One of the most basic business principles has the answer to the question:

Stakeholder Theory — For any business to be successful, it has to create “value” for customers, suppliers, employees, communities, and financiers (shareholders, banks etc.)

In corporate governance, a company should consider ALL interest of the stakeholders, beyond immediate members of the corporation.

All involved parties must benefit

Involvement from all interested parties is a key to successful business.

Think of Uber and their strategy for example. After an outstanding decade-long march, Uber IPO is expected to hit the market in the next few months. Uber created a business strategy that encourages involvement from all interested parties. The system created by Uber allows (1) drivers to earn money anytime they want, (2) the company to profit and (3) customers to receive more convenient and cheaper service than a cab. Again, everyone involved must benefit from the business.

This idea applies to Token Projects as well.

ICO Projects in decline

Numerous attempts have been made in blockchain projects to encourage community engagement: community management, bug bounty, a working product for trial, and consistent updates. Yet, many projects have failed to get enough involvement for successful adoption. How did this happen?

Difficult User On-boarding Blockchain does not solve enough problem ICO Projects were designed for “To-the-Moon” growth

The lack of involvement has led to the decline of many ICO projects. Let’s go over them one by one.

Difficult User On-boarding

Image Credit: Communicate Health

First of all, using a token platform takes a tremendous effort from buying crypto to making transaction within the platform. Let’s say a crypto-inexperienced user wants to use Augur, He/she needs to:

Sign up at a Fiat-to-Crypto exchange Go through KYC to get verified and buy ETH from the exchange Install Metamask and create a wallet Send ETH to my wallet Connect my Metamask wallet with Augur Web App and choose a prediction market I wish to participate Make a transaction in Augur platform

From crypto exchange to wallet platform, a user must learn through three different platforms. Transaction fees involved in buying/sending crypto also diminish users’ interest in using the service. The general public is not used to all the process to be part of the crypto ecosystem.

Despite current efforts from companies like Samsung and Lumi Wallet for mainstream adoption, the ecosystem is not yet prepared to take in regular end users. There were way too many projects that could not be reached out to a large pool of users due to this reason.

Blockchain does not solve enough problems

The blockchain is not a solution to ALL problems. A flow chart by Morgen Peck above evaluates the necessity of blockchain by comparing it with traditional technologies. Unless there is a clear use of blockchain, the projects are very likely to fail. Many projects did not solve enough problems to convert regular non-crypto users to use their platform.

Decentralized ≠ Better Service

Many ICOs were marketed saying they “use blockchain” to solve a problem. From an end user’s perspective, there is no reason to use blockchain unless it does the job much better than traditional technology. Good projects market themselves on “what” problem is solved instead of “how”. It is impossible to have a sustainable growth if the project does not solve a good amount of problems.

ICO Projects were designed for “To-the-Moon” growth

ICO was a way for companies to raise a tremendous amount of funds without having to verify their ideas. They were not evaluated properly but rather convinced investors through marketing and false evaluation.

Take startups for example. Series A, Series B… Startups go through multiple funding rounds to have their ideas verified over and over again. The system is designed for sustainable growth. In process of auditing, many aspects of the startup are reviewed: Teams, legal issues, problems to solve, scalability, etc. Eventually, a successful startup must create a cult-like following from end users and convince more investors.

When incredibly high funds are raised from ICO, what’s next for them? Funds have been raised and it may not be in the interest of the project team to further pursue. As a result, ICO projects end up slowing down or run out of funds for further growth. They were able to raise millions of dollars with one well-engineered ICO. It was that easy. ICO is not designed to create involvement from the immediate member of the project. If ICO projects were to take the same steps as startups, how many would have survived?

Case Study: Basic Attention Token

Basic Attention Token (BAT) is a good example of a successful ICO project. The BAT was developed in hopes of changing the problematic digital advertising industry using blockchain technology.