The FUD is back and we are here to debunk the lies that has recently been spread out. For a few days now, the crypto space is attacked again by an avalanche of negative news about cryptocurrencies and ICOs. It appears that 50% of ICOs are scams and that one should better not hold tokens to avoid losing money. Is it true? Is even 50% of scams in an innovative field that bad? Should you sell or be concerned? Let’s talk about this.
[July 12 update: following an article published by Cointelegraph, we added a few corrections]
ALL OF A SUDDEN
On June 29, CCN release an article named “Research: Over 1,000 Cryptocurrencies are “Dead Projects””. Relying on Dead Coins and Coinopsy listings, they tell us that there is more than 1000 failed / dead coins. Most of them are scams and, it is not specified but, most of them aren’t either included in the Coinmarketcap ranking which currently lists 834 tokens among 1624 cryptocurrencies. We also learn that scams raised 1 Billion $USD in 2017, which looks like an impressing number. However, the total amount of money raised for legit projects isn’t reported. Instead, we’re gifted with a quote from Bloomberg betting on a 100% fail of all ICOs ever:
“There has obviously been significant fraud and hype in the ICO market. I have seen 80 percent of ICOs were frauds, and 10 percent lacked substance and failed shortly after raising money. Most of the remaining 10 percent will probably fail as well.”
Three days later, on July 2, CNBC outbids with an article named “Over 800 cryptocurrencies are now dead as bitcoin is 70 percent off its record high”. In case you didn’t notice that we are in a bear market, CNBC reminds you that 800 coins are dead and that Bitcoin is down 70%. This time we are provided with a number for the total amount of money raised in 2017: 3.8 Billion $USD. It is inexact, but we’ll see that later.
“There’s a lot of risk. The majority of ICOs do fail”
Finally, on July 9, Bloomberg adds to the mix with the following title: “Half of ICOs Die Within Four Months After Token Sales Finalized”. In this article, we learn that less than half of crypto projects survive after 4 months and that the best strategy as an investor is the FLIPPING game:
“What we find is that once you go beyond three months, at most six months, they don’t outperform other cryptocurrencies,[…] The strongest return is actually in the first month. […] These are stakes in platforms that have not yet been built, that have no participants yet. There’s a lot of risk. The majority of ICOs do fail.”
Note that this article has been remixed 1 day later by the BBC.
[July 12 update]
Cointelegraph just published an article relying on a document released by Bloomberg. Bloomberg’s document is divided into two fairly equal parts. The first part focus on the technology with a general overview of the ecosystem. The second part focus on scams. Numbers are wrong they omitted too many legit projects, inflating this way the percentage of scams. They announce 11.9 Billion $USD total raised money from the beginning, scams included, while this number is already exceeded by at least 2 Billions if we take only 2017 and 2018. I also suspect them to have inflated the scam percentage by putting in the scam category projects that are legit. They do not provide any detailed list, but instead explain the rules they used to segregate scams and legits. One of these rules allow a quite frivolous classification.
“Gone Dead (pre-trading): Succeeded to raise funding and completed the process, however was not listed on
exchanges for trading and has not had a code contribution in Github on a rolling three-month basis from that point
Many projects wait quite a long time until releasing anything on Github. Sometimes it can take around 6 months, sometimes even more. Later in the article, we provide a few examples of legit projects that have released their code quite late. Apparently, they may be counted as belonging to the scam category.
The article written by Cointelegraph is even worse: everything is wrong since they are talking about 2017 all along while they give the numbers referring to the whole history of ICOs.
The mistake probably originate in Cointelegraph’s inability to properly read a not so complex document. Here is the extract of Bloomberg’s document I am thinking about.
First, calm down everybody.
- As we will see below, the majority of ICOs do not fail. A good half of ICOs failed, but they together only captured a fraction of the total invested money.
- Articles quoted above are full of statements that do not take into account the specifics of the new market in which ICOs are operating. This leads to absurd comparisons like this one: “only 28 percent of blockchain technology startups could proceed to the second round of seed funding”. How can you draw such statistics in a free market where projects may rely on 1 to 10 funding rounds involving many different categories of investors (VCs, pools, individuals, airdrops, …)?
- We are talking about ICOs that occured in 2017, meaning 6 to 18 months ago. Consequently, we have no clue about the long term outcomes, especially since roadmaps rarely propose any final product before 2 or 3 years of development. So, clearly 6 months may be too soon to evaluate the merits of past year’s activity.
- We have to take into account that unfortunate event called bear market or “the burst of the bubble which is exactly like the Dotcom and the Tulips” if we want to match with the CNBC/Bloomberg/CNN/BBC/etc. narrative. Of course, many uneducated or unaware investors got fooled during the bull and many projects collapsed quickly during the burst, it is common in any speculative market.
- Yes, the ICO market is a bit weird and dirty, exactly like when you build the foundation of a house. So let’s talk a bit less about the dirt and a bit more about the house.
FROM ICOs TO MAINNETS
According to our numbers, which are based on the projects we have identified and listed on our website, we can estimate the total legit money raised during 2017 around 3.5 Billion $USD if we include the not as prominent as today’s VCs participation. The “legit” projects are active projects: they, at least, keep the world updated about what they are working on, they sometimes attend events, they are often listed on one or more exchanges and they are very likely to be found on Coinmarketcap. Legit projects can be divided into two categories: those who didn’t deliver yet anything meaningful and those who released… something meaningful. Blockport would belong to the first category. They recently released the Beta version of their platform, but the social side of it, which is supposed to involve their BPT token, is still absent. The second category is more interesting. Here are a few examples that represent a total of ~ 300 Million $USD raised :
- On June 30, Privatix launched the Alpha version of its P2P VPN based marketplace. The Privatix network allows its users to offer and receive services in a totally decentralized manner. The source code is accessible here.
- Enigma, a platform for decentralized applications focused on privacy, has already an up and running testnet and you can access the code here. Same for Zilliqa (1000 nodes) who is soon ready to launch its version 2.
- There is a nice competition in the domain of currency “swaping”. A handful of projects is working on enabling efficient tokens interchangeability and they all had their ICO in 2017: Kyber‘s platform, 0x and Airswap may be the real contenders.
- Request network is not only functioning, it is already used by key players like Ledger Wallet. They even have a Woocommerce plugin that we might use in the future.
- The decentralized identity platform Civic is also used by several other projects with great success and may be used in the future for critical situations like voting “in the real world”.
- Augur, the decentralized prediction network has been launched two days ago.
- Even FUCK, which started as a simple tipbot money, is releasing this weekend the HUB, which is an application that will give anyone the ability to connect their Reddit, Twitter, Telegram, Slack, Twitch and Discord usernames to one wallet and seamlessly give a FUCK between platforms.
There are so many more if we look into 2017 ICOs, but Bloomberg, CNBC and CNN want you to focus on scams. If scams and dead projects represent 1 Billion $USD, that’s less than 25% of wasted money (~ 4.5 Billion $USD total) for a ~ 50% fail over a 18 months period. Indeed, not 100% of today’s “legit” projects will succeed, but it seems that those who fail / die the fastest are also those who raised the least. We still have to witness what big projects will do with the 75% remaining money and it is most likely that a substantial part of it will be spent to support adoption (user friendly front-ends and reach), a long term challenge so to speak.
Ask Bloomberg about decentralized economy, decentralized information and privacy.
Blaming an innovative field for its abuses is counterproductive when one could spend the same energy contributing in many ways. Rapid fail of funded projects is not even a new or abnormal thing. In the “traditional” tech startup field, 90% of projects are expected to die mainly due to the inability to meet markets needs. Cryptocurrency world, on the other hand, is a wasteland upon which a brand new society as yet to be built. The needs are real, obvious and has been created precisely by those who seize the slightest opportunity to gun this new ecosystem down. Ask Bloomberg about decentralized economy, decentralized information and privacy. The money involved is not even that big: the dotcom bubble was about Trillions poured by accredited investors into a giant mess revolutionizing nothing more than the centralization of the Internet. Thousands of additional coins could disappear without leaving a trace, it would still be totally irrelevant compared to the benefits of the technologies currently being funded by the “crazy money”.
A LOVE STORY
If it is still a bit soon to talk about successes and failures of 2017 ICOs, did we actually hear good things from mainstream financial media about any blockchain related project that may have had its ICO before 2017? Ethereum is the most used decentralized smart-contracts platform in the world. It is not the most powerful, but Ethereum played a key role in the cryptocurrency ecosystem by democratizing the creation of Dapps. Today, most of ICOs use its ERC20 Contract Standard to create their initial token and some mainstream applications already showed some interest. For example, the Opera browser will now act as an Etherem wallet as well. It is obvious for anyone involved in the cryptocurrency revolution that Ethereum is one of the most important and beneficial piece of code deployed so far, but that’s not what you get when you search for “Ethereum” on CNN or Bloomberg. Check the links: the former focus 90% of it’s articles on the price, hacks and criminals, the later focus 100% of its articles on price, hackers and criminals. The technology is not so interesting you know, it is a “crypto-smart-contract-whatever” which could be cloned. I am under the impression that they like Ripple, though.
ICOs ARE INEVITABLE
Technically, ICOs are the only mean for decentralized solutions to get money. If you want to be able to build something that is autonomous, you may need to get the money before, so you can hire developers, incentivize the community and conduct the proper audits. Ultimately, a decentralized application is supposed to be open-source, meaning shared to everyone and “forkable”. This is a very different situation compared to traditional funding: the code produced by tech startups is clearly the opposite of free. Facebook algorithms are weapons that make money, Ethereum smart-contracts are collaborative tools and they do not bring even 1 penny to the creators and developers of Ethereum.
Many people criticize ICOs for the fact that they kind of create money out of thin air and capture this way what would be considered as being more legitimate money (FIAT, Bitcoin, Ethereum). It is partly true because, in many cases, newly created tokens do not turn out to be needed for the proper functioning of their surrounding ecosystem. When they are not simply mediums of exchange, they often imitate already existing work tokens and justify their existence by flirting with the security side of the force (see our article about the categories of tokens). However, it does not mean easy to say that this has a detrimental effect on the innovation currently taking place. On a purely financial level it may be a new thing one could call competition between decentralized economies. On a broad technical level one could say that it is a competition between decentralized open-source software, which is an even weirder concept to grasp.
The “created from thin air” money can however be considered not only as money, but also as a very democratic participation system, since it is not anymore a bunch of accredited investors who inflate the SEC friendly company X or Y. Now, anyone is able to pick any project, invest in it and eventually make profits out of it. Anyone being able to invest means anyone more likely going to self educate and be aware of the benefits as well as the dangers. At the end of the race, the winners won’t be a bunch of privacy stealing companies supported by their fellow investors-friends, but decentralized open-source applications that benefit to everyone, supported by a brand new generation of unknown investors / traders who can be you, me or your neighbor.
FUCK THE FUD
Unlike Wall Street journalists, we give a fuck about cryptos. So we decided to give many to celebrate the launch of the FUCK platform. We made a T-shirt so you can make true friends everywhere you go and for every order, we will send you 100 FUCK tokens for you to Hodl or if ever you want to give a FUCK here and there on social media.
Have a great day and feel free to give your opinion on Telegram!