ICOnomics: The One-Size-Fits-All Approach, And Its Faults

Lately, there has been a boom on ICO. It seems that there is a coin for everything. Coins for buying news, for making online IDs, coins for paying for porn, coins for saving energy, and even coin for funding gaming platforms. The quantity, purposes, and number of ICO are out of the scale. According to an article by the Wall Street Journal, only in the last year, initial coin offerings raked in more than 4 billion dollars. That is not pocket change.

Everyone wants a seat on the ICO bus because is one of the easiest and more popular ways of collecting funds for virtually anything. Many people think that they are buying a utility or contributing to a transcendental project. But in reality, they are only buying tokens. That’s why they are called Initial Coin Offerings. A token that will develop a part on a platform around the project funded; but a token.

This brings us to the second thing that is paramount for the popularity of ICO as funding tools. There is virtually no method of evaluating the performance of an ICO that does not involve the same ICO. Only the same project developers know the scope of the project and the phases that it will undergo. If you underperform at your job, you will get fired, surely. But you cannot fire an employee of an ICO;  you cannot even complain to them. Also, the same ICO establishes its fundraising goals, called “caps”. If they don’t reach what is called a “soft” cap, the ICO can decide not to refund investors. Even a big ICO, like the one being sponsored by Telegram, brings confusion to its clients in this aspect.

It looks like the one size fits all approach to this kind of enterprise does not work. At least not for investors. And regulators are starting to notice it. Last week two key events had place: Google announced a ban on ICO related advertising, and the House had its first hearing with representants of the crypto world. ICO, being unregulated, high-risk volatile endeavors, must be watched closely till they reach maturity with regulation. Until this occurs, play it safe and do your own investigation about them, if you want to invest. And stay away from the ones advertised by famous personalities; they tend to be the worst ones.

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