If you’ve been following cryptocurrency headlines, you probably know that 2017 was a good year for Initial Coin Offerings (ICOs). But what you may not know is that the 752 ICOs launched over the past year, having raised more than $5 billion. This surpassed the early-stage funding raised by venture capital for the first time in history.
With 57 percent of large corporations such as Microsoft and others starting to embrace the blockchain, and mainstream companies like Aptoide and Kik entering the ICO space, this momentum is only expected to continue into 2018.
For months, news headlines have been packed with speculation about what’s next for cryptocurrency, its underlying blockchain technology and ICOs, and the funding mechanism of choice for startups in this space. Here’s what I predict to be the biggest ICO trends for the year ahead, based on my work launching numerous successful ICOs in 2017.
Trend 1: New structures for pricing and bonuses
In 2017, many ICOs were aimed at the big numbers, striving to raise anywhere between $10 million and $100 million. Many of them succeeded. However now, ICO companies are going lean. As crowdfunding has grown around the world, more countries are stepping in and creating limitations and regulations as to how much companies can raise in a calendar year and how much individuals can contribute.
Instead of crowdfunding large amounts, companies will raise only the bare minimum, or even less. Most will focus on raising anywhere from $2 million to $10 million. But as VC interest has grown, many companies will begin to focus on attracting limitless institutional investors to fill the majority of their capital needs.
Last year, the bonuses for early adopters were everywhere, leading to fast token flipping and massive depreciation. This year, expect fewer ICOs to offer bonuses. For the companies that do, bonus amounts will likely be smaller and have a lockup period of several months or years to prevent immediate trading. This will allow demand, and value, to grow.
Trend 2: Product funding through ICOs
Companies with an existing product tend to be much more successful than ones with simply a whitepaper and an idea. In 2017, ICOs were largely confined to the IT sector, with startups raising money to facilitate token distribution or fund their platform buildout.
Now, the opportunities for new players are expanding. Last year laid a groundwork, as sectors such as healthcare and NGOs utilized the blockchain to facilitate critical activities. The IT industry has seen massive success with its ICOs. And with more VCs joining the ICO movement, expect more companies to turn to the blockchain in 2018 to bring their products to market.
Trend 3: Wider ICO adoption
ICOs faced backlash in numerous countries due to their lack of regulations. Because cryptocurrency and ICOs are still in their nascent stages, governing authorities have been rushing to catch up to the industry that has exploded onto the scene.
As more countries define ICO limitations and establish regulations to keep token sales aligned with fiscal authorities, it will become easier to launch ICOs in territories that had previously banned them. This will fuel increased competition between territories and jurisdictions.
Trend 4: Classical investors will join the ICO
Venture capitalists took notice of ICOs in 2017, investing in large numbers and seeing massive ROI. This begs a crucial question: are ICOs going to replace traditional IPOs? There’s no clear answer at this point, but one thing is clear: 2018 will prove that VC interest is more than a trend.
Several large firms have added cryptocurrency to their asset class mix, and VC startup investors like Andreesen Horowitz are also actively investing in ICOs. As more classical investors join the ICO pool and support blockchain companies, 2018 could shape up to become another record-breaking year for token sales.
Trend 5: ICOs will become more trustworthy
Last year, ICOs launched startups and jumpstarted sales for numerous services and crypto products. While their popularity rages on, authorities have been hard at work evaluating the regulatory landscape to make it more trustworthy for future investors.
Financial regulators in the U.S., Singapore, Hong Kong, Canada and Russia are among the bodies looking into whether ICOs should be included in securities regulations. The United States Securities Exchange Commission (SEC) has already established that certain types of tokens should be considered securities.
Other countries likely will soon follow suit by requiring token sales to adhere to financial regulations. By standardizing ICO frameworks, implementing legislation and promoting ICO education, financial regulators are taking steps to ensure ICOs offer legitimate and fair investments.
With a new year ahead and a year full of lessons behind us, we’re entering a crucial time for the ICO landscape. These developments might decrease the number of ICOs hitting the digital world, but they will help accomplish something even greater: higher-quality token sales, which will foster a more reputable landscape overall.