The ICO market in 2017 raised more than 3.5 billion dollars, and much has been written about the problems caused by this market which is as rampant as it is unsupervised.
In an alarming report, Diar, a weekly publication that analyses the digital coin industry, reveals that the market is even more vulnerable than had been previously thought.
The report highlights that the billions of dollars raised by the ICO market in 2017 is not equally split; the majority of the money was raised by a relatively small number of large projects. Over 1.5 billion dollars were raised by 17 projects alone, and 40 percent of the total can be attributed to no more than twenty.
This isn’t reassuring news in a market beset with problems. Regulatory authorities worldwide are struggling with how to define and tax ICO projects, while security continues to be a major issue – one study found that almost 300 million dollars had been stolen from more than 60,000 people in 2017.
The most pressing issue stemming from the lack of supervision is the fact that projects are not obligated to follow up on the promises of their whitepapers, meaning that many ICOs are either unfeasible/unnecessary, or outright scams (a couple of examples: Confideo raised 374,000 dollars only for its organisers to disappear with the money, and two Seele employees stole 2 million dollars from investors).
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169 new projects were launched in October 2017 alone – more than five every day – and reading a project’s whitepaper often leaves one befuddled by the techno-babble, wondering if there is really anything material behind it, and more importantly, how it is possible that so many people are blindly pouring money into projects that it may not even be possible to understand (“powered by an up-scalable Neural Consensus protocol for high throughput concurrency among large scale heterogeneous nodes” anyone?).
Diar found that after reaching out to ten of the twenty big projects, only two replied, and only one responded to follow-up questions (Bancor, ICO 153 million dollars, was the only one that continued communication).
The ICOs that Diar reached out to were listed as:
Filecoin (ICO raised 257 million dollars);
Tezos (232 million dollars);
EOS (197 million dollars);
Bancor (153 million dollars);
QASH (106 million dollars);
Kin (98 million dollars);
Comsa (95 million dollars);
TenX (80 million dollars);
TRON (70 million dollars); and
SALT (48 million dollars).
Filecoin, which actually had to suspend its ICO because too much money had been pouring in, hasn’t been heard from since the 1st of January. Tezos has been mired in court proceedings for months, and the EOS whitepaper opens with a disclaimer that the creator “does not guarantee the accuracy of or the conclusions reached in this white paper” and that it will “have no liability for damages of any kind arising out of the use, reference to, or reliance on this white paper or any of the content contained herein”. This didn’t prevent Bitfinex, the largest cryptocurrency exchange in the world by trading volume, from partnering with it to create a new exchange.
The cryptocurrency market is notoriously fickle, and as Diar correctly points out, one of the big twenty projects failing could have a major effect on the others, and by extension the entire market. The fact that almost none of the major ICOs listed responded to communications is not exactly reassuring.