Ask HN: What are the downsides of ICO fund raising? - febin
======
randomerr
This article gets into a couple of points. I pulled the higlights:
[https://blockgeeks.com/guides/initial-coin-
offering/](https://blockgeeks.com/guides/initial-coin-offering/)

Legality - The legal state of ICO is mostly undefined. Ideally, the token is
sold not as a financial asset but as a digital good like many other things.

Profit and Loss - Many ICO has been a lucky choice for investors. ETH, for
example, was sold at 0.0005 Bitcoin and is worth today 0,05 BTC. On the other
side, many ICO ends with losses. Cryptocurrencies like Lisk, IOTA-token or
Omni did not hold the value in Bitcoin the token has been assessed at the ICO
(or struggle to keep it).

Another article: The Declining Middle Tier of ICO Fundraising
[https://medium.com/tokenreport/the-declining-middle-tier-
of-...](https://medium.com/tokenreport/the-declining-middle-tier-of-ico-
fundraising-725767586f6b)

The median fundraise in initial coin offerings (ICOs) has been on a steady
march downward since its peak in the heady days of the second quarter. In the
fourth quarter, even the high-profile Science Blockchain (12.2 million USD)
failed to come near its hard cap. Chatter at cryptocurrency conferences points
to a more cautious investor base. But the truth is, crypto is starting to
resemble the world wage economy: tokens that can command large fundraises are
rolling in on bigger and bigger waves of money, while the bottom tier bounces
along and the middle tier gets squeezed.

Kik's coin the 'Kin' has been a fairly study decline since it's high in
January (then $0.0031 and now $0.0001.)

[https://coinmarketcap.com/currencies/kin/](https://coinmarketcap.com/currencies/kin/)

------
api
Questionable legality? Dealing with scammers and people interested in get rich
quick schemes? The biggest downside is probably negative signaling. The ICO
market is so scam-ridden that any company doing an ICO can easily be labeled a
scam.

------
rajacombinator
You might get so much money it makes more sense to exit scam than actually
build anything?

------
tetek
it puts incentives in the wrong place. I recommend reading this:
[https://blog.sia.tech/the-ico-paradox-and-how-to-fix-
it-3bfc...](https://blog.sia.tech/the-ico-paradox-and-how-to-fix-
it-3bfc61bc6eb8)

~~~
api
Traditional VC fund raising can do this too in that the founder is often
pressured to fund raise more than running the company and to optimize the
company for the next round rather than for real customers.

