25 Feb 2019
ICOs (Initial Coin Offerings) were one of the biggest trends in the crypto world back in 2017. However, just like cryptocurrencies, the ICO model suffered a massive blow in 2018 due to the crypto winter. Not only that, but a large number of scams, technical issues, and even the regulators' crackdown left the trend seemingly in ruins.
There is no doubt that the trend is currently on the decline, and that it has been for a while now. Some even went as far as to proclaim it dead back in 2018. While the statistics suggest that this is still not the case, it is still clear that the interest in the model, as well as the generated revenue, went down by quite a lot when compared to previous years.
For example, in February 2017, ICOs managed to generate as much as $2.6 billion. However, in November of the following year, the total dropped to $65 million. So far, 2019 has been just as bad for the ICO model, if not worse. So, going from here, what can be expected regarding ICOs in 2019? What difficulties lie along the road, and can ICOs overcome them?
As many are undoubtedly aware of, cryptocurrencies are in a serious lack of regulations, even now, almost two years after the initial boom. The situation was even worse regulation-wise in 2017 when the boom originally occurred. At that point, people barely even knew about cryptocurrencies, and the authorities did not care about them. The lack of regulations and the lack of interest in bringing them allowed ICOs to prosper. At this time, Ethereum's ERC-20 token model also became popular, since it allows anyone to create new tokens.
As countless new coins started to appear, the SEC started paying attention, and the regulator finally took action in early 2018. However, they only started penalizing ICOs in November of last year. Soon after that, the US government shutdown came to pass, and the SEC could not operate. The regulator finally published guidelines for ICOs two weeks ago, after the trend already lost its strength. And even so, many view the guidelines as rough and believe that they still need quite a lot of polishing.
Whatever ends up happening to ICOs in following months, it will likely include some heavy regulations, as the SEC already believes that most altcoins are actually securities.
Security Token Offerings (STOs) emerged as a spiritual successor to ICOs after the model started losing its impact on the crypto space. However, it also acts as a competitor, as ICO is still alive. STOs require KYC procedures, meaning that only verified investors can buy the tokens. While this makes them less anonymous, it also makes them more secure, as well as compliant with current regulations.
Furthermore, the value of tokens sold via ICOs depends on the project's future success, meaning that buying them may or may not pay off. When it comes to STOs, the coins provide buyers with ownership of the underlying asset, which can be pretty much anything of value. The STO trend has yet to pick up, but there are many who believe that this will happen in 2019 and that it might push ICOs out of the picture when it finally grows.
As mentioned, ERC-20 token model quickly became a favorite for new coin developers. However, there were problems with the model in the past, one of which resulted in hundreds of millions of USD worth of coins being stuck in a Parity's Ethereum wallet due to a bug. This happened in late 2017, and the issue has yet to be resolved, which does not exactly encourage investors to participate in token sales.
Then, there were problems with the latest hit ICO which was held on Binance Launchpad on January 28th. The token that was being sold was BitTorrent (BTT), and the sale was a huge success, with all of the offered coins being sold off in barely 15 minutes. The sale would have been completed in seconds if not for technical difficulties that resulted in the platform being frozen due to the number of interested participants.
While the problem was quickly resolved, only a relatively small number of investors managed to buy the coins.
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