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“The blockchain is the financial challenge of our time. It is going to change the way that our financial world operates.” – Blythe Masters, CEO, Digital Asset Holdings
There’s been a lot of growth seen in the blockchain technology environment over the last two years, especially when it comes to crowdfunding campaigns such as initial coin offerings (ICO).
Initial coin offerings (ICO) increased by a staggering $5 billion for Q2 in 2018 with a total amount of $8.3 billion from a total number of 827 campaigns compared with funds raised in Q1 which amounted to $3.3 billion, according to a recent report from Business Insider.
However, independent analytical research and rating agency ICO Rating has reported that despite the growth figures, more than half or 55% of all ICO’s have failed in Q2. This was an increase of 5% in failed campaigns from Q1, which was at 50%.
What does this mean? Those that failed were ICO’s not reaching their soft cap, causing organizers to either abandon their campaigns or refund investors as a result of insufficient funding.
PumaPay, a cryptocurrency solution for merchants, became the biggest ICO in Q2 raising $117 million in May. The study by ICO Rating found that median return for tokens in Q2 was a 55.5% loss versus a 49.3% gain in Q1. Even bitcoin has declined in value to more than half this year.
This meant that fewer campaigns were attracting large sums of money while the rest settled with small amounts or outright failure in their ICO investment campaigns.
What went wrong? Industry analysts put the blame on the quality of projects, which ICO Rating stated “significantly worsened” since Q1, calling for measures to ensure transparency and a more structured project development process to ensure the security of investors contributing to the campaigns.
The recent numbers indicate a shift towards quantity instead of quality, where ICO campaigns failed because something wrong happened along the way. Apparently, those that failed were the ones who had no clear vision or lacked due diligence to ensure the success of their campaigns.
The situation has placed investors on full alert and has become a lot more cautious by checking on the quality and viability of an ICO, with more reason to avoid one without a reputable member or advisor representing the group.
The development of a surefire ICO is critical, which must be carefully planned from conception to completion. This is then followed by a strategy which will determine how the campaign is launched and sustained.
Defining a strategy for an ICO launch is really important because it will determine how you are going to market your ICO investment campaign to reach your desired goals.
One of the main reasons for the massive number of ICO’s is that the industry still remains unregulated, which means that anyone with a basic understanding of blockchain technology and cryptocurrency can initiate one.
The recent ICO statistics showed proof that the percentage of failed campaigns apparently resulted from poor planning and execution, lack of vision, and the lack of effective strategies supported with sufficient knowledge of the process and technical details.
While more than half of ICO’s failed this year, it does not mean that you will. There are lessons to be learned that can help you avoid failure from the start of your ICO launch until completion.
The first step before planning your ICO launch is to identify your product. To do this, you must avoid making assumptions by looking at concrete and hard data to back-up your product.
For instance, you drink a cup of coffee and it tasted great, so you buy out the franchise and pour in your investment only to find out that there are several better-tasting and cheaper ones just around the corner.
This means that in order to make your ICO work, you need to do your research as to which products are relevant in the market. If it’s a new one, ask yourself if this is relevant and viable for your target market or audience.
When it comes to planning your ICO, you need to dive deep into the details and inner workings of the process.
Create your initial plan by developing your product, studying the market, determining the viability, developing your knowledge base and skillset, calculating your costs and identifying your target audience.
You need to have supporting data and business intelligence to help you decide on which products to use.
For example, the ICO Rating report indicated that the top three industries with the biggest ICO funding contributions were in finance, infrastructure, and gaming. This is a strong indication which will show you areas that are potentially attractive to investors.
Clarity is key. Your whitepaper can either make or break your ICO plans, so make sure that you create it in a manner that conveys the right message to your target audience.
Obviously, the first thing that potential investors would do is to study your whitepaper that details all the technological, financial, commercial and other salient information about your coin offering.
A well-prepared whitepaper could enhance your chances of attracting more investors to subscribe to your ICO. So, you need to have a strong whitepaper to introduce your campaign.
It needs to have the right balance of jargon and easy to comprehend content. Too technical and jargon-laden it could confuse and put-off your investors, too high-level or generic it could fail to convince your audience. These are common mistakes made by companies when creating their proposals, so being specific and comprehensive is critical.
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