Towards transparent & responsible ICOs.
The clock is ticking. The crypto community is running out of patience. We should advance an agenda of self-imposed rules for ICOs in order to effectively separate the high quality investment opportunities from the scams and frauds.
In my previous post I proposed that we, the crypto community, need to see at least three things in all future ICOs: a much higher degree of transparency, a more ambitious approach towards contributing to the solution of global challenges (hunger, climate change, etc.), and a strong proof of concept (value being generated before the ICO). Today I wish to elaborate on these points taking into account the wonderful comments that fellow steemians wrote bellow the original post.
How can an ICO be transparent and responsible without burying great exponential solutions in a mountain of regulations and paperwork?
1.- By becoming objective-based, not idea-based. Instead of merely rewarding an idea we could reward achieved objectives and milestones of the development of the project / company linked to the ICO. For example, an ICO could be split in three or four rounds, and its team could announce the project’s / company’s progress always before each round so that potential investors can understand how money is being used and better assess whether to keep investing or not.
2.- By self-imposing transparency rules. Let us make a quick review of some of the actors present in the ICO scene: (A) governments try to regulate (governments will be governments), (B) potential investors try to get more information before investing, (C) confirmed investors try to get more information before buying more, holding or selling, (D) the ICO team tries to finance its project / company as fast as possible and get valuations as high as possible, and (E) the crypto community is drowning in an ocean of conflicting (and even misleading) information all along the process. And with over a thousand coins and tokens out there you can bet there is a lot of conflicting and misleading information to drown in. With this in mind, it becomes important for ICOs to start considering self-imposed transparency mechanisms such as having open financial statements, making quarterly coin-holders’ calls (yes, like stocks), or welcoming certain types of external audit on its achievement of objectives (an independent NGO that works on transparency / open data / governance, perhaps?).
3.- By having a permanent communication channel with the crypto community. Some options are: a quarterly newsletter, active and welcoming social media accounts and evidence-based reports (a comprehensive account with pictures, data, infographics and statistics of what is being done with the funds and what value is being created).
Let us walk towards transparent & responsible ICOs that aim to solve global challenges.
Great article and great suggestions. However, I have doubt that guidelines would improve the quality of ICO's. Apart from obvious scams, I think that plenty of ICO's started with good intentions and found only later that it's hard to carry out their ideas simply because of a lack of experience or comparable projects.
Thank you for commenting @ghaaspur !! You are right, while we have tens of thousands of cases of IPOs we are still learning and don't have that many references (for a relevant number of years) on ICOs. We are still in early stages of the learning curve. There is still so much room for development. Luckily this is a fast learning community, and blockchain allows us to experiment fast and build fast new solutions. It is an agile world, the crypto world.
Nice post
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You should really take a look at CLOUT. In the future, if an ICO isn't listed there, and the community doesn't like it, it has no hope. Only the most credible and community favorites will be at the top. I truly believe a one-stop-shop for crypto is needed, and CLOUT seems to set on making that happen.
Thank you very much for your comment! It promises to be a relevant platform. I will check it more in detail. I am following you already! Cheers!
Hello @cryptotequila - I've just seen your original post on the other article which linked me to here. In total agreement - there needs to be a set of standards laid down that are set up as a voluntary public charter that ICOs are voluntarily asked to adhere to in the absence of (reasonable) regulatory frameworks. What such a charter looks like and how we push it is the real question. Could be an idea for an ICO ;-) (I think I'm only half-joking....)
You are right indeed!! Let's keep the conversation going. Indeed it is an idea worth exploring! Very best, cheers!
Love this post!!!
I really think we need to self impose some rules as a community in order to grow bigger and stronger together.
This seems like the begining of a new ruling system based on the power of the user and not the money he can bring to the table.
Keep up the great posts
Thank you very much for reading and commenting! The power of the user, that is a very interesting concept. It goes beyond something being user friendly, it puts the user at the centre.
Resteeming this for all. Thanks for writing such a detailed view.
Thank you very much for your comment and resteemign it! I am following your account too! Cheers!
Overall I love your message and the specifics here. I'd like to suggest some important thoughts on exemptions to the rule for ICOs though as well.
As background, it's important to note the status quo for companies seeking capital to grow/scale/finalize their value proposition. Family & friends, angels, VC & PE comprise the big pillars of startup financing with crowdfunding as a newer way to mobilize capital that has it's toe dipped in all of them. If we look closer at what ICOs are supplanting in the marketplace, have their predecessors met high standards in startup mode? Maybe a few, but I'd suggest the percentage is fairly small.
There are a great many stories spanning decades of companies that have made a huge impact on the world that were barely controlled chaos through multiple phases of their early evolution.
Relatedly, high failure rates for startups are a fact of life. So when urging ICOs to recognize that the scrutiny is heightened, and that big impact ideas, transparency and better communication are fantastic ways to embody the best of what ICOs can be, it is also very important to not establish a higher threshold for ICOs over more traditional startups at the precise moment when the risk of failure is highest. It is a crazy journey, and a vital force in our economy, so we need to be careful to not equate chaos and swagger and some other rough edges with unscrupulous or unethical intentions.
Keep in mind some of the biggest names in venture capital poured $125m+ into Juicero: a now defunct company that created a wifi enabled press for juices that a child could have pressed out themselves in seconds. They had planned to charge well over $500 for it initially too, until a few reporters figured out how silly it all was, and the mercy killing was underway.
Juicero to me is an extraordinary example of stupidity, greed and how low the bar can sometimes be set in the traditional innovation pipeline. But you won't see the attacks and presumption of ugliness like the coverage of the ICO space.
So in short, please keep sharing your ideas to help solidify the long term growth of the ICO space and protect it from heavy handed intervention. But remember to leave room for the rogues and the kooky geniuses to break and remake and create some carnage, because that's part of what startups do too. I think your encouragement to think big and to build far deeper transparency into new business models are powerful guideposts.
Let's just be sure a flexible, dynamic and realistic framework for due diligence still allows the full range of worthy investments to take a shot at the power of rapid capital infusion with lower cost and red tape if called for. If we strike the right balance, maybe we learn over the next 5 years that failure rates drop for startups that got past the early stages where the obstacles are front loaded when seeking capital. And maybe the foolishness of a Juicero is then seen as no better or worse than the overzealousness of some of the lesser quality ICOs.
Again, just refining some thoughts I hope add, not subtract from your recommendations. I've started following precisely because I like your focus and ideas very much.
I appreciate your comment so much! Thank you for taking the time to read my post and sharing here your thoughts. I believe what you add up here is most valuable! You are right, we should still give room for ideas to flourish, and not suffocate them from the very start.
Actually, here is a post I published a couple of weeks ago that says why I am open to new ICOs. In principle, for me, ICOs are a great way froward, we just need to work as a community to improve the mechanism and support those that have indeed done a good work, separating them from those with incomplete, and even fraudulent ICOs. Here is that article, maybe you will like it, it is called "Reasons I am long on BTC, ETH, EOS + open to new ICOs":
https://steemit.com/bitcoin/@cryptotequila/reasons-i-am-long-on-btc-eth-eos-open-to-new-icos
@cryptotequila As a crypto noob I've been taking in as many articles as possible to get a better understanding of the community. Some articles are way over my head but some, like yours, makes it clear and concise, which is appreciated. Thank you and looking forward to reading (and learning) more from you.
Thank you for your kind comment! This week I will post on the work of the most recent Economics Nobel Laureate and how it can be applied to the cryptocurrencies. I am excited reading and preparing the post!
Maybe you could find the previous post interesting, as it is an introduction to this whole conversation on why the ICOs need to be more transparent and how can they be so. I am following you already! Cheers! Here is the link:
https://steemit.com/blockchain/@cryptotequila/3-things-we-need-to-see-in-future-icos
Great post!
Blockchain is going to be a key element in solving global challenges with transparency!
Thank you for your comment, @alberto1 !
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Thanks, I'll go ahead and Follow you