From Pierre Entremont early this month, ICOs: You’re scammy and you know it:
99%+ of the ICOs out there are scams. It has the very unfortunate side effect to make good teams/projects look dubious by association, so it has to stop.
I spent a lot of time thinking about what defines legitimate players. I feel the framework is now robust enough to be shared.
First three parts are definitions of what are Decentralized Networks (I), Tokens (II) and ICOs (III). Once these concepts clearly defined, identifying legitimate players is pretty straightforward.
He’s not the only one that things many ICOs are scams, though the 99% figure seems high. While most projects may not succeed, it seems ridiculous that 99% of projects are out to purposefully deceive investors/token holders. Entremont lays out his questions to ask for determining if a particular ICO is legitimate:
- Is this organization really building a Network, or is it just a traditional company looking for easy and unregulated money?
- Is there value to Decentralize this Network ? Some things work very well in a centralized way, plus decentralization is still an early and very costly/underperforming technology, it’s not a good idea to decentralize everything
- Is the value of the Infrastructure the Organization says it will build correlated to the amount and Tokens % they are asking ? (example: Asking €x00m and x0% of the Tokens to “build a new currency for Africa” by cloning Bitcoin is questionable)
Most certainly don’t pass those questions and are using token sales primarily as a fundraising method .That doesn’t necessarily make it a scam, in my opinion, but they aren’t capturing the full technological potential presented by tokens and blockchains.