90% of ICO Tokens lack use cases months after their crowdsales

By J P Buntinx - October 25, 2017 (themerkle.com)

There have been several dozen cryptocurrency ICOs this past summer alone. This new craze is attracting a lot of attention, although very few of these projects will ever realize their full potential. A new article on Bloomberg explains that only 20 out of 226 tokens tracked are currently being used. All the rest simply derive value from expectation and speculation. These numbers are pretty sobering, although no one should have expected anything else.

ICO Tokens are speculation and hype

With hundreds of projects trying to raise millions of dollars through initial coin offerings, the industry has seen significant growth. While there are plenty of projects to genuinely get excited about, it remains to be seen how many of them will actually create something worthwhile. A fair few ICOs have only become successful due to heavy marketing, as it covered up the fact that there was no minimally viable product in place to begin with.

Indeed, that is what most ICOs are these days. All the typical team does is write up a whitepaper to get people excited about an idea. More often than not, there isn’t even one single line of code in place to warrant any value attributed to the new venture. That doesn’t matter to most ICO investors, though, as they will gladly trust complete strangers with their money. As a result, we see a vast abundance of ICO projects which are still not using their own token for any specific purpose months later.

Granted, it takes time to build a proper product or platform before the associated tokens gain any fundamental value. However, ICOs should have these things in place before begging for money from investors. This leads to a very disturbing situation in which only one in ten ICO tokens is used for a specific purpose right now. All others simply derive value from the associated hype and manipulation across supporting cryptocurrency exchanges.

Indeed, there is very little reason to use ICO tokens other than for speculative purposes. Most people purchase these tokens for the sole purpose of selling them at a higher price. This is how people make money in the “real world”, but it remains to be seen if such a situation is sustainable in cryptocurrency. For this to work long-term, once people offload their tokens at the desired value, there need to be others willing to buy them.

If there is no viable reason to own or use such tokens in the first place, it will become very difficult to sell them for profit in the future. Considering that 90% of ICO tokens serve no purpose right now, it is evident a big collapse will happen sooner or later. A lot of projects are still working to put together an alpha version of their platforms, for crying out loud.

Some teams already have alpha versions in place and are currently collecting feedback to take things to the next level. Any project without a use case for its tokens six months after raising money will have to take a hard look in the mirror and contemplate refunding investors, though it is doubtful that will happen. Rest assured the ICO industry will face a day of reckoning eventually, and a lot of people will lose money in the process.

Jdebunt

JP Buntinx is a FinTech and Bitcoin enthusiast living in Belgium. His passion for finance and technology made him one of the world's leading freelance Bitcoin writers, and he aims to achieve the same level of respect in the FinTech sector.