26 March 2018 | Paul Durkin | Dynamic Mix

Preparing research for an article about Initial Coin Offerings (ICOs) has provided a poignant picture of exactly how volatile this digital space actually is.

It is young, fresh, exciting, changing and RISKY !

The old saying “Go West Young Man” has never been more true. It’s a totally new frontier and the rules have not yet been determined. Fortunes are and will be made, just as they will be lost.

The old days of the Wild West are well and truly here folks.

Just as the purveyors of magical Snake Oil rattled into emerging Western American towns in their horse-drawn wagons promoting health, wealth and happiness from a bottle of secret liquid, today there are modern day scoundrels promoting ICOs offering the promise of solutions to every known problem on the modern day planet. Theres an ICO for this…and an ICO for that — it could become confusing!

Additionally, the governments of the world lack a synchronized regulatory approach to ICOs, cryptocurrencies and Blockchain.

The legal characterization of cryptocurrencies is still being explored and is yet to align with many countries, including the US where “a cryptocurrency does not have legal tender status in any jurisdiction.”

In countries all over the world, citizens are beginning to demand their Governments adopt investor friendly ICO and crypto-trading regulations.

So let’s take a look at what seems to be happening with ICOs by reviewing the very brief history of Bitcoin.

As I see it, there are particularly two relevant points in history to this story:

The filing for Chapter 11 bankruptcy protection by financial services firm Lehman Brothers on September 15, 2008

This remains the largest bankruptcy filing in U.S. history. At that time, Lehman was holding over US$600,000,000,000 in assets and had over 26,000 employees. It was the catalyst which resulted in a global financial crises, highlighting many inadequacies in the existing financial services industry.

2) First real wold purchase made with crypto currency…….Pizza for Bitcoin

On 22 May 2010, Laszlo Hanyecz made the first real-world bitcoin transaction by buying two pizzas in Jacksonville, Florida for 10,000 bitcoin. At the time, bitcoin was only worth US$0.008 but in the following five days, its value rapidly escalated by 900% to US$0.08% for one bitcoin.

So as the story goes, in late 2009 literally a year following the Brothers Lehman crash and subsequent Global Financial Crisis, a bunch of computer techies meet at a symposium in the USA in order to discuss digital cryptography. Some dude or dudes going by the name of Satoshi Nakamura presented a paper about a peer to peer, electronic cash system. This system proposed to use a digital currency to be transferred between peer to peer using the internet. Such a transaction would not require a bank, government or any other intermediary to complete. The medium of exchange was to be a digital product called bitcoin and this bitcoin transaction was to be registered on a virtual ledger called a Blockchain.

Satoshi Nakamura developed a computer code which ensured there would only ever be 21 million bitcoins and each time a transfer of any bitcoin occurred, the transactions could be verified by complex mathematical algorithms. As a reward for verifying these digital transactions, the person who successfully did so was paid in bitcoin.

The ‘pizza purchase’ event in May 2010 is officially referred to by many as the dawn of the internet of money and when you think of it, that was only eight year ago!

Did you get that ? ONLY EIGHT (8) YEARS AGO !

So here we are in early 2018 trying to make sense of what has and is happening with this digital currency thing.

There have since been thousands of ICOs promoted and in the early days (like in 2017 — did you also get that folks?…the “early days” in ICO offerings was not much before LAST YEAR!, all you had to do when promoting the sale of your ICO was to mention the words ‘Blockchain’, ‘Ecosystem’, ‘open-source protocol’ and ‘smart contract’.

These words woven carefully into your marketing statement would have you assured of being able to quickly raise many millions of dollars in order to create your start-up, digital business. And the beauty was, there were no government regulations and you didn’t have to comply with normal capital-raising protocols (…at this point I can almost hear the rattle of rickety old wagons rolling into town!)

Having a look at the track record, it isn’t too good.

Since the beginning of June 2017, 46 projects have completed an ICO in line with their stated objectives, raising over $1.6 billion. On average these projects have raised $36 million to fund their efforts although outliers skew the data as the median raise was $19 million. Clearly these projects have demonstrated excellent receptivity by token purchasers.

However, most ICOs fail, sometimes miserably, at achieving their objectives.

The token distribution market has quickly become more difficult. In June 2017, only one project failed to reach it’s objective. However, subsequent months tell a far different tale. From July 1 through September 25th 2017, 51 ICOs launched with high hopes, yet failed to meet their own objectives. These represented an astounding 59% failure rate for all ICOs during that time period. Beyond this, during the July to September 2017 period, it is widely projected that over 90% of all ICOs are likely to fail.

The reasons for their failure may not be directly related to the quality of the product being offered but might likely be attributed to an increased government regulatory environment.

Not only do the producers of ICOs have a changing regulatory environment with which to contend, but they also have public and consumer sentiment likely to affect their success.

Many who had an appetite for speculating on ICOs seem to have become more discerning and selective as tales of ICO failures and investors losing their money emerge thick and fast.

Additionally, the jury is still out in respect of whether there will be a need for thousands of different cryptocurrencies.

Using the introduction of the euro as an analogy, regardless of your political leanings, it would be impossible to argue that the Euro didn’t make transacting across European borders simpler.

That world is more or less what many ICOs are actively trying to build. However, if every app and every ecosystem requires its own unique tokens to participate, what the hell is the point! A future where every product and service demands payment via a different cryptocurrency will be cumbersome and inefficient and a very likely a backwards step for society.

If I need 100 different tokens to use a 100 different apps, my wallet (and head) gets complicated pretty fast.

From a user adoption perspective this is a no go! Simply having to use crypto is bad enough. If using an app is like walking through a grocery store and wondering which tokens you need to buy, then this experiment might as well end now…In fact, with the plethora of crypto currencies likely to be in the marketplace, I can see the potential for an ICO token which will automatically determine the particular or optimum cryptocurrency required for any particular application, product or service.

So there you have it!

To change the world you have to change lives.

Lives are changed by adopting different habits…and this requires a damn good reason!

In business the tried and true means to ensure good public uptake is a combination of a great product and great marketing.

Bad products fail and a good product could fail due to poor marketing. Current ICO marketing methods can no longer rely upon the use of the words ‘Blockchain’, ‘ecosystem’, ‘open-source protocols’ and the like.

ICO marketing demands a greater level of sophistication including an expert development and management team and an association with an entity or product which might potentially add value. For example, movie and sports stars have recently been recruited to endorse certain ICO offerings…only to have the US regulatory authorities quickly respond by ensuring such endorsing personalities disclose their ‘fee’ to intending ICO token purchasers. Other ICOs and recently launched cryptocurrencies have publicly intimated at strategic alliances with established banking groups or top 500 companies, all of which resulted in steep price increases.

Marketing, endorsements and associations aside, the scalability of cryptocurrency and the manner in which it is to be regulated, taxed and used are still yet to be determined. Digital financial services are still a long way off becoming mainstream. But be warned…a month in the new digital space is like a year in the current world. Things will sort of creep-up behind us and become reality. Things move at lightning speed in the digital space. A crypto marketing plan developed today may be prevented from actualisation due to unforeseeable changes to the law, government regulation, licensing and taxation.

As an investor, the more experienced you are the easier it becomes to identify the traps and no-go zones when analysing the potential success of an ICO. Exceptional returns remain possible when trading ICO’s, but be wary as it is a new frontier, it is in its early days and very much subject to unforeseeable forces and change…and it is the future !

https:/t.me/dynamicmix

About the author:

Paul Durkin has been in the property marketing business for over thirty years. In that time he successfully recognised and implemented a range of new trends which significantly effected the methods in which properties were marketed.

Paul additionally introduced a range of new financial products into the industry in order to facilitate the marketing and sale of particularly ‘off-the-plan’ apartments and dwellings in record-breaking volumes.

Paul has recognised Blockchain and cryptocurrency as offering the most significant and beneficial change to the future of the financial services industry. He has been involved in the digital space since early 2017 and is passionate about its future and certain of its eventual mainstream adoption.