Why ICOs don’t offer what they promise: An efficient Funding method

Why ICOs don’t offer what they promise: An efficient Funding method

ICOs are supposed to offer a convenient method of fundraising – both for Blockchain platforms, but increasingly also for companies not related to Blockchain. Although, reality differs a lot from its idea.

The potential of ICOs for companies

Companies looking for capital in early stages as well as companies needing a budget to expand their business might raise them easier by performing an ICO. Initial Coin Offerings promise to be easy, fast and secure. They do not require you to ask for money at a bank or fulfil complex requirements for an IPO. Therefore, they are expected to be cheaper.

Why ICOs are still a young phenomena

Who has been in the ICO sphere for a longer time might see the impressive development since 2017 that ICOs surpassed till today. Looking at from the viewpoint of a company who want to execute a tokensale, they are still bringing some pain with it.

Especially the regulation makes ICO produce a lot of what we call boilerplate results. Since many countries have not published exact guidelines that can be followed, many ICOs are doing their own business, building it from scratch and handling regulatory issues without being able to rely on previous experiences or governmental guidelines.

This requires a business to put a huge amount of money into the project upfront before the ICO can even start. Therefore, tokensales are not really a method to raise capital for everybody coming up with a great idea – at least for now. The money invested upfront can reach a few hundreds of thousand dollars.

How can we enhance the accessability?

Speaking about the regulatory aspect, governments will show how the new phenomena will be treated. And this can be a chance for many regions. For example, Singapore developed to a top location for ICOs since they provide some kind of a legal framework startups and businesses can count on.

On the other hand, the people behind can have a strong influence on the performance of ICOs. For example in Germany the market is quite small and the people dealing with it are a few. Especially in this case, it is more necessary than ever to network. There is no „How to ICO“ guideline that guides you through the whole process. The technology is advancing in such a high pace that most of the information is exchanged between parties and people. The time will come when we will see certain frameworks, guidelines, etc., but this is still some time to work on it. Not to wait for it.

In a few years, regulatory frameworks may have evolved widely and ICOs could be executed

Is Regulation necessary for ICOs to succeed?

Is Regulation necessary for ICOs to succeed?

Regulation is often seen as an obstacle for Blockchain projects. Since their aim often is to cut out specific intermediaries in processes or networks, a regulatory party is usually not a well-seen participant in it. On the other hand, the current situation shows that regulation could sometimes help to overcome issues related to the right transfer of virtual belongings to real-life rights.

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