The high rate of failure among ICOs in the last two years has mainly revolved around two things: the increase in scammy ICOs being released and the decision of the Chinese government to ban them outright. That doesn't mean that ICOs are a bad decision for anyone looking at financing their next big idea via the blockchain. This article will delve into why so many ICOs fail and how you can avoid falling into that trap.
A business that fails can be due to a number of factors, not least of which is sheer blind bad luck — opening the wrong thing in the wrong place at the wrong time. However, these types of freak occurrences aside, a business will generally fail due to poor preparation.
Much is the same with ICOs. The first thing that failed ICOs have in common is that they all had poorly written whitepapers. Your whitepaper is like your business plan for the masses. It should be easy to understand for anyone in the community, not just the tech heads or the business school graduates. They might bring in some funding, but they are not the majority, and the majority is where the bulk of the financing is coming from.
ICOs that have failed have also done so because of a lack of coin utility. The coin shouldn't just be a token that is passed around from person to the next. That was done in 2009, and the blockchain industry and the cryptocurrency market has moved far past that. In fact, it would be like offering horse carriage repairs next to a car dealership. Sure, you might get some antique business, but you will never actually be popular, profitable or do enough business to keep you afloat. Make sure your coin has utility, and you will open up the market to more and more people than you could possibly have ever had.
Having a proper business model is also crucial. Getting into the ICO game just to raise money, without having some sort of underlying business reason for it is a sure fire way to have your ICO fail. People will smell the intention from a mile away. It's not the early days when heady ICO capitalists would click on any coin that entered the market. People are more cynical and if you can't show a real good reason someone should buy your token.
The first thing you should do once you're sure you're not making the mistakes outlined above is to maximize security. The moment your ICO hits the market, all eyes are on you. Whatever platform you launch, you need the biggest amount of eyeballs on your product, and a lot of those eyeballs are going to be hackers. Make sure your security is tight.
Another key thing to consider is a fantastic KYC/AML process. If you do not have one, then you will be looked at suspiciously by any bank you would want to do business with. Regulators will be down your throat and problems will crop up immediately. Having a sturdy and robust KYC process eliminates a headache that will haunt you years into the future.
Another important factor is the community. This means taking preemptive action and creating lively communities on Reddit, Telegram, and GitHub. These are the big three when it comes to any ICO and having a bad presence or a slow community on any of these platforms could be the death knell to your ICO. Investors will go to see what your Reddit community has to offer, what the movement has been recently on GitHub and Telegram is a story in and of itself. Make sure those stories are being played out in your favor.
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