There are now more than 800 coins which are essentially dead. However, the market for Initial Coin Offerings (ICOs) continues to boom in 2018, raising almost $12 billion in the first two quarters alone.
LOTS OF FLAWS
ICOs have surely become a hot topic in the last year and a half. This alternative fundraising method saw its massive upswing of interest in 2017 when it managed to reach upwards of $3.8 billion of capital raised. Yet, the first two quarters of 2018 have dwarfed that number, raising almost $12 billion, according to Coinschedule.
Total amount raised through ICOs in 2018
Nevertheless, this fairly controversial way of raising capital. And it hasn’t been without merit. A recent study showed that at least 20% of all ICOs have turned out to be a scam, which makes them a seemingly risky investment opportunity. The massive amount of flawed projects also caused some to take this even further. BitTorrent’s creator, Bram Cohen, said that all ICOs are scam unless proven otherwise.
Others, such as Bobby Lee, co-found of BTCC cryptocurrency exchange, said that 95% of ICOs aren’t based on blockchain technology but are rather database projects.
Furthermore, 800 of the tokens issued through initial coin offerings are essentially dead, according to a website called Dead Coins. The venue lists them under a few different categories, based on the reason for their devaluation. Some are the results of scam projects or have been hacked, others have gone to prices less than 1 cent. There are also those which are nothing but a parody.
Despite all of the criticism ICOs are subjected to, they remain widely profitable. The aforementioned study also came to the conclusion that if you had invested in every single visible ICO, regardless of whether it turned out to be a scam or not, you would have made 13.2 times return on the investment.
Furthermore, prominent figures in the field like Zhao Changpeng, founder of Binance – the world’s largest cryptocurrency exchange by means of traded volumes – have outlined numerous advantages of the alternative fundraising method.
As ICOs continue to grow in popularity, we are also seeing a serious spike of attention on behalf of regulators. Understanding their obvious importance, countries are beginning to formulate legislative frameworks aiming to protect investors and potentially reduce the number of scam projects to a minimum. Thailand, for instance, recently introduced a new decree which holds ICOs to substantially higher standards.
Following the country’s biggest ICO scam, the Vietnamese government is also pushing for legislative clarity and regulations. South Korea, on the other hand, revealed that it might soon legalize ICOs after having the flat-out banned them in September 2017.
It does seem like governments are realizing the potential revealed by this yet controversial means of raising capital. This might provide the much needed legal grounds for a potential widespread adoption.