ICO Trends. The past, the present, the future. The aftermath of 2017

Although blockchain technology has existed for almost 20 years, 2017 will definitely be a significant milestone for this industry. During this year the main pillars of blockchain infrastructure started to rise:

• investments close to $12 bln were raised in crypto;
• large corporations began exploring opportunities to increase efficiency and cut on costs by switching to blockchain technology;
• regulators started taking actions ranging from a blanket ban, as it has happened in China, to more friendly regulations in Switzerland and Singapore;
• ICOs flourished, and fierce competition to Bitcoin started to snatch their share of the Bitcoin dominated market.

During 2017 Ethereum and Ripple started to attract mass attention for the first time since their inception in 2015, followed by hundreds of new cryptocurrencies and thousands of tokens in an attempt to raise funds for ambitious startups looking to become the next big thing.

The crypto craze of 2017 will remain in the memories of millions of people around the world — for those who have made over 5000% from holding Ethereum for the entire year, and those who bought Bitcoin for 20,000$ during the December peak and desperately sold it with over 70% loss just a few months later. The sharp increase in price has attracted a lot of attention from both the good and bad guys, while the lack of professionalism of many ICOs made it a mission impossible to filter out the good from the bad.

The dark side of “to the moon”

According to a recent study from ICO advisory firm Statis Group, more than $ 1.3 bln has been lost to scams during 2017. And according to another report, more than 1000 crypto projects were dead by the end of June 2018.

Two remarkable incidents of 2017 are the Parity wallet breach due to a vulnerability in its version 1.5 wallet software, causing a loss of Ether worth more than $100 mln, and Parity wallet freeze which caused the freeze of Ether worth close to $ 300 mln. In total, more than half a billion USD were lost due to security breaches during 2017.

Two biggest scams of 2017 were the “Pincoin and iFan” which collected more than $ 660 mln through the same company operating out of Vietnam. Another one is the Ponzi scheme of Bitconnect which stole more than $700 mln from people by promising them to convert their Bitcoins to Bitconnect Coin ‘BCC’ for astronomical returns. Eventually, its operations were shut down after receiving a cease and desist from two American financial regulators.

The ICO industry as it was after 2017

Strengths

• Utilization of blockchain technology. Blockchain technology keeps track of every single transaction ever conducted on the platform. This provides a very high level of transparency and trust. It is virtually resistant to data tampering and is redundant, the thing which makes any proof from the blockchain as neutral evidence.
• Global Outreach. Startup founders can reach virtually every potential investor anywhere in the world. They are not limited by the physical borders or certain jurisdictions anymore.
• Fundraising made easier. Entrepreneurs who are not coming from wealthy families can now start their own business and raise money in cost effective and time efficient ways.

Weaknesses

• Scams. The fact that any person can start an ICO provides fertile land for fraud. Unfortunately, more than 1 Billion USD were lost to scams last year, and this has shaken the trust of retail investors in this industry.
• Hacks. The multi-billion ICO industry is still in its infancy stage where many security vulnerabilities could be explored. As a result, hundreds of millions of USD has been lost to hackers so far, and this phenomenon may not end very soon.
• Regulatory Uncertainties. Countries like India adopted a stricter ruling on ICOs and cryptocurrencies, while other countries like Malta or Estonia decided to favor this industry. There’s no global certainty worldwide, and that makes the industry look like a quicksand surface for startups.

Opportunities

• Mass Adoption. Since ICOs are global, there is a vast room for growth. Once regulations have been put in place and stricter measures have been adopted to avoid hackers and scammers, the masses will feel more comfortable to support ICOs.
• Cost Reduction & High Efficiency. It takes dramatically less money and time to raise funds through ICOs than going through a rigorous and time-consuming process of raising funds through VCs or Banks for example.
• Innovation. Nowadays, we have only certain countries which have access to big funds, the thing which limits innovation on a global scale. ICOs solve this issue by allowing access to international supporters from anywhere in the world regardless to the country from which the ICO was raised.

Threats

• Regulations. Some regulators perceive ICOs as a way to circumvent existing law. Such strict regulations which refuse to evolve to allow more room for innovative ways of fundraising can cause a high risk for the success of ICOs.
• Security. Over the years 100s of millions were stolen by hackers. However, so many improvements have been made, and many lessons learned have been taken. Still, we have a long way to go from here
• FUD. Fear, Uncertainty, and Doubt are the biggest enemies of ICOs. It is so hard to deliver a positive message to the masses, but it is so easy to spread FUD.

So, this was the position of ICO industry entering the 2018. The following six months brought new changes to the markets, and the next article will be full of details about this timeline.

Richard Shibi has more than 15 years of experience in the IT industry. He has served as a senior management consultant and a regional account executive for IT projects deployed at global scale in the Telecommunication industry (North America, Europe, Russia, Middle East, China & South Africa). Richard is currently studying MBA at Imperial College Business School in London, running a Blockchain consultancy development start-up in Europe (PureGo OOD) and is serving as a board member and ICO advisor for Coinnup, TYDO, Cyber Capital Invest, MyEarthID, WMpro and ZeeRing blockchain projects.