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A huge proportion of the ICOs I investigate turn out to be pure facade. It's amazing to me just how quickly this con was honed and formalized, but I guess people have always been good at aping when it comes to get-rich-quick bandwagons.

The standard ICO consists solely of: 1) A slick website. 2) A well-produced video. 3) A whitepaper that discusses trivially standard blockchain features and goals. No differentiation necessary. 4) The appearance that prominent or well-credentialed people are working on the "technology".

That's all. The "product" is vapor. The real product is another pump & dump vehicle to satisfy the insatiable demand for pump & dump vehicles. This product is sold to the "investors" during the ICO. Said "investors" are even explicitly awarded more coins for shilling the pump everywhere by creating amateurish articles and YouTube videos.




The brilliant part of it is that it's a double pyramid scheme. The people buying into these ICOs are doing so with Bitcoin or Ethereum that has often appreciated 100x or 1000x from when they bought it. So a company may raise $200M in an ICO, but the investors may've only paid $200K for their Ethereum in the first place. The huge dollar amounts attract more people into the ecosystem, which drives the price of your base cryptocurrencies higher, which means that the prices of these new ICO tokens are even cheaper relative to the dollar amounts paid in the first place, which encourages people to drop exorbitant amounts willy-nilly on ICOs, which attracts even more publicity, and so on.

Until one of two things happens: there are no more buyers for cryptocurrency, the price crashes, and all these ICO investors lose their shirts; or all money enters the cryptocurrency ecosystem, entrepreneurs develop new products & services that can only be bought with their proprietary ICO tokens, Ethereum replaces the dollar as the world reserve currency, and the dollar crashes. I would bet on the former being much more likely than the latter in terms of probabilities, but given that the outcome of the latter is that all savings of people who don't invest in cryptocurrencies are worthless, that fear may be driving a lot of the ICO speculation.


>all savings of people who don't invest in cryptocurrencies are worthless, that fear may be driving a lot of the ICO speculation.

There are lots of ways to invest your money that aren't based on the dollar. Futures, real estate, company stocks, metals.


Sure, and they'll hold their value even in this scenario. But (other than the hedge funds) I suspect many people investing in these ICOs aren't big investors in those, and even among those that are, I doubt they'd like to see their checking account become worthless.


It’s a reflection of the growing understanding that this country is now a pump and dump scheme. See: infrastructure spending.


Was this ever not the case?


I even seen a designer specialized in creating beautiful ICO websites :)


What % of ICOs are seemingly legitimate? I see advertisements for ICOs on reddit and other tech websites all the time, and I have yet to find one that doesn't look incredibly shady.


Not many of them! Even the ones that are sincere, often have terrible ideas. Or purely unworkable ideas or no business model.

It makes it hard for legit people like my startup. We're actually using tech for an end case, not building tech on top of tech for tech's sake.


The legitimate ones happened years ago and have survived, they wouldn't be called ico's anymore.

Invested in one that raised just over $1m, it was considered a huge amount at the time, they had a solid team, serious whitepaper and a rough alpha open sourced product that you could load up and use. A small team that struggled with limited funds and still going strong long down the track.

Today whitepapers have little scientific merit and are more brochures. These companies are raising 100's of millions with no product whatsoever.

Only time can tell legitimacy, and unless you have both the technical and economic ability to properly assess these offerings the best advice is to stay far away until a viable alpha product is created.

Anecdotal experience is that >95% of ico investors haven't even tried the product they have invested in. Seen people who spend hours a day on the forums spruiking yet can't even point to the binary download page when asked.


This. You hit the nail on the head.




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