The ICO industry continues to attract a lot of attention. However, one also has to question the business model a lot of these companies maintain as of right now. Especially with so many projects only selling a minor share of the total tokens, things are not looking overly positive.
Greed is a very real problem in the world of cryptocurrency and initial coin offerings. We have seen this type of behavior well before ICOs became the next big thing, and it will continue to cause problems for some time to come. In the world of initial coin offerings, however, there are quite a few worrisome trends worth keeping an eye on. Especially the correlation between the number of tokens in total and the small amount of tokens being sold is beyond proportions as of right now.
The ICO Token Allocation Issues
More and more ICO projects now only sell a small number of tokens through the crowdsale itself. That is not uncommon, yet these projects still aim to raise tens, if not hundreds of millions from the public. It is evident this business model simply will not work, yet these companies couldn’t care less about that. All they want is the easy money, by the look of things.
Unfortunately, it seems this trend will not slow down anytime soon. Although most ICOs issue far too many tokens in general, this new approach isn’t much better. In fact, it is possibly worse overall. There is no reason for any company to effectively expect people to contribute millions for under half of the token supply. After all, this seems as if these companies will cash out once the tokens are listed on exchanges.
Public allocation of ICO tokens is a serious matter. Right now, dozens of projects are taking the wrong approach in this regard. If the public owns 50% of the tokens or less, things are simply not working out. It is evident the people buying into these offerings deserve to own the majority of tokens. Without their money, these projects wouldn’t even be possible. A lot of work lies ahead for these ICOs, to say the least.
Header image courtesy of Shutterstock
