Will 2019 Bring About the Death of ICOs?

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ICO has become known as a method of crowdfunding in which crypto tokens are sold in order to fund the development of a new tech product. Sounds legit, right? Well, the only problem is that due to a lack of regulation, it was fairly easy for anyone to offer an ICO, which often led to scams, parody coins, and ICOs based off of terrible ideas.

The market was flooded with ICOs in 2018, many of which quickly died leaving their investors wonder where their money went. This brought a new sense of skepticism among investors and ultimately caused a decline in new ICOs between May and December of 2018, as shown here. So is the ICO dying or already dead? Will it make a comeback in 2019? Take a look at a few 2019 ICO predictions and decide for yourself.

2019: The Year of the Quality Product

2017 was the year of the multiple ICO scams, and the start of 2018 was the time of bad ideas. Now that 2019 is here, all those have finally been weeded out.

Investors are no longer fooled by a fancy whitepaper and illegitimate claims. Michael Lachar, Co-Founder of social spending app Rubiix and contributor to Cryptovest, states his 2019 ICO predictions saying, “If you don’t have something that is already built and working, it’s really hard to make a case for yourself in today’s ICO market.”

As the markets are in shambles, investors no longer have the funds to be throwing them at the next big thing. ICOs in 2019 have to guarantee that they can offer returns. Meaning they need to be well-developed and already functioning. With that being said, the number of new ICOs in 2019 will pale in comparison to the amount in 2018, but the focus will be more on quality rather than quantity.

DAICO: The Responsible ICO

At the start of 2018, Ethereum Founder Vitalik Buterin introduced the concept of DAICO that is expected to be the new “socially responsible ICO in 2019” as stated by Calvin Amu, Founder of the news site Crypto Globe Daily.

DAICO, a blend of Decentralized Autonomous Organization (DAO) and ICO, is expected to be the new standard in 2019. It puts more power in the hands of investors by implementing a voting system, which determines how much of the funds invested in a product the developers have access to.

It also allows investors to pull their funds altogether. If investors believe their funds aren’t being properly utilized, they simply call a vote, and if the majority votes for their funds to be returned, they are. This places a higher sense of responsibility on developers to push themselves to create a product which pleases investors. With DAICOs, scams or just plain terrible ideas are no longer possible. DAICOs are a strong sign that developers believe in what they are producing, and it increases the level of trust with investors. These two factors mean there will most likely be a sharp rise in DAICOs in 2019.

An Increase in Global Regulation

Given that ICOs have run rampant for the past few years, it’s apparent that regulators such as the U.S. Securities and exchange commision (SEC), the United Arab Emirates’ (UAE) Securities and Commodities Authority (SCA), and Europe’s Securities and Markets Authority (ESMA) are growing tired of dealing with reports of ICO-related scams.

UAE has announced plans to introduce new ICO regulations in the first half of 2019. The ESMA began evaluating ICOs in 2018 to enforce new regulations in 2019, and there is new legislation in the works for the SEC to regulate ICOs much more effectively. Toward the end of 2018, the SEC even set up an entire division intended to hold new ICOs’ hands through the verification process.

The blame can be placed on ICOs that scammed their way through 2018, but now that 2019 has arrived, this will no longer be an option. Being oblivious is no longer a proper excuse for companies to explain why they lost investors’ money. There are companies dedicated to developing proper ICOs, though, intended to guide startups through each stage of the crowdfunding process.

Private Sale ICOs: ICOs Targeting Veteran Investors

Out of the $2 billion raised in 2018 ICOs, 84% of those funds came from private investors. This is largely due to the rise in the private sale, as well as pre-sale of ICOs, which seems to be a safer option from the regulatory standpoint.

Private sales tend to target wealthy, experienced and accredited investors, where startups pitch their whitepapers and business ideas directly to institutional investors, angel investors and venture capital firms. During this time, investors can often be given a cheaper rate for a token before they enter the public sale stage. Ultimately, it equally benefits both the ICO startups and investors, as ICOs tend to raise a significant amount of capital while being less costly in legal fees, and investors get access to exclusive tokens, often at a discounted rate.

Some of the recent examples of ICOs conducted fully through private sales are Telegram ($1.7B raised), Tatatu ($575M raised), and Basis at $133M of raised capital, according to Bloomberg.

The Next Step in Evolution?

So, are ICOs dead or dying? No, in fact, it’s quite the opposite — they’re evolving. Startups are now realizing they need to create a greater sense of trust between them and their investors. All the bad eggs have been thrown out of the basket, leaving nothing but quality ICOs and DAICOs to prosper in 2019.

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