As we enter Q2 2019, the ICO landscape has dramatically shifted from the dizzy heights of 2017. And as the ICO landscape shifts, we see IEOs and STOs stepping up to the limelight. In this exclusive interview, we bring together two experts in this field. On Yavin, Cointelligence founder and keen spectator of the sector. And Niki Nikolaou, Business Director at leading finance and blockchain content marketing agency Contentworks.
Q: What has been your involvement with ICOs/Cryptos?
Niki: Contentworks has helped many ICOs communicate their product to investors. From the foundations of writing the white paper through to the energy involved in the lead-up to their ICO with blogging, websites and videos. We have also developed content for educational, governmental and multi-national corporations that’s given us a real advantage of seeing the larger picture at play. On a personal level I became intrigued in 2012 through friends that were mining and a few years later moved from being a passive observer to an active participant.
On: My role in the crypto world has been largely educational/evangelical. When I first heard about cryptocurrency and the blockchain, I went all-in. I was really excited about it, and I wanted to let everyone else know about it. So I dedicated myself to providing impartial and reliable information about crypto and blockchain companies, including but not limited to ICOs, STOs, coins, and exchanges, as well as educating people about how to get involved with crypto, how to do their due diligence on ICO investments, and the possibilities of crypto in general.
Q: How would you summarise the last 12 months in the crypto/ICO space?
Niki: Following the crazy bull run of 2017, 2018 did come as a downer for crypto enthusiasts everywhere. The crypto space was due for a correction and it did see a huge one through the year. One thing that the past year has proven, is that most altcoins are quite strongly correlated to the performance of Bitcoin. On the other hand, the past 12 months have also seen the emergence of innovations like the “Lightning Network,” which has the potential to significantly improve scalability, while reducing transaction fees. There has also been meaningful progress in regulating the crypto space. Not just the US SEC, but G20 countries which have also been working on regulating crypto assets to protect against money laundering and the rampant Ponzi schemes of 2018.
On: There’s been a lot of ups and downs. At the start of 2018, everyone was excited about crypto, bitcoin had gained so much value, ICOs were raising so much money. But by the middle of the year, things were slowing down and people started to worry, then winter rolled around and brought Crypto Winter with it. I think 2019 started on a hopeful note, though, and we’re seeing more large institutions explore the possibilities of blockchain, and more companies accepting crypto as a form of payment. I think we’re going to start to see more and more adoption of blockchain and normalization of crypto assets.
Q: Is there enough post ICO marketing happening- what are your thoughts here?
Niki: The difference between success and failure for an ICO/STO comes only after the initial coin offering is over. Once the needed capital has been raised you might think that the marketing campaign is done and now it is time to focus on the project’s roadmap. However, the fact is that now you have investors who have put their money into your project and they want to be kept informed about your progress. In fact, marketing becomes even more important post-ICO because this is the time when you need to keep your community engaged and informed. By meeting your commitment and telling people about it, you will build greater credibility and trust. This is what’s needed for mass adoption of your blockchain solution. It’s crucial to continue to post regular updates on social media, continue to communicate on forums and online discussions, and even send out regular email newsletters. This is the best way to avoid people from speculating whether your project was a scam and whether you intend to fulfill your promises. The good news is that blockchain projects are increasingly realising this and putting post-ICO marketing campaigns in place.
On: To echo Niki’s sentiments, definitely not a lot of post-ICO marketing happening. Too many of these ICOs just raise a lot of money and they think that’s it. They don’t realize that for their platform or product to take off, they’ve got to keep attracting an audience. You can’t just rely on your ICO investors, you’ve got to keep bringing on new users to build a robust demand for your utility token. And post-ICO marketing is also about keeping investor confidence and engagement up – you’ve got to let your token holders know what’s going on with development, what you’re doing to make those tokens have real value for them.
Q: Let’s talk IEOs- what are they and how are they different from STOs?
Niki: IEO or Initial Exchange Offering is essentially an ICO, with the difference that it is conducted via an exchange, which acts as the counter-party. Following the large percentage of ICOs that turned out to be scams in 2017, IEOs may offer a more credible way to raise funds. The reason for this is that the exchange conducts audits and analysis of the project and the potential of its token and then manages the sales directly on its own platform. While IEOs might be more expensive to run, given the exchange fee involved, STOs or Security Token Offerings tend to be even more costly. This is because STOs are essentially held for asset-backed tokens, where the token acts as a security of assets such as company shares, bonds or real estate. However, STOs also offer the highest investor protection due to this very reason.
On: An IEO is similar to an ICO, except that in this case, the crypto project is providing tokens to the exchange, who then administers the offering. Ideally, everyone benefits from this arrangement:
Project team – Doesn’t have to spend as much time and effort on the marketing and administration of the offering and can focus instead on development.
Investors – If they are already signed up on the exchange, they can easily participate in the IEO without having to go through additional KYC or AML checks. Additionally, the exchange is supposed to vet the project who has sent them tokens, which should add an extra layer of trust.
Exchange – Gets a cut of the proceeds, and an influx of new members who have signed up to participate in this specific IEO.
On other hand since the exchanges control the token sale, they have too much power with regards to selecting the projects and they can also manipulate and mislead the public about the information regarding the IEO. Moreover, many exchanges mainly care about profits and not about the crypto community, and they won’t choose and present the best projects always but will choose the ones that can get them the most profit which is not the crypto way. Lastly, we’ve seen most exchanges faking trading volume and acting in unethical ways and I am afraid this type of behavior will influence the IEOs process as well.
An IEO is essentially just a new evolution of the ICO, whereas an STO is going to involve specifically complying with securities regulations.
Q: And the big question to both of you- are ICOs coming back?
Niki: The ICO explosion of 2017 brought to light the huge number of scams and Ponzi schemes that robbed investors of their hard-earned money. Unfortunately, this gave ICOs a bad name, impacting even genuine projects. Regulatory bodies all over world took note of this and have been working on creating a regulatory framework for the crypto space. However, it was the absence of a regulatory framework that led ICOs to flourish. Following the crackdown by the US SEC and China, and the establishment of stringent regulations, these countries have seen a decline in ICOs. This has also led to the emergence of compliant security-backed token offering or STOs. However, countries like the UK, Singapore, Malta, UAE and Estonia have seen a rise in ICOs in 2019. The future of ICOs looks bright for projects that can create a compliant ecosystem for their crypto tokens. Whether ICOs can once again see the numbers they did in 2017 and 2018 is doubtful. Projects are now looking at more secure means like STOs and IEOs to gain investor trust.
On: Yes! I think it might take a few years for the ICO market to recover, but I believe they’re going to make a comeback. There really are a lot of companies that can benefit from this form of crowd sale, but it’s going to take time for investor confidence to return after so many scams and failed ICOs.
Q: How do you see the crypto sector evolving in the next year? Do you have any predictions?
Niki: Crypto market sentiment has been on a slow recovery in 2019, with the market gaining close to $50 billion in total market cap in the first 3 months of the year. This actually makes cryptocurrencies the best performing asset class so far in 2019. The year is likely to also see the entry of even more institutional investors into the crypto space. In fact, a recent survey by PwC revealed that the demand for blockchain advisory services could be as high as $1.7 billion in 2019, with 11% of the respondents having already spent more than $10 million. Bloomberg has gone a step further to predict that institutional investors would take over from high net worth individuals as the largest buyers of crypto, with transactions worth over $100,000. And, if institutional investors are in the game, then we are likely to see Ripple do well, given the high levels of trust that large institutions have in XRP. With improved stability, scalability, and transactions speeds, crypto adoption is likely to rise, going beyond just the techies and crypto enthusiasts, to the common investor. This will need crypto exchanges to work on their liquidity and once higher liquidity and security are achieved, mass adoption will become more likely. This will allow easy exchange from fiat to crypto and vice versa, at lower fees, which will attract more investors looking to diversify their portfolios. Overall, blockchain budgets are unlikely to diminish just yet, given that this technology offers key solutions to existing issues. The space is still in its infancy and holds huge promise. We expect 2019 to see exciting developments in this arena.
On: I think the crypto sector is heading in a good direction. We’re seeing less scams, more regulators adopting a pro-crypto attitude, and more serious players coming to the field. We’re going to see a lot of growth in the industry from now into 2020.
Thank you On and Niki – we will check back again to revisit your predictions. In the meantime, stay tuned to Cointelligence for the latest ICO news and visit www.contentworks.agency to keep up with the latest from Niki and the team. Do you agree with our experts? Comment below or tag us on social media.