It may be inconceivable that something as remarkable as the initial coin offering was generally unknown for so long. Businesses are traditionally known to follow the funds, whether for seed capital or profit. This is why it is surprising that they never took notice of the prospects of ICO as a means of raising funds for projects until 2017, well over four years after the first ICO. Even then, it took the exponential appreciation of bitcoin prices to do so.
The year has come and gone, and many companies have successfully raised funds through ICOs. Initial Coin Offering (ICO) is the new crowdfunding that refers to the period in which a company receives digital currencies such as bitcoin and ether from investors in exchange for digital tokens unique to the company and which has utility in that company’s ecosystem.
The ICO is usually phased as the pre-sale and main sale. The former is the limited period in which the company offers discounted token sale to angel investors and venture capitalists after revealing their whitepaper while the later is another limited period of sales open to retail investors.
After ICO sales, the companies are expected to use the funds raised to finance the project as put forward on their whitepaper and executed within the time frame set forth. In fact, the basis of ICO itself is a smart contract which is a pre-programmed digital document that is unalterable and executable when the necessary conditions are met.
For instance, if a smart contract indicates that a company intends to raise $5 million from its ICO and that the fund gets released to the company on the condition that the target amount is met, that is what happens. Unless that amount is met, the contract is programmed to return the money back to investors.
After ICOs, the funded companies are expected to keep up with updates on how the project has progressed as this is critical to the valuation of their token and investors continued confidence in the project.
Let’s see how some of the most successful ICOs fared in terms of project development and execution. This may perhaps give us insights on how to properly assess the success or otherwise of an ICO with respect to fulfillment of the objectives for which it was initiated.
It would seem that the Pareto principle applies to ICOs as well. If you don’t know about that, it says that 20 percent of people or businesses earn 80 percent of the money available. Of the $3.7 billion dollars raised through ICOs in 2017, 37 percent of that amount was made by just 20 companies.
Filecoin, the data storage company that aims to build a decentralized network raised $257 million in August 2017 in a crowdsale that holds the record of garnering in the most funds. The company has the intention of creating a network that allows users to rent out their computers’ storage spaces and get paid with the filecoin token.
Since the August ICO sales. Filecoin seems to be on track judging by its January 1 blog update which highlighted some of the post-ICO accomplishments as building the team to make the Filecoin project a reality, as well as an interactive community whose support and assistance the team hopes to utilize in fulfilling their expectations.
The community was encouraged in the update to make references for the company in their bid to hire the best skills in the project development as well as create awareness among early users of the project and miners of the Filecoin token.
The January 1 tweet by the company reads, “Since completion (of the ICO), we have been heads down turning Filecoin’s tremendous potentials into reality”.
Tezos, the Switzerland based company raise $232 million in sales in an ICO that was the highest earner last summer. Despite the initial success, the company that promised to create a digital commonwealth through the establishment of a platform that creates smart contracts such as The Ethereum Network has not been able to find its footing. Neither does it seem likely to do so in a while.
Tezos has been mired in controversy after controversy after a management squabble that had some of the company founders make accusations and counter-accusations, leaving investors at a loss of what becomes of their investment.
The last project update was on September 30. The company having since been slapped with a number of class-action lawsuits that had investors move to recover their investments even as complaints were filed that the Tezos token is an unregistered security. Despite its challenges, the Tezos token has not done badly, presently valued at $4.45 this end of January 2018. it is interesting that despite all odds, the token has never fallen below its ICO price.
As at December 2017, EOS had raised $185 million from an ICO that was staged to continue in 2018. Presently, it has garnered more than that. The project which was aimed at creating a platform that improved on the failings of existing platforms such as Ethereum and Bitcoin was promoted in the community as an Ethereum killer.
This is mainly because of its scalability and user friendliness. Strengths largely lacking in Bitcoin and Ethereum with their tendency to get clogged with high usage traffic. With the ability to support one million transactions per second, EOS potential as a platform that could have corporate and massive utility was not in doubt.
By December 2017, the company has already launched the beta version of its project, DAWN 2.0. EOS success at project implementation can be traced to the experience of its team, most of whom are behind platforms such as Steemit and Bitshare.
Steemit is a user-friendly platform while Bitshare has scalability enabling it to support 800 thousand transactions per second. EOS post-ICO project implementation must be responsible for its token appreciation. The token is presently valued at $13.21.
Bancor, the Swiss-Israeli startup is building an integration platform that seeks to bring all coins and token under a manageable system that allows investors and users buy and sell easily as well as make sense of the complexities of the coin market. Bancor’s ICO raised $153 million.
Despite initial setback after analysts failed to make sense of the Bancor project leading to fall in the company’s token price to less than $1 from $23, the company bounced back 6 months after the ICO through an announcement of technical progress made on the token building and exchange platform. The coin market has since been supportive of the Bancor project, with their token presently valued at $7.17
The company raises $98 million from a September ICO, funds with which they intend to create a platform for digital communications that prioritized user experience according to the website. The summary of the Kin project is that they intend to build a platform that comprises a messaging app that is based on blockchain as well as integrate it with an e-commerce arena in which users would be rewarded for services they provided. The reward shall be with the platform’s internal currency, Kin.
From the Kin ecosystem timeline, one would say that the company is behind schedule, the timeline reports that the next phase of the Kin project which is Kik-Kin integration was to commence in the Q4 of 2017. This integration has so far not been accomplished by January 2018. This may be the reason why there seems to be little activity on the coin market regarding the digital token valued at $0.000427.
With that analysis, it can be seen that the highest grossing ICOs may not necessarily have been the best to invest in. Variables such as the team behind the project, their experience, and practicality of the project in terms of ease of integration with easily implementable platforms concepts are strong factors that determine the long-term benefits to investors.
Another reality is that some of these companies actually got more funding than they actually needed just as Meni Rosenfield, who is the chairman of the Israeli Bitcoin Association said. According to him, most ICO issuings may not have been valued correctly leaving companies with more money than they needed just because ICOs are hyped.