21 ms·

Half of ICOs Die Within Four Months After Token Sales Finalized

466 points by chollida1 8y ago

vkou 8y ago
"Still, all investors should probably sell their coins within the first six months, the study found." If all investors should sell their coins, who is the counterparty that should buy them?
- aphextron 8y ago
  Shhh
  - mockingbirdy 8y ago
    He knows too much. Better put him at the top of our pyramid scheme so he loses his integrity in exchange for money like Mr. McAffee.
    - vkou 8y ago
      How much money will you give me, and what coin do I have to shill for it?
- artursapek 8y ago
  the industry standard term for them is "the suckers"
  - wmf 8y ago
    I thought they're called bagholders. (baghodlers?)
    - callmeed 8y ago
      I thought they're called the "greater fools"
- dguaraglia 8y ago
  I see you've spotted the flaw with this argument :)
- RIMR 8y ago
  Suckers. That's who bought all my Bitcoins at $20k when I sold them.
polski-g 8y ago
They're called shitcoins for a reason.
rm_-rf_slash 8y ago
The research in the article was not quite clear. Was their only “sign of life” measured by tweets? What about capitalization, transaction volume...anything?
- garmaine 8y ago
  It’s almost like... they got busy and started working on what they promised to do.
  - MBCook 8y ago
    Or they ran away with the money and don’t want to be as easy to track.
    - garmaine 8y ago
      Missing the point. TFA uses a metric which is unable to distinguish between success (working instead of tweeting) and failure (scam). That's beyond wrong...
      - s73v3r_ 8y ago
        If they were working on it, though, one would think they'd be delivering updates to show their progress.
        garmaine 8y ago
        As someone who has actually worked on such things, you'd expect updates to drop off to a trickle on an actually productive engineering project. At least compared to the pre-ICO hype. A few regular blog posts every other week, vs. a constant storm of promotional material and hype.
        chipotle_coyote 8y ago
        I've actually worked on such things, too, and in my experience, "I'm too busy programming to let you know my company is still around" isn't a particularly good excuse even at tiny two- and three-person shops. When I've seen that happen at cottage software companies in the past, it has never been a sign of health: more often than not, when they finally communicate again, it's to tell us that they're closing shop. And more to the point, tiny two- and three-person shops probably aren't doing ICOs. If your company is big enough to undertake a public offering of any kind, it's damn well big enough to have someone on staff whose responsibilities explicitly include some kind of community relations work.
mrnobody_67 8y ago
I'm so surprised that smart contracts aren't being used to release the funds over some set of time, with the ability for community to vote to block it if they feel team has stalled. Nobody needs $20 or $50m on day 1.
- deleted 8y ago
  [deleted]
- MBCook 8y ago
  Why would anyone running an ICO agree to that? Clearly the current system ‘works’. They get money, no accountability, and everyone just moves on. No wonder crypto-currencies enjoy such a positive image among the ‘haters’ and ‘doubters’. Because they keep earning it.
  - shawn 8y ago
    Once ICO scams stop working, the world will move towards traditional models. Crypto is out there, and it's not going anywhere. Eventually someone will realize that the smarter move is to create sustainable value over time.
    - jacquesm 8y ago
      > Eventually someone will realize that the smarter move is to create sustainable value over time. Most ICO's - if not all of them - are powered by the greater fool theory, sustainable value isn't really on the table. I see value in the blockchain and some in BTC (but not as much as others apparently do), but the whole ICO concept seems to be just a way to transfer wealth from greedy suckers to even greedier suckers.
      - shawn 8y ago
        One promising example is SpankChain. It's a cryptocurrency specifically designed for the porn market. Traditionally, it's hard to make money in porn due to fraud and chargebacks. Most payment processors also won't touch you. But crypto has no chargebacks, so it's a natural fit. One could argue that if you have to dip down to the level of porn just to find some value, ICOs are worth dismissing. But I would say that it's a decent example of the future potential.
chollida1 8y ago
So I've been doing alot of thinking lately about traditional VC and PE vs ICO's for work. Its pretty rare for VC and PE firms to just be blatantly ripped off like a good portion of ICO investors are. As far as I can this is due to 3 things. 1) Geography, Most VC/PE firms only invest in a particular country and know the laws as they relate to the contracts they sign with companies. This ensures that they can atleast try and go after the founders, legally speaking, if any "shenanigans" occur. 2) KYC, most will only invest after performing due diligence, which always includes meeting the team and confirming through lawyers that the team is who they say they are and they own the IP they say they do. 3) Contracts, I've participated in a few ICO's and never signed anything. I realized I was essentially giving money to a complete stranger with nothing more than an IOU from someone who I'll never meet and in many ICO cases, never have any way to find them. Fortunetly for ICO's as a legit means to raise money these are all solvable. They just require "adults in the room.". If you look at the successful ICO's from a professional investors angle(VC,PE) they all followed the above 3 steps.
- JumpCrisscross 8y ago
  > for ICO's as a legit means to raise money these are all solvable At which point you end up with an overcomplicated share certificate.
- wslh 8y ago
  > So I've been doing alot of thinking lately about traditional VC and PE vs ICO's for work. You are missing part of the story: before ICOs there is a presale phase where some projects finish before the ICO. This is where real competition with VCs happens since the top projects receive more money from non traditional investors using cryptoassets than the one promised by traditional VCs (except in very rare cases). In this context: (1) Geography does not matter and (2) KYC/AML is enforced. The advantage for real entrepreneurs is receiving a bigger investment in short time. Disclosure: I work in this kind of syndicates.
  - chollida1 8y ago
    Unless I'm misunderstanding you, you seem to agree with me, with the exception of you thinking geography doesn't matter. I'd disagree with your idea that geography doesn't matter. I would have more confidence in an ICO in the US than I would in say China where it can be hard to sue someone and collect your damages if you win. but if you really feel geography doesn't matter then please share your argument for this, I'm ready to learn!!
jacquesm 8y ago
That's long. I would have expected the end to come within hours of the funds being released to the perps. Err. Entrepreneurs.
- jerf 8y ago
  I imagine the facade must be maintained long enough for the checks to irrevocably clear, which can actually take a while. The big bad evil fiat government money system has the advantage and disadvantage of being able to claw back transactions for quite a while, since it's basically the fundamental primitive of the system that ensures integrity of the system. (That is, at the foundation, the money system tends not to be about preventing fraud so much as being able to remediate it after the fact. There are many higher layers that are about preventing it too, of course. But at the very bottom, it's about remediation.) If you're going to hike away with investor money, the whole system needs to clear all those tentacles away from your Cayman Islands (or whatever the hot destination is) account first.
  - JumpCrisscross 8y ago
    > fiat government money system has the advantage and disadvantage of being able to claw back transactions for quite a while Recently helped a friend extract his company from a wire fraud scam. Wires, particularly international wires, are surprisingly irrevocable. You basically have to get the receiving bank to agree to send the money back.
    - jacquesm 8y ago
      That's worthy of a blog post in its own right.
    - Yizahi 8y ago
      Now that is the thing that should be fixed, instead of taking it to absurdity (i.e. immutability).
  - koolba 8y ago
    Don’t most ICOs use an existing coin (likely bitcoin or Ether) as the unit of purchase?
hudon 8y ago
You can see the state (volume, # daily users) of some of these promised "dapps" here: https://dappradar.com https://dappradar.com . It is indeed a barren wasteland. And when a new popular ICO comes along, the Ethereum network struggles and fees skyrocket. It's weird because people compare it to the early days of the Internet... but the early Internet was useful from its beginning: you could at least send messages and files across the network, which was incredibly useful to academia and the military and was orders of magnitude more efficient than any alternative. Now, all we see is rampant fraud and a complete disregard for the environment [0] with no gain in efficiency. It's high time we hold "crypto-anarchists" accountable for these issues. [0] The Ethereum network consumes more electricity than Iceland https://digiconomist.net/ethereum-energy-consumption https://digiconomist.net/ethereum-energy-consumption
- ZirconCode 8y ago
  What if we make a currency where each ICO is one coin?
  - 1996 8y ago
    It is more or less what ethereum is with ERC tokens
  - granaldo 8y ago
    ethereum lets people create a coin and conduct ICO there are thousands of them https://www.coingecko.com/en/coins/all?asset_platform_id=279 https://www.coingecko.com/en/coins/all?asset_platform_id=279
- jerguismi 8y ago
  > It's weird because people compare it to the early days of the Internet... but the early Internet was useful from its beginning: you could at least send messages and files across the network, which was incredibly useful to academia and the military and was orders of magnitude more efficient than any alternative. How is running an ICO not useful to people? Get lot of money with only doing a lousy whitepaper, drive ferrari and live luxury life rest of your life. No joking, many people can't imagine anything better.
matte_black 8y ago
Is there legit money to be made in ICOs without running a fraud?
- NathanCH 8y ago
  Forget money, I would like to know of one legit ICO. One single ICO that has a product. One.
  - jrockway 8y ago
    There was that one on Silicon Valley where the coins represented credits on a distributed computing network. It sounded pretty legitimate to me, but of course it's just fiction. Over in the real world, I haven't heard of any legitimate ICOs.
  - AlwaysBCoding 8y ago
    The Brave web browser
  - HammadB 8y ago
    I think the RNDR token is the only one I've seen that really makes sense. https://rendertoken.com/ https://rendertoken.com/. And the people behind it (Otoy) are very reputable.
    - fabricexpert 8y ago
      There's no product though, just a roadmap. The first item of which is "raise ICO money"
  - deleted 8y ago
    [deleted]
  - api 8y ago
    Brave browser, Sia storage network, ... and uhh... Cryptokitties? The vast vast majority are vaporware.
  - ENGNR 8y ago
ashishb 8y ago
Are there any ICOs which resulted in a successful product? Please exclude crypto-exchanges like Binance.
- maxencecornet 8y ago
  Brave Browser / Basic attention Token is very successful although in it's early days But Brendan Eich, the founder of the project, is much more experienced then any random ICO project founder in this space I'm not sure he will succeed where Flattr failed, but we'll see ! Check out how many websites are already Brave/BAT publishers: https://batgrowth.com/publishers https://batgrowth.com/publishers Vice - freeCodeCamp - BitTorrent - xhamster - The Guardian - Washington Post - TinyUrl - JS Bin - Sitepoint - Smashing Magazine and much more are already verified publishers... Even dappradar.com that was quoted in this thread !
  - mrhappyunhappy 8y ago
    Indeed. I am curious to see how brave turns out. Right now I don't use it as it feels too bulky and I don't want to mess with bookmark exports - who knows maybe that will change.
  - marktolson 8y ago
    Wait so BAT with its $250M market cap has < 600 sites in the Alexa top 1 million??? That's like 6 hundreths of a percent. That's a terrible rate of adoption considering the hype behind BAT.
    - maxencecornet 8y ago
      >Wait so BAT with its $250M market cap has < 600 sites in the Alexa top 1 million??? That's like 6 hundreths of a percent. That's a terrible rate of adoption considering the hype behind BAT. The script is still running at the moment, right now it's 600 sites in the top 230k, around 0.25% The cron job should be over by tomorrow
- cslarson 8y ago
startupfounder 8y ago
Original Boston College Paper that this article is based on: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3182169 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3182169 Conclusion: "We also show that there is a positive and convex relationship between (log) market cap and (log) number of Twitter users, that nearly all ICO capital is raised by crypto-companies that continue to be active (on Twitter) after 120 days, and that daily Twitter intensity is associated with positive returns that day but negative returns in the future, suggesting overreaction and reversals. " "It suggests that scams, while plentiful in number, are not as important in terms of stolen capital because investors are shrewd enough to spot (and underfund) them."
tiglionabbit 8y ago
Do you all have any idea what this is talking about? I've never heard of ICO and you're all using it as if it's some familiar and obvious thing with no explanation.
- Captain_Usher 8y ago
  An ICO is an "Initial Coin Offering", it's supposed to be like an IPO except instead of offering shares, you're selling cryptocurrency coins. ICOs are usually framed as a way to fund a project or business, usually related to cryptocurrencies or blockchain technology in some way. The idea is that the project's success will increase the value of the coins you bought and you'll be able to sell them for more later. The main difference is that the coin is just a coin, buying it won't make you a shareholder and you aren't subject to the regulation that IPOs and shareholders are. That regulation makes it difficult to scam investors by starting a dummy company, pretending it's a valuable operation, selling shares in an IPO, and then running away with the money. Doing this with an ICO is much easier, and there's a lot of concern about how many ICOs are frauds.
  - themagician 8y ago
    Is the company required to buy back the coins? I’m not sure I get the point of an ICO. It seems like a company issuing monopoly money. It even seems like this would have been possible before crypto—literally just Monopoly money to people and let them trade amongst themselves. I guess Monopoly money is easy to duplicate… but so is crypto in a way because you can just start your own currency that uses the same block chain to create more tokens.
    - RIMR 8y ago
      Do you understand the concept of a stock share? Well, just remove the company, the product, and the regulation, and that's an ICO. The issuer of the coins/tokens do not have to buy anything back. The idea is that they will increase in value and function, and others will want to buy them from you. It goes like this: 1. "RichCoin" is created and the creators begin selling them at 5,000 Richcoins for 1 Bitcoin. Ads are pushed across social media platforms and web communities are seeded with information that encourages people to invest. 2. 50,000 people spend a total of 1000 Bitcoins buying the first 5,000,000 RichCoins. 3. After public launch, 5,000 people sell their RichCoins to late investors, netting ~20% profits. 4. The remaining 45,000 people "HODL", hoping that their $1 RichCoins will one day become $100 RichCoins so that they can move to a private island and never work again. 5. RichCoins fall to 10% or less of their ICO value as all official websites disappear. 6. The creators of RichCoin, who long ago converted their 1000 Bitcoins to $5,000,000 USD, move to a private island and never work again.
izzydata 8y ago
I thought the whole idea of an ICO was a joke from the comedy Silicon Valley. It seemed too ludicrous.
fairpixels 8y ago
That’s actually a conservative number. We [1] design UI/UX for all sorts of startups and the last year a good chunk of that was for ICO related projects. The vast majority dies somewhere during the sales period. [1] http://fairpixels.pro http://fairpixels.pro
- dougmccune 8y ago
  So you actively seek out and work for companies that you believe are most likely pure scams? I don't mean this to come off as too judgmental, I'm honestly curious what your take on it is. Does the fact that you know your client is trying to rip people off factor into the decision to take on a project? Or do you think the ICOs you design for are all well-intentioned and just so happen to all fail after/during their token sales?
  - fairpixels 8y ago
    We never seek them out specifically and it’s impossible to tell if someone is planning to scam people. Pretty much each of those projects start of with seemingly great founders, boards of advisors and even tech. Some projects did succeed and others are in progress right now so who knows how things will evolve.
- mrhappyunhappy 8y ago
  Your site was taking over 10 seconds to load on mobile, I gave up waiting.
blocked_again 8y ago
Like it or not blockhains are here to stay. Nobody is going to run behind VCs looking for elite money in 20 years from now. Isnt it obvious? Blockhains are going to redistribute the wealth from the wealthy elite few to the masses. More and more wealth is being generated from nowhere. Just because there are some spammy ICOs now doesn't mean it's the end of the blockhain and ICO. This is going to be another rare instance in which hacker news is going to be wrong like Dropbox incident. Mark my words.
- lucasmullens 8y ago
  How would blockchains redistribute wealth away from the wealthy?
  - ENGNR 8y ago
    Securities deregulation. On the one hand, investors deserve protections. On the other, has the regulation gone too far by design, locking out the middle class it used to serve so well. Why do companies wait until most of the value is already realized before they IPO these days Crypto could be Uber for securities, ignoring the regulator and using technology to self regulate, or by operating out of countries with lighter regulation
    - empath75 8y ago
      This is one of the most naive, starry-eyed posts I’ve ever seen here. If you deregulate securities you’re just going to see a whole bunch of senior citizens fleeced by high tech boiler rooms.
      - ENGNR 8y ago
        Geez sorry for outlining both sides of an argument in response to a question, hivemind downvotes are strong today
        DonHopkins 8y ago
craigc 8y ago
Haha what do you know. Another day, another anti-crypto article on the top of Hacker News. In this case, I agree with the overall sentiment. I don’t think these companies are actually “dying” though, but rather they were probably created as get rich quick schemes, so they took the millions of dollars they raised and then sailed off to some island somewhere. From the report > We use intensity of tweets from the cryptocurrency official Twitter account after the ICO to estimate that the survival rate for startups after 120 days (from the end of the ICO) is only 44.2%, assuming that all firms inactive on Twitter in the fifth month did not survive. Not sure how I feel about that methodology, but probably many of these companies never planned to actually issue a product in the first place so it may very well be accurate.
- xbkingx 8y ago
  I love it and agree. It's like this at the start of every major change that has an impact on all levels of society. Even if these tokens are failing, they exist because they caught some unique insight into how the tech will change the world and they were able to communicate that clearly enough to get many, many investors. That they failed or were money making schemes is irrelevant because someone will see the core idea once the sector has matured and use that to build something cool and useful. It should also be pointed out that 50% of small businesses fail within 5 years, and between 70-96% fail within 10. You'd think people so incompetent at identifying success would know when to STFU by now. "Hey, our industry is the go to source for how to run a business. Businesses have a 96% failure rate. Please continue to listen to us. Why are you laughing?" https://www.fool.com/careers/2017/05/03/what-percentage-of-businesses-fail-in-their-first.aspx https://www.fool.com/careers/2017/05/03/what-percentage-of-b... https://www.inc.com/bill-carmody/why-96-of-businesses-fail-within-10-years.html https://www.inc.com/bill-carmody/why-96-of-businesses-fail-w...
- splintercell 8y ago
  HN anti-cryptocurrency bingo: - "It's just a glorified database" - "It's just a slow database" - "Congratulations, the crypto people just learned why regulations exists. Soon enough, we'd need to create each and every regulations in financial sector but for crypto" - "Oh, to solve that problem, they'll have to do this other thing, and another thing, and soon enough you'd have recreated each and every aspect of our current financial system which they aimed to remove" - "Can we stop using the word 'crypto' to mean 'cryptocurrencies'? I downvote any article's headline which uses 'crypto' to mean 'cryptocurrencies'"
ThomPete 8y ago
Most companies built on the TCP/IP protocol dies. I really don't think this is very meaningful metric for anything. Sure where there is a lot of money there is a lot of people trying to weasel their way in. But so far the usage has grown. Much more companies will fail just like on "the internet" but the blockchain just like the TCP/IP protocol is here to stay and the coming generations will adopt it as if it's the most natural thing in the world just like we did with the internet.
agotterer 8y ago
How is this possible? Most of these ICOs are raising way more money than a tradition VC backed seed/series A round. Shouldn’t they have enough funding to limp along for few years? I wonder if it takes 4 months to give up on the idea or steal the funds?
- jopsen 8y ago
  Isn't it mostly the valuations that are high?
deltateam 8y ago
All they did was look at how active twitter accounts were and then wrote about how things were performing in a 6 month long crypto bear market. There is a lot of gullibility involved if this is all it takes to confirm your worldview.
analog31 8y ago
To put this in perspective, how does 50% failure rate compare with other ways of funding startups?
Animats 8y ago
And that's for a really weak definition of "fail". How many made it to - claimed product became operational - claimed product achieved positive cash flow - claimed product repaid investors.
christianbryant 8y ago
In contrast, the ICO for SingularityNET has actually done quite well and received 5 times the amount of demand expected for their token sale; they postponed the end of their token sale date to properly handle the overwhelming demand. Feels most ICO sites are giving them 4/5 rating on average, but we'll how that goes. I think the reason this one in particular is doing so well is that the purpose of the sale feels useful, which is "to let anyone create, share, and monetize AI services at scale". According to them, the world’s first "decentralized AI network" has arrived. Anyone have thoughts as to why this ICO could be different? ICO Drops says it was a whitelisted ICO: https://icodrops.com/singularitynet/ https://icodrops.com/singularitynet/ Interesting note from the website: "While we are aware that the AGI token is currently being traded on some exchanges, we do not encourage or facilitate this exchange trading in any manner. Speculative secondary trading is against the spirit of the AGI token and SingularityNET project. We strongly discourage speculative secondary trading and officially ask AGI token holders to act accordingly."
- syndev 8y ago
  Do you own some of this? Are you associated with the project in some way?
  - christianbryant 8y ago
    I'm in no way whatsoever connected with the SingularityNET ICO or project. I actually couldn't get on the whitelist but I'm curious if the underlying point of the ICO is why it "appears" to be doing better than your average one. Could it be a model for future projects and whether they decide to go IPO or ICO. Clearly more successful ICOs are good for the model in the long run.
    - tim333 8y ago
      There have been hundreds of ICOs and some of them are actually trying to make an interesting product. I'm guessing this one is above average though the return has been unspecatcular. It says 1.08x on the website in USD terms. Zil is an example of one building something with a real purpose and non trivial technology - a sharded blockchain that should be able to scale indefinitely which is up 20x in USD. Built by university researchers rather than obvious scammers https://icodrops.com/zilliqa/ https://icodrops.com/zilliqa/ There are some interesting things out there amongst the silliness.
cjlars 8y ago
The article gleefully ignores the positive side of these investments documented by the authors of the study: >We find evidence of significant ICO underpricing, with average returns of 179% from the ICO price to the first day’s opening market price, over a holding period that averages just 16 days. Even after imputing returns of -100% to ICOs that don’t list their tokens within 60 days and adjusting for the returns of the asset class, the representative ICO investor earns 82%. Not saying I want to participate in any ICOs, especially now that a lot of frothiness has gone out of the market, but this article is clickbait garbage if they can't even summarize some of the main points from the abstract.
- granaldo 8y ago
  which make it not healthy. old time miners do not expect instant return mining coins, and today ico investors want out fast
lamontcg 8y ago
"die" is a funny way to spell "exit scam"
arisAlexis 8y ago
not commenting on weather facts are sane or not. bloomberg has consistently been publishing negative cryptocurrency articles each time the market goes up to the point of suspicion
drngdds 8y ago
Is there a legitimate reason why ICO-backed projects seem to need so much money before even making a working prototype? Don't startups normally have to have a basic product to show off before they get investors?
- tomglynch 8y ago
  Almost all successful ICOs in the past 6 months have working prototypes. Only in the very early stages, June 2017 - November 2017 was this not the case.
- mrhappyunhappy 8y ago
  No. The incentives do not line up when you are making up front what you would typically when you have a successful business.
granaldo 8y ago
ICO die is one extreme, ICO that has too much hype like Tron https://www.coingecko.com/en/coins/tron https://www.coingecko.com/en/coins/tron is the other spectrum of questionable
putlake 8y ago
The headline is misleading. It says ICOs "die". The actual article says that after 3-6 months, returns from a cryptocurrency are no better than the overall crypto market. This is like saying after 6 months of an IPO, the stock does not outperform the S&P 500. It doesn't mean the IPO is dead, or the stock is dead.
jillesvangurp 8y ago
Some thoughts from the inside. My company (Inbot) is currently in the pre ICO phase: we're selling tokens but not on the blockchain yet. We're very hesitant to move to the next phase precisely because of the tendency of many ICO companies to collapse almost straight away. Investors dumping your coin on the day of the ICO is kind of deadly for its valuation and if your ICO is attracting that kind of investors, something is indeed wrong. Quite many ICOs are set up such that this is actually the goal rather than something they want to avoid (pump and dump). We're kind of going against the trend here by planning to survive this initial phase (hard). The reason many companies are doing ICOs regardless is because it actually makes sense if you look at it as a financial instrument that gets you funded quickly to the extend where you get similar capitalization comparable to a big series A or even B round. Like with high risk investments, ROI is pretty bad; except when it is not. Most ICOs will fail but some will not. This space continues to be so hot on the premise that there are a few unicorn ICOs out there that are actually going to make it. Ironically, this is leading to a lot of misguided investments by, well, idiots. This in turn is leading to a lot of successful attempts to separate these idiots from their cash. Blame the idiots, not the ICOs. Hence Dogecoin, PonziCoin V3 (this is a thing !!!), and similarly poorly veiled scams. I applaud these people for being able to make so much money with so little effort. There are many issues with dapps. IMHO it doesn't make any sense to write dapps right now unless your roadmap spans several years because the technology is very immature, the infrastructure is not there, and the fixes are years out from becoming proven to the point where you can rely on them to function as advertised. This requires more than proof of concept. Ethereum and bitcoin are out there with many users that are trying to exploit it in any way they can. That makes it battle tested. Alternative technology stacks exist but lack this type of user base and scrutiny. Most of these alternative stacks still have serious flaws conceptually and practically. Quite a few of them seem to be moving the problem rather than solving it. What's needed is orders of magnitude improvements to throughput and scale for dapps to be usable by the masses. 50k transactions sounds nice until you realize that is globally and needs to service the entire ecosystem of dapp applications. That's not a lot compared to a modern db running on off the shelf hardware. Once users actually show up, that kind of traffic can be caused by a spike in usage on a single dapp. If you have many of those, that will be happening all the time. Right now the only things dapps make sense for are things that are relatively high value so you can justify the cost and have enough per transaction revenue and very low in transaction volume so that the whole thing doesn't collapse when you actually get some traction. That pretty much narrows it down to limited amount of trading of coins on top of ethereum, which is indeed the dominant type of dapp in use today. Some successful ICOs are actually about fixing this problem. They are long term investments in tech companies that are likely to fail but very lucrative if they don't. E.g. Telegram is a high risk investment but they are now well funded and have enough runway to execute whatever it is they are doing for the next few years. And they have a decent tech team. Similarly IOTA, QTUM, HashGraph, and others are well funded companies well capable of executing roadmaps that will take quite long to deliver results. Are those bad investments? Not if they succeed. Is that any different from e.g. the likes of Google bank rolling Magic Leap? Or indeed any kind of VC tech investment?
tehabe 8y ago
"Still, all investors should probably sell their coins within the first six months, the study found." This is a baffling statement, mostly because if you sell your "coins" to someone and they keep them too long, they will lose everything. Which could lead to liability questions. I mean, you buy those coins and sell them as fast as you can, because you know that they won't be worth anything within in days or weeks, it could be argued that you committed security fraud. Well it could also argued that the ICO itself is already fraud, because of the huge risk involved.
- tim333 8y ago
  Shares and similar tokens don't work like that on the secondary markets like stock and token exchanges. One person clicks sell and another buy and very seldom does anyone worry too much legally about the reason why, insider trading being the occasional exception. Issuing shares from scratch is different and there you can get done for fraud.
arisAlexis 8y ago
how is this different from startups failed purportedly at 99% rate? It's only faster

466 points by chollida1 8y ago

vkou 8y ago

"Still, all investors should probably sell their coins within the first six months, the study found." If all investors should sell their coins, who is the counterparty that should buy them?

aphextron 8y ago
Shhh
- mockingbirdy 8y ago
  He knows too much. Better put him at the top of our pyramid scheme so he loses his integrity in exchange for money like Mr. McAffee.
  - vkou 8y ago
    How much money will you give me, and what coin do I have to shill for it?
artursapek 8y ago
the industry standard term for them is "the suckers"
- wmf 8y ago
  I thought they're called bagholders. (baghodlers?)
  - callmeed 8y ago
    I thought they're called the "greater fools"
dguaraglia 8y ago
I see you've spotted the flaw with this argument :)
RIMR 8y ago
Suckers. That's who bought all my Bitcoins at $20k when I sold them.

polski-g 8y ago

They're called shitcoins for a reason.

rm_-rf_slash 8y ago

The research in the article was not quite clear. Was their only “sign of life” measured by tweets? What about capitalization, transaction volume...anything?

garmaine 8y ago
It’s almost like... they got busy and started working on what they promised to do.
- MBCook 8y ago
  Or they ran away with the money and don’t want to be as easy to track.
  - garmaine 8y ago
    Missing the point. TFA uses a metric which is unable to distinguish between success (working instead of tweeting) and failure (scam). That's beyond wrong...
    - s73v3r_ 8y ago
      If they were working on it, though, one would think they'd be delivering updates to show their progress.
      - garmaine 8y ago
        As someone who has actually worked on such things, you'd expect updates to drop off to a trickle on an actually productive engineering project. At least compared to the pre-ICO hype. A few regular blog posts every other week, vs. a constant storm of promotional material and hype.
        chipotle_coyote 8y ago
        I've actually worked on such things, too, and in my experience, "I'm too busy programming to let you know my company is still around" isn't a particularly good excuse even at tiny two- and three-person shops. When I've seen that happen at cottage software companies in the past, it has never been a sign of health: more often than not, when they finally communicate again, it's to tell us that they're closing shop. And more to the point, tiny two- and three-person shops probably aren't doing ICOs. If your company is big enough to undertake a public offering of any kind, it's damn well big enough to have someone on staff whose responsibilities explicitly include some kind of community relations work.

mrnobody_67 8y ago

I'm so surprised that smart contracts aren't being used to release the funds over some set of time, with the ability for community to vote to block it if they feel team has stalled. Nobody needs $20 or $50m on day 1.

deleted 8y ago
[deleted]
MBCook 8y ago
Why would anyone running an ICO agree to that? Clearly the current system ‘works’. They get money, no accountability, and everyone just moves on. No wonder crypto-currencies enjoy such a positive image among the ‘haters’ and ‘doubters’. Because they keep earning it.
- shawn 8y ago
  Once ICO scams stop working, the world will move towards traditional models. Crypto is out there, and it's not going anywhere. Eventually someone will realize that the smarter move is to create sustainable value over time.
  - jacquesm 8y ago
    > Eventually someone will realize that the smarter move is to create sustainable value over time. Most ICO's - if not all of them - are powered by the greater fool theory, sustainable value isn't really on the table. I see value in the blockchain and some in BTC (but not as much as others apparently do), but the whole ICO concept seems to be just a way to transfer wealth from greedy suckers to even greedier suckers.
    - shawn 8y ago
      One promising example is SpankChain. It's a cryptocurrency specifically designed for the porn market. Traditionally, it's hard to make money in porn due to fraud and chargebacks. Most payment processors also won't touch you. But crypto has no chargebacks, so it's a natural fit. One could argue that if you have to dip down to the level of porn just to find some value, ICOs are worth dismissing. But I would say that it's a decent example of the future potential.

chollida1 8y ago

So I've been doing alot of thinking lately about traditional VC and PE vs ICO's for work. Its pretty rare for VC and PE firms to just be blatantly ripped off like a good portion of ICO investors are. As far as I can this is due to 3 things. 1) Geography, Most VC/PE firms only invest in a particular country and know the laws as they relate to the contracts they sign with companies. This ensures that they can atleast try and go after the founders, legally speaking, if any "shenanigans" occur. 2) KYC, most will only invest after performing due diligence, which always includes meeting the team and confirming through lawyers that the team is who they say they are and they own the IP they say they do. 3) Contracts, I've participated in a few ICO's and never signed anything. I realized I was essentially giving money to a complete stranger with nothing more than an IOU from someone who I'll never meet and in many ICO cases, never have any way to find them. Fortunetly for ICO's as a legit means to raise money these are all solvable. They just require "adults in the room.". If you look at the successful ICO's from a professional investors angle(VC,PE) they all followed the above 3 steps.

JumpCrisscross 8y ago
> for ICO's as a legit means to raise money these are all solvable At which point you end up with an overcomplicated share certificate.
wslh 8y ago
> So I've been doing alot of thinking lately about traditional VC and PE vs ICO's for work. You are missing part of the story: before ICOs there is a presale phase where some projects finish before the ICO. This is where real competition with VCs happens since the top projects receive more money from non traditional investors using cryptoassets than the one promised by traditional VCs (except in very rare cases). In this context: (1) Geography does not matter and (2) KYC/AML is enforced. The advantage for real entrepreneurs is receiving a bigger investment in short time. Disclosure: I work in this kind of syndicates.
- chollida1 8y ago
  Unless I'm misunderstanding you, you seem to agree with me, with the exception of you thinking geography doesn't matter. I'd disagree with your idea that geography doesn't matter. I would have more confidence in an ICO in the US than I would in say China where it can be hard to sue someone and collect your damages if you win. but if you really feel geography doesn't matter then please share your argument for this, I'm ready to learn!!

jacquesm 8y ago

That's long. I would have expected the end to come within hours of the funds being released to the perps. Err. Entrepreneurs.

jerf 8y ago
I imagine the facade must be maintained long enough for the checks to irrevocably clear, which can actually take a while. The big bad evil fiat government money system has the advantage and disadvantage of being able to claw back transactions for quite a while, since it's basically the fundamental primitive of the system that ensures integrity of the system. (That is, at the foundation, the money system tends not to be about preventing fraud so much as being able to remediate it after the fact. There are many higher layers that are about preventing it too, of course. But at the very bottom, it's about remediation.) If you're going to hike away with investor money, the whole system needs to clear all those tentacles away from your Cayman Islands (or whatever the hot destination is) account first.
- JumpCrisscross 8y ago
  > fiat government money system has the advantage and disadvantage of being able to claw back transactions for quite a while Recently helped a friend extract his company from a wire fraud scam. Wires, particularly international wires, are surprisingly irrevocable. You basically have to get the receiving bank to agree to send the money back.
  - jacquesm 8y ago
    That's worthy of a blog post in its own right.
  - Yizahi 8y ago
    Now that is the thing that should be fixed, instead of taking it to absurdity (i.e. immutability).
- koolba 8y ago
  Don’t most ICOs use an existing coin (likely bitcoin or Ether) as the unit of purchase?

hudon 8y ago

You can see the state (volume, # daily users) of some of these promised "dapps" here: https://dappradar.com https://dappradar.com . It is indeed a barren wasteland. And when a new popular ICO comes along, the Ethereum network struggles and fees skyrocket. It's weird because people compare it to the early days of the Internet... but the early Internet was useful from its beginning: you could at least send messages and files across the network, which was incredibly useful to academia and the military and was orders of magnitude more efficient than any alternative. Now, all we see is rampant fraud and a complete disregard for the environment [0] with no gain in efficiency. It's high time we hold "crypto-anarchists" accountable for these issues. [0] The Ethereum network consumes more electricity than Iceland https://digiconomist.net/ethereum-energy-consumption https://digiconomist.net/ethereum-energy-consumption

ZirconCode 8y ago
What if we make a currency where each ICO is one coin?
- 1996 8y ago
  It is more or less what ethereum is with ERC tokens
- granaldo 8y ago
  ethereum lets people create a coin and conduct ICO there are thousands of them https://www.coingecko.com/en/coins/all?asset_platform_id=279 https://www.coingecko.com/en/coins/all?asset_platform_id=279
jerguismi 8y ago
> It's weird because people compare it to the early days of the Internet... but the early Internet was useful from its beginning: you could at least send messages and files across the network, which was incredibly useful to academia and the military and was orders of magnitude more efficient than any alternative. How is running an ICO not useful to people? Get lot of money with only doing a lousy whitepaper, drive ferrari and live luxury life rest of your life. No joking, many people can't imagine anything better.

matte_black 8y ago

Is there legit money to be made in ICOs without running a fraud?

NathanCH 8y ago
Forget money, I would like to know of one legit ICO. One single ICO that has a product. One.
- jrockway 8y ago
  There was that one on Silicon Valley where the coins represented credits on a distributed computing network. It sounded pretty legitimate to me, but of course it's just fiction. Over in the real world, I haven't heard of any legitimate ICOs.
- AlwaysBCoding 8y ago
  The Brave web browser
- HammadB 8y ago
  I think the RNDR token is the only one I've seen that really makes sense. https://rendertoken.com/ https://rendertoken.com/. And the people behind it (Otoy) are very reputable.
  - fabricexpert 8y ago
    There's no product though, just a roadmap. The first item of which is "raise ICO money"
- deleted 8y ago
  [deleted]
- api 8y ago
  Brave browser, Sia storage network, ... and uhh... Cryptokitties? The vast vast majority are vaporware.
- ENGNR 8y ago

ashishb 8y ago

Are there any ICOs which resulted in a successful product? Please exclude crypto-exchanges like Binance.

maxencecornet 8y ago
Brave Browser / Basic attention Token is very successful although in it's early days But Brendan Eich, the founder of the project, is much more experienced then any random ICO project founder in this space I'm not sure he will succeed where Flattr failed, but we'll see ! Check out how many websites are already Brave/BAT publishers: https://batgrowth.com/publishers https://batgrowth.com/publishers Vice - freeCodeCamp - BitTorrent - xhamster - The Guardian - Washington Post - TinyUrl - JS Bin - Sitepoint - Smashing Magazine and much more are already verified publishers... Even dappradar.com that was quoted in this thread !
- mrhappyunhappy 8y ago
  Indeed. I am curious to see how brave turns out. Right now I don't use it as it feels too bulky and I don't want to mess with bookmark exports - who knows maybe that will change.
- marktolson 8y ago
  Wait so BAT with its $250M market cap has < 600 sites in the Alexa top 1 million??? That's like 6 hundreths of a percent. That's a terrible rate of adoption considering the hype behind BAT.
  - maxencecornet 8y ago
    >Wait so BAT with its $250M market cap has < 600 sites in the Alexa top 1 million??? That's like 6 hundreths of a percent. That's a terrible rate of adoption considering the hype behind BAT. The script is still running at the moment, right now it's 600 sites in the top 230k, around 0.25% The cron job should be over by tomorrow
cslarson 8y ago

startupfounder 8y ago

Original Boston College Paper that this article is based on: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3182169 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3182169 Conclusion: "We also show that there is a positive and convex relationship between (log) market cap and (log) number of Twitter users, that nearly all ICO capital is raised by crypto-companies that continue to be active (on Twitter) after 120 days, and that daily Twitter intensity is associated with positive returns that day but negative returns in the future, suggesting overreaction and reversals. " "It suggests that scams, while plentiful in number, are not as important in terms of stolen capital because investors are shrewd enough to spot (and underfund) them."

tiglionabbit 8y ago

Do you all have any idea what this is talking about? I've never heard of ICO and you're all using it as if it's some familiar and obvious thing with no explanation.

Captain_Usher 8y ago
An ICO is an "Initial Coin Offering", it's supposed to be like an IPO except instead of offering shares, you're selling cryptocurrency coins. ICOs are usually framed as a way to fund a project or business, usually related to cryptocurrencies or blockchain technology in some way. The idea is that the project's success will increase the value of the coins you bought and you'll be able to sell them for more later. The main difference is that the coin is just a coin, buying it won't make you a shareholder and you aren't subject to the regulation that IPOs and shareholders are. That regulation makes it difficult to scam investors by starting a dummy company, pretending it's a valuable operation, selling shares in an IPO, and then running away with the money. Doing this with an ICO is much easier, and there's a lot of concern about how many ICOs are frauds.
- themagician 8y ago
  Is the company required to buy back the coins? I’m not sure I get the point of an ICO. It seems like a company issuing monopoly money. It even seems like this would have been possible before crypto—literally just Monopoly money to people and let them trade amongst themselves. I guess Monopoly money is easy to duplicate… but so is crypto in a way because you can just start your own currency that uses the same block chain to create more tokens.
  - RIMR 8y ago
    Do you understand the concept of a stock share? Well, just remove the company, the product, and the regulation, and that's an ICO. The issuer of the coins/tokens do not have to buy anything back. The idea is that they will increase in value and function, and others will want to buy them from you. It goes like this: 1. "RichCoin" is created and the creators begin selling them at 5,000 Richcoins for 1 Bitcoin. Ads are pushed across social media platforms and web communities are seeded with information that encourages people to invest. 2. 50,000 people spend a total of 1000 Bitcoins buying the first 5,000,000 RichCoins. 3. After public launch, 5,000 people sell their RichCoins to late investors, netting ~20% profits. 4. The remaining 45,000 people "HODL", hoping that their $1 RichCoins will one day become $100 RichCoins so that they can move to a private island and never work again. 5. RichCoins fall to 10% or less of their ICO value as all official websites disappear. 6. The creators of RichCoin, who long ago converted their 1000 Bitcoins to $5,000,000 USD, move to a private island and never work again.

izzydata 8y ago

I thought the whole idea of an ICO was a joke from the comedy Silicon Valley. It seemed too ludicrous.

fairpixels 8y ago

That’s actually a conservative number. We [1] design UI/UX for all sorts of startups and the last year a good chunk of that was for ICO related projects. The vast majority dies somewhere during the sales period. [1] http://fairpixels.pro http://fairpixels.pro

dougmccune 8y ago
So you actively seek out and work for companies that you believe are most likely pure scams? I don't mean this to come off as too judgmental, I'm honestly curious what your take on it is. Does the fact that you know your client is trying to rip people off factor into the decision to take on a project? Or do you think the ICOs you design for are all well-intentioned and just so happen to all fail after/during their token sales?
- fairpixels 8y ago
  We never seek them out specifically and it’s impossible to tell if someone is planning to scam people. Pretty much each of those projects start of with seemingly great founders, boards of advisors and even tech. Some projects did succeed and others are in progress right now so who knows how things will evolve.
mrhappyunhappy 8y ago
Your site was taking over 10 seconds to load on mobile, I gave up waiting.

blocked_again 8y ago

Like it or not blockhains are here to stay. Nobody is going to run behind VCs looking for elite money in 20 years from now. Isnt it obvious? Blockhains are going to redistribute the wealth from the wealthy elite few to the masses. More and more wealth is being generated from nowhere. Just because there are some spammy ICOs now doesn't mean it's the end of the blockhain and ICO. This is going to be another rare instance in which hacker news is going to be wrong like Dropbox incident. Mark my words.

lucasmullens 8y ago
How would blockchains redistribute wealth away from the wealthy?
- ENGNR 8y ago
  Securities deregulation. On the one hand, investors deserve protections. On the other, has the regulation gone too far by design, locking out the middle class it used to serve so well. Why do companies wait until most of the value is already realized before they IPO these days Crypto could be Uber for securities, ignoring the regulator and using technology to self regulate, or by operating out of countries with lighter regulation
  - empath75 8y ago
    This is one of the most naive, starry-eyed posts I’ve ever seen here. If you deregulate securities you’re just going to see a whole bunch of senior citizens fleeced by high tech boiler rooms.
    - ENGNR 8y ago
      Geez sorry for outlining both sides of an argument in response to a question, hivemind downvotes are strong today
      - DonHopkins 8y ago

craigc 8y ago

Haha what do you know. Another day, another anti-crypto article on the top of Hacker News. In this case, I agree with the overall sentiment. I don’t think these companies are actually “dying” though, but rather they were probably created as get rich quick schemes, so they took the millions of dollars they raised and then sailed off to some island somewhere. From the report > We use intensity of tweets from the cryptocurrency official Twitter account after the ICO to estimate that the survival rate for startups after 120 days (from the end of the ICO) is only 44.2%, assuming that all firms inactive on Twitter in the fifth month did not survive. Not sure how I feel about that methodology, but probably many of these companies never planned to actually issue a product in the first place so it may very well be accurate.

xbkingx 8y ago
I love it and agree. It's like this at the start of every major change that has an impact on all levels of society. Even if these tokens are failing, they exist because they caught some unique insight into how the tech will change the world and they were able to communicate that clearly enough to get many, many investors. That they failed or were money making schemes is irrelevant because someone will see the core idea once the sector has matured and use that to build something cool and useful. It should also be pointed out that 50% of small businesses fail within 5 years, and between 70-96% fail within 10. You'd think people so incompetent at identifying success would know when to STFU by now. "Hey, our industry is the go to source for how to run a business. Businesses have a 96% failure rate. Please continue to listen to us. Why are you laughing?" https://www.fool.com/careers/2017/05/03/what-percentage-of-businesses-fail-in-their-first.aspx https://www.fool.com/careers/2017/05/03/what-percentage-of-b... https://www.inc.com/bill-carmody/why-96-of-businesses-fail-within-10-years.html https://www.inc.com/bill-carmody/why-96-of-businesses-fail-w...
splintercell 8y ago
HN anti-cryptocurrency bingo: - "It's just a glorified database" - "It's just a slow database" - "Congratulations, the crypto people just learned why regulations exists. Soon enough, we'd need to create each and every regulations in financial sector but for crypto" - "Oh, to solve that problem, they'll have to do this other thing, and another thing, and soon enough you'd have recreated each and every aspect of our current financial system which they aimed to remove" - "Can we stop using the word 'crypto' to mean 'cryptocurrencies'? I downvote any article's headline which uses 'crypto' to mean 'cryptocurrencies'"

ThomPete 8y ago

Most companies built on the TCP/IP protocol dies. I really don't think this is very meaningful metric for anything. Sure where there is a lot of money there is a lot of people trying to weasel their way in. But so far the usage has grown. Much more companies will fail just like on "the internet" but the blockchain just like the TCP/IP protocol is here to stay and the coming generations will adopt it as if it's the most natural thing in the world just like we did with the internet.

agotterer 8y ago

How is this possible? Most of these ICOs are raising way more money than a tradition VC backed seed/series A round. Shouldn’t they have enough funding to limp along for few years? I wonder if it takes 4 months to give up on the idea or steal the funds?

jopsen 8y ago
Isn't it mostly the valuations that are high?

deltateam 8y ago

All they did was look at how active twitter accounts were and then wrote about how things were performing in a 6 month long crypto bear market. There is a lot of gullibility involved if this is all it takes to confirm your worldview.

analog31 8y ago

To put this in perspective, how does 50% failure rate compare with other ways of funding startups?

Animats 8y ago

And that's for a really weak definition of "fail". How many made it to - claimed product became operational - claimed product achieved positive cash flow - claimed product repaid investors.

christianbryant 8y ago

In contrast, the ICO for SingularityNET has actually done quite well and received 5 times the amount of demand expected for their token sale; they postponed the end of their token sale date to properly handle the overwhelming demand. Feels most ICO sites are giving them 4/5 rating on average, but we'll how that goes. I think the reason this one in particular is doing so well is that the purpose of the sale feels useful, which is "to let anyone create, share, and monetize AI services at scale". According to them, the world’s first "decentralized AI network" has arrived. Anyone have thoughts as to why this ICO could be different? ICO Drops says it was a whitelisted ICO: https://icodrops.com/singularitynet/ https://icodrops.com/singularitynet/ Interesting note from the website: "While we are aware that the AGI token is currently being traded on some exchanges, we do not encourage or facilitate this exchange trading in any manner. Speculative secondary trading is against the spirit of the AGI token and SingularityNET project. We strongly discourage speculative secondary trading and officially ask AGI token holders to act accordingly."

syndev 8y ago
Do you own some of this? Are you associated with the project in some way?
- christianbryant 8y ago
  I'm in no way whatsoever connected with the SingularityNET ICO or project. I actually couldn't get on the whitelist but I'm curious if the underlying point of the ICO is why it "appears" to be doing better than your average one. Could it be a model for future projects and whether they decide to go IPO or ICO. Clearly more successful ICOs are good for the model in the long run.
  - tim333 8y ago
    There have been hundreds of ICOs and some of them are actually trying to make an interesting product. I'm guessing this one is above average though the return has been unspecatcular. It says 1.08x on the website in USD terms. Zil is an example of one building something with a real purpose and non trivial technology - a sharded blockchain that should be able to scale indefinitely which is up 20x in USD. Built by university researchers rather than obvious scammers https://icodrops.com/zilliqa/ https://icodrops.com/zilliqa/ There are some interesting things out there amongst the silliness.

cjlars 8y ago

The article gleefully ignores the positive side of these investments documented by the authors of the study: >We find evidence of significant ICO underpricing, with average returns of 179% from the ICO price to the first day’s opening market price, over a holding period that averages just 16 days. Even after imputing returns of -100% to ICOs that don’t list their tokens within 60 days and adjusting for the returns of the asset class, the representative ICO investor earns 82%. Not saying I want to participate in any ICOs, especially now that a lot of frothiness has gone out of the market, but this article is clickbait garbage if they can't even summarize some of the main points from the abstract.

granaldo 8y ago
which make it not healthy. old time miners do not expect instant return mining coins, and today ico investors want out fast

lamontcg 8y ago

"die" is a funny way to spell "exit scam"

arisAlexis 8y ago

not commenting on weather facts are sane or not. bloomberg has consistently been publishing negative cryptocurrency articles each time the market goes up to the point of suspicion

drngdds 8y ago

Is there a legitimate reason why ICO-backed projects seem to need so much money before even making a working prototype? Don't startups normally have to have a basic product to show off before they get investors?

tomglynch 8y ago
Almost all successful ICOs in the past 6 months have working prototypes. Only in the very early stages, June 2017 - November 2017 was this not the case.
mrhappyunhappy 8y ago
No. The incentives do not line up when you are making up front what you would typically when you have a successful business.

granaldo 8y ago

ICO die is one extreme, ICO that has too much hype like Tron https://www.coingecko.com/en/coins/tron https://www.coingecko.com/en/coins/tron is the other spectrum of questionable

putlake 8y ago

The headline is misleading. It says ICOs "die". The actual article says that after 3-6 months, returns from a cryptocurrency are no better than the overall crypto market. This is like saying after 6 months of an IPO, the stock does not outperform the S&P 500. It doesn't mean the IPO is dead, or the stock is dead.

jillesvangurp 8y ago

Some thoughts from the inside. My company (Inbot) is currently in the pre ICO phase: we're selling tokens but not on the blockchain yet. We're very hesitant to move to the next phase precisely because of the tendency of many ICO companies to collapse almost straight away. Investors dumping your coin on the day of the ICO is kind of deadly for its valuation and if your ICO is attracting that kind of investors, something is indeed wrong. Quite many ICOs are set up such that this is actually the goal rather than something they want to avoid (pump and dump). We're kind of going against the trend here by planning to survive this initial phase (hard). The reason many companies are doing ICOs regardless is because it actually makes sense if you look at it as a financial instrument that gets you funded quickly to the extend where you get similar capitalization comparable to a big series A or even B round. Like with high risk investments, ROI is pretty bad; except when it is not. Most ICOs will fail but some will not. This space continues to be so hot on the premise that there are a few unicorn ICOs out there that are actually going to make it. Ironically, this is leading to a lot of misguided investments by, well, idiots. This in turn is leading to a lot of successful attempts to separate these idiots from their cash. Blame the idiots, not the ICOs. Hence Dogecoin, PonziCoin V3 (this is a thing !!!), and similarly poorly veiled scams. I applaud these people for being able to make so much money with so little effort. There are many issues with dapps. IMHO it doesn't make any sense to write dapps right now unless your roadmap spans several years because the technology is very immature, the infrastructure is not there, and the fixes are years out from becoming proven to the point where you can rely on them to function as advertised. This requires more than proof of concept. Ethereum and bitcoin are out there with many users that are trying to exploit it in any way they can. That makes it battle tested. Alternative technology stacks exist but lack this type of user base and scrutiny. Most of these alternative stacks still have serious flaws conceptually and practically. Quite a few of them seem to be moving the problem rather than solving it. What's needed is orders of magnitude improvements to throughput and scale for dapps to be usable by the masses. 50k transactions sounds nice until you realize that is globally and needs to service the entire ecosystem of dapp applications. That's not a lot compared to a modern db running on off the shelf hardware. Once users actually show up, that kind of traffic can be caused by a spike in usage on a single dapp. If you have many of those, that will be happening all the time. Right now the only things dapps make sense for are things that are relatively high value so you can justify the cost and have enough per transaction revenue and very low in transaction volume so that the whole thing doesn't collapse when you actually get some traction. That pretty much narrows it down to limited amount of trading of coins on top of ethereum, which is indeed the dominant type of dapp in use today. Some successful ICOs are actually about fixing this problem. They are long term investments in tech companies that are likely to fail but very lucrative if they don't. E.g. Telegram is a high risk investment but they are now well funded and have enough runway to execute whatever it is they are doing for the next few years. And they have a decent tech team. Similarly IOTA, QTUM, HashGraph, and others are well funded companies well capable of executing roadmaps that will take quite long to deliver results. Are those bad investments? Not if they succeed. Is that any different from e.g. the likes of Google bank rolling Magic Leap? Or indeed any kind of VC tech investment?

tehabe 8y ago

"Still, all investors should probably sell their coins within the first six months, the study found." This is a baffling statement, mostly because if you sell your "coins" to someone and they keep them too long, they will lose everything. Which could lead to liability questions. I mean, you buy those coins and sell them as fast as you can, because you know that they won't be worth anything within in days or weeks, it could be argued that you committed security fraud. Well it could also argued that the ICO itself is already fraud, because of the huge risk involved.

tim333 8y ago
Shares and similar tokens don't work like that on the secondary markets like stock and token exchanges. One person clicks sell and another buy and very seldom does anyone worry too much legally about the reason why, insider trading being the occasional exception. Issuing shares from scratch is different and there you can get done for fraud.

arisAlexis 8y ago

how is this different from startups failed purportedly at 99% rate? It's only faster