If you’ve read my last few pieces, you’ll be aware of my recent fascination with the biggest trend in the crypto-coin world right now, ICOs, or initial coin offerings (yes, it’s a horrible name).

Since the best way to learn about stuff is to dive right in and do it yourself, I spent much of yesterday getting prepared for the Basic Attention Token (BAT) sale in an attempt to participate. Considering I had very little to do with Ethereum up until that point, the learning curve was quite steep. Nevertheless, I got it all together and had an ERC20 wallet funded and ready to go for this morning’s sale. While I thought the ICO might be pretty popular, $35 million is still a decent amount of money and I didn’t foresee having any real issues with getting an allocation. I couldn’t have been more wrong.

At the end of the day, I got zero BAT tokens and was left extremely frustrated with how the whole thing went down. While it’s undoubtably a historic moment for the nascent ICO market and an incredible achievement for an experimental browser monetization model to raise such a sum in less than 30 seconds, could this really be called a crowdsale?

While details still seem a bit sketchy, what’s clear is that a lot of people are very pissed off and a very small number of players seem to have received a huge chunk of the offering.

Here’s what Coindesk reported:

Only around 130 people were able to buy the tokens today, with five buyers scooping up about half of the supply. The top 20 addresses in the token sale control more than two-thirds of all BAT, according to Joseph Lee, founder Magnr bitcoin exchange, who conducted a post-sale analysis. The fast nature of the ICO has drawn some ire online from users that were hoping to buy into the token but were quickly shut out. However, the company has so far sought to portray the sale as a success.

If that’s right, I have a real problem with it, and don’t think the term crowdsale is an appropriate term for what happened. In fact, part of why I became so excited about the potential for ICOs was related to a potential leveling of the playing field when it comes to participating in capital raises. Here’s what I wrote in last week’s post, :

Innovation in the crypto world will continue until one day we will actually see equity offerings in startups to regular people as opposed to just allocations to the wealthiest clients of brokerage firms. The innovation in this space has the potential to flatten the world of investing in a meaningful and powerful way, starting today with tokens, but ultimately in many other ways as well. It’s gonna take time, but it’ll happen.

I’m not sure exactly what went wrong and how they could have avoided the allocation issues this ICO seemed to have, but I really hope it’s used as a learning experience for future token sales. For one thing, it appears the cap of $35 million was simply too low. The company vastly underestimated the demand situation, and who really benefits from the low amount of money raised here? Mainly the few individuals who actually got the BAT tokens and can then flip them in the secondary market at a huge markup. It would have been better if that money had went to the company to build out its platform. Even if the cap was much higher, who knows, the thing could’ve still sold out in 90 seconds or something, but 24 seconds is completely ridiculous.

Meanwhile, it appears people were willing to spend thousands of dollars in transaction fees to cut the line. Here’s what Ethereum co-founder Vitalik Buterin noted on Twitter earlier:

https://t.co/oiFGyh1iju This is a $2220 tx fee, used to cut in line in BAT ICO. “Ethereum avg txfee $1” statistics include stuff like this. — Vitalik Buterin (@VitalikButerin) May 31, 2017

This seems to imply that anyone with big pockets who can afford to pay thousands in transaction fees to get a huge allocation will always be able to squeeze out the little guy in ICOs. Is this what we want? It’s not what I want.

Going forward, it’ll be interesting to watch how other ICOs handle their offerings in the coming months given how hot the space is right now. Will lessons be learned from the BAT sale? What are some viable options to ensure these new capital raising strategies are actual crowdsales where a wider number of people can actually participate, as opposed to just a playground for crypto oligarchs? Only time will tell, but Vinny Lingham’s Civic will certainly be closely watched.

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In Liberty,

Michael Krieger



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