How ICO’s Make the World a Better Place

Comparing crowdfunding and initial coin offerings (ICO).

It’s hard to argue that an ICO is an ideal investment and that such projects always turn out successful. Moreover, a particular report claims that 46% of ICO's in 2017 have failed. So, unlike the Kickstarter platform, where only 36% of projects reached their target, more than half of ICO’s have reached their funding goals. It’s also worth taking a look at the average amount raised: for ICO in 2017 it was $250 thousand while for Kickstarter throughout its existence - $25 thousand.

This is frightening statistics, but still, it should be noted that the cryptocurrency industry is still in the infancy and that ICO is a risky way to invest. And by the way, on Kickstarter, there are strict procedures that protect the rights of donors, which suggests it’s safe but is it?

Project Zano Drones started out, as it usually happens on Kickstarter, with a rich track record: they had a well set up page, a unique idea and an excellent video. They intended to make flying drones, that would be used for photographs by the user and cost less than competitors. Right from the start, the project was met with enthusiasm - the founders raised almost $3.5 million - almost 20 times more than the declared goal of the campaign.

Campaign description said: “ZANO is an ultra-portable, personal aerial photography and HD video capture platform, Small enough to fit in the palm of your hand and intelligent enough to fly all by itself! ZANO connects directly to your smart device (iOS or Android) via onboard WiFi ... Our supply chain is 100% ready to go, from vital components that make ZANO fly, to the very boxes that ZANO is packaged in are all priced and sourced!”

But gradually the production deadline were beginning to get postponed, and updates became less frequent. After just two years after the campaign got underway, the company filed for bankruptcy.

It’s the lack of supervision by the community that allows firms like Zano to declare goals that are achievable, exceed the claimed amount by 20 times and leave almost all customers without a product or a refund. ICOs are more controlled - precisely because of the community’s involvement. Yes, ICOs are being hyped up, but since the whole rush began, countless procedures were developed to combat unscrupulous projects.

Here are a few advantages of an ICO in comparison to crowdfunding campaigns in the context of external verification:

Constant work to verify information on ICO’s is done by well educated and unbiased members of the community from different corners of the Earth. Unfortunately, the team's experience is often simply not enough - especially when it comes to not just ICO’s.

The New York Opera, that faced with rising costs of production and a need to subsidize tickets, to allow various people to see concerts, took to Kickstarter, but after collecting only $300 thousand from the $1 million goal, was forced to declare itself bankrupt.

Up next, the government of Malaysia that wanted to raise money to repay the public debt after a change in its top political flight. For $250 billion of debt, just $2 million was collected - a miniscule amount. Crowdfunding is an excellent mechanism for raising funds, but using traditional platforms and underdeveloped processes, the results can disappoint.

Perhaps an inspirational story would have attracted more money, but the organizers decided to provide just the bank account details for transferring money, which stopped many potential donors.

On the other hand, Venezuela is trying to solve a similar problem of high national debt, but in a very different way, by launching an ICO and a token called Petro, which is backed against oil reserves of the country. Regardless what the public thinks about the idea, there are the numbers: Venezuela has reportedly raised more than $5 billion, or almost 250,000% more than Malaysia.

Yes, with the help of ICO, money is being collected, but this money can well be directed towards a good deed. There is a common misconception that crowdfunding is a different kind of philanthropy, while the ICO’s are arranged exclusively in pursuit of profit, but that may not be the case. Gradually, an increasing number of organizations begin to realize that it’s better not to ask for donations but offer incentives in return, and that’s where the ICO comes in. Companies proud of their principles may rather conduct an ICO than crowdfund for the following reasons:

No matter how noble the goals of a commercial organization may be, it can’t simply rely on charitable contributions from strangers. Of course, universities receive support from alumni, street beggars receive charity, and NGOs attract funds from benefactors, but there are limits. Thus, it could be argued that the days of one-sided crowdfunding are numbered, and an increasing number of people will need an answer to the question “what’s in it for me?” in order to open their wallet.