We take a deeper look into the ICO market — what has changed over the past years, what are the latest trends and developments, and how it might progress in the future.
The Past and the Present
Initial Coin Offerings are a type of crowdfunding of newly released projects and ideas with various cryptocurrencies. While ICOs seem like something fresh and new, they do in fact date back to 2013, with the first ICO ever having been held by a project named Mastercoin (MC) which raised 3,700 BTC (around $2.3 million) at the time.
ICOs became most popular between late 2017 and early 2018 when the cryptocurrency market gained a lot more exposure to the general public.
The total number of ICOs released up to now is hard to calculate. However, it is estimated that in 2017 and 2018 only 6–7% of all ICOs successfully reached their hard caps, rendering them complete. On average, the ones that completed their crowdfunding raised around $11.5 million.
While some ICOs did raise a lot of capital and were very successful, the general statistics do not show such a bright picture. Only 43.3% of all the ICOs in 2018 managed to raise more than $1 — in other words, less than half of all the projects failed to raise a single dime.
The five biggest ICOs until now are:
EOS, raised: $4.2 bln
Telegram, raised: $1.7 bln
Petro, raised: $735 mln
TaTaTu, raised: $575 mln
Dragon, raised: $420 mln
What the future holds for the ICO market is unknown, however, I do believe ICOs are an improvement over the traditional venture capital style of crowdfunding new projects. There are, of course, several critical fundamental obstacles that need to be resolved before the ICO market can be adopted, such as:
a clear regulation and/or market oversight,
the KYC/AML procedures.
In my previous blog, From IPOs to ICOs, STOs, and IEOs, I reviewed the progression of ICOs to some “regulative style” styles of crowdfunding. I do believe STOs to be inspiring towards regulation but since the authorities do not have clear guidelines yet, they only tend to get registered with the SEC. They still lack some of the critical features that would allow them to be broadly adopted.
In my opinion, currently, IEOs are the most advanced form of digital crowdfunding, since the major exchanges possess the ability to push self-regulatory standards.
In this way, the projects that want to be exposed to investors on major exchanges have to go through a thorough screening process and have to report to the exchange. Furthermore, investors who want to invest in such IEOs need to register with the exchange, clearing the KYC/AML procedures. Exchanges also offer great security standards, however, a desirable future improvement would also be providing some form of custodial services, so that the assets (of the IEOs and investors) could enjoy secure storage with a 3rd party provider.
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