By Far the Biggest Chunk of Tokens are Sold in Private and Pre-Sales - Some Thoughts
The largest part of all tokens available for sale are sold in private and pre-sales. That does not sound very ‘decentralised’ or ‘healthy’ to me.
According to an article on Hackernoon a staggering 84% is sold in private and pre-sales. That means ‘only’ 16% is available for the community and smaller investors.
I remember 6-9 months ago, you could still join an ICO with just 100USD and there were barely any private presales. Nowadays token distributions seems to get more and more concentrated and unfair. Communities of 50k+ members spread the word in exchange for bounties and high hopes. Once the ICO starts you have about 10 seconds to get in and you still have to be lucky to get in.
This is not the right balance. And I am not even talking about all the exclusions from ICOs based on geographics, minimum contributions, slow internet or just plain luck. Stuff needs to change and everybody knows it.
I get that it is not easy to coordinate the perfect ICO, but I feel teams can put in a bit more thought. Too much goes wrong because of the way the ICOs are structured in the first place. Currently there is also too much incentive for projects to go with private presales and ‘accredited investors’, since it is a lot less hassle and risk.
Open, honest and clear communication from projects would be a great start and some are doing that, but the majority isn’t. I would recommend the following filter to all projects for which actions to take (I personally use this a lot, inspired by one of my mentors):
“If you can’t explain it in a stadium full of people, it is not the right thing to do.”
A community missing out? - Image source
Anyway, these are some of my thoughts on the matter. I guess there is some frustration in there as well ;-)
What are your thoughts? How should it change? Let me know in the comments!
Sources:
https://hackernoon.com/icos-the-community-does-the-marketing-large-investors-grab-the-tokens-2551bba51e1f
https://news.bitcoin.com/icos-raised-2-billion-year-mostly-private-sales/
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Disclaimer: I am not a financial advisor, trader or developer. I am just a blockchain & cryptocurrencies enthusiast. Make sure you do your own research, draw your own conclusions and do not invest any money that you cannot afford to lose.
i dont like ICOs, I like mineable coins. then you can easily see if coin works and if dev team is actually doing something. much harder to get scammed this way - and even if they do scam you eventually, they have to put much more effort in it ;)
Bullseye! You brought out all the weaknesses of the ICO sales. Decentralized lost its meaning with this kind of greedy teams and investors.Lucky for us things are beginning to change.There are couple of projects like Ethearnal that are first with DAICO.I hope there will be more DAICO projects in the future.... so people can regain confidence.
Very true indeed! Like the non pre-mined coins in 2013 :-) Good old times!
I think the days of crazy ICO ongoings are numbered though. It's indeed a 10-second window right now, but there are also a lot of initiatives and experimental ICO's that try a different approach to get a more even distribution. Many projects recognize that it does their project no good to see their token dumped straight after the ICO. Then again, plenty of projects don't seem to care either..
But I'm thinking that upcoming regulations and initiatives like the CoZ 'ICO framework' on the NEO blockchain may normalize things in due time. By then we'll be talking about the good old days and sharing anecdotes from 'that one time' when we managed to get into a good ICO and score big.
That might very well be the case. I think gradually investing in this space will be very similar with traditional companies.
The bigger and eventually successful projects might follow the steps: VC/accredited investor seed money -> Build product and release first version -> raise money through ICO (general public). Maybe more than 1 seed funding round, but eventually the average Joe investor won't get in early on the solid professional projects any longer, or at least chances are very slim.
Reading back what I just wrote....this is very much already the case actually :-P
In the States it appears the SEC is taking a hard look at those who structure private pre-sales under the SAFT (Simple Agreement for Future Tokens) framework.
https://venturebeat.com/2018/03/03/sec-subpoenas-show-the-saft-approach-to-token-sales-is-a-bad-idea/
I'm not usually one to be bullish on zealous regulators, but I think in this scenario it might not hurt.
Thanks for sharing. I read something about that and it indeed might be necessary to 'force' even quicker learning :-)
I haven’t participated in an ICO and by reading thys my chances are getting slimmer by the day.
Just like everything which can be tokenized will be tokenized, everything that can be monitized will be monitized.
On one handit shows that the cryptoworld is maturing on the other hand it’s attracting the wrong kind of investors.
These kind of investors don’t see it as a gamble or do believe in the product but want instant return on their investments. This is bad news for the cryptoworld. Nowadays deadlines are skipped cause the developpers don’t think that the quality is good enough. Which causes a small decrease in value for the coins but thats it. These days will be over soon. The developpers will be presured to go life with an inferior product and maybe lacking the desired quality and even security. These lacks will be exploited and bring muchmore damage to the coin/product and even the complete cryptoworld.
If this continuous every small investors chances get slimmer. But I believe the space is learning and newer ICO models come into existence. Full airdrops, 25k whitelist with low individual caps, auction models etc.
As usual the rich are getting richer. I feel there will always be big massive whales making stacks of money off smaller investors with cryptocurrency. Thanks for the interesting post!
That might be true. That would be unfortunate though. We're in this space for a better world!
Accredited investors are the bane of small investors but you can't blame the project owners though. After all, the incentive is for them to maximize contributions and Accredited investors offer just what they need and without all the hassle of a traditional ICO.
Your article reminds me of Telegram's TON presale. Had great plans for TON but those darn Accredited investors had better plans lol.
Yeah, that project is a classic example indeed.
I do think there is enough money in the market to raise a good amount of funds for your project. If it is solid, it's okay to have an ICO that takes a bit longer than 10 seconds. That first few million should be enough for the first 6-12 months right ;-)
Yeah, I agree with your take on there being enough money in the market to raise sufficient funds for the project.
Howbeit, that also assumes that humans are rational. Truth is, humans are the most irrational beings in the history of irrationality lol. Add self interest and it gets uglier and so the vicious cycle persists. But if it's any consolation, it's evident that we're in the nascent stages in the adoption and advent of cryptocurrencies and blockchain technologies so as the cryptosphere evolves we can hope for better infrastructure for ICOs, some forms of regulation, etc.
Great words!
Muy buen post, me ayudo mucho a conocer este tema ya que cuando entre no tenía idea de que se trataba, muchas gracias y saludos,
You're welcome :-)
me gustan muchos tus post, y me gustaría que revisaras mi blog :)
I agree completely about not sounding decentralized. The 1 percenters are here!
It seems like it..
Muy buen articulo amigo,
You got a 2.48% upvote from @buildawhale courtesy of @cryptotem!
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