There are two kinds of news on ICO market: good and bad ones. What’s even more interesting, both are the logical continuity of each other.
Good news is
ICO market keeps growing. Now more than ever it’s apparent that cryptocurrencies are here to stay and for a long while. Just take a look at the statistics of the annual ICO growth in 2018 compared to previous years. The growth is evident.
In 2018, ICO has grown more than two times comparing to 2017. That tells a lot.
No wonder that ICOs are expected to become the main method of fundraising, including surpassing venture capital. If this actually happens, the concept of growing a startup as we know it will change tremendously. Instead of current VC madness, we are about to see ICO madness.
Here bad news steps in
In fact, ICO madness is already there, just not in a good “harmless” way. When we say “madness”, we mean there are people fooled, money lost, and bubbles burst. We are just past half of 2018 and those six months were enough for 1000 of ICOs to fail and disappear, with all collected money of course.
Is this all scam?
Not everything but yeah, the overwhelming majority is truly a fad. Dead Coins, a platform that collects the data on failed ICO projects, classifies them in the following categories:
- Scam (someone intentionally screwed others up)
- Hack, those poor coins that got hacked
- Deceased (those losers-ICOs that just didn’t make it)
- Parodies — these are created to teach investors some lessons, primarily on how to spot the shitty offering.
The list does not lack scammy offers. Imagine how many of those are just not spotted yet.
Yep, public offerings fail and become a big story — or a federal crime (that depends on the ICO nature). Let’s, however, not focus on the complete and utter scam and instead shift the focus towards those “deceased” ones. What can go wrong and why do ICOs die?
Let’s investigate.
5 Epicly Failed ICOs of 2018
might be only the beginning
Doom #1 — Cooperation with wrong ICO advertising partners
If you plan to launch an ICO soon, watch out for unreliable partners. Instead of helping to develop a product, some advertising and public relations providers do the opposite, deceiving the business owners and throwing both ICO and product’s reputation to trash.
Moirai
It was difficult to predict that an ambitious future-predicting platform will fail in its ICO launch, especially to those who have invested in the platform. An innovative product somehow could not reach their soft cap and therefore, became deceased — just as many other competitors.
As the website explains, the platform got screwed up by the ICO advertising company which, as Moirai claims, “took investors money and refuse to refund back”.
Consequences
People don’t really care whether something went wrong in the company or with their partners. Could be that tedious trials somehow help to restore justice but not many customers and investors will stick around to watch that happening.
In fact, the Moirai case demonstrates just that. Even though (as company claims), ICO’s epic fail was not their direct fail, customers and investors still naturally accuse the platform of fraud. No one cares about your explanation after the offering is dead and money is lost.
Doom #2 — untrustworthy founders
You know how they say that the fish rots from the head? With ICOs, this statement proves to be correct almost all the time. To evaluate cryptocurrency chances of success, take a look at their founder’s profile. In this case, it’s fairly self-explanatory.
CryptoCopy
CryptoCopy has optimized the investment process by storing the contact information about the successful investors and monitoring every made transaction with the smart contract. In this case, you don’t really need a predicting algorithm to tell that this ICO must’ve been doomed from the very beginning.
The fact that the ICO was founded by Igor Manjencic, the same person who has created a RICH Coin, an offering that failed in 2016. Shortly after the fail of the previous project, it was decided to start the next one but apparently, mistakes were not taken into account. Instead of giving the second chances away, don’t risk putting money into currencies whose founders might seem suspicious in any way.
The consequences
Most active users were promised to receive 10% of the platform’s profit but actually got left with nothing. The worst part about it is that all the alarming signs were really on the surface and could’ve been easily spotted in time.
Linda Health Coin
Doom #3 — Legal problems and the absence of necessary governmental agreements
Being a successful ICO and tackling an investigation at the same time is beyond challenging. Handling legal troubles and staying on the top is not virtually impossible but in the era of the tough cryptocurrencies competitions, such events hit hard and fast.
The platform aimed to provide a smart medical solution which could advise some changes in the course of treatment based on the patient’s medical reports. The developers have even integrated the AI system to make sure the platform will be constantly learning and getting better in diagnosing.
Things, however, didn’t go as planned. Just recently securities regulators in the U.S. state of Colorado has issued a cease and desist order halting the initial coin offering (ICO) of Linda Health Coin (LNDA), which they deemed an unregistered security.
The entire process has started in May and even led the startup to stop selling their ICO on the territory of Colorado (the website even has a pop-up that says as much).
When you see things like that on the ICO’s website, it means investing might not be the best idea.
Conclusions
All documentation matters. In the world of ICOs that is not so heavily regulated, it’s easy to forget that legal limitation still exist, and they can turn out to be quite a bummer. For Linda Health Care, the absence of investment disclosure was enough to create a huge trouble.
That’s what Colorado news say on the topic:
State regulators, however, pointed out that potential buyers of the token were “not provided disclosures of the risks of investing in cryptocurrency,” saying a pop-up on the company’s website stating that the ICO constitutes a security in Colorado “can be closed and easily ignored.”
Doom #4 — the promotion that aims too high
Or to be specific, as high as Everest’s peak. With ICOs, it often happens that promotional activity is way out of place, and it ends up just hurting the reputation of the cryptocurrency.
Askfm and their Mount Everest currency
One of the most popular social media Askfm wanted to go big but instead, were forced to go home. It turned out, the idea of promoting an ICO by sending crypto enthusiasts on Everest is not the safest version of a PR stunt.
The tactic seemed awesome until one of the enthusiasts died on the expedition and now is presumed dead. Of course, it killed the reputation of cryptocurrency and became a valuable lesson in how not to build a communication strategy.
What about guarantees?
We already mentioned that a decent offering has a great informational support and the company cares a lot about its reputation. Take a look at what Triggmine, a marketing automation platform, uses to prove its legitimacy before launching its ICO on August, 10 with the 4XStake business model:
- The possibility of purchasing 4XStake (300 000 TRG) 4 times lower than the nominal value
- Demand for TRG Stake is guaranteed by the expansion of the platform and a limited quantity
- 40 potential partners (in the stage of signing the NDA and contracts) and own working product
- Transparency of the purchase/sale of TRG Stake and 4XStake is secured by smart contracts.
That’s how it should look like when it comes to guarantees. You give respect — you get respect.
Guarantee is a synonym for honesty, transparency, and mutual benefit.
How to spot possible failures before they fail you?
There are no 100%-proven algorithms for finding decent cryptocurrencies and spotting the sucky ones. However, based on cases we analyzed, consider the following criteria before choosing an offering for the investment:
- Make sure the company has a released product. If you invest in ICO, issued by the blockchain platform, assure that it’s released and successful. For that, you can read reviews, request a demo, contact the team for more information.
- Check the team’s reputation, especially founders’ credibility. Before taking rushed decisions, make sure you are not joining a sinking ship. If the company has too little developers, it might be the signal of danger (who knows what happens if one of them leaves the company). Check the previous projects of team members to avoid experienced scammers.
- Take a look at the way ICO’s creators communicate to potential investors. Check social media, go to the Telegram channel, contact support. The communication should be clear and timely, otherwise, it raises suspicions.
- Dig deep into the promotional strategies. If you see too many tokens given away for free, or numerous discounts being made, could be the ICO is already sinking.
- And don’t buy all the “extra” stuff like Everest expedition, it can always go wrong.
If ICO providers don’t give guarantees that seem to be grounded for you, request them specifically or find a safer alternative for investments. The clearer the company communicates the process of cooperation, its benefits, and assurances, the lower is the chance of failure.