ICO Trends. "To do" list for the 2nd half of 2018

During the first two articles, we have covered the hype of ICOs during 2017-2018, frauds and scams, hacks and security breaches, which all resulted in high regulatory attention around the world.

In this article, we will discuss in details what measures ICO investors should be taking, in order to protect themselves against scams, and invest their hard earned money in the most promising ICOs of the year. After all, not every shining is gold; investors need the right tools to be able to pick up the few most promising ICOs out of the thousands which are flooding the market almost on a daily basis.

Last but not least, we will close the article with the outlook for the second half of 2018 and what signs should investors be seeking.

So, before running an ICO or starting any new business in this industry, you must ask the following questions and find the answers:

1. Is there a problem that the ICO is trying to solve, or a service to be provisioned?
2. Is this problem really worth solving? Will people pay their hard earned money to have this problem solved?
3. Is there a demand for such a service? Is the market big enough?
4. Is it a must to use the blockchain? What added values will blockchain bring to the project? And why a database can solve the same problem efficiently?
5. Is it a must to have a token on the platform? Can the platform be run efficiently without minting new tokens?
6. How can the business guarantee demand for the token, in order to sustain its price?
7. If you are not going to raise funds through the ERC-20 token, are you sure the code is secure enough?
8. Are you trying to solve too many problems?
9. Are you targeting a small niche?

 

What happens if you relevantly answer these questions?

Once we have a clear answer to the questions above, we will be able to filter the diamonds from the crystals. In case an ICO is not addressing directly any of the above questions, this should raise the alarm. Investors must have the clear understanding of what added value will blockchain bring to the business, and why existing crypto or even fiat currency can’t be used instead of a native token of the project. In many cases, having a database is superior to a blockchain, especially when it comes to storing sensitive personal information.

Unfortunately, using a public blockchain will make it virtually impossible to delete or change a block of transactions, once it has been approved and stored. This means that users will stop using such platforms when they realize that there is no way to delete their personal data or actions. For example, not every person will be glad to have their personal info and a list of recent activities stored forever on a dating platform. Most of the users at some point would like to delete their accounts permanently.

In case a native token is not a must, users will not be incentivized to hold it. Such a situation will cause a sharp price slump to the token due to the overselling if there would be weak demand for it.

Lastly, if the project is not trying to solve a specific problem for a large market, it will be quite difficult to create enough demand to keep the project alive. This will either lead the project to the situation, where the soft cap isn’t reached, or to eventual failure of sustaining itself once it has exhausted the funds.

The outlook for the second half of 2018

Although 2017 was the year of awareness about the blockchain technology, 2018 is the starting point of adoption. The $12 bln which were raised during the last year will start yielding actual value only this year and will continue for the coming few years until maturity of applications is reached.

Institutional investors will start entering the market at a faster pace, especially once regulations have cleared out more and regulated custodial services have been tested and proved to serve the need.

Institutional investors need a different set of tools to feel comfortable penetrating into the crypto sphere. After all hundreds of millions have already been lost to hacks and scams, the thing that such institutions don’t want to encounter.

On the positive side, it is worth noting that:

• The world’s largest ETF provider BlackRock has set up a working group to assess potential involvement in cryptocurrency;
• Coinbase is now providing a regulated custodial service and got regulatory approval to list security tokens;
• China’s IT Ministry said that blockchain should be supported to reach industrial scale. The thing which may relief the strict ban on cryptocurrencies that China is forcing at the moment.

Such developments should be fruitful for the long term. However, for the mid-term, especially before the end of this year, we can witness more adoption from institutions, the thing which will bring stability to a very volatile market.

Special attention should be paid to:

1. Security tokens: many ICOs have excluded US investors by default to avoid any questioning by the SEC who considers that most of the ICOs are security and not utility tokens. Once new ICOs start issuing security tokens at a large scale, this should expand the market reach to one colossal net with enormous amounts of funds.
2. Scalability: Cryptocurrencies suffer mostly from scalability issues. However, such problems are solvable, and many solutions are already being developed. Once Cryptocurrencies are able to process enough transactions per second at a scale which supports global adoption, this should provide a huge incentive for whales to flood the market
3. Regulations: Many countries are starting to realize that being a pioneer in the blockchain technology will give them ”the first mover advantage.” For example, the Maltese prime minister Joseph Muscat indicated that he would like to have Malta as a pioneer in the blockchain technology and not become a copy from other countries. If other nations follow this path, it will open the gates for this technology in general and for cryptocurrencies in particular.
4. Safety of funds: Many countries are starting to push crypto exchanges to comply with stricter regulations, especially when it comes to storing user’s personal information or funds. South Korea is taking the lead here, as it was one of the first countries to officially regulate and enforce crypto exchanges. The more countries who follow the lead, the safer it will be to keep fund on those highly secure exchanges.

So we brought you the main ideas for the second half of 2018 the investors and startup founders should consider when going ICO. The game changes almost instantly, and mistakes in this industry are quite costly. One should always stay aware and keep a hand on the pulse of the markets; thus we will continue to unpack and examine the hottest trends of the ICO sphere.