Hacking the ICO: How Greed Defeats the Industry
ICO’s are like a high-speed highway with a high toll fee. Before entering it, you have to pass endless traffic jams, sometimes without enough fuel to pass through. Yet there are other ways to reach your destination.
In the last few months, the ICO hype has led to exponential growth in the number of companies and entrepreneurs who wish to create it.
Nowadays from 30-50 offerings are being announced for launch on a daily basis. And this growth is only gaining momentum. Several thousand offerings are scheduled for Spring 2018.
The offerings are being conducted both by clear Blockchain-based projects with related IT projects and a traditional business industry that views tokenization not only as a new opportunity for capital-raising but also optimization of its services.
Whitepaper by SMS
Crypto veterans and sudden bloated crypto funds can hardly puzzle out in such a chaotic stream. The crypto community no longer reads the limitless whitepapers, they have switched to so-called three or even one-page teasers, and this is not a limit yet.
One major venture capitalist from Singapore asked me to send him my project description by SMS! Everyday crypto pioneers and opinion leaders receive hundreds of offers to participate as advisers.
Many of them can hardly remember in what projects they are key pushers. Advisers are often unfamiliar with the core of the projects and even with their neighbors on the landing pages. Certainly, it does not even come to any real mentorship or valuable advice.
Many projects like to think that landing pages decorated with star advisors give power to their ICOs, but buying advisors’ face-masks to put them on one’s website has become a service a long time ago.
Crypto funds myth
It is both mantra and myth at the same time. Everyone is talking about them, but no one sees them. No one sees them, but everyone trusts in them. Some are lucky to meet them somehow. And that is how legends and myths are born.
There is a visible part of an iceberg – a series of public funds with some successful investments, but they are probably not true crypto whales, rather first renegades from VC industry with similar approaches and techniques. One’s application can hang up for months in the hands of analysts in some crypto funds of this kind.
There is also an underwater part of the iceberg. Most people see it as a mysterious miners syndicate, operating with millions of Bitcoins and Ethers, the real guys from crypto-world being both carriers of financial leverage operations to all start-ups, and the bearers of the main thing - the ideology of crypto. The one that was introduced by Satoshi and later taken up and developed by Vitalik. The Ideology of Freedom.
The ideology, in which ‘peer-to-peer’ is not merely reduced to an abbreviation for ‘p2p’, but keeps its meaning of the environment where everyone is important and everything matters.
The ideology with no boundaries, no evil firewall of banks, stock exchanges, legal firms, rating agencies and other transactional consultants.
Those funds do exist; they are not public, but they can be found if needed. Sometimes they are the individuals who pioneered the crypto economy.
They were the ones who used to mine Bitcoins with a few cents price, and then created wallets with tens of thousands of Bitcoins but losing keys afterwards.
They made “joke currency” like Dogecoin for fun which later came to cost hundreds of millions of dollars. Each start-up business is dreaming of making a pitch for such a fund. But they observe the hype cautiously, having in mind that no reflux can be avoided and that is the very beginning.
The cryptocurrency should go through childhood illnesses to develop its immunity.
Virus of hype
Hype is a virus defeating the ideology. It creates the imbalance, which crypto ideology should fight against.
The hype highlighted the ugliest side of any ICO – its greed, or rather: Greed.
"A different strain we utter; then record
Pygmalion, whom his gluttonous thirst of gold
Made traitor, robber, parricide: the woes
Of Midas, which his greedy wish ensued."
- Dante Alighieri
In today’s ICO market greed plays the first violin, conducting and soloing simultaneously. Driven by greed, major speculative crypto funds began to call themselves ‘smart investors’ and tailor the ICO market to match their own interests.
These new crypto funds start any talk with startups with arrogance.
If they are interested in a project, they demand such terms and conditions that founders, in order to fulfil them have to lie to ‘dumb investors’ sneering at them. Receiving a 3x return on their investments in a few months from capital raised to conduct an ICO, these smart investors look more like cheaters.
These are the rules of the game created by such crypto funds and are supported by transactional consultants.
Those projects which do not agree with the rules or do not wish to pay consultants for buzz and marketing will be lost in the sea of many other projects. Your super-idea or know-how will simply be not heard. Nowadays direct costs for ICO advertising and marketing start from $500,000. This does not include acclaimed consultant fees and ‘stars’ on the landing page.
These expenses do not create value, they are not invested in other projects or spent for charity, they are simply cash burning.
Perhaps it is hard to imagine how Vitalik Buterin spends $500,000 to hype his smart contract protocol, but some guys are searching for funding for their new protocols right now.
The Blockchain is like a genome with all operations recorded. The reading of the genome gives a lot of information and Blockchain projects are the way to somehow utilize this knowledge.
ICO’s are one way to make Blockchain viral. ICO’s are like a high-speed highway with a high toll fee. Before entering it, you have to pass endless traffic jams, sometimes without enough fuel to pass through.
Yet there are other ways to reach your destination. Why not map up the new roads, create your own junctions and intersections?
Just like ICO challenged IPO, the time for new protocols is coming challenging ICO’s as we know it. One such protocol can be the CIO – a Collective Investment Offering.
The next article about a new protocol CIO is coming soon.
Dmitry Khan is a Strategic Advisor of Miniapps.pro project. He has more than 20 years of entrepreneurship in hitech, biotech, and space technologies.