The ICO and IEO Are Dead. What’s Next for Crypto Fundraising?
So long ICO and your short-lived successor the IEO. It was nice knowing you. We’ll remember the good projects you spawned, but mostly we’ll recall the financial mismanagement, misaligned incentives, regulatory side-stepping, and token-holder acrimony. Regardless of whether you view the ICO era as a net good or bad for the crypto industry, it’s an era that’s now winding down. A trickle of initial exchange offerings will continue into this year, but the golden age of token sales is fading into the rearview mirror.
In their place, industry participants are scrambling to find a fairer means of raising capital and allocating tokens, one that doesn’t invite the wrath of regulators and the ire of bag-holders left clutching tokens that have died a slow death. While the jury is still out on which ICO and IEO alternatives pass muster, there are signs that in 2020 it’s possible to hold an ethical token generation event (TGE). As evidence of this, one need only look to the example of LiquidApps and Kleros, two projects that are pioneering a fairer fundraising system.
Slow and Steady Wins the Race
While most projects gauge their fundraiser by the speed with which it sells out, LiquidApps and Kleros have moved the opposite way, taking a deliberately slow approach. No FOMO, and no fighting to snap up tokens before the buzzer sounds. Instead, they’ve focused on writing code and shipping products, while conducting a year-long TGE in the case of LiquidApps, and a milestone-based fundraiser for Kleros.
The former, an EOS scaling project that sprang to life a little over a year ago, is on the verge of completing its long-running token sale. During this time, tokens for its DAPP Network have been made available in daily cycles for interested buyers. Instead of resorting to marketing hype or the launchpad of a major exchange to drum up interest, LiquidApps has centered its efforts on releasing products that have genuine utility, and that are already being put to use in relieving the load on the EOS blockchain. These include LiquidLink, a cross-blockchain communication network, and LiquidAccount, a means for dApp developers to frictionlessly onboard new users.
LiquidApps’ greatest effort to date has been its DAPP Network, which provisions off-chain resources for EOS dApps in the form of vRAM and vCPU. These tools allow developers to release dApps with high transaction volume without being on the hook for the cost of allocating scarce and costly resources to users. It’s also pushed out DAPP Leasing, which enables dApps to access DAPP Network services on a pay-as-you-go basis.
Build It and They Will Come
Kleros, meanwhile, held a two-month token sale in mid-2018 and then got straight to work on building out its blockchain dispute resolution layer. In 2019, it released Kleros Athena, a smart contract-based backend for automating dispute resolution, coupled with a clean and user-friendly UI. Kleros also released a token curated registry that gives the community a trustworthy source of information about Ethereum tokens, and Kleros Escrow, which locks funds into a smart contract until both parties are in agreement about a transaction, after which the tokens are disbursed. This month, Kleros held the second phase of its token sale, issuing a further tranche of PNK Tokens, with 18 months of goodwill behind it, endorsements from Vitalik Buterin, and a sizeable community now in place to support its efforts.
Although LiquidApps’ and Kleros’ token sale types are markedly different, they share this much in common: a willingness to focus on building rather than marketing in the knowledge that delivering real utility to crypto users is the key to turning them into long-term advocates. As its token generation event prepares to wind up, LiquidApps finds itself in the enviable position of having deeply imbedded itself in the EOS ecosystem and gained a reputation as a project that can ship products quickly that address pressing blockchain problems, namely scaling, interoperability, and user onboarding.
It remains to be seen which acronym replaces the ICO and IEO, and becomes the preeminent fundraising mechanism for crypto startups. Projects eyeing a raise in 2020, however, would do well to take a leaf from LiquidApps’ book. To paraphrase John F. Kennedy, ask not what your investors can do for you – ask what you can do for your investors.
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Guest, Khareem Sudlow