In an analysis, the Center for Innovative Finance of the University of Basel is approaching the development of ICOs in the period between 2014 and 2017. The analyzes by Remo Nyffenegger and Dr. med. Among other things, Fabian Schär concludes that the invested capital has risen by 15,000 percent. In addition, researchers propose a framework for categorizing token sales.

ICOs are both a curse and a blessing. On the one hand, they are a great find for scammers of all kinds — the reports of fraudulent ICOs have increased significantly in recent years. On the other hand, they offer a new vehicle for financing young tech start-ups.

These latter possibilities also arouse the interest of science — this is how Remo Nyffenegger and Fabian Schär from the University of Basel tackled the topic. The result: capital invested increased by 15,000 percent between 2014 and 2017.

In the analysis, the researchers considered only token sales, which were successfully completed in the period between 01.01.2014 and 31.01.2018:

“Striking is the huge increase in both the number of token sales and the volume of financing. While only just over $ 31 million in token sales were successfully generated in 2014, there were thirty times more such sales in 2017. “

This increase, according to the study , especially from the second quarter of 2017 again a tooth:

“Especially from the second quarter of 2017, an extreme increase can be observed, which is probably due to the increase in the general interest in the Blockchain technology. While $ 20 million was invested in token sales in the first quarter of 2017, total capital accumulated in the second quarter of the year was $ 950 million.“

Framework for the division of token sales

Outside the growth of investments, the study mainly examined the nature of token sales. From their analyzes, they finally derived a framework for the division of token sales. Here is an excerpt from the study:

“Our framework is divided into four dimensions: representation, functionality, capping and divestment processes. The representation describes the way a token is mapped to a blockchain. Here we define three categories [colored coins, smart contract tokens, new blockchain]. Further, various tokens may be used differently depending on their functionality. Here too, three categories are distinguished [payment token sale, usage token sale, investment token sale]. Once the representation and functionality of a token are defined, the publisher determines if he wants to make a capped or an uncapped sale. Lastly, it will determine how the token will be sold [Dutch Auction, Threshold Auction, Interactive Coin Offering, Auction with several rounds]. This can be done as a sale with a fixed price and offer or through an auction. “

The study, with its breakdown of ICOs, ultimately provides guidance for companies looking to tackle blockchain-based financing in the future.

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