A recent Forbes post, written by staff, Jeff Kauflin, questioned the whereabouts of funds typically raised through Initial Coin Offerings (ICOs). 2017 has been highlighted as the year for ICOs, as several projects – good and bad – have either resulted in gains, losses or completely nothing.
Throughout the post, Kauflin provides examples of firms who have raised funds through ICOs and have failed to discuss how the funds actually made a difference. The first example was that of MobileGo.
MobileGo’s mission was to establish a crypto platform that focused on video games and fantasy sports. It turned out being one of largest ICOs in 2017, as it raised funds of nearly USD$53 million.
Due to nature of ICOs, which typically lack regulatory bodies and the need to disclose financial statements, no one will know (at least not for now). The brothers behind this project, Sergey and Maxim Sholom have ultimately decided to rid the aspect of cryptos from their project, which is deceiving given that investors only put money into their project for that sole reason.
Another example that has been provided is that of an Estonian project called Polybius, which raised nearly USD$32 million in a 2017 ICO with the aim of establishing a crypto-version of a financial service called Mint, as Kauflin put it. The end result? The firm’s native token drops by more than 80% and fails to launch anything until November 2017. With this being said, the firm still managed to turn the USD$32 million to USD$40 million.
NewsBTC, who also covered this respective piece made the argument that not all ICOs resulted in scams. Nonetheless, a majority either did or simply failed, but the fact that such recording and how funds have been utilized still remains covered is problematic. An example that was shared was that of the NXT Project, which gained momentum way before the ICO craze, with the hopes of developing a “Proof-of-Stake consensus mechanism.”
The NXT token was definitely a success given its “383953.58 percent return off each NXT token,” as NewsBTC put it. In addition to PoS, NXT supposedly focused on a blockchain-as-a-service platform, which they’ve stuck to, to date.
Interestingly, the project to have lead this ICO movement has been deemed as none other than Ethereum (ETH), which sold its tokens at a price of $0.31 each and gained a significant return on investment regardless of current price or all-time high.
Kauflin also went as far as analyzing 10 different projects that have been recently launched to see where exactly the funds were going. While some seem to have used the funds wisely, others either got rid of them or have them stored, which defeats the purpose – given that it was raised for the project to begin with.
NewsBTC on the other hand see it based on “goals”, that is, an ICO is likely to succeed given that it, “focuses on offering BaaS, privacy, and decentralization,” and that said projects are the ones responsible for the survival of the funds-raising method.