BY CNA Team - March 28, 2018
ICO Watch 0
Why are ICOs failing or going to the moon?
That was a hot topic at LATOKEN’s conference in Singapore in February, with strong views coming from its panel. Veteran crypto market analyst, Tony Vays kicked off the session by noting how ‘wild’ the ICO world can be. He reminded the audience that when it comes to traditional IPOs, the companies getting listed have typically been around for a while, reporting revenues and having independently audited books. “Sure some traders may pump up the stocks of IPOs but there is publicly available data showing the fundamental values of such companies. In the case of ICOs, the practice is to get the ICO out as early in the life of the project as possible.”
“There’s probably only two dozen people capable of figuring out if your project is sustainable or legit or technologically stable. But those people aren’t looking at your ICO. There is no regulation in the ICO space. There’s no background requirements or age requirement for participants. So all of this is why ICO and cryptocurrency prices are so volatile.”
“I’ve seen 13-year-olds pump up some ICO prices through chat groups and trollboxes.”
Vays claims to have seen 12 and 13-year-olds pump up ICO prices through chat groups and trollboxes.
Alex Mashinsky: “If you have a thriving community, your coin is going to go up, and Ethereum is a good example of that”
For Alex Mashinsky, an Israeli-American tech entrepreneur, the token or coin is a barometer of the community involved in the particular project. “If you have a thriving community, (the value of) your coin is going to go up,” he said citing Ethereum as a great example of that. Another factor is the actual utility of the token. He cites filecon as token that has a very good ‘utility’ as the coin is being used to exchange value between parties swapping their storage capacity.
“I get around 300 ICO whitepapers on my desk every month, but 99.9% of those are crap”
Christian Ferri, a former Lead at PwC Tech Advisory and current CEO of BlockStar which invests, advises and trains on Blockchain and ICOs said that he receives around 300 ICO whitepapers on a monthly basis. “But 99.9% of those are crap. They do not have any business logic. When you ask the CEO how is the project going to make money and the answer is “through the ICO,” quipped Ferri. “That is absolutely not sustainable”.
Ever the contrarian, Vays stepped in to question Ethereum’s long term viability. “It is not the community of Ethereum that has worked for it. Right now, Ethereum has convinced people that they need to build their tokens on top of Ethereum and that’s the use case for Ethereum — for people to replicate Ethereum’s way of raising funds.” But Vays says that is not going to last.
John B Kaplan, managing partner at Aslan Capital broke down the ICO “community” into four categories. The first is the developer community, “who might get interested about your project and may want to be joining the open source mission that you have”. Then there are the investors, who if they have made money on an ICO are likely to talk about that project and promote it; another community are the strategic partners who will benefit if the project succeeds in its disruption mission; and then there are the ambassadors who are the techies interested in disrupting certain sectors of business.
“When you ICO, you are launching a new economy, it’s a paradigm shift. We are no longer selling equity and future earnings on a discounted cashflow. We are selling pieces of a new economy that does not rely on profits.”
But it was Emmie Chang, founder of Superbloom.Network who lit the room up when she took to the mic promising that she had a very contradictory view on the issue. “When you ICO, you are launching a new economy, it’s a paradigm shift. We are no longer selling equity and future earnings on a discounted cashflow, which is what a traditional stock represents. We are selling pieces of a new economy that does not rely on profits. This is the new paradigm that coin companies are trying to move toward, but many people are still stuck in an old mindset, who are thinking equity and earnings and stock prices or even about how this utility token works. We will see ICOs that create new ways of viewing things or new economies, that move away from the standard capitalistic capital markets to more of a community based true economy. We don’t exactly know that’s going to look like in the future, but that’s what makes it super interesting for innovation.”
Mashinsky though said he didn’t disagree with Chang’s view except that there were hardly any ICOs out there which are seeking to build these new economy models and pointed out that many ICOs are for projects trying to fix or “blockchainise” existing industries. “They don’t seem to be creating creating new economy models,” he said.
Adding on the community issue, Mashinsky said that if cryptocurrency values are to go up, there needs to be at least 100 million participants in the crypto world. “There are now 35 million wallets. But you need a 100 million or a billion people to adopt this new economy. They are not going to come just for the ability to exchange coins with each other or for CryptoKitties (which Chang said was a killer app). You need real world applications that allow these people to improve their quality of life and join the middle class of society, to enable them to do things in this new system that their current dollar or euro of yen system does not.”