Along with other new technologies and projects, fundraising on the basis of the blockbuster is becoming more popular as it recruits Turns and de facto becomes the main method of Funding for innovative crypto-currency projects. This technology for the masses – blocking promises to give up mediation in financial transactions and much more, so, probably, one should expect that investments and developments will also come from the broad masses. Large corporations develop their own distributed registry technologies, but real innovations occur in individual segments scattered throughout the network.
Return on investment
So, what motivates investors to invest in these projects? In 2016, there were several seven-figure fund-raising projects, some of which collected millions of dollars – or at least their equivalent in bitcoins, since bitcoins and other crypto-currencies are the standard means of investing in such projects. Bitcoin is a truly international currency that has no restrictions on movement or size of investment, and therefore it is an ideal way for investing investors around the world.
This is a cutting edge sector, and such projects would be impossible ten or even five years ago. Of course, investors want to be the first participants of such initiatives. But for many investors – or speculators – it's just a way to generate potential profits. All of them observed a multiple increase in the market capitalization of bitcoin 10,000 fold after it first entered the exchanges, and other large projects managed to grow 10 or 100 times. Some, of course, could not achieve such indicators. Some have failed because of lack of experience or marketing, others have been frank fraud. In 2016 at least one major project suffered a catastrophic failure. There is always a risk / profit ratio, and greed can lead investors into a trap. It is likely that these expectations – and usually the profits – will approach common sense within the next year. This is the difference between penny stocks and multinational companies; ICO take a step toward the mainstream.
However, this sector has already changed a lot in the last one or two years. He becomes more professional. Long gone are the days when an anonymous developer could collect tens or hundreds of BTC (tens or hundreds of thousands of dollars) on the forum. Nowadays, successful projects contain much more information about the technologies and experience of developers, and are much better advertised. The more transparent and professional the company and its team are, the more funds they can collect, all other things being equal.
Kraudfanding vs. Securities
One of the main changes in recent years has been the development of the regulatory framework. The boundaries between acceptable and unacceptable were drawn. It became clear that the issue or even the purchase of securities outside the existing regulatory bases is fraught with problems – especially for US residents.
Crypto-tokens have different forms. Some have similarities with securities: they can be resold with profit for themselves, if the value of the tokens issued by the project will increase. This is a regulatory nightmare for issuers, and they will face major problems if the Securities Commission or similar bodies show interest in them. Those few who decide to go this way prefer to either remain anonymous (which affects their ability to attract funds effectively) or are residents of jurisdictions that have not yet banned it.
Therefore, most companies are trying to produce tokens that are specially Structured not as securities. For example, they do not give the right to receive dividends, voting rights, the right to check the company's accounts, etc. They are also an integral part of the project: the application uses the same token that was used to raise funds. As a rule, the demand for them in the foreign market will appear after the product is launched, therefore, the holders of the tokens will be paid not from dividends, but from the increased demand for the purchase, resulting from the transactions of customers or users. From a regulatory and legal point of view, this is a completely different matter. Instead of securities, such tokens become more like digital products, such as downloads of electronic books or music, only they can be traded on the open market.
Collecting funds on the basis of blockage is a gold rush. Of course, any form of investment carries a certain risk, but some projects are consistent, while others are only a mirage. One of the changes that occurred since 2014, when the wave of well-founded ICO began, is the level of professionalism that developers and companies display in their proposals. Then it was possible to collect hundreds of thousands and even millions of dollars with just a few publications on the forum and half a convincing technical description.
At present, the corporate description (including the technical and financial parts) is just a starting point. The key to success is a well-designed website and marketing activities – if they do not look professional, then the project probably looks the same, and investors understand this. Some developers or the entire project team must reveal their identities – they need to publish their resumes or LinkedIn profiles and ensure that they are exactly them and they are fully responsible for the project. They must have appropriate and proven experience and, ideally, a good reputation both in the crypto sector and in their chosen field of business: reputation in this area is very important – much more important than qualification or education. They also need to be ready for direct interaction with the community, on the Slack platform (most often) and on forums, as well as in videos and online consultations of AMAs (Ask Me Anything). All this is an obligatory part of the preparation for the launch of the project in 2017, and any project that does not want to do this will raise doubts among investors.
The number of fraudulent projects decreases with the growth of regulation of this sector and investor education. However, the essence of the crypto currency is decentralization, so the solutions to this problem, including the audit and approval of projects by specific parties, are often unpopular and do not inspire confidence – and cause a failure. One of the alternatives is a decentralized reputation system. In one implementation, tokens are distributed in the crypto-currency community in proportion to the amount of currency available to participants. Then they will be able to vote for the viability of new projects based on the possession of this token. Thus, it is a kind of public process "Know Your Customer" (Know Your Customer). It is not perfect, but nothing is ideal, and it offers an alternative model to traditional regulatory regulation that does not work very well in this sector.
We are still only at the beginning of the journey, but 2017 promises to be very important for Collection of funds on the basis of the blockade.