28 February 2018

We continue to talk about relevant information from The Blockchain Economic Forum 2018 that AXIOMA attended in Singapore. The conference has become a useful tool for immersing ourselves into different themes, such as Initial Coin Offering (ICO) projects. Several panel discussions were completely devoted to this topic: the experts talked about problems and prospects of ICO campaigns.

What was interesting to us:

Christian Ferri states that the lack of a plan and regular public feedback on a project are frequent causes of failure. "I have 300+ white papers that come through my desk on a monthly basis and 99.9% are crap… there is no business logic." CEOs of such companies to the question: "How will your company make money?" answer: "Via ICO." Collecting money during the IOC is just one of the early steps of the project. ICO is not a target itself. When developing a startup, you need to have a goal for the future. This way is easier to develop a high-quality Utility Token.

Alex Mashinsky considers the problem that blockchain now serves to improve existing systems (in healthcare, banking, etc.) and instead suggests creating innovative systems based on the blockchain. For example, he suggests replacing the banking system, rather than modifying. The main value of tokens will be in their utility. This is what you need to focus on when developing an ICO. Alex sees the token not as an object of sale in the market, but as a mirror of the community that issued it.

According to Tone Vays, the main difference between Initial Public Offering (IPO) and ICO is that during IPO the company is a known market participant, so information about them is readily available. You can conduct an analysis of the enterprise before the purchase of shares. With ICO this is not true, just a few people are able to understand the real meaning and the truth about a new project. Moreover, there is not any regulation, licensing or requirements for ICO initiators  (even by age).

AXIOMA comments: Comparing IPO and ICO isn’t accurate. A company that enters the market through an IPO is well-known already and has a well-established history and financial flow. Meanwhile, an ICO is a combination of crowdfunding and VC. In some cases, venture financing is already used as a basis for starting an ICO campaign.

John B Kaplan reveals common features of successful ICO projects:

  • presence of strong consultants who help to develop a utility token rationally
  • presence of in-house marketing teams, because no one will learn about the product without advertising
  • competent liquidity procuring

Christian Ferri on the contrary, states  common features of failed ICO campaigns :

  • no "right" team
  • lack of competent consultants
  • insufficient funds
  • unsuitable product
  • ICO is a goal itself, and as a result, the pour utility of the emitted tokens

AXIOMA comments: Speaking of mentions of the advisors’ importance, it is worth noting that John B Kaplan and Christian Ferri themselves are advisors, so their assessment is, to put it mildly subjective.

We recommend that utilizing advisors be one of the last steps during the evaluation of ICO projects. It is more important to look at the usefulness of the product, at the necessity of implementing the blockchain technology, and at the team behind the project.

28 February 2018