The fate of ICOs
ICOs made a revolution in the venture capital market. Startups raised fabulous money within some very short periods in 2017. For instance, Bancor Network has managed to raise $153 mln just in 5 hours through the offering of tokens, and Aragon, another project, attracted $25 mln in mere minutes. Anyway, ICOs gave a chance for a self-fulfillment not only for innovators, but for scammers too, and to other type of ambitious individuals who saw the means of money laundering in this tool.
This fact, combined with the big hype around the theme has attracted the attention of governments, some of which decided to prohibit this financial know-how before they come up with a proper regulation. Bitnewstoday has decided to ask experts and find out together what fate awaits ICOs in the future and if it is able to become a full-fledged, recognized tool of finance.
2017 – the year of ICO experiments
The year 2017 can be called the year of big ICO experiments. Firstly, the projects themselves were experimenting. Few startups requiring investments did not issue tokens. The society was thrilled both with the size of investments attracted, with Tezos gaining $232 mln, FileCoin - $205 mln, and with the periods of time in which the projects were successful to charm investors – the SingularityNET project can be called an ICO which has almost surpassed the speed of light, as it has attracted $36 mln in 66 seconds.
ICOs gave a chance to realize for every project, regardless of the geographical coordinates. “Historically, innovation and especially startup funding was very concentrated geographically while great ideas and entrepreneurs were spread across the globe. ICO has become a powerful tool democratising startup investment,” comments Nick Martyniuk, Co-Founder and CEO of WePower.
Secondly, investors experimented with ICOs as well, both big with huge investments and little, sending around $1 to finance project development. The rise of token price on crypto exchanges heated the interest of the community towards ICOs even more.
ICOs will have to prove their usefulness
There is a popular opinion that most projects attracted finance through token offerings not because they had a good concept or a model well-planned, but just because it was trendy to invest in ICOs in 2017 and almost nobody realized what exactly is being financed.
“With time people will become more savvy and companies will have to prove their worth beyond just creating media hype for any substantive long-term growth. Right now ICO’s can offer little information & still create enough hype to cause movement in price, people will learn to discern what is hype and what is true potential, so the ICO sector will have to up their game”, comments Daniela Siggia, of Black Ram MediaGroup re Crypto.
Will ICOs really replace IPOs?
Last year, when the boom of ICOs occurred and even some serious companies tried to attract investment through tokens, the members of the crypto community started to talk about ICOs replacing IPOs in the future. Among other arguments, the statement was usually backed by a fact that holding IPOs and venture investment attraction was a real problem for many projects.
“In my opinion, the ICO will replace IPOs or IPOs will change and be more in the direction of ICOs, definitely. There is a strategic problem in most places where people with money start to get involved, because they affect the product. In most cases this is a negative effect. The minute someone is free to do things as they please, it's much better. Of course there are scams, but this is where regulation comes in. There are also other methods for transparency. In my opinion, the ICO will greatly influence the IPO, and the IPO needs to change or it will disappear,” deduces Vadim Onishchenko, founder and CEO of Selfllery.
ICOs have already replaced a big part of annual venture capital potential, states Moshe Joshua, CPO of Blackmoon Crypto. “ICOs have already replaced a sizable chunk of the annual Venture Capital raising capacity. It’s already happened, and gaining momentum. IPOs just don't know it yet. IPOs have been undressed and the emperor has no clothes. Can you remember the last IPO you researched to invest in? You can’t, because you couldn't. And the ones you did, your money is still locked, with a bogus valuation and nobody to sell to. Remind me, what's an IPO supposed to do again?” – the expert finishes his line of thought with this rhetorical question.
But many experts are much more skeptical and believe that ICOs are not replacing IPOs anytime in the future, but they can co-exist and be useful in their own spheres.
Nick Martyniuk, Co-Founder and CEO of WePower, notes: “Currently both of the tools are used to fund businesses at complete different state so they co-exist. However, I believe that both ICOs and IPOs as well as the whole startup funding ecosystem will evolve. ICOs have been a disruptive force in the 2nd half of 2017. Many investors are looking into them and figuring out how to evolve their investment strategies and models. There is definitely space for both. Time will show how they will co-exist in the future.”
Space could help to evade regulations
Currently, the lack of ICO regulation not only gives complete freedom for projects, but also problems as well. Those working with cryptocurrency-related business complain about the countless news and statements on initial coin offerings regulation appearing every day. This makes projects to clarify and change ICO documents again and again.
Experts assume that in the near future one jurisdiction (almost certainly one of the countries supporting the crypto economy development) will establish a comprehensive set of rules which will be used by other states as a standard model. But every country will make its regional amendments.
The representatives of the crypto sphere hope that the regulations will be focused on transparency to prevent frauds, not on simply being strict.
While talking about the future, Chris Keshian, co-founder of the Apex Token Fund, noted: the mechanism of initial coin offering provides a novel means of raising capital and funding development of new projects. Given the recent mania, there will be significant pull back and skepticism around ICOs, but ultimately they will solidify a position as a new means of raising capital.
With this in mind, many experts are also pessimistic. For example, Mihail LALA, Founder of **WAWLLET Enterprises Limited, has given a rather non-assertive comment on the ICOs fate: “ICOs, as we know today, will die very soon. They will be replaced by strongly regulated ICOs. What is happening today is close to chaos. I believe in a free market. I believe in free will. But we are not the ones that set the stage. Governments do that. And they will regulate the market soon. How? That is the question! I just hope not to close the door for regular entrepreneurs and leave the door open for big players ONLY. That will transform ICO into IPO and the story of ICO will be dead.”
But some experts think that ICOs have a chance even in case of very strict regulation.
James Song, CEO and co-Founder of Exsulcoin: “ICOs will be regulated substantially within 36 months. In the next 10 years, it will evolve into something else entirely. The ICO boom highlights human need for it. Regulation will kill it off and then that human need will express itself in a different way. I believe someone, or a group of people, will try to bypass regulation entirely by setting up an autonomous, anonymous network in space.”
The representatives of the cryptocurrency sphere believe that in the future, the offering of tokens will become a great tool to attract investments for innovations, as it’s ICOs which allow to swiftly attract finance, which is of utmost importance for those who create innovations. But to ensure that the ICOs indeed become a full-fledged means of finance, there is still much work to be done. This includes the upgrade of standards of ICOs organization and management.