The blockchain revolution has introduced ground-breaking innovations to an unsuspecting market. Not only do we see new products and companies, we also see new fundraising methods, among them, ICO‘s. In the first quarter of 2018, $4.6 billion was raised in ICO sales — that’s 85% of the 2017 total. Unfortunately, along with these ICOs came waves of negative news and controversies. In this article, we will debunk some of the most popular myths about ICO‘s.

Tools of Financial Fraudulence

With all the stories in circulation, it is important to define exactly what ICO’s are. ICO’s are financial instruments, and like any instrument, they can be used for positive and negative purposes. It’s important for investors to view ICO’s objectively and the companies launching them critically. As described by the AFM, an ICO is a way for companies — usually start-ups — to obtain funding for the development of products and services. With an ICO, the provider issues digital tokens through a blockchain platform. ICOs have a cross-border nature, anyone with internet access and a digital wallet can buy these tokens. The tokens may sometimes be purchased in euros or dollars, but more frequently in cryptocurrencies, like Bitcoin or Ethereum.

No Transparency

There have been claims that ICO‘s lack transparency. It‘s important to note that ICO‘s are investments, therefore; transparency differs from company to company. Transparency isn’t an ICO problem; it’s an organizational one. As with any investment, investors should conduct due diligence on companies before committing capital. The proper due diligence of blockchain companies begins with lite papers and white papers.

Lite papers are condensed versions of white papers. They are usually a few pages describing fundamental components of the blockchain project. White papers are prospectuses created by the company that clearly outline the technical aspects of the product, the problems it intends to solve, how it is going to address those problems, a description of the team, and a description of the token generation and distribution strategy. Companies with neither should be viewed as automatic red flags. If investors are unable to access the information needed to make an accurate decision, they should contact the company directly. Legitimate companies are happy to answer questions and can provide necessary documentation.

The ICO Market is Driven by Manipulation

The belief that the cryptocurrencies market is driven entirely by manipulation is false. Like any market, the cryptocurrency market is subject to supply and demand, but to assume that a single entity or group of entities can manipulate the entire market is a stretch. At press time, the current market capitalization of the cryptocurrency market is roughly $210 billion, with billions more pouring in every quarter. Earlier in the year, there were huge price fluctuations, mainly due to the buzz surrounding blockchain technologies; however, experts believe that cryptocurrencies will continue to stabilize as more of society becomes better acquainted with crypto.

The Crypto Market is Unregulated

Although the cryptocurrency market isn’t under the direct jurisdiction of the Securities and Exchange Commission (SEC), it is far from unregulated; the SEC had been following the cryptocurrency rise for years. In fact, the SEC began issuing reports last summer detailing potential plans for addressing ICO’s. The primary focus has been on protecting the consumer. Targeted enforcement actions started with scammers, and moved towards naive entrepreneurs who had real products but a poor understanding of regulation.

A paramount case occurred last year when the SEC, brought charges against the issuers of two ICOs (REcoin Group Foundation and DRC World). Among other things, these companies provided false and misleading information to investors. They promised high returns from activities related to real estate and diamonds, when in fact, the providers were not involved in any of those activities; the fraudulent and incompetent were penalized for wrong-doings to serve as a deterrent for the future.

Too Many Companies are Doing it

To be frank, there is no such thing as too many companies doing ICO’s. In fact, there are only two types of ICOs, successful and unsuccessful ones. In 2017, 913 ICOs were attempted, of those ICO’s 435 were successful. As the overall number of ICO’s increases, so does the likelihood that some will fail. But there is no direct correlation stating that an increase in ICO production produces adverse effects of any sorts. What it comes down to are management and economics. Companies that are well managed and provide value will get funded, companies that are poorly managed and don’t provide value will not get funded.

The blockchain industry is still relatively new, and with uncharted territory comes skepticism — rightfully so. But all great investor know that the most lucrative investments aren’t out in the open, they are hidden in unknown frontiers. The blockchain is the new frontier, and ICO’s are the investments that we’ve all been waiting for. Moving forward, investors shouldn’t focus on the myths behind the ICO’s being raised; they should focus on the companies hosting them. ICO’s are a financial instrument which can serve great utility; they are something to be understood, not feared.