From $2.9 Billion in a Month to Hundreds Dead: Trends of the Rollercoaster ICO Market in 18 Months

Stats on where ICOs are mostly coming from, and what they are mostly about, paint an interesting insight into the ecosystem. As does the data on how the ICO market has changed into 2018. The biggest month for ICO investment was just four months ago, and 2018 has also seen the time taken to complete and ICO, and success of these projects, shift significantly since 2017.

Around 1000 cryptocurrencies have been considered deceased recently. It was attached to Bitcoin’s drop in value and was hinting toward a total cryptocurrency bubble.

However, the cryptocurrency ecosystem is a little more complex than that, and one of the most interesting and staggering facets of it all has to do with the Initial Coin Offering (ICO) marketplace. It is seen as an area of cryptocurrency that is aimed at both disrupting traditional venture capitalism as well as expanding the broadness of cryptocurrency beyond that of just Bitcoin.

This rambunctious side of cryptocurrencies has a lot of telling statistics that are worth delving into — especially over the last 18 months, which have seen a massive boom in new coins as well as a steady growth in capital raised for new cryptocurrency projects.

ICO countries and categories

ICOs are indeed a global phenomenon. However, some countries and markets have taken to them far better than others. In the latest trends, it is still the United States that leads the way, followed by Great Britain and Russia.

Chart

Source: icowatchlist.com

When it comes to the sectors that these ICOs are targeting, it is unsurprising that  finance is at the top, due to the cryptocurrency nature of the projects. But what is surprising is that finance is not where the most money is going — that belongs to blockchain technology itself.

Chart

Source: icowatchlist.com

Finance comprises 13 percent of ICOs, then goes to payments/wallets with 6.6 percent, while third is commerce/retail at 6.3 percent.

Then, looking at token sale results based on funds raised, we can see a big chunk going to blockchain platforms with 38 percent, followed by network/communications at 16.6 percent and then Finance at 9.5 percent.

Chart

Source: icowatchlist.com

The evolving trends of ICOs in 2018

It would not be hard to estimate that a good time for ICOs would have been in 2017, especially toward the end of the year. Cryptocurrencies were the talk of the entire globe and interest in them was being picked up in terms of Google searches — as well as in the price of things like Bitcoin in what has been called a ‘Satoshi Cycle.’

However, while there was indeed a boost toward the latter months of 2017 and into 2018, March 2018 has been by far the best month on record for funds raised by ICOs. As much as $2.94 billion was raised in March alone, which is more than the next two best months (Dec. 2017 and Jan. 2018) combined.

This however did have a lot to do with two specific ICOs, the Telegram ICO — raising $1.8 billion in total, including $850 million in its second round of ICO on March 30 — as well as the Petro of Venezuela — which raised $5 billion with its presale beginning on February 20.

Chart

Source: Coinschedule

However, the worrying trend with these ICOs and the money they are raising is that not enough of the projects are leading to success. ICOs have picked up a bad rap in recent times, with some major names hitting major difficulties — such as Tezos, which suffered a slew of lawsuits after infighting between the members shattered its progress.

Data collected over 2017 saw 913 projects with tokensales with 435 (48%) a success, raising $5.6 billion. 131 (14%) didn’t survive this stage and as many as 347 (38%) stayed unreported, with no data displayed. Some even had their websites and all traces of them disappear.

This puts forward a very negative perception of the ICO space, and thus also flows over to other major cryptocurrencies and even blockchain technology itself. Much like the Dot Com bubble, businesses flocked to ICOs, but many found out that they were, perhaps, unnecessary for their projects.

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Source: ICObazaar

2018 emerges, and the hype has somewhat died down. Regulations are also tightening up and more protection is being afforded to investors, but at the same time, project teams are getting a more powerful foothold for development.

Still though, ICOs — even with increased pressure from laws and regulations — are struggling to deliver on their promises in 2018, as they are held to more scrutiny.

In May 2018, there were 195 ongoing ICOs listed on ICObazaar that were planning to close sales. However, only 91 public sales were closed, with total of $2.57 billion raised.

Chart

Source: ICObazaar

This statistic shows that either ICOs are not delivering at all on their promised timelines or that their ICO stage of the project is purposely taking longer. Comparable data from 2017 suggests that, indeed, more time is being taken across the board to complete ICOs in 2018, indicating that they are not as rushed or poorly formulated.

Chart

Source: ICObazaar

From the data above, one can see that 2017 had ICOs that predominantly planned to last between 10-30 days. However, in 2018, there was a broader division, with longer periods of time being prefered. In fact, where a 150 day ICO was unheard of in 2017, five percent of them in 2018 have chosen this route.

This has a lot to do with ICOs that are run in different stages becoming more popular. These teams initially have a pre-ICO, and then three or more stages of sales. In the current conditions of substantially increased competition, the duration of marketing preparations also increases.

There are also case studies that show that these elongated ICOs can be more successful — a project like EOS showing how it managed to accrue $4 billion over a year-long ICO.

Private over public

Another trend that has come about in 2018 is the idea of first launching a private ICO and then opening it up to the public. Nearly 30-35 percent of tokens with large discounts — of up to 50 percent — will go to funds and angel investors. Projects use the money to fund pre-ICO campaigns, including marketing and social media advertising.

A good example of this is the Telegram ICO, which was so successful in its private ICO that it decided to cancel its public ICO due to the abundance in funds it raised initially.

Some others include Kodak Coin, which also went the private ICO route, raising $10 million in the presale. Coinlist collected over $9.2 million from some of the finance industry’s most prominent investment firms in its attempt to keep regulation friendly.

In fact, there have been reports that suggest 84 percent of all ICO fundraising this year has come from private and presales.

An evolving form of raising capital

Already — even though it is barely a few years old — we are seeing a change in the trend for fundraising through blockchain technology. Part of it has to do with the belief that the ICO space is in its own bubble and part of it is a general evolution in a fast-paced space.

The terminology is changing, as is the way in which these offerings are made. Companies as big as Overstock are leaning toward Security Token Offerings (STO), while other major crypto players, such as Vitalik Buterin, are proposing new forms of crypto crowd sales like DAICO, Interactive Coin Offerings or Continuous Token Models.

The STO is a token is backed by a real asset, profits or company revenue. Prime examples of this include the Venezuelan government’s oil-backed Petro coin. These coins are meant to operate more like traditional securities and to meet all the requirements of the SEC.

These STO tokens are seen as a step in the right direction because of their regulatory compliance at the start, and there is already a belief that they will be the dominant force in the near future when it comes to Initial Coin Offerings.

Security Token Offering (STO) is held when token is backed by real assets or profits or company revenue. These tokens are protected from speculations and scammers, more like a traditional security, but in electronic form. Moreover, such a token meets all requirements of the U.S. Securities and Exchange Commission (SEC), which allows it to completely legally implement the token sale in the USA. The first security token platform Polymath data shows that STO will prevail on the market by 2020 and will be more than $10 trl.

Chart

Source: Polymath

Then there’s DAICO, which is a hybrid solution of ICO and DAO — a decentralized, autonomous organization, which is a form of a management management model based on blockchain technology. It allows a company to attract a solid investment, but at the same time provide investors with certain levers of management. It was Ethereum founder Vitalik Buterin who suggested this modification in order to improve ICO processing.

Interactive Coin Offerings are another option — which offer a protocol from creators Jason Teutsch and Vitalik Buterin — that suggests a different model of a crowdsale that ensures the certainty of valuation and participation at the same time.

Then there are Continuous Token Models. This model assumes that, “instead of pre-selling tokens during a launch phase, the tokens are minted as needed through various means. The tokens are then dispensed for services rendered in the network,” a Medium post describes.

Sorting out the scams

The data indicates that there are a few big problems with the ICO space in terms of not delivering on projects after investors have taken part in ICOs. This partly comes down to failed ICOs, but also down to a number of scams.

ICObazaar has a system of rating ICO projects that consists of a weight-adjusted formula with five factors — a sixth factor consisting of the actual score — which is all correlated by their blockchain and finance professionals. Their data shows some interesting trends. Firstly, they state that, in their rating system, only 7 percent of projects are rated above 4.5 out of 5.

The majority of the rest of the projects — up to 58 percent — score less than 4 out of 5. The reason for this, according to the site, is because of a “lack of information about the company and it’s team, as well as an unsatisfactory description of the product in the Whitepaper.”

“This usually happens when the team hurries to get listed on ICO trackers but doesn’t pay enough attention to their documentation, social media or the size and quality of community supporting the project.”

On the up

There is also data that shows better results in terms of ranking ICOs in 2018, as compared with last year.

Projects with ratings lower than 4 were even higher in 2017, with a large portion of projects having scores of 3–3.4. Thus, it shows that the share of high-quality projects has increased into 2018, ICObazaar’s data explained.  

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Source: ICObazaar

Still early days

We need to remember that ICOs, cryptocurrencies and the entire blockchain space is still very much in its infancy. And, just like we have seen things like Bitcoin evolve, with Segwit and even the emergence of Bitcoin Cash, ICOs will evolve too.

The changes will be geared toward security, transparency, and reliability, and a lot of that will be driven by harder regulations intended to protect investors. However, it will also continue to be a competitive space, and that competition will also drive the necessity for well-built projects.

ICOs may have become a bit of a dirty word, but the process still has a lot to offer. After a bit of tweaking and growing, there will be a lot that can be done in the ecosystem once it is functioning well.

This article originally appeared at: https://cointelegraph.com/news/from-2-9-billion-in-a-month-to-hundreds-dead-trends-of-the-rollercoaster-ico-market-in-18-months.

Mobile Mining is SO COOL. – Ivan Likov of Phoneum.io

CoinHash.co Blockchain interview.

Ivan Likov explains to .Warren Whitlock of Coinhash how Phoneum.io allows billions of mobile users to participate in a mobile-only mining system.

Use a free app called Phoneum to mine crypto on a mobile device. Cryptocurrencies are no longer limited to high power machines with expensive energy requirement. Phoneum brings mining to the masses.

Phoneum is set to launch their mobile-only cryptocurrency and bring mining to the masses, utilizing their proprietary algorithm to monitor and regulate mobile device sensors while ensuring low power consumption easy-to-use mining, and transparent e-transactions

Startup is changing the way we trade online

I advise several startups and Bazista is one of them. What I write here is my own opinion. You can read more about Bazista and why their token sale is worth looking at by visiting Bazista.io

In the short time I’ve been associated with Bazista, I’ve been impressed with their work on the current ICO, but more impressed by the company they are building.

It’s an ambitious goal. They are potentially disrupting the way we do e-commerce. 

Bazista won’t be putting the multi-billion dollar competitors out of business anytime soon and quite likely those players will adapt to move away from dependence on fiat currency. 

Where Bazista really shines is it’s ability to allow trading down to the the unbanked and barely connected parts of the world. They will be able to lower retail distribution markups and the friction of complex distribution systems. With lower transaction costs, security of smart contracts and ability to reach anywhere someone it connected, Bazita will empower billions of people when they want to buy or sell online. 

Without a middle man. 

A grand goal. Early work out of their development team looks like they will do it.  

I won’t try to convince you of the ROI for traders or potential value of the ICO tokens. That’s in their white paper if you need it. What I AM here to tell you. There is a lot of good that can be done by Bazista and other startups who bypass institutions that have benefited the 1st world and been a hurdle for others. 

Fixing this means a brighter future of billions. 

That excites me.

CryptoBNB is taking on Airbnb, using cryptocurrency instead of dollars

Airbnb may be the biggest home-sharing game in town, but a new startup is trying to push its way into the market.

Enter CryptoBnB: the online home-sharing platform that wants you to pay for your couch-surfing stays using digital currency.

That’s right — this startup is combining two of this year’s trendiest topics — home-sharing and cryptocurrency — into one buzz-word extravaganza.

The CryptoBnB team says the advantages of cryptocurrency go beyond having a slick, high-tech way to pay for your room. The startup will use blockchain — the technology behind bitcoin and other digital currencies — to power its home-sharing platform. Blockchain is a decentralized digital ledger that facilitates secure online transactions between different computers, creating a record that can’t be altered retroactively.

Tariq Alwahedi, CryptoBnB’s founder, says by using blockchain for its transactions, the startup will create a secure platform through which it’s easy for a host to verify the identity of a prospective guest, and hard for a guest to leave fake reviews.

And the technology cuts out the need for a middleman such as Airbnb to facilitate the transactions between landlords and guests.

“The relationship can happen with hosts and travelers directly,” Alwahedi said. And the platform can automate many of the processes that otherwise would require human effort, such as compliance checks and record-keeping.

That means CryptoBnB can charge less. Airbnb charges guests a service fee of 5 percent to 15 percent of the cost of a reservation, and charges hosts another 3 percent. CryptoBnB, by contrast, will charge a total of 2 percent or 3 percent at most, Alwahedi said.

The technology also will learn about travelers as they use the platform, allowing it to tailor searches specifically to their preferences.

This article originally appeared at: https://www.mercurynews.com/2017/12/12/this-home-sharing-startup-is-taking-on-airbnb-using-cryptocurrency-instead-of-dollars-2/?itx[idio]=6025857&ito=792&itq=126fbcc7-bed3-4353-af4c-f5513cfa59fc.

ICO Tokens: A Serious Barrier to User Acquisition?

Anyone even moderately following tech right now knows that ICOs are exploding in popularity as entrepreneurs seek to raise large sum of non-dilutive capital for their company — while they can.

I have spent the year advising several tech companies, many of which have raised capital in the ICO market. Through this process, I have stood side-by-side with CEOs while they think through the challenges that inevitably come up during an ICO. I recently wrote about the conflicting legal advice around token sales and provided a framework that may be compliant within US law.

Today, I turn my focus towards another issue that blockchain companies don’t even realize they’re facing yet. Here it is…

Utility tokens, which customers must purchase in order to use the services of a blockchain platform, may be an insurmountable barrier to user acquisition.

Understanding the “holy” conversion funnel

An optimized conversion funnel is vital to successful online marketing, and blockchain companies are no exception. This practice of funnel optimization focuses on finding and removing “leaks” at various points through a visitor’s journey across a website in order increase the likelihood of the visitor taking a desired action.

Companies that ICO will ultimately be under pressure from their token holders to increase their token’s value, which over the long run must come from legitimate demand of the underlying platform. Unfortunately, there are substantial user acquisition problems that emerge when a token is added to the conversion funnel.

Let’s dive into this further with an example.

The fight is on: Airbnb vs. CryptoBNB

Imagine that you are a vacationer searching for a place to stay. You start by Googling “rent a vacation home” and see various results, including Airbnb, VRBO, HomeAway and the other usual players. You also find a couple of new names, which happen to be well-funded ICO projects, including Zangll and CryptoBNB, which is a company I made up in order to not spend this article trashing Zangll.

1*QbXKUhnEKOpxPYRIotXRVQ.png

You take the next step and visit Airbnb’s and CryptoBNB’s websites to compare their offerings.

On Airbnb, you find a refined site with tons of listings and the ability to pay by credit card.

On CryptoBNB, you find a site that uses decentralization and blockchain terminology, with few listings and the ability to pay only in CBNB tokens.

It is clear that one of these companies has an advantage for converting the average consumer… Airbnb. Over the course of years, their company has had time to grow its listings and optimize its user acquisition funnel down to a science.

Lost customer at the last minute, again!

Ignoring the fact that Airbnb has a multi-year operating advantage over CryptoBNB — which this is NOT an insignificant issue — let’s focus on the role that payment options play in user acquisition.

E-commerce companies spend considerable time reducing friction in the checkout process. Here are a few points that digital marketers focus on related to payments:

  • Reducing the information required from the customer
  • Optimizing the site for mobile visitors
  • Taking advantage of AutoFill
  • Accepting many types of payment options

Requiring payment in the form of CBNB tokens will present CryptoBNB with problems on all of these points. The checkout process for a typical user would go something like this… Visit site > select listing > go to checkout > be asked for CBNB tokens > don’t have any CBNB tokens? no problem! purchase them from a third-party foreign exchange > customer gets confused > customer goes to Airbnb.

1*2vDxwAwVmrFRlwlFnrUzMw.jpeg

Guy must be thinking through user acquisition of a tokenized blockchain platform.

Let’s not forget that cryptocurrency is challenging to obtain and use for the average consumer, and it is certainly not as easy to use as a credit card. Consequently, every consumer-oriented blockchain company with a token has a conversion problem lying ahead.

Decisions, decisions…

For companies whose token acts a means of payment (very common), there are two primary approaches that I currently see companies taking:

  1. Decentralized approach. Customers will pay the network directly using the token. While this option is more in line with the goal of decentralization, the need for users to acquire tokens via a third party website is a critical point of failure for conversion. There are additional costs to the consumer too, including exchange fees, which is a situation that is clearly inferior to the status quo where they earn points with their credit card.
  2. Centralized approach. In this method, customers will pay the company by credit card, and the company will in turn pay the network with tokens behind the scenes. This approach cuts out the barrier to conversion, but the company will assume several costs that Airbnb will never have, including exchange fees, implied cost of the bid/ask spread, order book slippage, Ethereum network fees and more.

It seems that companies are unnecessarily putting themselves in a disadvantaged competitive position in order to raise capital through an ICO. This is one reason why I am bearish on utility tokens whose primary purpose is as a payment method. I don’t believe that the advantage of “blockchain” will add enough value in most consumer applications to compete with lower cost competitors.

1*r-rD0L6yCRhHAzDuof1biw.jpeg

Why do you even have a token, broh?

In e-commerce, it is hard to see how a tokenized blockchain company could ever compete against an equity-backed tech company on a “per unit” cost basis, unless the existence of a blockchain…

  1. Is mandatory.
  2. Adds value that consumers care about.
  3. Creates significant cost reductions elsewhere.

Offering tangible value over competitors on the order of a magnitude is critical for blockchain companies. Over the long run, the value of every utility token will rely on the existence of real demand for an underlying platform, which may never materialize if a company has tokenized barriers to user acquisition.

In most cases I have seen, companies whose ICOs revolve around a payment token have not found a strong enough purpose for issuing a token or using blockchain. One rule of thumb I commonly ask companies is: “Why can’t your platform just accept ETH and charge on a typical SaaS model basis?” The answer to this question will generally shine light on whether the platform‘s token is useful, or if the company is simply creating the token as an excuse to raise capital through an ICO.

Payment tokens will be the first to fail

In the second half of 2018, investors will begin focusing on the adoption metrics of tokenized blockchain platforms in order to make newly informed investment decisions. In this process, blockchain platforms that don’t provide meaningful value over competing technologies will be discovered and “punished” by the market through their token price.

Companies who have created a token solely as a means of raising funds through an ICO have not set themselves up for long term success once the market becomes less speculative. Because payment tokens have an inherent disadvantage on conversion and platform adoption, I believe they will be the first type of utility token to fail.

There will still be a few success stories, of course, but most entrepreneurs won’t be able to create enough tangible value for their customers to overcome their user acquisition hurdles.

In search of tokens with merit…

ICO investors looking for longer term viability in their investment should look to tokens whose existence won’t be a barrier to user acquisition. This means that the token’s purpose within the platform is likely “inventive” in some way, plays an operational role and is abstracted so as to be user friendly.

One example of a token that fits these qualifications is that being created by AQUA, whose company is building an IP rights platform with a primary focus on pharmaceutical R&D. Their token enables the assignment of fractional Intellectual Property (IP) rights, which could create an ecosystem for global collaboration in R&D. AQUA’s token has two characteristics that I find particularly interesting. The first is its flexible architecture that allows one group’s IP to be combined into another group’s IP later on, which allows research to build on top of prior research. The second is its fundamental token value structure, which gives token holders a stake in the success of all IP on the AQUA platform.

Conclusion

Within the next 12 months, asset fundamentals will begin eclipsing speculation to drive token valuations. Investors in ICOs should therefore assess each token’s impact on the underlying platform’s long term viability. Tokens whose primary purpose is to serve as a payment mechanism seem to have an inherent disadvantage on this point. Voting rights, power, operations and other areas where traditional equity funding does not exist are use cases where tokens are more likely to retain long term value.

This article originally appeared at: https://medium.com/@jaronlukasiewicz/ico-tokens-a-serious-barrier-to-user-acquisition-21ed2661bbad.