[2018-04-08] ICOs aren't scams, but a financial instrument

[tropyc]

We all read over and over that ICOs are scams and fraudulent investment opportunities.

However, it is important to define ICOs as financial instruments rather than financial products.
In other words, scammers can leverage ICOs as a fundraising tool, the same way that can leverage bonds or product crowdfunding.

As a financial instrument, ICO offers ground-breaking benefits:

• Facilitates liquidity for traditional illiquid assets
• A non-discriminatory financial instrument for the people
• Suitable for any stage of development
• Flexible functionalities and utility
• Resource-consuming exercise instrument

But most importantly, like with any other fundraising instrument, projects require a product with users!
Although the trend in the ICO market is to raise copious amounts of cryptocurrencies for user-less products, the more users the product has, the better an ICO will be.

Why inject capital into a fundraising campaign for an idea? Wouldn't it be smarter to first invest in the product?

https://tropyc.co/pages/news/ico-financial-instrument

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[zickle]

Financial instrument, certainly. But in most cases it's a financial instrument for deception of gullible crowd.

[kevoh]

Sadly, projects like Giza ICO and outright disrespectful ones like PRODEUM ICO have totally destroyed what ever positive definitions we will like to attach to ICOs. We can not wish away this fact with some fancy definitions, those investors who lost to these scam projects will be justified to badmouth ICOs due to their experience.

[DooMAD]

We all read over and over that ICOs are scams and fraudulent investment opportunities.

However, it is important to define ICOs as financial instruments rather than financial products.
In other words, scammers can leverage ICOs as a fundraising tool, the same way that can leverage bonds or product crowdfunding.

Changing the definition isn't going to change the number of scammers who are "leveraging" ICOs to part the inexperienced and gullible from their money.  If anything, it sounds as though the only goal in changing the narrative in such a fashion would be to legitimise what they're doing and balance the scales in their favour.  It's only important to you if you're one of the scammers.  So, funnily enough, I'm going to keep calling them scams because that's what the vast majority are.  None of the benefits you've listed can make up for the near-indescribable magnitude of abuse that disingenuous people have committed via ICOs.

Sure, it all sounds great in theory, but there's just no way to salvage it now.  The damage is done.  There's no "taking it back" by redefining a few choice words.   

People are asking for money in return for half-baked ideas at best, or things that are deliberately designed to simultaneously sound impressive and yet ultimately deceive at worst. 

ICO = shit.  End of.

[Gotottack]

This is an issue because this is where large companies are basing their supposition in banning ICO ads. But you know, this can do little to think that companies like Facebook, Twitter, among others, have already signified their stance to ban ICO ads. I am pretty sure they won't revert their decision, considering how wrongly can this be attributed to their companies should it be proved later on they were unjust in banning the same. You know, they gotta save face no matter what. Nevertheless, this is a great move to help people become knowledgeable on what ICOs really are.

[bbc.reporter]

@tropyc. What about Bitconnect? Wasn't that one of the biggest scams in the history of the cryptospace?

Also, I know that there are real projects that want to use the blockchain to solve problems in the real world. But what they are really doing is trying to solve the centralization problem and replaced them with a scaling problem, a token distribution problem, a community management problem and a sustainability problem.

Some developers have become aware that they will fail in the middle of their project's development but yet continue to pretend that everything is business as usual. Isn't that also a form of scamming?

[vit05]

Scam is the use that many were making of this new modality of financing. A world with a smaller number of regulators has many advantages. The main one is freedom of choice.
But also many disadvantages. People who do little research, little study, little preparation, and use an investment in the same way that chips at a casino are likely to be fucked.

[Variogam]

ICOs must follow regulatory steps in jurisdictions where they operate in. Only this make ICO legitimate financial instrument. So how many crypto ICOs are legitimate from this point? I guess zero. Thats why the general sentiment Crypto ICO = scam is not so far away from reality.

[ivanpoldark]

Wouldn't it be smarter to first invest in the product?

This is completely personal investment decision what to choose: invest on the first ICO stages or at a later stages. During recent bearish months, investment in new ICO`s looked like wasting the money. A lot of promising projects lost 2-6x of their initial market cap, and tokens could be bought with a good discount. Of course the price will recover, the question is when. In a month or year. But despite of this, ICO is great funding instrument for good ideas, and if you really believe in the project and team, so you should support them the very beginning.

[gabbie2010]

The rate at which these ICOs springs out is very alarming and calls for  public concern, the illegitimate ones will capitalizes on the non regulations of these ICOs to defraud genuine investors, I belief there is need for thorough research, reading of whitepapers and teams of experts involved in an ICOs before coming into conclusion whether to invest it or not.

[Aphrodite98]

The company has to publish the reporting under any standard determined by community of investors and regulators. Investors have to know what expenses and revenues of the company. The company has to publish and regularly update roadmap (road map) and report on its execution (or on the reasons preventing to perform it). The same concerns also a command: reliable data about her members have to be published. The company has to charge timely tokens at the price stated in ICO and perform other obligations for release of tokens and their distribution. The functionality of tokens has to correspond to stated.
Draw conclusions!

[Aphrodite98]

ICO is rather new instrument of attraction of financing, and swindlers can use it. On the other hand, bewilderment causes the fact that the ICO procedure which, unlike the IPO and placements of other emission securities, is simple, democratic and not such costly as, for example, the IPO, want to complicate and make more bulky and bureaucratic.

[Chase]

@tropyc. What about Bitconnect? Wasn't that one of the biggest scams in the history of the cryptospace?

Also, I know that there are real projects that want to use the blockchain to solve problems in the real world. But what they are really doing is trying to solve the centralization problem and replaced them with a scaling problem, a token distribution problem, a community management problem and a sustainability problem.

Some developers have become aware that they will fail in the middle of their project's development but yet continue to pretend that everything is business as usual. Isn't that also a form of scamming?

Very well said.  I would add that even the real ICO projects could face legal problems if they failed to register when required, or when disgruntled investors find out the token has no intrinsic value.

[orions.belt19]

Probably just an attempt to clean the name of ICOs. Even when described in a different way, we can't escape the fact that many have been victimized of fraudulent ICOs and even up to this day, there are still scams among the ICOs. Instead of being a financial instrument to be utilized by it's developers, it has become an instrument to fool investors and users. It's sad how this is supposed to be a way to financially enrich both the developers and investors however is abused by others.

[iram1011]

We all read over and over that ICOs are scams and fraudulent investment opportunities.

However, it is important to define ICOs as financial instruments rather than financial products.
In other words, scammers can leverage ICOs as a fundraising tool, the same way that can leverage bonds or product crowdfunding.

As a financial instrument, ICO offers ground-breaking benefits:

• Facilitates liquidity for traditional illiquid assets
• A non-discriminatory financial instrument for the people
• Suitable for any stage of development
• Flexible functionalities and utility
• Resource-consuming exercise instrument

But most importantly, like with any other fundraising instrument, projects require a product with users!
Although the trend in the ICO market is to raise copious amounts of cryptocurrencies for user-less products, the more users the product has, the better an ICO will be.

Why inject capital into a fundraising campaign for an idea? Wouldn't it be smarter to first invest in the product?

https://tropyc.co/pages/news/ico-financial-instrument

This is exactly the problem with the ICO today.

Most of the companies are launching their ICO before any product launch. The product or service launch is schedule in roadmap and they ask for investors money on the promise of launching and the success of their ""FUTURE POTENTIAL PRODUCT AND IDEA"". This is what makes these ICO a scam. With no product and no users, these so called ""FINANCIAL INSTRUMENTS"" can't be trusted as there isn't any regulation or check on these ICO. I respect the decentralized nature of ICO and cyrptocurrencies. But not on the cost of scams and potential risk these ICO posses. I still believe ICO are good for market but a regulatory check is needed to safeguard investors from the risks and scams.

[zarados]

I have been trying to invest in ICO as much as 2x, and I think that number is enough to just fulfill my curiosity and to examine how big and how much profit it offers. As a result, no one gives a profit 100% in accordance with the written in the whitepaper. Of the 10 promised, at most 6 are realized. That is, in an ICO Project, in addition to you have to get its presale, you also should not expect too high on the profit you will receive, because just to achieve ROI alone is very difficult.

[CryptoBry]

ICO is a crowdfunding platform and anybody can use it for legal or illegal purpose. That is why we can conclude that some ICO projects can be good and some can be bad...it is just like saying that drug traffickers can be using the dollar as medium of transactions but it does not mean that dollar is illegal or bad. It is sad that since the ICO market is still unregulated many are taking advantage of it to scam other people...well this is quite expected since scams can even happen in a regulated market...this is all human nature.

[danielschwerzer]

it is, but no doubt that more than 30% of all ICO's were created not to change the world, but to steal money and do nothing
and there're a lot of really bad ideas which can't be profitable at all

[Ruby Anderson]

ICO's themselves aren't scams. it is actually a new, modern interesting way of investing your income and it is similar to IPO (as we all know).
The thing is, and it's widely known, that people think that ICO's are scam or a fraud because of the companies that scam people, companies that make people invest in their ICO (sometimes non-existing) and then run off with their money.

I see how this might confuse and scare people, they might even start to think that all the crypto world is a scam, but it needs to be clarified and realized that investment (every investment) needs some research, understanding and at least some basic knowledge. So, ICO's are definitely not a Scam but it still needs cautiousness and carefulness!! 

[TrumpD]

Yup, I very much agree with you and this article. It is the use of wordings and phrases that create the FUD for ICOs. I see ICOs just as similar to a GoFundMe campaign, just that with this there is expected returns for the investor. Now a lot of people have used ICOs for scams (which is a fraudulent activity) and at the height of it, financial institutions and governments seeing themselves loosing money with a less liquid environment for them raised the alarm. Now with the way things are going, I am very much in support of ICOs in an already existing project which is verifiable, with this the scams will reduce, and the FUD spread about ICOs will also reduce. For now tho, if you still want to invest in fresh untested ideas, KICKICO website actually helps to reduce scams, as they do due diligence on the types of projects listed on their site who want to raise funds through ICOs.