A New Model for ICOs to Raise Money through Exchanges, Will it Bring back ICO’s from the dead?
ICO’s (Initial Coin Offerings) were all the rage in 2017, Crypto based startups managed to raise over $5.7 Billion in ICO funding in 2017 surpassing traditional Venture Capital.
Did ICOs disrupt traditional Venture Capital?
Not even close.
In 2018, not only did the number of ICOs fall significantly but also most of the money raised was from private investors in a few major ones like Telegram. There are several reasons why this happened:
- Most of the ICOs did not go through any vetting process
- A Majority of them turned out to be scams (78% of ICOs turned out to be scams according to Coindesk)
- The tokens have no utility
There is a reason why investment banks exist in the traditional IPO market, they go through the tiring process of due diligence and provide liquidity to the stocks. The retail investors do not have the bandwidth or time to do the due diligence on every project.
As much as the ICOs did democratize the process of investing, due to a lack of oversight and accountability many founders took advantage of the model to make a quick buck.
This industry deserves better.
There is a new which can make ICOs legit again, Enter Public Exchange Offering!
ICO’s – Will they rise from the Ashes?
In this new model called PEO, instead of a project having the token sale details on a website with a smart contract, they will be able to delegate this entire process to a trustworthy exchange. Exchanges become successful by building trust among its users, so when a project goes through an exchange to do the public sale the exchanges’ reputation is also on the line.
- Due diligence process will be taken care by the exchange as their reputation is at risk
- Exchanges provide a single secure platform for the token sale which prevents phishing attacks that are common with ICO websites.
- A smooth experience for the users as they are already registered on the exchange
- Strong technical and financial teams behind the entire process
Case Study – Temco
Temco, the first ICO to be run on Rootstock (RSK) is adopting the PEO model in partnership with the reputed Chinese exchange Coinbene.
Temco is a venture-backed company that is aiming to solve the most obvious problem that Blockchains are set to disrupt: Supply Chain. Unlike most other Blockchain startups working in Supply chain, Temco is aiming to take it to a whole new level by combining Blockchain based supply chain management with Big data collected from the public through multiple nodes of the supply chain. The company aims to reinvent the supply chain system using Bitcoin smart contracts.
The company is trying to solve real problems, unlike many ICOs who are searching for problems by having the technology first. A real use case for Temco would look like this: An aircraft is on the way to India and is in need of a part wherein the Pacific Ocean is the tanker with the part, this data is collected by Temco either by a public GPS system or a private API and added to the Temco system.
In order to achieve the full democratization of capital formation which was the initial vision of ICOs, it is critically important to weed out the bad players in the industry and create a standardized process to raise money.
It is better to have 10 less ICO’s than 1 more scam, clearly, the current model in which funds are being raised is not working.
Public Exchange Offerings (PEO) may change the Crypto industry for the better.
Image Source: Unsplash
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