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Why ICO Fail?By Abhishek Singh | May 2, 2018, 3:27 p.m. GMT
46% of ICOs that happened in 2017 have failed. According to a Bitcoin.com survey, out of 902 crowdsales that took place last year, 142 failed during the funding period itself and another 276 failed after funding. These 276 crowdsales include the frauds who raised money from the investors and ran away as well as the (probably) well-meaning projects that simply could not deliver their projects. In fact, the bleak numbers do not stop here. There are another 113 crowdsales which are classified as semi-failed. Semi-failed ICOs include the projects that are deemed to have no chance of success from the lack of activity on social media and Github or the minuscule size of their community.
There can be two distinct markers of such ICOs
1) Failed ICOs
2) Fraudsters doing ICOs
Why do ICOs project fail really?
One of the major reasons for a failed ICO is that the project did not necessarily need a decentralized approach. This means these projects were not solving a real problem geared for Blockchain. There are many projects that used Blockchain in use-cases that weren’t huge value-adds. Concerns like product-market fit, scalability etc. Are important ones for ICOs to solve before embarking on the money-raise. A team ended up doing an ICO for a token called the UET- Useless Ethereum Token, an ERC20 token used only to store and transfer UET tokens. Coins like this are an extreme example of projects not solving anything. Such lack of intent can be fatal to a project.
Investing in ICOs is like investing in the vision of the people involved in the project because there seldom is a product to show. Investors hence do check if there is a vision and whether the said vision solves a real problem.
Several ICOs fail because the project is not unique. If a company is solving a problem that others are solving too, then too bad buddy! There already is an Ethereum and scores of ‘Ethereum-killers’ today. If you are looking to create another ‘Ethereum-killer’, then waking up to a strong cup of coffee is what you need.
Bad marketing is another reason why ICO fails. ICOs need to have a good marketing and PR team. The social media presence and communication is required very much. Sometimes company fails to do it which leads to project failure as not many invested in it.
Sometimes a project fails because the target audience for the project is very small or it does not have enough demand in the market. It may be a good project but can fail possibly because it doesn't have a demand. An ICO works just the way a start-up does.
As for the second marker, fraudsters doing ICOs- several ICOs underway are complete frauds. People are raising money from crowdsales and then using it for personal enrichment. Hackers are hijacking ICOs in a few cases too. Confido is an example of a fraud ICO, a cryptocurrency start-up that raised nearly $375,000 through an ICO but disappeared with the funds. ICOs are prone to frauds for lack of regulations. Anyone can do an ICO and raise any amount of money from people. Sometimes it is very hard to distinguish between a good ICO and a fraud ICO. Brad Garlinghouse, CEO of Ripple, the fourth-largest cryptocurrency by value, said in a recent interview that "a lot of what's happening in the ICO market is actually a fraud." Ethereum co-founder Joseph Lubin said that there is "irrational exuberance" in the ICO market. But there are many red flags that you can look out for.
Don’t get spooked by this article though. For every potential failure, there is a great ICO too. The question is whether you can tell one from the other.