In the world of cryptocurrencies, every coin seems to be at the edge of a meteoric rise in value to the moon. Almost every day, a new cryptocurrency is launched and it can be hard to keep track of what coin is making a killing in the crypto market. However, as much as there is a lot of excitement in the crypto space about the possible success of any particular coins, there are also a good number of cryptocurrencies that simply won’t stand a chance. For that reason, we sought out to investigate what makes a cryptocurrency tick and most specifically, what makes for a successful ICO.
What are ICOs and why they are relevant?
If you are new to crypto, you most probably are not quite familiar with what an ICO is. Well, to put it simply, an ICO is similar to an IPO. However, instead of trading shares in a limited company for funding, an ICO trades cryptocurrency in order to get funding for the company. Think of it as a crowdfunding initiative to kick-start a Blockchain based company.
In the recent past, ICOs have moved from public affairs to more private events where a select group of investors is called upon to invest in a Blockchain based startup. The reason behind this has mostly been motivated by harsh regulations against ICOs by leading global economies. ICOs have always provided a reliable alternative to venture capital funding and this has attracted supporters and critics to the crypto space.
Which ICOs have been most successful so far?
One of the most historically successful ICOs in the world of cryptocurrencies is Ethereum’s ICO. In the beginning, an Ethereum token was sold in the crypto market for a paltry $0.31. Currently, with an overwhelming return of over 200,000 percent since the ICO launch in 2014, Ethereum’s value is now only second to Bitcoin.
By the look of it, it is pretty obvious that Vitalik Buterin (the founder of Ethereum) and his team are on to something. Ethereum has held on to the number two position for quite some time yet there is a lot of hope among crypto enthusiasts for this smart contract cryptocurrency.
NEO was formerly known as Antshare. So far it holds the title of the most profitable ICO there ever was with a massive ROI of over 250,000 percent since the launch of its ICO. Just like Ethereum, NEO also uses smart contracts on its Blockchain network and has since been called the Ethereum of China.
Founded by Da Hongfei, NEO is a Blockchain company from China that enjoys a lot of backing from the government and other big-time tech companies like Microsoft and Alibaba.
In the view of most people, the success that NEO enjoys is mostly thanks to the fact that it is backed by big investors. However, NEO is the only token that enjoys a monopoly of the Chinese market which stands at over a billion strong.
Truth be told, 2017 was an explosive year for most cryptocurrencies. One of the coins that managed to gain a meteoric rise from its ICO is EOS. EOS is a cryptocurrency on the EOS.IO Blockchain protocol that also operates with a smart contract to host other decentralized applications on its network. The platform was only launched last year, yet the EOS team managed to gather a whopping $185 million within the first week of the ICO launch. In a matter of days, the price of a single EOS coin went from just $0.925 per coin to over $5.
Even though the hype over cryptocurrencies seems to have gone down in 2018, there are still a good number of ICOs that are enjoying the success of being funded by users. One of such coins is AID Coin. It was first launched as a non-profit social service company that offered AID token for transparent donations while offering a pay service network for donations. Currently, the platform uses Blockchain to track donated funds in order to ensure transparency with donation funds. During its ICO a hard cap was achieved within three days with the ICO raising over $15 million. The success of AID Coin can mostly be attributed to a large number of interested investors looking for low-risk avenues of donating to charity programs.
What is teh reason for failing to become a successful ICO?
We have only looked at a select few of the ICOs that have had a unicorn-like success. There are however a huge number of ICOs that go unnoticed, leave alone those that fail flat. So what really makes an ICO succeed? Well here are some reasons.
Let’s face it, if the coin behind the ICO does not provide any utility to investors, there is a big chance the ICO will fail. Any of the successful ICO including the ones we have looked at provides a coin that is not only useful for being bought and sold in an exchange. After all, there are already hundreds of coins in the crypto market with little utility and most of them have been delisted from the major exchanges because of that. Most coins that have attempted to be the next Bitcoin by copying its features have failed miserably.
In some cases, even the most meaningless ICOs have managed to gain huge amounts of funding from investors. Most of the people who invest in such ICOs are usually speculators looking to make fast profits on popular ICOs. However, since such ICOs are mostly backed by Blockchain protocols that are poorly developed, hackers manage to steal most of the funds. In fact, this has happened to a good number of ICOs including the most organized ICOs in the crypto space. Chainanalysis has also come out with a statistic that shows that there are 1 in 10 chances of investors losing their funds through cyber theft during an ICO. Basically, if your platform has a faulty code, it is bound to fail as a result of hackers.
Before an investor chooses to invest in an ICO, most of them will conduct a due diligence, and one of the documents most investors go through is the whitepaper. A whitepaper is essentially a document that explains the fundamental parts of the company or project. Most companies that fail during their ICO stage are those that neglect the importance of a quality whitepaper. Thus, to make a successful ICO, it is important for a white paper to include a roadmap with detailed illustrations of how the project will work, the plan of action and the overall vision of the leadership. This way, investors are presented with a detailed and well-explained document that gives them the confidence to invest in the company through the ICO.
Most ICOs are based on unrealistic budgets and objectives that eventually end up choking the business. Even worse, some ICOs can turn out to be scams. While some developers manage to come up with revolutionary technologies that are able to change the world, most ICOs forget to consider the economics side of cryptocurrencies. As a result, most ICOs lack an economic skeleton to accompany the technical Blockchain side of the project. This way, most developers are motivated by the massive case of fear-of-missing-out and hope that their projects will gain the hype of investors who will pour in millions without completely understanding the project. To avoid this, developers should conduct thorough research on the technical as well as an economic aspect of their ICO.
Final thoughts on the most successful ICOs
Since the launch of the first ICO in 2013 by J.R Willet who launched an ICO for Mastercoin, there have been hundreds of ICOs launched with hundreds of coins. So far, billions have been raised through ICOs and startup companies that would initially go with VC firms have made a killing by simply launching ICOs. Obviously, there are many advantages to an ICO over venture capital funding. An ICO allows you access to a pool of investors from all over the world, plus there are fewer barriers to the developers who also end up retaining a huge percentage of the company ownership.
However, with more and more successful ICOs around, governments have started paying attention to them, planning to formulate laws that would govern how ICOs are held and whether they are allowed in different parts of the world. At the moment, there are only a select number of countries that are in full support of ICOs. The aim of regulators is to seal the loopholes that have since been used to scam investors leading to millions being lost to scams.