Amidst the global financial crisis and at the verge of the exit from a daunting economic recession ICOs have had an alarming effect on the general populace but the most impact has been felt in the Fintech industries. Over the past 5 years, this concept of fundraising has gained traction and reached the attention of every investment corporation, government agency, and the everyday layperson.
Initial Coin Offering events have broadened the scope of contemporary venture capitalism. While this crowdfunding technique is focused on crypto-centric individuals, more non-cryptographic specialists have begun to look into this auspicious ‘virtual treasure mines’ that has changed the lives of millions of individuals across the world.
At a glance, conventional forms of crowdfunding do not accept projects from countries of other origins, especially where they have not established any known presence.
Moreover, the rate of commissions is on the high end of about 15-20%, as do the payment systems people must use to contribute with.
These campaigns are sometimes constrained and eventually disappoint the proponents of the project.
Currently, in the United States, about 40% of startups and small business are within the profit margins, 60% of this niche are either on the break-even or losing money.
Crowdfunding used to be about big companies seeking to expand their products and services and has little or no space for startups with no marketing budget outside the borders.
Eventually, most ICO startups get outcompeted on the market. Many have described this sudden emergence of a ‘miracle money’ as a bubble and will come to an utter end, while others have identified it as a scam born of a pyramid scheme. However, this hasn’t stopped the entire mass of blockchain enthusiasts to rapidly dive into any speculative cryptocurrency with the prospect of earning more than they invest at the launch of the initial coin offering program.
They oftentimes anticipate as little as twice over their investment portfolios to as high as 100 times more, depending on how long they are willing to hold the digital assets and their strong convictions in the cryptocurrency market assays.
It sounds like a great gamble to invest in a product or service that only promises virtual value with no legal backing nor regulations. However, the risks involved have absorbed investment brokers alongside the end users of any products or services borne from a crowd sale event, to stop at nothing to ensure they maximize return on investment.
No doubt, this bubble has grown beyond where anyone who is technologically inclined can ignore, not even most governments can pretend anymore not to notice that such an amazing cryptographic instrument has swerved the economic mindset of the masses.
There have been speculations that the in the near future, the investment slide will reserve no space for coin offerings and altcoin projects. Venture Capitalists and anti-blockchain analysts have gone as far as to warn against crypto-tokens during crowd sales, but that has driven the prices of ‘veteran’ cryptocurrencies like Bitcoin even higher.
Others have it that the entire fate of coin offerings in the future will depend on whether investors and project developers would maintain a synergistic union to achieve a universally accepted modus operandi.
One would wonder whether the crave is a ‘get-rich-quick’ syndrome, or the masses truly understand the concept of a decentralized economy and are willing to stake so much to reform the economic system of this present age.
While the government in some countries have applauded this great feat achieved by the blockchain technology, others have for greater caution and regulatory shortcomings of ICO projects steer clear off the path and warned their citizens of capital punishment if involved.
As a matter of fact, many cryptocurrency projects have failed miserably on their commitment to investors contributing to the rift caused by differing opinions in the investment and financial state of affairs. An outstanding example that created a world scale nightmare would be The DAO Project, raising a total sum of $150 million during its ICO, recording the highest at the time, over 48% of that sum was lost during a hack that exploited a weakness in the code of the DAO project, causing a huge stir in the Ethereum community. This has invariably buttressed the points made by anti-ICO analysts
More frequently, cryptocurrency project startups have established their ICO without due diligence and have made a caricature of the entire concept of blockchain technology, failing woefully while drowning investors’ confidence.
Nowadays, it takes a little more than a complex white paper and a well-structured web platform to convince the evolving blockchain enthusiast and investors alike to plunge into just any ICO.
With the likes of China and South Korea placing a ban on cryptocurrency exchanges and the use of unregulated crowdfunding events to sponsor decentralized network projects, proves the uneasiness ICO activities present to the community at large.
This has become a dilemma for those passionate about the blockchain system. For unregulated crowd sales of tokens and the continuous existence of ‘Useless Ethereum tokens’, the essence of the system will be watered down and eventually be defeated causing more harm to subscribers.
It is not all gloom and loom for these decentralized networks or prospective entrepreneurs. Efforts are continuously invested by several interested parties to fully understand the blockchain phenomenon, associated bricks, and their applications. Currently, unregulated crowdfunding events are in check to mitigate the proliferation of global scandals caused by cryptocurrencies and their affiliates.
Regulations regarding cryptocurrencies and initial coin offerings have become a controversial subject, as the entire scope of the blockchain technology revolves around the decentralization of data and information across multiples streams of networked computers. Regulations as perceived by blockchain enthusiast and crypto-community will defeat the aim of the system. On the other hand, the harm done by unregulated crowdfunding would continue if there’s no check to the entire ICO processes.
Government rated tax policies are perceived by many to be one of the tools as a liberating effort employed by the government to alleviate the pains and tragedies experienced by many investors who have fallen prey to the evolving internet based enterprise.
Other regulators across the globe, such as the United States, United Kingdom, Hong Kong and Singapore have shown concerns to many companies attempting an ICO event as it could breach security laws, proponents/investors in such events have also be given the clear disclaimer that they could lose their funds.
The need for a constituted law binding on ICO activities and proponents of the blockchain system while maintaining the decentralized nature of the entire process is a sensitive issue. As the benefits of unregulated crowdfunding activities may have outweighed the consequential risks implored by failed projects.
Therefore, it is important to thoroughly investigate the genuine nature of crypto programs, patency of ICO trademarks, intellectual properties and digital asset security protocols; which in the long run can provide credibility to the entire blockchain systems.
While there are few countries in support of blockchain technology and ICO crowdfunding related activities, many are indifferent to these events. Others are strongly committed to instituting regulatory policies that could fully harness the economic potentials of this technological niche without dampening the conceptual overlay.
In conclusion, no doubt, unregulated crowdfunding activities have become more rampant in the world of decentralized technologies and have given prospective startups the edge to give life to their projects. Early investors have gained so much and improved their economical standards.
Currently, there lies a question of future prospects, that could form cross-conceptual protocols breaching the gaps between currently unregulated nature of crowdfunding and conventional regulated IPO techniques. This could lead to a hybridized economic tool and provide stability for most initial coin offering setups.