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Is the ICO market dead, or is it just evolving?

15 Feb 2019

Pretty much everyone in the crypto industry knows of ICOs (Initial Coin Offerings) or has at least heard of the term. For those who are not sure about what this is, it is a type of a crowdfunding campaign where companies (usually startups) start offering investors a new token in exchange for their investments. However, the model has one big flaw, and that is the fact that it is based on trust.

Those investing in ICOs are investing in the coin's future, and only if they believe that the coin truly does have a future. While flawed, the model became quite popular in 2017, especially when the prices of cryptocurrencies reached their all-time highs.

Unfortunately, ICOs quickly lost their popularity when the hype died down, and for several reasons. The bear market that came in early 2018 cut the crypto progression short, and coins started losing value. New tokens quickly died out due to their projects being weak and unable to survive the unfriendly conditions, but there were also a lot of scams and scammers, looking to trick new investors via fake projects.

Not only that, but the regulators also took an interest in ICOs, which led to additional problems for the model. As 2018 progressed, many were quick to call ICOs dead and extinct, although the question now is whether or not this is really true?

Are ICOs dead?

The fact is that ICOs are not dead, or at least not yet. They are definitely a rare sight these days due to the loss of popularity and trust, but they can still be found from time to time. The investors' interest in them has dropped by roughly 90%, judging by online search results, but one recent token sale, in particular, showed that ICOs still have supporters in the crypto space.

We are, of course, talking about the BitTorrent (BTT) token sale that was held on Binance Launchpad on January 28th. While it should be noted that this is a special case — since the largest exchange in the world supported the token sale, meaning that many trusted its choice — it still sold off all of the BTT tokens in about 15 minutes. The sale would have been finished even sooner if the platform did not experience problems due to the massive amount of activity caused by interested investors.

Furthermore, the Launchpad has announced another token sale — Fetch.AI (FET) — which is scheduled for February 25th.

With that in mind, it becomes clear that ICOs are still alive after all, even though they might need special conditions in order to be successful and trustworthy. However, there may be more to the argument that they are evolving into something else.

The shift from ICOs to STOs

Another thing that many have noticed is the shift from ICOs to STOs, which may be viewed as the next step in the evolution of token offerings. While ICOs offered utility tokens which were expected to be valuable in the future, STOs (Security Token Offerings) are selling securities, making them somewhere in between ICOs and IPOs.

This model is generally seen as much more secure from the investors' and companies' point of view alike, as the STO remains compliant with the regulators' guidelines. Indeed, the crypto industry seems to view STOs as the future, or at least the next step in the progression of token offerings, while the old model loses support little by little.

It should be noted that STOs still have a long way to go and that the interest in them has only starting to grow, but there are still more STOs chosen by startups for every ICO token sale out there. While exchanges are still uncertain regarding securities due to regulatory issues, this is currently the most promising alternative to the flawed model that is ICO.

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