All ICO's are scams
It is a bold statement I know. And maybe the intention of the ICO owners is not to run a scam as such. But that is essentially what they are. The ICO's are being launched to raise funds in exchange for digital tokens (coins) that in most cases do not have any real value, they do not give you any rights or say in the company that issued them. Let's take a quick look at how an ICO works (at a high level).
A Definition First
An unregulated means by which funds are raised for a new cryptocurrency venture. An Initial Coin Offering (ICO) is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. In an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies.
What does that really mean?
It seems these days, ICO's are being created almost daily and selling out even quicker. The "investors" are hoping that the value of these coins will increase in value. I use the term investors very loosely, as most people participating in an ICO sale are speculators. There is no guarantee that the value of these tokens will increase however almost immediately after the ICO has ended a large amount of these tokens are traded on various exchanges at some very high prices (as compared to the price to participate in the ICO). The tokens are not being valued against the company that created them in the first place, but rather they are being valued against the current hype that is being generated and subsequently valued based on supply and demand on the exchange. Without the exchanges these tokens are essentially worthless!
The Scam
As mentioned earlier, most of these tokens are not tied to anything tangible. The value of the tokens are based completely on the hype of the ICO and the subsequent market exchange. The companies that launch the ICOs have no accountability to deliver upon any promises they make. THERE IS NO SECURITY!
So, these companies launch and ICO to raise some funds. But no only that they also create a large number of the same tokens for themselves. What are these tokens used for? There is only one purpose and that is to trade them on the exchange to make ever more crypto.
So, you should ask yourself seriously why a company would be selling off their newly acquired (from thin air) tokens immediately on the exchanges when they have already raised such a large amount of crypto from the ICO itself.
Final Words
So, be careful. Take advantage of these ICOs for what they are, an opportunity for a quick profit on the market. But, I would advise that you do not hold these tokens for long unless they are pinned to something more tangible. The token should have real use going forward.. not just be an instrument of crypto exchange with no tieback to the company that issued them in the first place.
What are your thoughts?
Scam is definitely not the right word, but people do need to be aware that there is usually no guarantees at all with your "investments" so make sure you get into something you really believe in long term or be the first one to sell on the market and get your dirty profit.
Your points are valid. I'd like to point out that although some ICOs are 'unsecured' the good ones derive their value from the utility of the application. See MKR and REP.
You are right. Your 2 examples however have been in existence for awhile. But, yes I should have highlighted more that where the tokens are used in application then they do in face some intrinsic real value.
They have been around for a while becasue they have a solid model.