Initial Coin Offerings (ICOs) have been an incredible phenomenon over the past few years, raising billions of dollars of investment capital for a wide range of blockchain development projects. It seems that anything with the word “blockchain” attached to it draws immediate interest and attention. Not all ICO funding efforts achieve their funding goals, but for those that have, the casualty rates have been excessive. Recent surveys claim that over 80% of these projects are either fraudulent or led by incompetent executives with little experience in how to develop anything of value.
The present situation harkens back to the early days of the Internet. A similar “hype” mentality existed then, where investors threw money at projects with little more than an idea to back them up, and not a well thought out idea, for that matter. The massive wave of current ICO fundings has encompassed both 2017 and 2018, but apparent failures, regulatory pressure to eliminate outright fraud in the space, and a continuous flow of bad press may eventually curtail the unbridled enthusiasm for this innovative funding method.
If you would take the bad press articles and the continuous rant from regulators to heart, you could easily believe that there has never been a successful ICO, but this is not the case. Yes, many ICOs have crashed and burned or have had their founders disappear with the money in the dark of night, but there have been quite a few successful ventures, as well, if you rank the ICO tokens, based on total return to date. Except for the “Top Gunners”, many of these names may be unfamiliar to you. By market cap ranking, they may appear in the “Top 300”, but buy/sell dynamics are so sensitive that wild price fluctuations are common on a daily basis. This kind of ICO token liquidity issue makes selling a position very difficult to achieve, if large amounts are involved.
With hundreds of projects on the drawing board, each attracting investor interest of some kind, how can you pick out the potential winners in the group? If it were that simple, then we would all be rich and living the good life, but the “magic formula”, if there is one, was found by each of the ten programs that we will discuss in the paragraphs to follow. Each of these ventures was innovative or improved upon an existing model. Each was also successful enough to get its tokens traded by one or more exchanges, and then yield enough promise in the marketplace to justify incredible valuation growth and support from a broad range of international investors.
- Ethereum: We start with the highest return performer. Ethereum was actually one of the first ICOs. It raised a paltry, by today’s standards, $2.3 million in 2014, but its battle plan was to do much more than its rival, Bitcoin. According to one report: “Unlike Bitcoin, Ethereum is more than just a cryptocurrency. It is a ledger technology used to build and deploy decentralized applications, a.k.a. “smart contract” technology – a program that automates the execution of a contract when the correct conditions are in place. With its massive potential for application and innovation, Ethereum has piqued the interest of the corporate world that wants to take advantage of the potential for smart contract applications.” How much “pique” you might ask? Try an ROI of 33,725%.
- NEO: NEO is one of the largest ICO startups, due in part to support from the Chinese government, Alibaba, and Microsoft. Often labelled the “Chinese Ethereum”, it has copied to an extent the business plan of the Ether folks (See above), including “utilizing smart contract applications, decentralized commerce, digitized assets and identification, and more.” If you had been fortunate enough to buy early at $0.03 per token and then sold at $700, you would have been very wealthy indeed. Even at today’s price of $7.08, you would still have enjoyed a 23,600% return.
- Spectrecoin: Known for its dedication to privacy, the promoters for Spectre chose to support anonymity to the fullest, pandering in a way to the Dark Side of the web that moves capital across the globe for illegitimate purposes. Utilizing what some call heavy-handed encryption, Spectre is continually pushing the boundaries that digital currencies presently enjoy, while its management team remains hidden in the web underground. Regulators and tax collectors do not approve, but mainstream investors have reaped large rewards.
- Stratis: This UK-based startup has a singular focus that has carried it to a level of success that others can only envy. Initially supported by Microsoft and having benefited from the credibility that such support can bring, the firm decided to support developers that are more accustomed to working with traditional programming languages than with blockchain protocols. Its platform makes it much easier for businesses to design and develop custom applications, without having to create an entirely different infrastructure. Some pundits have begun calling it “blockchain for (corporate) dummies”. ROI pans out at 13,000%.
- Ark: The team at Ark have focused on efficiency and ease-of-use in the crypto world. As one reporter described its process: “The digital currency platform allows for quick integration of other cryptocurrencies into its own blockchain, with a global focus and a commitment to decentralization.” Convenience is always a valid business plan capable of reaping huge rewards in the marketplace.
- NXT: NXT, like its cousin, Ethereum, was one of the earliest ICOs, making its debut in 2013. It has also been one of the most successful, if ROI is the only measure of success. Pure and simple, the development team focused early on with a singular approach: “NXT was designed as a blockchain platform catering to the financial services sector. Returns have been astonishing: 130,000%!
- Storj: Can blockchain technology be applied to today’s “cloud storage” concept? The management team here is dedicated to building the ultimate cloud storage facility, one based on blockchain techniques, which will “be faster, cheaper, and more secure than anything in existence”. The deliverable is one that is easily understood by investors and computer users. As they say, “Keep it simple, stupid!
- Populous: Does anyone remember factoring receivables? At one time decades back, It was a common way that banks assisted their business customers by loaning funds up to a certain level, secured by outstanding invoices awaiting payment. Fraud destroyed the domestic application, but an international approach may still apply. The Populous platform “allows investors from any part of the world to invest in an invoice sold by an invoice seller from anywhere in the world.” Based upon Ethereum infrastructure, average investors can now participate in financing arrangements that previously had been restricted to financial institutions, wealthy individuals and governments.
- QTUM: Once again, success follows, if and when the ICO team has a primary mission and sticks to it. In the case of QTUM: “It is an open-source value transfer platform which focuses on mobile decentralized apps or dapps. QTUM is the world’s first proof-of-stake smart contracts platform.” The team has embodied many of the design attributes of Bitcoin and Ethereum, along with a number of technical innovations of its own.
Is this a complete list? Of course not – there are many more worthy ideas and concepts that envision bringing the benefits of blockchain to the mainstream. What lessons can be learned from this group of successful ICOs? In every case, the management teams have been singularly focused in a niche market. They are not attempting to be all things for all clients or take on titans in another industry. They are more than just an idea, too. Each has a product in the marketplace that brings “value” to a set of customers.
In the early days of the Internet, there, too, was a mass grouping of startups with all the best intentions for creating value in their respective markets. The potential market for all of these products and services was much smaller than the level required by the amount of invested capital to produce a reasonable return on investment. In other words, a sorting out process had to take place at some point. That consequence was an immediate consolidation, referred to as the bursting of the Internet bubble in November of 2000. Cost/benefit considerations won the day. Many firms closed their doors.
A similar situation exists today with ICOs and the projects they represent. At some point, there will need to be a consolidation to shake out questionable business plans. There will be winners and losers, but the process will be healthy for the industry and the next step to the “irrational exuberance” that pervades the ICO ecosphere today.