(Eye) ICO are doomed to failure.

The rapid growth of the cryptocurrency market in 2017 drew attention to several new companies that created ICO. According to some estimates, last year ICO raised more than 5.6 billion dollars. Despite this success, many projects have already failed or come to light. It is important to study in detail the current state of things in this market and determine if the negative trend will continue in 2018 and beyond.

Looking at the data

According to a recent study, 418 of the 902 public offers of currencies (46%) listed in the Tokendata listing in 2017 failed, 142 failed in the ICO stage, 276 ceased operations after the ICO. It is worrisome that these projects have already completed their existence. However, there are others: currently 113 start-ups have "gone out into the dark" and do not respond to questions from the media and users of social networks. If these projects are added to the list, the proportion of disastrous ICOs will increase significantly.

From the point of view of ordinary business, such statistics are not surprising. Many startups fail. However, ICO projects stop working much faster and more frequently than traditional companies or new companies in other high-tech areas.

Before proceeding to the conclusions and declaring that the ICO era has come to an end, it is necessary to understand the reasons for the failures of the new projects. It turns out that there are alarming general signs that should be taken into account when evaluating the potential of a cryptocurrency project to raise funds during the ICO and its subsequent work.

Characteristics of the failed ICO

1. Bad idea / realization

When choosing ICO, investors must first think about whether the project will receive wide recognition and whether it will have demand in the real world. Unfortunately, many projects solve exaggerated problems.

A good example is the association of the energy drink Silber Pfeil and Mercedes. He showed that the famous brand is not enough for a successful fundraiser. According to a press release from last year:

"Currently, the program to place AMG tokens is underway, and sellers will receive a token for each bank made of Silberpfeil."

Giving a card for a sale is a great idea. However, if people consider it unnecessary, progress is very complicated. The idea of ​​using a certain

The cryptographic currency to buy an energy drink seems impractical. As a result, this project did not show investors its long-term potential and could not raise enough funds during the ICO.

2. Technical problems

Many projects carried out by ICO in 2017, from the beginning, faced serious technical difficulties (for example, scalability and weak security). This prevented its advance in the market.

The biggest failure is the DAO, a project launched in 2016. The main reason for its failure was low security.

In April / May 2016, the project attracted an incredible 11.5 million ethers. However, as a result of the hacking attack that occurred on June 16, 3.6 million coins were stolen. The DAO promised investors decentralization and transparency, but was defeated by vulnerabilities.

Despite the collapse, the project has become an important and necessary step towards greater decentralization. DAO was followed by other start-ups that offered better solutions for decentralization and the future of Crypto-currency.

This is a good example of how a promising and promising project can fail. Understanding all the technical aspects is an absolute advantage, but it is not always enough. However, it is important to have at least a general idea of ​​the project's technology before investing in it.

3. Regional focus

Cryptocurrencies are designed to create a global monetary network, but not all regions are equivalent in terms of the success of ICO. For example, in developing countries, the proportion of successful projects is proportionately lower than in developed countries.

According to Tokendata, Africa leads the number of failed ICOs. Tingo Coin is one of the typical examples. The project had several shortcomings (lack of experienced professionals in the team, its small size, etc.), but the main problem from the beginning was the desire to become "Africa's first agricultural project based on overproduction".

In Africa, the number of investors in the ICO is relatively small (as of March 2018, of 10 countries with the largest investments in ICO, there is not one in this continent).

It is very difficult to obtain wide recognition, focusing only on local investors, since investors from other regions of African agricultural projects are not too interesting.

Focusing on highly specific ways of using new tokens and restricting their geography, many projects like this one are destined to fail from the start. In addition, the ICO should be avoided with a vague and vague regional strategy, however, in newly created companies with too narrow a market niche, the probability of failure is even greater.

 

conclusion

Investing in any ICO is risky, so it is important to look for projects that try to avoid these errors. Of course, some of the most promising start-ups may fail. If you plan to preserve the investment before the victory, be sure to evaluate the long-term strategy of the project.

In summary, it should be said that the market for primary placements of currencies continues to evolve, and a high proportion of failures is the norm for startups in any market.

Do we expect more failures of ICO? Yes, but this does not mean that you should stop investing. In fact, the investment principles remain the same as always.

The increase in the number of ICO alone means that investors will have to make more efforts to select the most promising projects.