The technology is built around the Brave browser which has a special setting that allows users to see only the advertisements that are relevant to their browsing habits. The team noticed that people were being bombarded daily with too many ads while they were using the internet. Both ads that they want to see and ads they don’t want to see were indiscriminately popping up on pages they were visiting. This is due more to Google Adsense and Adword capabilities.
This team created a browser that gives users complete control of what advertisements they choose to see. The browser blocks out other ads to avoid constantly disrupting the users’ workflow. The ICO for this project was a massive success, and it showed how interested people were in BAT. Some analysts like to stress that the success of this ICO is also due to the influence of Brendan Eich who is the lead creator of the project.
Key figure: Brendan Eich
“Present Days: Rentberry — Real Estate Industry
On the surface, this may seem to be a rather unusual sector for blockchain disruption, but Rentberry has recorded surprising success since their inception. This platform provides a decentralized home rental service, thereby eliminating real estate agents and their much-loathed exorbitant fees. Some regarded it as the Uber of real estate industry. Let us dive deeper into the tech and see why it is currently regarded as one of the most successful ICO projects.
According to their website, “Rentberry is a transparent home rental service and price negotiation platform uniting tenants and landlords. It automates all the standard rental tasks from submitting your personal information, credit reports and custom offers to e-signing rental agreements to sending maintenance requests”. In basic terms, they are cutting down on many of the middlemen involved in the real estate industry such as brokers, lawyers, insurance companies and escrow companies in order to unite tenants and landlords in a peer-to-peer platform.
Rentberry eventually sold over $30 million in its ICO, which made it the biggest ever for a company in the Property Tech / Real Estate space. It recently announced a strategic partnership with Roomdao which is disrupting the tourism industry and bringing blockchain technology directly to consumers. It would be a good idea to keep a close eye on the development of this company. “
“Notable Industry Examples of Failures
In this section, we will delve into two failed ICOs, Enigma and Coindash, and the reasons why they did not succeed. These ICOs delivered sub-optimal performance for investors, basically because they provided only sub-standard security.
ENIGMA — Security Industry
The goal of the Enigma Project is to turn “”smart contracts”” into “”secret contracts””. How does it do that? It keeps input data secret from nodes in the network that execute the code. It aims to function as an extra layer on top of all blockchains in order to fully bring about the decentralization of smart contracts from the authority of a central figure.
With that in mind, you can imagine the level of embarrassment felt by the founders when half a million dollars’ worth of ETH was successfully hacked prior to the commencement of the ICO. Enigmas mailing list, Slack channels and website were all compromised. That enabled the hackers to contact potential investors via Slack and inform them about early access to the ICO. The hackers made off with 1492 ETH of Enigma investor’s tokens, leaving the Enigma project resource’s untouched but their reputation in ruins even before they were able to begin their crowdsale.
In fact, the exact path to the Enigma project Slack account, where the hacker’s initiated their phishing scam, was through the personal email of Enigma founder Guy Zyskind!
” ICOS in the Future : Industries likely to be revolutionized by the Blockchain
Obviously, the world cannot immediately adopt and adapt to all of the potential that the blockchain makes available right now. But the blockchain has already revolutionized the way industry leaders are thinking about the future. We will discuss some of the features of the blockchain that are ready to redefine the way certain sectors and industries operate.
This is one sector most likely to be redefined by the blockchain. Transparency is a major feature of the blockchain due to the open ledger system. Keeping records on the blockchain eliminates human error and ensures the security of the data. Implementation of the blockchain will undeniably cause a quantum leap forward in this area, radically altering the future of accounting.
Business can become more efficient and productive, with less time required to simply create, maintain and prepare records. For the accounting industry, this will allow them to focus on value-added services, maybe even acquire new partners and open up new lines of business, rather than spend so much time on basic administrative tasks.
” Industries likely to be revolutionized by the Blockchain
This industry plays a major role in the world economy. How can the blockchain influence aviation? Accenture is a blockchain-based company that intends to implement blockchain solutions to the aviation system. Specifically, Accenture is looking at simplifying the reconciliation process. According to the official website, “Using robust cryptographic techniques and a distributed messaging protocol, it creates shared ledgers that decentralize reconciliation-based processes”. The use of smart-contracts will eliminate time-consuming contractual transactions and bring about automatically validated agreements. This will of course render intermediates and middle men obsolete in the process. Processes such as ticketing, loyalty mechanics, security, identity, and maintenance can all be automated.
The Fintech industry is facing direct and immediate impact from the blockchain. Right from the start, the banking and finance sectors have been significantly threatened by the fundamental ability of the blockchain to eliminate middle-men, reduce cost and time required to perform so many traditional financial transactions.
The blockchain Fintech industry has been growing exponentially within the overall crypto ecosystem. Projects that started before the blockchain have in many cases been fundamentally redesigned to adopt blockchain technology. Projects like Pecunio and Eotrade have fused the real world with the virtual world.
” Industries likely to be revolutionized by the Blockchain
Supply Chain Management
Blockchain technology has special characteristics that can make any supply chain significantly more efficient and responsive. It offers cost efficiency and traceability ensuring transactions, while also ensuring transparency at every step of the journey. This will make processes such as ownership transfers, production and payment problems disappear the same way better technology made black & white television disappear.
Other industries that are likely to experience a revolution due to the blockchain include governmental agencies and systems (for energy supply etc.), electioneering processes (voting), B2B (Business to Business) interactions, and B2C (Business to Customers) interactions, among many others.
But what actually is it about the blockchain that makes it such a powerful and disruptive force in government, industry and society at large?
The blockchain has special qualities and capabilities that no one and nothing else has had before; the use of smart contracts, and an immutable, transparent ledger system.
” Future of the ICO
ICOs have progressed way past the novelty of simply creating a new cryptocurrency.
The financial sector has no choice but to acknowledge what the technology has to offer; adopt it and adapt to it. Like in any sophisticated system, there are major forces that help drive solutions toward greatness. There are professional teams and companies that can help ICO firms in the same way VCs have always helped early-stage companies in traditional industries.
We will look at the leaders and major players in the blockchain industry. We will see what their function is and how they have propelled the growth of ICOs.
Vedran Kajic, co-founder of CryptoTask, views ICOs as better means of raising funds than traditional IPOs. “”Smart contracts for smarter crowdfunding””. One example is that of the CryptoTask crowdfunding mechanism. Its code is audited by bitcoin/blockchain veteran Peter Vessenes who is the co-founder of the Bitcoin Foundation and Pantera Capital among others.
Stakeholders or token holders can vote on the project’s progress after the crowdfunding ends. If they are not satisfied, the code ensures that refunds are made to them. Funds are released for use in stages, only as the founders actually deliver.
“Professional Traditional Firm Assistance to ICO Firms
At this point it is no longer in doubt that growth of blockchain technology is inevitable. If people have insufficient understanding of what that technology is, how it works, and what it can do, they may simply get left behind.
The role of experts and professional advisors etc., cannot be overstated. Team members must include marketing professionals, copywriters, community managers, legal counsel, business advisory boards, and a host of others. The important thing is that team members work together toward achieving the team goal.
The main function of an ICO is to raise funds for a blockchain related project. Investors commit funds for the incredible returns they can get. Advisors can help with networking, especially with venture capital firms and other financial backers.
More so than with conventional businesses, ICOs have little room to change their structure after it is established at the beginning of the project. But the key advantage ICOs have over traditional fundraising techniques is the ability for literally anybody to invest. This model has been tremendously successful for ICO companies so far. These companies have largely had this success due to the professionalism and talent of the team. VC firms are famous worldwide for their shrewd business insight, ownership and restructuring strategies. While traditional firms might not necessarily be able to help ICO companies change or improve the structure of the firm; they will have an increasingly valued role advising on business strategy and direction.
“Professional Traditional Firm Assistance to ICO Firms
ICO companies like Foundico and Antier offer a full suite of corporate services to ICOs in exchange for fees and tokens from the projects. These two companies offer a competitive alternative to the traditional firms assisting startups, and are a good example of the maturity and development of the blockchain industry.
The fact that the industry now has advisory firms providing this kind of sophisticated strategy for ICO startups demonstrates the confidence of the founders in the continued success of the business, and also the actual demand for the services.
ICOs as a funding mechanism will not completely replace the role of Venture Capital. They will coexist in a world where specialization is the rule. VC firms will no longer need to provide such comprehensive advisory services or networking abilities to early stage startups. Early stage companies will be able to look for an advisory firm with experience assisting a pre or ICO company, while at the same time being able to lean on VC firms for their strategy and thoughts on tokenomics.
Ultimately though the choice will be made by the founders of the ICO project. They can elect to use the full suite of corporate services available at any point in the progress of their ICO project; or they can selectively choose the advisory or other services they feel are the most valuable and beneficial for their needs. Founders and teams that are looking for a greater level of support and more confidence might consider a VC that already has experience scaling companies quickly.
“Evolution of the ICO Process
Necessity for the Future
The major difference between ICOs and IPOs is that the latter is government regulated while the former is not. ICOs are a new concept. The cryptocurrency and blockchain industry is still struggling without a clear legal framework in this regard.
As of late 2017, certain ICOs require investors to do a KYC (Know Your Customer) before investors are allowed to purchase tokens. KYC involves sharing your personal information with the identity verification services that complete KYC processes for governments. This is a measure taken by the ICO companies to identify who purchased what tokens in their sale. This particular measure has been a significant step in legitimizing the ICO process. Hopefully this will lead to more regulatory clarification that will further advance the acceptance of ICOs as a legitimate funding mechanism.
The two primary attributes that need to develop for ICOs to be recognized and accepted are; the interplay between traditional regulation and the blockchain industry, as well as the clarity and transparency of regulations regarding the legal status ICOs.
The blockchain industry is still far from obtaining the clear legal status and regulatory framework it requires.
Universities and professional bodies can help by conducting research and publishing papers on the topic too. Universities can educate individuals about the opportunities and processes in the blockchain industry, further helping to drive the acceptance of blockchain technology into mainstream and academic social consciousness.”
“The Maturity of the ICO Process
The ICO process has undergone considerable change as it matures. At first, users didn’t have to reveal their identities when investing in ICOs. With the recent adoption of KYC into almost all ICOs, investors are worried the decentralized nature of the system might be corrupted and forgotten.
Many people see this as the natural evolution of the ICO process. Other people have their doubts, and are growing reluctant to participate in ICOs.
Key Developments from the Beginning
There have been both positive and negative changes to the ICO process over the years. In the beginning, ICOs were defined without any knowledge of token metrics. People didn’t care about hardcaps. Often, the sales were more equitable and didn’t have large bonuses for private sales. Funds were almost entirely raised in public sales.
Over time, the process matured and more projects started to raise funds privately, in seed, private, and pre-sale. Small public sales were carried out to create demand to support price action on exchanges.
There has also been significant growth in the amount of funds raised as people have begun taking KYC more seriously. But due to the introduction of KYC, the process has lost some of its key values. The disadvantages of this maturity are:
-Loss of Anonymity.
-Ambiguous fundraising prices and depths.
ICOs are becoming more popular and widely used in today’s blockchain economy, and this indeed shows that investors still have faith in the ICO system.
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