How not to step on a landmine while investing in ICO: comparative analysis of new platforms.

  

What is wrong with ICO market and ICO model itself? 

ICO market price has skyrocket in 2017 and will go even higher in 2018. Any person involved with cryptocurrency at some points consider investing in ICO. At the same time the success rate of ICO is rapidly decreasing. According to multiple experts over 90% of all ICOs will fail in 2018. The general reasons for a project to fail (before or after ICO) are as follows:  

•   market competition – too many ICOs suggest the same product/service and etc. 
•   non-working concept – some ideas and concepts looks great on paper and are useless in real life.
•   inexperienced team – not all project have a dream team that can coupe up with all difficulties 
•   hackers – collected funs can be simply stolen 
•   scam – some ICOs are actual scam created to steal your money and disappear 

You can name a hundred more reasons why a project can fail. The real problem is in the model of ICO itself. With an ICO, once the token sale finishes, developers have complete access to all the contributed funds. Developers have to calculate in advance how much is necessary to produce a minimum viable product and once they reach this amount, called ‘the soft cap’, they can start to work on the product and spend the money on whatever they deem necessary. If they don’t reach this initial soft cap, they have to refund the money. But if they do, there’s no further real obligation.  

How can you avoid getting into scam project? 

Let’s see how simple can I make it for you: You can’t. You can do your own investigation and check if the project is legit, but you can never be 100% sure the project will not fail or that the team will not move to some distant country with all your money.  

DAICO concept was suggested by Vitalik Buterin in January 2018 and is aimed at making ICO’s more secure by involving investors in the initial project development process. It will further enable token holders to vote for the refund of the contributed funds if they are not happy with the progress being made by developers.  Read more here. 

Concept is a good thing, but implementation will still depend on the team itself. The solution to this is an ICO platform that enforces DAICO concept (or provides similar features at least). Today we are going to compare 3 different platforms and see if any seems relevant enough.  

Competitors and rules  

The following 3 platforms will be compared today. 

CrowdHub (in coop with RACIB and VEB Globex bank) - system for protecting investments in Russian ICOs. See more in my previous post. 

DESCROW - service with a set of reliable tools for safe investing in ICO from Estonia. See more on official site. 

INCREMINT - decentralized escrow platform that implements enhanced variation of a DAICO with increased flexibility. Check yourself here.  

Rules will be simple. We will compare these platforms based on set of features desired for such systems. Features were chosen after analysis of ICO and DAICO models, common problems of ICO projects and discussions of these platforms on bitcointalk forum. For each feature a platform get from 0 to 3 points:  

•   0 – Feature completely unsupported/no info  
•   1 – Feature is available but has critical defects/or is incomplete 
•   2 – Solid implementation of feature with minor defects     
•   3 – Feature fully implemented, platform also has other supportive functionality that enhance the feature  

The platform with the highest score will be chosen as the winner. I will make a full review of the best platform in the next post.  

Comparing platforms 

Feature 1: Working product and roadmap. 

This one is easy, let’s look if these platforms are concepts on the paper or a working business. 

CrowdHub: Has a working site for crowdfunding, but has no ongoing ICOs. Launch is announced for March. No actual roadmap or whitepaper provided. Score – 0. 

DESCROW: Is on ICO stage itself. Platform implementation planned for Q1 2018 and platform launch for Q2. Has a good roadmap and whitepaper, but it seems it is behind schedule. Score – 1. 

INCREMINT: On pre-sale stage at this moment. The platform is under development. According to telegram group admins the platform is preparing for audit (go life seems to be planned for May). Whitepaper and roadmap are good. Score – 1.  

Feature 2: Implementing basic functionality of DAICO model. 

Contributors must have a way to control collected funds after an ICO using vote mechanism.  

CrowdHub: Group of investors will be assigned to review progress and will vote to transfer the next part of funds to the team. No vote for average investors. Score – 1.  

DESCROW: All investors that participated in ICO on the platform can vote based on voting rights. It seems people who bought tokens on exchange can’t vote. Team can choose to change vote days by paying money to platform. Score – 1.  

INCREMINT: All token holders (other than exchange wallets) can participate in vote (confirmed by transaction – 1 token = 1 vote). Milestones can be changed through public vote. Token holders can initiate a vote through a petition to return all remaining escrowed funds. Score – 3.  

Feature 3: Addressing main issues of DAICO concept. 

Team holds a lot of tokens and can affect the vote. Contributors are not usually well informed and can be affected by token price and etc. Contributors can also rely on others and ignore the vote. 

CrowdHub: Only a group of investors/experts participate in vote. Each member has a lot of weight. Average users can’t check if they are not payed to do the “right” vote. Score – 1.  

DESCROW: Team tokens can’t vote. Funds and tokens are locked until vote. Investor needs to take actions or wait to get the tokens. As people usually dump a lot of tokens after ICO, we can expect that voting will be done by platform users who bought tokens on the platform from others. So a lot of people will abstain from the vote. Score - 1. 

INCREMINT: Team tokens can’t vote. Every holder can vote if he stores tokens on non-exchange wallet. Platform will assure all required information and history of previous vote is provided. Any new holder can (but not must) properly educate himself on the project. Investors can chat on the vote. Score – 2. Comment: 2 point given only because any person who wants to take part, but didn’t participated in ICO can vote.  

Feature 4: Keep decentralization as much as possible. 

Platform or an average exchange is a centralized part of decentralized world of cryptocurrency. We don’t want to store funds of platform wallet, we want to have our private key (the same goes for ICO team). We want to get our tokens and have an ability to sell them at any time on our favorite exchange. 

CrowdHub: Investors will transfer funds to the wallet and CrowdHub will be responsible for further funds distribution. No actual info who will hold private keys. Score – 0. Comment: I can be mistaken, but it seems the platform will work with wallets like a centralized exchange. 

DESCROW: You need to transfer your money to a wallet on the platform that will store your ETH and bought tokens in frozen state. The key is not stored on the platform. Score – 1.   

INCREMINT: You use your own wallet to invest. Any ICO will have their own method of selling tokens. You actually need the platform to get info and vote. Score – 3.   

Feature 5: Fiat currencies support.  

Yeah, we don’t like banks and we are not here for fiat. But ICO team needs fiat to pay bills. Even when ICO collect ETH/BTC they want to convert them to fiat to pay the team, rent fees for the office and etc. Cryptocurrency cost can change too fast. ICO can collect hard cap in ETH and a week later ETH will drop by 100% and ICO team will not have enough money to work on the project. Team should be able to convert crypto to fiat, but we still want to have the same control over these funds.  

CrowdHub: Has a partnership with a state owned bank to store funds in fiat. Funds are controlled in the same way as cryptocurrency. Score – 2.  

DESCROW: Doesn’t support this feature. Score – 0.  

INCREMINT: Part of the funds can be stored on escrow account in a bank. Funds are still controlled in the same way. Score – 2.  

Feature 6: Special functionality and internal tokens 

Does the platform provides any additional functions? Does the platform has its own token? Can I use platform without the token? What are benefits of holding the token?  

CrowdHub: We don’t have much information so far. As I understand no tokens will be issued. No additional functions announced. Score – 0. 

DESCROW: DES tokens can be bought on ICO. Token gives discount on the platform service price (up to 30%), right to participate in some lottery and possibility to transfer the frozen tokens to other Backers (investors). It seems you need to hold these tokens to fully use the platform. Other functions: Insurance, means for bounty and referral campaigns. Score - 3.   

INCREMINT: MINT tokens can be bought on ICO. The token gives a 10% discount on a token purchase of up to .01 ETH value in an ICO using Incremint. You don’t need these tokens for any function on the platform. Additional functions for vote were covered above. Score – 2.  

Competition result. 

Here is the table with results:  

The prize goes to INCREMINT platform for providing a secure and truly decentralized service. I will do a full review of the project in next few days. Stay tuned for updates. 

More links on incremint: site | twitter | telegram

Disclaimer 

I’m not a financial of any kind. I encourage you to check all information yourself and make decision only based on your own opinion.  

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