The Biggest ICO Predictions For 2018
Last week, the US Securities and Exchanges Commission ordered the shutdown of an Initial Coin Offering (ICO) by the crypto firm, AriseBank, and proceeded to sue the firm and its founders for alleged fraud.
In one of its biggest catches in the murky ICO waters since declaring war on fraudulent ICOs, the SEC found that the ICO by AriseBank had allegedly defrauded investors of some $600 million on its way to achieving its $1bn target for its token, AriseCoin.
And even as the drama unfolds between the SEC and AriseCoin, this incident paints a picture of an industry in a constant state of flux and uncertainty.
Just this past year, startups used ICOs to raise billions in funding, surpassing many traditional funding platforms. However, the growing popularity of ICO-powered platforms also highlighted significant risks associated with these platforms, prompting authorities across the globe to take action.
These interventions, coupled with unending cryptocurrency volatility, saw ICOs close the year on a quieter note, with confusion and uncertainty reigning supreme over the future of the ICO industry.
And now, a month into 2018, there’s still a lot of uncertainty in the air, with opinions split about the future of ICOs in the midst of regulation and volatile crypto markets. Still, there are a few predictable trends in the works that are most likely to shape the future of the industry.
1. Tokenization will spread into existing industries
At the CES 2018 earlier this year, photography firm Eastman Kodak (NYSE:KODK) announced plans to launch its ICO as part of its strategy to make inroads into the world of blockchain. The company said it would be minting its own cryptocurrency, the KodakCoin, to give photographers more control over their image rights.
In addition to Eastman Kodak, there’s Telegram, the messaging service whose upcoming $1.2 billion ICO is poised to set new highs in the crypto world. Telegram’s ICO is already receiving interest from Silicon Valley, with VC firms such as Sequoia Capital and Benchmark each looking to pump $20m into the ICO.
Eastman Kodak and Telegram are among a growing number of traditional companies that are tokenizing whole or part of their platforms. There’s every indication that this trend will continue, perhaps in appreciation of the huge potential of ICOs in general.
2. Regulations will be good for ICOs down the stretch
Unlike IPOs, ICOs are easy to start. Founders can receive millions of dollars within a few months without ever having to schedule a VC pitch or part with a share of their companies.
Unfortunately, this has also meant feeding season for hackers and fraudsters, with ICO investors losing over $400m out of the $3.7bn raised via ICOs so far. This has prompted authorities to step in, with the SEC being among the first bodies to take action by instituting a raft of measures to try and tame the hyped industry.
And even though crypto die-hards have been faulting the SEC’s involvement in the crypto world, this intervention will ideally do more good than harm.
In addition to instituting investor protections, regulations help to bring ICOs closer to mainstream finance with all the protections of the law. Bob Jenson, a loans advisor and working capital consultant based in Los Angeles, CA, says regulations will eventually make sense for many traditional industries, including the lending industry. “With the right form of legal and financial frameworks, ICOs are easily the best platforms for non-bank lenders looking to raise funds,” he says.
3. Developments in blockchain technology will drive innovation for ICOs
Put simply, blockchain is a decentralized ledger that keeps track of each transaction on its network, maintaining visibility for everyone with access. Different iterations of the blockchain power cryptocurrencies and ICOs, making it a significant player in the future of ICOs.
Unfortunately, many startups that sponsor ICOs will often have a hard time explaining the value of the blockchain to their companies.
Lana Ustinova, co-founder and CEO of the ecommerce platform iGotOffer, compares the current blockchain hype to the dot-com bubble of the early 2000s. “Back in the day, businesses rushed to make dot-coms part of their business plans, even when it didn’t make sense,” she says. “And even though the internet was the future, many early adopters failed because they didn’t fully understand its value.”
Many startups with ICOs go out of their way to fix the blockchain into their business plans and whitepapers, promising a cool product or service but falling short of delivery.
Going forward, only those startups that create services and products that make the best use of the blockchain stand to benefit the most from ICOs as investors look beyond the hype for value and sustainable gains.
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