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Clemen Chiang

Ph.D. | CEO | Investor | FinTech in Stocks | Blockchain in Cryptos | Singapore

Why It Is Vital For ICOs To Have An End Game 05 Nov 2018

Why It Is Vital For ICOs To Have An End Game

Atthe end of December 2017, Coindesk ran an article full of predictions from Ripple’s Chief Technical officer. Among those predictions was the idea that 2018 was to be the “year of the great ICO hangover”. The bubble would burst and ICOs would die off. While 2018 isn’t quite over yet, recent downward trends and the deaths of countless ICOs suggest that this wasn’t too far fetched. There are fewer ICOs in operation now than during the summer. Furthermore, many ICOs fail to live longer than 5 months. Is this all purely down to a lack of long-term planning? Did these failed operations even have an end game?

There is a high mortality rate for ICOs, and this isn’t a temporary blip either.

A study from Boston College found that just 44.2% of token projects remain active in their fifth month. The numbers of ICOs in the market have fallen steadily in the latter half of this year. There are a few areas where we can assign some blame. They include:

  1. a lack of value in the current market.
  2. poor brand identity.
  3. poor money management.
  4. a lack of reporting.

What we see here are many start-ups from young, enthusiastic entrepreneurs with no real vision. It is no wonder that these projects fail in the fifth month — there wasn’t a long-term plan to manage the ICO at that point. Newcomers go in big at the start, drawing people in with concepts and great exchanges. The figures and forecasts look great for the short term, but there is no business or financial plan for what is to come.

Simply put, many start-ups lack the skilled personnel to create something of worth.
They don’t have the consumer relation skills to understand the perfect niche that they should occupy. They don’t have the branding skills to market themselves properly. They certainly don’t have the financial skills to manage the product like a true ICO. A lack of identity and mainnet presence means no way of progressing with crypto exchanges and product development.

This is why ICO investment is such a gamble for new users.

A secure investment requires a sense of confidence in the new system.
Investors need to know that this is a reliable, forward-thinking company that will have a big impact on the market. This means some idea of the business plan and long-term goals of the team. There should be some idea of the aims for the development of the currency in order for it to remain valuable. Yet, many fail to look beyond the launch date and the $ signs as they raise their funds.

Of course, that is if there is even a short-term plan. We can’t ignore the fact that the end game here for many ICO startups is simply to scam users as quickly and quietly as possible. These frauds come and go just as easily as those that may genuinely want to succeed.

For every success story, there is also a failure.

Many ICOs come and go in the blink of an eye.
The next big thing forecast for the start of November could be dead in the water by 2019. Many that saw early success back in the highs of August are no longer with us. A great example of a failure is Telegram’s TON — the telegram open network. They raised $1.7 billion to develop the system, with no timeline or long-term plan on releasing it on exchanges. It was short-sighted from the start. If there was an end game, it was a closely-guarded secret.

But, there are clearly exceptions to the rule, such as Tron and EOS.
These ICOs are performing well. In fact, these, and a handful of other top names, are expected to outperform leading cryptocurrency giants in coming weeks. These ICOs have a strong mainnet presence and now embrace token swaps for improved trading. Their switch to a new, personal blockchain gives them an improved brand identity that helps separate them from ETH. This brings the big whales and big trades into the equation. It is easy to suspect that this was all part of the end game plan. The smart moves and gradual growth of these companies show the forward thinking lacking in most start-ups.

Of course, the end game can always change as new ideas and proposals come along.
ICOs need to be able to adapt and adjust these business plans to enhance their chance of longevity. For example, some may develop aspirations of creating an IPO. Bitmain worked hard with a clear financing plan to do just that in September. This means real time value and clear shares in the market.

This all shows that an end game really is essential to succeed in the cryptocurrency world.
A mass extinction of ICOs isn’t necessarily on the cards any time soon. There will always be those that decide to test out the market — either as a legitimate venture or a scam. Many will continue to experience the same early deaths for the same simple reasons. Yet, there are those exceptions to the rule that show that it is possible to find a market with great crypto exchanges. That they can build something strong, stable, appealing and profitable. It is all about that end game. If ICOs don’t have one in mind, they won’t succeed.

References:
1. https://www.coindesk.com/over-half-of-icos-fail-within-4-months-suggests-us-study/ 
2. https://hackernoon.com/4-primary-reasons-why-icos-fail-43274fd34e2e
3. https://www.coindesk.com/death-ico-4-2018-predictions/ 
4. https://techcrunch.com/2018/05/03/telegrams-billion-dollar-ico-has-become-a-mess/ 
5. https://www.finder.com/uk/initial-coin-offerings
6. http://todaysgazette.com/bitmain-files-18-billion-ipo/

initial coin offeringinitial public offeringIPOICOinvesting
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