The success of various cryptocurrency projects has attracted many bad players in the market. They aim to cheat the investors and leave without a trail. It has left a very bad impression on people’s minds.
As per some reports, 1840 cryptocurrency projects failed since 2017. It is believed that most of these failed crypto projects were focused on defrauding the gullible investors. There were 518 failed cryptocurrency projects in 2019. The number of failed digital currency projects decreased by 20% in 2019 compared to the number of failed crypto projects in 2018.
The Craze for IEOs
The ICO boom subsided in 2018 and it was soon replaced by IEOs. The kind of craze that was seen during the ICO boom has never been seen afterward, but IEOs did come close. It filled in the gap that was left by the craze for tokens created by ICO. The results speak for itself as the exchange utility tokens secured the top spot in the list of best-performing tokens in 2019. How did this happen? It is because exchanges and platforms ensured that they made it attractive for the investors to hold on to the exchange utility tokens.
There’s no doubt that the IEO craze has been tremendously beneficial for the cryptocurrency exchanges. The exchange utility tokens helped the exchanges in increasing activity and interest on their platform. But can we say the same for the investors as well? Maybe not! It is because many investors that bought the tokens during the IEO have been holding on to the tokens without any other options.
Doesn’t this look similar to what happened during the ICOs? It sure does look the same. The scale of issues may be less, but there are similarities. Many of the exchange utility tokens haven’t delivered on its promises. Many of the IEO tokens didn’t deliver any returns at all over 200 days. It’s because many IEO tokens were introduced to the market without any future planning or proper use cases. It led to a situation where these tokens are worth next to nothing today.
There’s one big issue with IEOs, and that is that the investors don’t want to hold on to their IEO tokens for the long term. It may be because of regulatory uncertainty as IEOs are in the grey area whereas the SEC has already mentioned that ICOs are considered to be unregistered securities.
IEO in New Format – Will it Change Anything?
One of the leading cryptocurrency exchanges, Binance made some changes to the IEO format to make it more accessible. It impacted the ROI that the investors got through the IEO tokens. Thus, investors thought that IEOs were equal to ICOs. Is this true? Well, in some instances IEOs did bring high ROI for the investors. Let’s see some examples of recent IEOs that saw considerable success.
The Cartesi IEO brought ROI as high as 550% for its investors on the Binance. The WazirX IEO was equally successful and brought returns as high as 700% for the investors on the Binance. But a handful of wins cannot change the fact that most of the IEOs fail. Of course, it is not the end of IEOs, and many other projects are already in the pipeline for the IEO. A few of them may even prove as successful as WazirX and Cartesi. But the fact is that the golden period of IEOs and ICOs has faded.
How are Crypto Projects Raising Capital now?
There’s no backtracking from the fact that the ICO era is done and over. It won’t return ever. Today’s the time for a fairer way of raising capital. The crypto projects should focus on adopting the fair allocation of tokens to raise funds so that they don’t attract the negative kind of attention towards their project.
Many other alternatives are coming up to replace the IEOs and ICOs. In 2020, many crypto projects ethically raised capital, and thus, it proves that it is possible to conduct an ethical token generation event. Kleros and LiquidApps pulled it off quite swiftly. They did not value their project in terms of how speedily their tokens get sold out. Instead, they took the way of “Slow and Steady, Wins the Race.”
Kleros and LiquidApps did not make their token sale some kind of racing competition for the investors where the one who puts their hand on the buzzer first wins. They did not leverage the “Fever of Missing Out” technique to sell their tokens. Their main focus was on their product itself, and at the same time, they opted for a more ethical manner of raising capital. Kleros chose a milestone-based fundraiser, whereas LiquidApps went with a year-long token generation event.
Successful Examples of Non-IEO & Non-ICO Token Sale
LiquidApps has been in operation for over one and a half years now. It is an EOS-focused project, and its year-long token generation event has been successful. The buyers who were interested in LiquidApps token were allowed to get their hands on the LiquidApps tokens in daily cycles. They did not rely on over-the-top marketing and launching on some major exchange to raise capital.
LiquidApps worked on its product and made it sure that their app has some genuine use in the market. Their products are already helping EOS blockchain by relieving them of the overload on it. Their products LiquidLink & LiquidAccount are seeing some really good traction.
Kleros, on the other hand, conducted a token sale for two long months in 2018. Thereafter, they started working on their product without wasting any time. They came out with Athena in 2019, which powers the automatic dispute resolution mechanism of Kleros. It’s a smart contract-based backend. Athena also had a very user-friendly UI.
Soon after the launch of Athena, Kleros released a token curated registry. It aims to be a trustworthy source of information about Ethereum tokens. The next in line was Kleros escrow, and it holds onto the funds and locks it until the counterparties involved in a transaction agree that the transaction has been successful. Once both parties agree, the tokens locked in Kleros escrow are released.
Kleros has garnered lots of goodwill since their existence. They have even got endorsements from none other than Vitalik Buterin, and at the same time, they have also built a supportive community.
The Road Ahead!
IEOs may not be completely dead yet, but it’s not the same anymore. It hasn’t seen the kind of success that the IEO tokens saw in 2019. The legit crypto projects must also opt for a more ethical manner of raising capital and distributing their tokens. It would be really interesting to see how the future shapes the token sale process and if the IEO will be completely shelved or not.