Hey, remember initial coin offerings, the almost totally unregulated form of investment vehicle in which investors trade real cash or assets in exchange for virtual “tokens” in cryptocurrency-backed startups? You know, that hot new crypto market that the Wolf of Wall Street, Jordan Belfort, warned everyone was rife with scams? Those very ICOs that the Securities and Exchange Commission told everyone to be very careful about because of the “greater opportunities for fraud and manipulation”?
Turns out most of them failed or are in the process of failing!
According to an analysis by Bitcoin.com, of the 902 ICOs from 2017 listed on fairly comprehensive crowdsale site Tokendata, 142 failed at the funding stage and a further 276 have failed, “either due to taking the money and running, or slowly fading into obscurity.”
All told, that’s 418 failures or a 46 per cent failure rate. Actually, counting an additional 113 ICOs which have either gone dark on social media or have communities too small to succeed, that’s 531 or an astonishing 59 per cent of 2017’s ICOs that either stole, lost, or are on their way to losing $US233 ($297) million in investors’ money.
The results deeply bothered even Bitcoin.com:
Trawling through 900 ICOs in one sitting is a deeply depressing experience, news.Bitcoin.com can report. Abandoned Twitter accounts, empty Telegram groups, websites no longer hosted, and communities no longer tended are par for the course. A digital graveyard, complete with metaphorical tumbleweed, characterises the crop of 2017 that decided to take the money and run. Many raised zero; some raised a couple of thousand dollars; and a handful raised over $13 million. In each case, the end result was the same though: no MVP, no alpha release, and no contribution to the decentralized web for the betterment of humanity.
Any journalist who has ever mentioned the words “crypto” or “blockchain” in an article can tell you that their inbox was flooded with pitches advertising dubious ICOs in everything from online poker and dating to “gaming infrastructure” and cryptocurrency index funds, and with virtually all of these the question lingers as to why exactly many of these platforms needed to rely on blockchain technology. The answer, of course, is that many ICOs were just trying to cash in on the then-skyrocketing value of cryptocurrency — or were just thinly veiled fronts for scammers.
The cryptocurrency scene’s get-rich-quick image has attracted innumerable marks, many of whom weren’t savvy investors and sunk money into projects that were clearly doomed to fail from the start. In a separate analysis, researchers from London-based firm Ernst & Young examined 372 ICOs that raised a collective $5 billion, finding that $510 million of the money had already been stolen.
“The volume just exploded, people raised their fundraising goals and the quality just dropped,” Ernst & Young global innovation leader for blockchain technology Paul Brody told Reuters. “We were shocked by the quality of some of the white papers, we see clear coding errors and we see conflicts of interest between the companies issuing tokens and the community of token holders.”
Ah, well. At least the Monero-mining botnet scene seems to be doing ok.