Insider Reflections on the ICO Bubble, Part II: What it takes to ICO.

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In Part I of this series I presented my take on the ICO bubble as CEO of a company in the middle of the ICO process. In this companion piece I present post-ICO insights on what it takes to run a professional ICO at the end of 2017.

In part III, I’ll present my predictions for the ICO market in 2018.

OpenST, aka the Simple Token project, recently raised $21 million from 6871 buyers in what has become known as an initial coin offering or “ICO.” Through a ton of hard work, many heroic efforts, an incredibly supportive community, and some good luck, we achieved 189% of our initial target.

Since our token sale ended on 1 December, the price of ETH has increased dramatically, and we’ve had a fairly good market debut for “OST.” Needless to say, the ICO results surpassed even our wildest expectations.

Behind the scenes though, it was a hair-raising process, as we tried to avoid hype, dampen speculation, abide by conservative legal and regulatory guidance, shut down any discussion of Simple Token as an investment, and dodge all manner of quick-buck artists and other unsavory characters.

There’s this prevailing myth in startup circles that ICO’s are easy. These days it seems like everyone wants to ICO (and thinks they can).

I want to make clear: The Simple Token ICO was hands-down the most challenging and most exhausting eight months of my entire professional career, and pulling off a successful ICO is very hard, very costly, and for good reason increasingly difficult.

Towards Minimum Standards for Good ICO’s

Eight months ago when we first contemplated the Simple Token ICO, it really was a wild, wild, westICOworld. Thanks to fantastic legal and regulatory advice from our partners at King Wood & Mallesons and Perkins Coie, we voluntarily embraced a set of criteria for “professional” utilty token ICO’s that — while erring on the conservative side when we began — are now rapidly becoming the minimum standards (presented as a series of topics and questions) for all “good” ICO’s throughout the industry.

Clear Product Utility. What is the actual product utility of the token? Why is the token needed in order for the proposed software to function? Minimum Viable Utility Established Before Tokens Are Sold. Can you prove it? The utility of the token must be proven, demonstrable, and replicable by others before holding the token sale. The source code for the protocol must be made available via open source. A demo of the token utility in-action on a blockchain must be presented. And, any developer should be able to replicate the demo and implement it. Blockchain Required. Why is a blockchain uniquely necessary for the solution? — i.e., the “secret sauce.” In other words, what is it about blockchain that uniquely enables the solution? Token Required. How is the token not just a cute substitute for fiat? You should not be able to just replace the token with fiat (or ETH or BTC) and accomplish the same functions. If the only value ascribed to the token is as a payment rail, it’s a currency not a utility. Blockchain Principles. How does the project adhere to key blockchain principle such as open and decentralized? (where technology allows for it.) Product Driven Token Economics. Is there a viable token economic model for how the token will be used and how ongoing demand for the token will be derived? Beyond speculative demand, how will real product demand for the token be driven? Scalability. How will your project actually work on a Blockchain? What is your solution for solving the scalability challenges of existing public Blockchains? Your Token is Not a Stock. You must be prepared to shun all forms of speculation about your token as an investment vehicle and avoid all references to secondary markets.

Not every ICO today adheres to the standards above, but increasingly the professionally run ICO’s do. My bet is that these 8 standards (and more) become the absolute minimum for any reputable law firm to support and put their stamp on an ICO in early 2018.

Inside the Simple Token ICO

In hopes of shining a light on the actual “costs” and efforts involved in ICO’ing, below I provide a behind-the-scenes summary of what it actually takes to hold a professional ICO at the end of 2017:

I’m sure there’s so much more that I left out — the above is just a taste of what was involved. (I’ll continue to update the post as the team and I remember more of the details).

And, above all, we are fortunate and lucky to have had the opportunity to connect with the most amazing community of believers and supporters of our long term mission to bring the benefits of crypto to mainstream businesses and consumers. We promise to be even more engaged going forward.

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