Why ICOs Might Not Work For Genuine Long-Term Investors

Why ICOs Might Not Work For Genuine Long-Term Investors

Image credit: Dacxi

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Have you ever invested in an ICO (or IPO for that matter)? If so, what was your goal? Was it to make a satisfying long-term investment that would help you grow your future wealth? Or to make a quick speculative profit, in the hope that the asset will eventually be traded at a listing price lower than the market price? More often than not, it’s likely the  latter.

Here, we’ll take a close look at the pros and cons of ICOs, and explore a new way to invest and fund tech projects; with the Dacxi Chain global tokenized crowdfunding platform.

What is an ICO?

ICO stands for Initial Coin Offering. An ICO is a kind of hybrid between a crowdfunding offer and a tokenized asset sale. ICOs currently mimic the early stages of the dotcom boom, where projects could list on the Nasdaq on the strength of an idea – or even just a great URL.

Here’s how Wikipedia describes an ICO:

 A quantity of cryptocurrency is sold in the form of “tokens” (“coins”) to speculators or investors, in exchange for legal tender or other cryptocurrencies such as Bitcoin or Ethereum. The tokens sold are promoted as future functional units of currency if or when the ICO’s funding goal is met and the project launches. In some cases like Ethereum the tokens are required to use the system for its purposes. 

ICOs from an investor’s perspective

ICOs tend to operate in their own little hype-bubbles, completely disconnected from macro-economic realities that impact the ability of people to invest. But ICOs are also often surrounded by big buzz, which seems to promise a strong market once trading begins. This means FOMO takes hold. The lure of an ICO is the potential to make a quick profit. Whether or not that proves to be the case is another matter.

The actual process of investing in an ICO is easy. Usually all you need to do is pay for your crypto in an approved currency – often BTC or Tether. And unlike many traditional early-bird investment opportunities, you don’t have to be a government accredited investor or part of a syndicate managed by a broker. ICOs give private individuals the freedom to invest in whatever they want. 

In terms of the upside of ICOs, that’s about it. The downside for investors is much more significant.

Firstly, ICOs are a law unto themselves. They are not regulated and have no investor verification or protection. Doing proper due diligence is virtually impossible. There are so few financial and regulatory standards to meet when initiating an ICO, it’s very hard for a savvy investor to get the financial information they need to make a sound investment decision.

ICOs are mostly supported by investors from within the cryptocurrency’s own community. But buzz is no substitute for sound financial data. Many popular listing exchanges have few policies and practices in place to identify or prevent fraud.

Once the founders of the project get the money from the ICO, they have little motivation or pressure to follow through and complete the project in a timely and businesslike manner. That’s why many investors have been caught out by exit scams, known as ‘rug pulls’, or projects that just fizzle out as the founders enjoy their new-found wealth. Lack of transparency in many crypto-based projects hampers investors’ ability to check in and see how things are progressing.

Lastly, ICOs are particularly prone to pumping and dumping. Which means that mooning price you watched straight after listing might not be such a good sign after all.

ICOs from an entrepreneur’s perspective

The big drawcard for founders is that ICOs can call upon a whole world of potential investors. All they need is some crypto and an account at a listing exchange, and seconds after the ICO launches you have millions in the bank. Good times! And you haven’t had to jump through any pesky accounting or regulatory hoops to get it. So surely it’s plain sailing from here, right?

Maybe not. There is a considerable risk that a regulator will come calling in the future claiming that you have illegally sold an unregistered security. In the US and Europe in particular that’s frowned on by the authorities – which takes a lot of the fun out of being a high-rolling entrepreneur. And because your investor base is mainly made up of speculators, you’ll find they aren’t very patient with you, either. After all, you’re supposed to be making them rich, and those Lambos don’t buy themselves. 

The vagaries of a speculation-driven market also means your funding is unreliable. Your project might get some bad press or you might not keep the hype-bubble inflated. Before you know it, what’s worth millions today could suddenly be worth just thousands tomorrow.

Why the Dacxi Chain might be a better alternative to an ICO 

At first glance, an ICO might seem like a great idea. It’s a fast way to get enormous financial resources very quickly, and it means you might make a quick profit. But they can be risky for investors, and they generally don’t attract the right crowd. 

The Dacxi Chain tokenized crowdfunding platform aims to be a better solution for both investors and entrepreneurs. 

For investors, the Dacxi Chain lets people purchase equity stakes in new tech projects with high long-term growth potential. All with the assurance that the shares are priced fairly, there is full regulatory compliance, proper due diligence can be done, and their ownership is secured by tokenization on the Dacxi Chain’s native blockchain.

For entrepreneurs, the Dacxi Chain puts them in touch with people who understand their product or service. It connects them with investors who are looking to grow their wealth in the long-term, alongside the increase in the value of the new venture.

A global game changer for investors and entrepreneurs?

The Dacxi Chain tokenized crowdfunding platform aims to revolutionize crowdfunding all over the world, by connecting serious private investors with entrepreneurs who need funding for projects with genuine growth potential.

The Dacxi Chain will sit on top of a global network of local Dacxi-supported crypto wealth platforms, run by locally licensed companies. 

Here’s an example of how it will work.

Say an electrical engineer in Manila has developed a new type of fitting that would revolutionize interior lighting. He has begun manufacturing and selling locally, and feedback tells him that overseas markets would buy it too – if only it was available to them. He calculates that he needs to raise USD$4 million to expand overseas.

Through an advisor he approaches Dacxi Philippines Opportunity Division, and an offer agreement is made. Dacxi secures the shares, and its staked blockchain writer node ‘mints’ tokens for sale. Shares are offered globally through Dacxi licensees to investors who have indicated their interest in a primary sector offer. A property developer in Naples who is registered with Dacxi Italy sees the opportunity and understands the product’s potential. He completes due diligence using the information made available through the Dacxi Italy platform. Satisfied with what he sees, he swaps Euros for Dacxi Coin and sends his investment to Manila on the Dacxi blockchain. His new investment tokens appear in his Dacxi Italy portfolio.

Translation systems allow for global term sheets, so everyone within the Dacxi Chain ecosystem gets the opportunity to invest – no matter where they’re based.

When the offer is fully funded, the Philippino engineer converts the Dacxi Coins into local Pesos and begins expanding his business, confident that he has the right amount of funding to achieve his objectives. 

His investors won’t be speculators who are only interested in making a profit then heading for the hills. Instead, they will be serious investors, who appreciate the product’s potential, and recognise that their own business could even benefit from it. 

Under the speculator motivator ICO system, an outcome like the one above is almost unimaginable. But with Dacxi Chain tokenized crowdfunding, it will be an everyday occurance.

For the latest information on Dacxi Coin and the Dacxi Chain, visit dacxicoin.io. You can download the Lightpaper, and join the Dacxi Coin telegram community. For media enquiries, please contact pr@dacxi.com. You can also check out the latest Benzinga Dacxi Review.

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.

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