Many people have compared the Initial Coin Offering (ICO) craze of 2017 to the dot com bubble, and mostly for good reason. Hundreds of companies see the potential of a totally new and different way to do business (the internet in the case of the dot com world, and blockchain in the case of the ICO craze) and so they are rushing to have first mover advantage and succeed in this new world.
But there are two significant differences between the dot com bubble and this ICO bubble – Blockchain is much more complicated than the internet, and an ICO is really nothing like an IPO.
In the days of dot com – it became pretty easy to explain and understand the magnitude of the internet and how much it would change the world. Amazon founder Jeff Bezos will tell you that when he was pitching the company to angel investors in 1995 it was pretty hard, but by the time we got to 1997, it seemed like everyone got it. Blockchain has already been around for a number of years – and it’s still much harder to explain to people, and it remains less obvious to the masses just how much it’s going to change things. So that’s one. The other is essentially the difference between an ICO and an IPO. Dot com companies sold stock in their companies and they wanted to go public and people got stock in those companies and it was really obvious that they were stocks like any other stock and were regulated by the SEC just like any other stock. ICOs aren’t like that. For starters – Initial Coin Offerings sell digital tokens, or in some cases the right to a digital token – they are not the same as stock in the company. What’s a digital token you ask? Well – unlike a simple share of stock – a token isn’t even one thing – it can be a lot of different things. Smithandcrown is a popular web site that allows companies to list their ICOs and one of the questions they ask is below – what kind of token are you offering?
That’s six different things a token can be.
So even though there is huge excitement about these ICOs, they are complicated. And to make matters worse – there are differences of opinion about how they should be regulated. This lengthy article by Samuel Guzik is the best we have seen in months that explains, with some very fresh examples, just how complex and confusing all of this can be.
So does this mean the ICO bubble is about to burst?
Not at all.
What it really means is that people are realizing just how different the ICO market is from anything that has come before it – and it’s complex and it requires some regulation and oversight that’s equally different and it’s still being sorted out – in broad daylight. Unfortunately for some – being too aggressive can put a company on the wrong side of regulations and lead to lawsuits – or worse.
So we are still as excited as ever about the ICO market and the future of the blockchain – we, like a lot of companies are slowing down a little bit – dotting some i’s and crossing some t’s in terms of how we define our token and how we register it with the SEC to be sure we stay on the right side of the regulators. It’s going to separate the wheat from the chaff as time marches on because all of this takes time and money with lawyers and that adds up in a hurry.
Our ICO is still coming. So be patient. It will be worth the wait.