06 May 2019 #Ethereum
ICOs are still making money, but they are far from VC alternative that they were billed as a few years ago. It was just in 2017 that many thought ICOs would take over as the primary source of funding for any blockchain startups that were serious about their future prospects, but the market has decided differently.
Decentralization, the reason ICOs became so popular, is also the reason for its downfall. No regulation meant that scam proliferated and that many investors became wary of this particular financial model.
However, the following trends show that ICOs have definitely influenced the financial world in more ways than one and even if ICOs themselves are losing ground that doesn't mean the next generation of offerings that are based on ICOs is not going to thrive.
There are two types of institutions that are helping prop up the ICO market this year. On the one hand, you have institutional investors that are bringing a lot of money to the table and are hungry for more investment opportunities.
Harvard's Endowment Fund, a 30+ billion dollar behemoth has recently bought coins from a startup. These types of institutional investors bring a lot more money into the ICO ecosystem than there ever was before but they also have strings attached. Taking the Harvard example into account, we can see that they invested in a company that is looking to release an SEC backed token offering. Big money means big compromises, but this isn't necessarily a bad thing. It means that the market is maturing and that more options are going to be available.
Then you have the other side of the coin. Exchanges, large financial institutions in their own right, are finally taking their roles as the middle man in the crypto world seriously. The birth of IEOs is proof perfect of how this is happening.
IEOs are basically crypto exchange-backed ICOs. They have realized that the average investor does not have the know-how to do proper due diligence. They have taken their money and their expertise and have started applying it to the ICO market. Backing horses that they believe in, and giving their clients easy access to startups that are serious about the money they will be raising.
True, IEOs are not as open as ICOs. You might not be able to buy the token you are looking at directly, but anyone can still open an account at any of the exchanges that are offering their own fully backed ICOs. They also simplify the entire process, which is excellent and gives all investors more piece of mind.
The scams that proliferated among ICOs in the last few years have seen regulatory bodies come down hard on bad ICOs. The SEC has officially announced that token bought through an ICO are classified as securities. This puts them in the same ballpark as old school IPOs and increases the financial burden on the issuing party. It also gives the SEC a lot more power to go after scammers who are looking to make a quick buck.
The SEC's decision to label all tokens as securities due to the proliferation of ICOs has had many up in arms. It kills innovation and the way a coin can be used they say. That is 100% true. The financial community, however, has seen this as an excellent way to introduce the concept of Security Token Offerings and open up different classes of investments to a larger number of people than ever before.
Securities tokens are backed by a physical asset and will now allow various institutions access to a type of crowdfunding that has never before been possible. Average people could never invest in multimillion-dollar property, but with STOs, they finally can and have proof of ownership with the tokenized asset.
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