The level of success of ICOs using the amount of funds generated and massive adoption is no longer news. What is news is the proposal by Vitalik Buterin in a Whitepaper co-authored with Jason Teutsch. Vitalik and Jason are recommending a change to the current mode of tokenization due to the “irresponsible” dimension it has assumed. For a nascent fund-raising method which has dwarfed traditional fund-raising methods in recent times, attracting interest outside the Crypto communities. A correction from within is essential to retain the liberation and freedom it offers.
Unwholesome practices like the Pump-and-Dump and Ponzi Schemes which have been practiced previously in penny stock markets is already in play by some ICOs. This is why the Securities and Exchange Commission of the United States has declared that they intend to dive deep into which tokens are in fact a security by definition, and furthermore regulators might finally treat all ICO`s as IPO`s. There is an urgent need to correct this anomaly and others that will definitely surface.
Uncapping Sales for Mass Participation
Described as the lack of rational economics and absence of a traditional analysis of the valuation of token sales other than an idea. These two issues are what the Interactive Coin Offering intends to solve using two proposals. Currently, ICOs are capped upfront, this leads to a stampede and inability of potential investors to access the sales portal. In June, the Initial Coin Offering to fund a new web browser called Brave raised $635 Million in 30 seconds. Interestingly, the token sales involved only 130 investors. Millions of potential investors were unable to participate, leading to disappointment and frustration.
One other proposal of Vitalik in correcting the anomaly is the ability to cancel purchases by investors. This is to allow the forces of demand and supply take charge. They suggest an interactive platform where potential buyers can enter and exit the sales based on the buying behavior of others. In a scenario, whereby a single individual has mopped up a large chunk of the crowdsales, a potential investor should have the options of canceling his purchase.
A New Approach to Token Sales
Interactive Coin Offerings proposed by Vitalik and Teutsch will be based on the principle of “limit order”. Being an element of stock trading, startups offering tokens will no longer set price. Potential buyers will determine the price based on the number of tokens they are willing to buy at different values. The new system is related to the one used by eBay in the auctioning of items. This will bring about a fair pricing of tokens as against the arbitrary pricing existing presently.
More importantly, this will discourage whales who are deep-pocketed from mopping up entire tokens on sale. The new proposal will be beneficial to both the ICOs and potential investors, bringing sanity to the Crypto community. It’s a two-way street, no more unfair pricing by ICOs and no more greed on the part of investors.
In the FOMO-frenzy (Fear Of Missing Out) to gain extremely high ROI in the crypto-community’s decentralised answer to crowdfunding, many have gone from zero to hero, while others have bet their entire life-savings… and lost, BIG!
The general consensus shows that Initial Coin Offerings, the “initial” crowdfunding 2.0, have provided an arena for fast moving innovation. The community is not denying the fact that there is great potential here, and we’ve only seen the tip of the iceberg when it comes to advances in global tech.
It’s been a wild ride so far, but if we want to keep the party going, things need to change from the inside out. Vitalik and Jason have laid out a way to do this, now it’s up to the community to adapt and persevere.
The bar has been raised. Who will be the first to reach it?