Let's face it, the cost of doing ICO has skyrocketed for the last 6 months. A point of reference: I have asked around in August of 2017 on how much was the fees to do an ICO, and the quotes that came back were around USD200k-300k. Fast forward to now-- a quote i got from a well-connected ICO service provider was USD 550K. A whopping 120% increased in fees in just 6 months!! If you asked me, I think the best business model now is to sell the tools, rather than the solution, in this ICO gold-rush era.
Coupled that with the fact that regulators in every countries are scrutinizing ICO launches with a very close eye, and US has deemed majority of ICOs as security offering and would need to adhere to its security laws, doing an ICO now faces tremendous headwinds.
Let's think for a while why blockchain exists. It existed because of bitcoin. And after a while, developers found that the distributed ledger technology behind bitcoin which is termed as blockchain can have applications other than just keeping the books. There launched the era of alternate blockchains and tokens that serve specific purposes. For example, Ethereum for smart contracts, Ripple for banking transactions, Steem for social networking. And how does those blockchain made money? They make money via the capital appreciation of their token. If you launch a token with new functionality that other developers build decentralized apps on, and if those apps grow, the value of your token can skyrocket as a thousand flowers bloom. If you launch your own blockchain, you can get paid for each transaction on it too. Value accrues to the protocol layer.
Look at the top 10 cryptos by market capitalizations. Here is a screenshot from coinmarketcap as of 9-Feb-2018:
You should be noticing that the top 10 cryptos, beside bitcoins and it's forks, are all blockchain infrastructure solutions. You also see those not-so-familiar blockchain developers such as NEM or IOTA on the list.
Now, we have established three things. One, infrastructure blockchain developers have the ability to gather capitals from investors and are raising a lot of money. Second, those blockchain required others to build solutions on top of it in order to increase its usability. Third, dApps developers are having difficulties raising capital via ICOs due to limited resources and fundings to weather through the regulatory storms.
The solution? This is what I proposed: Every blockchain developers should set up venture arms to invest in startups that would like to build applications on their infrastructures. Some has started to do it, such as EOS with [email protected]. What I would like to see is let's make the funding process transparent and democratic, and not like the traditional VC where investable money is centralised in a few well-connected individuals. With that, we have a win-win-win situation. Win for blockchain developers as more solutions will come on-board, win for dApps developers where they got the fundings to proceed further, and win for investors where their token will increase in values as more demands will be generated because of the increased utility functions of the tokens.
As the dApps developers are getting to be more mature by gaining market tractions, then we can start looking at ICO as the path to exist for those early investors. At this time, dApps developers will have all the resources to go through an ICO exercises, and ICO investors have the mean to know that the idea actually worked, thus weed out the fraudsters and making our community a safer and healthier industry.
Can we make this happen?