From decentralization to ICO regulation: is there a way back?

The genesis of decentralization

Lots of people associate words like bitcoin, crypto, and blockchain with the concept of decentralization. Of course, if you research every cryptocurrency in detail, you would find centralized and kind of centralized moments. There are lots of discussions on this matter in the Net, and one could argue on this for a long time.

In my opinion, bitcoin has become this popular and drawn the attention of the public exactly thanks to the concept of decentralization. In its development period between 2009 and 2011, the main users of bitcoin were developers, for whom the concept of decentralization is associated mostly with the distributed networks. Since 2012, so-called liberals started to pay attention to cryptocurrencies. Interesting enough, this was mainly the liberal movement among white collars. Starting at that moment, the term of decentralization in the crypto industry has changed its meaning drastically and has become more economical. Now, bitcoin and blockchain became the instruments of independence from the governments and dictated economical rights. From the marketing point of view, this familiar idea of independence, together with the technical possibility of realization and some kind of riddle created by the absence of bitcoin’s creator played its role in such an impetuous growth of the whole crypto market’s popularity.

Search term: Bitcoin. Worldwide. © Google Trends

The first blood

Nonetheless, despite its uniqueness and novelty, the crypto market didn’t become something new for the speculators. As any growing market, cryptocurrencies have got a lot of fakes, variations, and third-party solutions. This may be compared to the smartphone market, where there are a few main players and a ton of much cheaper Chinese producers. The market, which embraced both people with faith in the bright future of decentralization, and speculators, aimed only at gaining profits by any means.

By coincidence, ICO campaigns became an instrument of manipulation. Some people have seen there an instrument of supporting the projects, their development, and, surely, multiplying the personal finances, while others decided to simply play on this and get money. As a result, now we have lots of projects, stolen user money, and only a few successful cases. But the main thing you should keep an eye at in this situation is the key market players: individuals (more known as hamsters) and speculators. Institutional players are now aside, as the market is to small and not interesting for them.

Is it the time for a change?

On the last crypto conferences, I started to note that the ideas of speeches move to the need for regulation and creation of strict rules for cryptocurrencies and ICOs. In the begging of this year, everyone was talking about some kind of regulation, but in every way tried to put their tokens into the utility zone, but now everyone speaks only about STO (Security Token Offering).

It can be considered as a natural development of the market, but if you pay attention to the conference speakers, they are mainly made of institutional and VC markets, together with politicians and government affiliates. The market regulation is mainly anticipated by this companies for insuring their own risks. However, with the loud statements about securing the users from scam projects, nobody speaks about securing the users investing their $500 into a project for income. Who is speaking about the need for regulation then? Real cryptocurrency users, who have already got their fingers burnt and make their conclusions, or those who want to gain income from the market, but only if it is framed by law, to minimize risks? While we think about that, the marked started its turn towards the regulation.

Where do the ICO investments come from now?

The best way to understand the market is by reading numbers, but it is quite hard to notice on the sidelines. Let’s take a look at the crypto market in general first.

Now ask yourself, if you would buy crypto at $10, would you sell it or invest somewhere with the current $3 price? This is where the so-called HODLers community has come from.

The chart of ICO investments is also interesting:

In parallel with the descending cryptocurrency chart, we see the increase in investments. The peak in March is related with closing the Telegram’s ICO (which was oriented only on funds and VCs), and the June’s one with the EOS token sale, which has continued for a year and collected around $4 billion, which makes it different.

The explanation of this situation is a fairly easy one. Starting with the market’s downfall, lots of ICOs didn’t manage to attract enough funds for their token sale. It was conditioned by the descent and the scam projects on the market. To secure themselves, new ICOs started to run in the 90/10 format, where 90% of investments are welcomed from VCs and funds, and the other 10% is left for the community, to remain in the market. The investments from funds and VCs are coming along with some kind of ‘regulation,’ which assumes some mutually profitable agreements between the project and investors. The so-called transparency and decentralization are only left for the remaining 10%, and only for making an appearance.

Back to the roots

Probably, the whole situation around the ICO market centralization is not the bad, but only for the companies and investors. Business acting in the legal field can contribute to the same protection of every human’s rights. But on the today’s market, even on the crypto market, we can only see the same centralization by bigger players and governments, however, still only regarding the investments.

Will the users manage to return decentralization back to the crypto market and the true striving to decentralization? Only the time will show.

Probably, quite soon we will see yet another fight between bulls and bears, but not among traders, but between users and governments, for the cryptocurrency and blockchain markets, and the freedom in the net.

Written by Alexandr Kerya, CEO at INCRYPTICO