What Makes a Good ICO?
As Votem gears up for its ICO, we thought it might make sense to weigh in on how our team — which consists not only of technologists and engineers but also seasoned executives as well as certified elections experts — views the blockchain-related investment market.
Now, at the outset, it’s also important for us to note that we’re not investment professionals. We’re a team of passionate election specialists. So this is not investment advice. And of course, since we’re seeking funding ourselves, you’ll have to view our opinions as inherently self-serving.
That being said, it’s also true that we put a lot of thought into our decision to undertake a coin offering, and it’s worth sharing those thoughts with our larger communities, including potential investors. If nothing else, you’ll get insight into how we evaluated our own prospects.
The reality is that an extraordinary amount of money has been put into ICO’s by mid-year this year. Don’t take our word for it — the Economist does a nice job outlining just how much investment is flowing into this space, and what it might mean, both good and bad.
Our own view is that in an increasingly crowded and perhaps overpriced market, there are three simple “sniff tests” peers, investors, commentators and others can use to decide whether or not an ICO, including ours, makes some basic degree of sense — and fundamentally, whether or not the underlying application of blockchain technology also has integrity.
1. A big idea that requires a decentralized solution
While blockchain technology has significant advantages over many more centralized solutions, not all ideas perform optimally when decentralized. Where blockchain has perhaps the most importance is in its ability to rethink some of our most fundamental infrastructure (i.e. voting), as we’ve seen with Bitcoin in the finance sector and Ethereum in computing.
Platforms that are building decentralization into their business model know how to leverage the powerful network effect of blockchain. This allows companies to build their own unique economic ecosystems and incentivizes early community contribution and adoption in an unparalleled fashion.
2. A proven ability to execute
Just as with more traditional investments, a company that already leverages its technology in the market, and which has existing clients, proves at least partially that there is in fact a commercial demand for its product/service…and that that product/service set can withstand commercial application over time. In the ICO market in particular, many companies are pre-commercial and pre-product. That doesn’t mean they don’t deserve funding in order to get themselves into a revenue-producing position, it means that companies that have market-tested capabilities stand out.
3. A token that increases in value the more it is used
With the proliferation of new tokens, it is clear that some tokens hold fundamental value, while many others do not. Tokens are most valuable when used to align incentives between developers, users, investors, and community contributors — meaning that the more utility the tokens have to those who interact with the platform, the more financially lucrative it is likely to be. This removes the traditional chicken and egg problem for centralized systems, which has quelled much advancement in network infrastructure thus far.
For example, those with Votem’s VAST Tokens can not only access the platform, but also help improve the efficacy of democratic decision-making for public and private elections. The more VAST tokens used per election administered, the greater the verification and transparency of the election, which supports a wide range of validation requirements for different elections.
The world of blockchain and ICOs is still nascent, and for as many unknowns as there are in the ecosystem, there is clearly tremendous potential. Regardless of the hype, we believe it’s important that ICO opportunities are viewed with the same due diligence as any other investment.
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