It was August 2017.
The days were hot, and the ICO climate was even hotter. The hype of Initial Coin Offerings was making the promise of getting rich fast, both to startups and investors. And everybody was buying into it.
Data storage start-up Filecoin managed to raise $200 million in just one hour. The BAT ICO raised the speed bar with $35 million in just 30 seconds. Everybody was doing ICOs and raising money.
Even UET, which stands for Useless Ethereum Token, managed to raise $40.000 in just 3 days. I think it is redundant to point out that it does nothing, offering no benefit.
Collectively, in 2017, 902 ICOs managed to raise over $4.5 billion, twice as much as the funds raised from VC funding by blockchain projects.
Sounds like extraordinary news for the future of the decentralized economy, right?
Fast-forward to February 2018. A report compiled by Tokendata shows that 142 of the ICOs started in 2017 failed at the funding stage and 276 failed since, either by scam-exiting with a bang (or with a laugh, like in this case) or just simply fizzling away, failing to meet their commitments, cutting the communications, “going on vacations” etc.
If we add also the 113 ICOs that basically lost all support and are on life support, we reach the grand total of 59% percent of last years ICOs being either dead or slowly dying.
In some cases, the project was dead from day one. Sketchy teams, no real use case for blockchain technology, poorly written White Papers, no working prototype (or sometimes not even a properly defined product), these were all red flags that any experienced investor should have been able to see and steer clear of those crowd-sales.
And here are the main reasons why most ICOs fail: cryptoeconomics and utility.
Formed from the words cryptography and economics, cryptoeconomics is the study of how goods and services are being produced, distributed and consumed in a decentralized, digital economy. It implies that behind every token there should be a real advantage, some good or service which brings added value to the user. Not only that, but also the delicate aspects of supply and demand, inflation/deflation and the vast intricacies of the market forces should be studied and respected. Unfortunately, most of today’s ICOs just skip this part, they arbitrary decide upon a monetary mass, call it a day and go back to creating hype.
Common sense is sometimes all that it takes. Is that business being able to deliver a benefit without a token? If yes, chances are that tokenizing it won’t do much.
As William Mougayar points out in his Medium article, there are three tenets to token utility and they are:
Is your ICO describing all three of them?
Now, after we have decided whether there is any real value behind a token, let’s talk about token velocity.
Token velocity is a key indicator, that derives from the traditional token valuation formula: TV = PQ, where T is the number of tokens, P is the token price, and Q is the volume of services or goods that the platform provides (the real added value). As such, Velocity (V)= Total Transaction Volume / Average Network Value.
Simply put, token velocity is a measure of how fast people will want to get rid of your token. Is it going to be a pump and dump, or will they hodl for the long term?
Here is the worrying trend:
Willy Woo, from WooBull plotted the performances of 118 coins, from the first day of their inception to the day he made the graph. After that, he grouped the coins by the year of their inception. He came up with this:
That means that cryptocurrencies and tokens are behaving less and less like a real utility token and more and more like securities, creating in practice an ICO bubble and a toxic environment, in which you can only win if you fool others to buy in on your hype… creating the perfect setting for scammers, Ponzi-scheme peddlers and con artists. Like this guy.
At WebDollar, we believe in doing things right and offering real value, before anything else. We believe that long term growth can be given only by true innovation, not marketing hype.
We want to offer a mature, fully developed and secure technology.
We want to make sure that WebDollar’s price reflects its real value as digital currency, a price set by free market forces, and not an arbitrary price like most capped ICOs offer.
These core values that the WebDollar team shares and the above problems with the ICO model convinced us to give up on having an ICO and focus on developing the technology.
This is why WebDollar will NOT have an ICO.
We will, however, have something that we have decided to call WebDollar Genesis Event.
After all the testing is done, all the intended features implemented and all the outstanding bugs removed, when the main-net will be launched, we will have an initial release: users will be able to sell or buy the first WebDollars on the market, directly from miners.
The price for the WebDollars, expressed in BTC and ETH, will be free-floating in real time, expressing the real demand of the market.
As we expect the prices to spike very fast seconds after the release, we will follow-up with a detailed announcement on the exact date and hour of the WGE, so that everybody has a fair chance in buying WebDollars at the cheapest price.
For future updates, please join our Telegram Group: http://t.me/webdollar