The many failings of ICOs
Or: How do you know what’s good and what’s not?
There’s a few things I’ve been pretty vocal about of late.
The first being on-chain scaling and how against the idea of Lightning Network I am.
The second being my dislike of ICOs. This is predominantly due to how many of them either fall to pieces, or have founders / developers who just cut and run with your money.
You see, anybody can write a Whitepaper. It’s actually super easy to draft an idea, throw in some technical sounding buzzwords with 4–5 syllables each, then you can even get your mate Dave to check it for spelling mistakes and call it “peer reviewed”.
It’s also rather easy to whip up an ERC20 token, there’s websites that will do it for you in a matter of minutes with no experience required in anything Crypto at all.
It really is no wonder that so many ICOs fail in their first year: https://news.bitcoin.com/46-last-years-icos-failed-already/
They estimate a little over 50% have failed or are in the stages of failure already, and we’re in February 2018. If you look back at 2017, things didn’t really kick off until May (Except the DAO back in 2016, but again I’m not an Ethereum fan due to how that was all handled too). This means from May to February, we’ve had more than half of all ICOs fail, in just 10 months!
It’s very easy to see why China banned ICOs back in 2017, followed shortly after by a ban from South Korea! When you’ve got statistically over 50% failing in such an incredibly short time frame, that’s a considerable amount of risk for people, and so it makes sense governments would want to protect their people.
Speaking of banning things, Facebook has banned all ICO and cryptocurrency related ads on its site. The risk was too high, with too many users being scammed, to allow the advertisements to continue.
Then, how do you separate the good projects from the bad ones?
That’s a really good question, and unfortunately it’s something that I don’t have an answer for.
So many people I know have a few rules they’ve made for themselves to follow when choosing ICOs to invest in. Things such as “it must have a good looking Whitepaper” or “I won’t invest unless there’s a full-time developer mentioned on their website”, or “It must show the LinkedIn profiles of all members”.
Some of those are good ideas, some of them are simply designed to make them feel better about their own decisions. I mean, the theory is they’ve had a quick look and the tech-talk on the whitepaper goes over their head so it must be a solid investment, that couldn’t possibly go wrong… could it?
It’s not that simple though sadly. Sure, I’ve seen people laughing all the way to the bank based on an early investment in an ICO, but I’ve also seen way more ICOs go bust and people lose hard as a result.
You’re just sad because you missed the boat, ICO’s aren’t all bad!
I totally agree, ICO’s aren’t all bad!
I’ll also agree that I’ve missed a great many boats, predominantly because I’m not actually interested in “catching” those boats. I’m a slightly more conservative risk-taker (sounds ironic), and although I’ve seen some amazing ICO’s, on a personal level it’s not been something I could ever bring myself to invest in.
Time for a quick story about why:
I had a friend of mine contact me one weekend evening in September 2017, about a new ICO that he’d found through a Facebook ad. He said it looked solid and was getting some money together to invest in it, and suggested I did likewise.
This friend is a business owner, he’s rather tech-savvy too, and somebody who’s opinion I respect quite a lot, however in this instance I was skeptical.
That ICO was Plexcoin:
The website did look very polished, so he was arranging some funds to put into Plexcoin and was planning on doing-so later on in the week.
Lots of other people were investing too!
He was lucky, the website went down briefly on the night he was going to throw a thousand dollars worth into it. He decided against it, “if they can’t even keep their website up, how will they manage all that they want to achieve?”, and instead carried on with his life without investing in PlexCoin.
Lucky for him, as it turns out that Plexcoin is a scam: https://motherboard.vice.com/en_us/article/qvzkx7/plexcoin-scam-founder-sentenced-to-jail-and-fined-10k
You see when I first started with cryptocurrencies, it was very much the “Wild West” it is now, just a different kind of wild. Back when I got into things in 2013, you had to have a fully working Blockchain of your own. There were a bunch of cryptocurrencies coming out, based mostly on Bitcoin / Litecoin, but all of them (even the meme coins like DOGE) had their own independent fully functional blockchain!
I look at a great number of ICOs and half of them don’t even need to be a cryptocurrency. Often times it’s little more than a business running a “kickstarter” mixed with “shares” in the venture.
There’s nothing inherently wrong with that, but, when everybody out there is changing their name to include Crypto or Blockchain, just to make a few bucks and bump their share price (I’m looking at you Kodak!), it starts getting excessive, borderline ridiculous.
I know there’s some solid ICOs out there, but in between the PlexCoins and BitConnects of this world, there is so many scams that I think for now I’ll personally just stick with my genuine cryptocurrencies that have actually launched and have a Blockchain, not too mention aren’t 100% pre-mines *cough* XRP *cough*…