OPINION: Will the Initial Coin Offering bubble burst?

New technologies are opening up vast investment opportunities but over-saturated audiences make it increasingly challenging to attract attention

Wednesday, 10 January 2018 21:32

There has probably not been so much talk about Dutch Tulip mania since the seventeenth century. References to these once-coveted flowers litter the international business press as everyone seeks to capture the mood of global fever surrounding virtual currencies and associated technologies. For many analysts and economists, this is quite simply the most significant bubble for a generation. The innovative concept of a non-sovereign, egalitarian and transparent currency has also excited the emotions of investors of all kinds.

Some believe this enthusiasm is due to an historic loss in confidence in the existing global financial system. Others point to a newfound readiness to embrace pioneering technological breakthroughs. Either way, we probably do not have enough tools at our disposal to predict the success of the field in the future, but we can certainly say that one cannot ignore the sudden breakthrough it has experienced in the past year.

The world of digital currencies and the innovative Blockchain technology it is based on have created a new term that has taken the financial and investment worlds by storm: Initial Coin Offering (ICO). Simply put, this is the process of raising money from investors for future projects. In return for investment in a project, which is usually only at the initial stages of development, investors receive tokens from the entrepreneurs that are issued in the hope that the success of the project will increase demand for the token, which will turn it into highly valuable currency. To understand how much this phenomenon has gained momentum over the past year, just look at the following figures: in 2016, USD 300 million was raised from the public via ICOs. In 2017, the amount reached USD 2 billion.

The phenomenon has expanded at such a rate that it now threatens to undermine the traditional way we look at investments. This has prompted a series of economists to launch an unprecedented attack on ICO culture, with many claiming that it is not a viable new model for financing projects at all, but rather a sophisticated fraud that is about to implode spectacularly.

With an abundance of investment opportunities but mounting skepticism over miraculous claims, marketing is also undergoing an evolution of its own. A survey of the multitude of offerings currently on the market highlights the changes taking place in the way potential products appear before the public.  

The language is now markedly more cautious, and is as distanced as possible from the grandiose declarations that characterized the field in the recent past. It seems innovators wish to position their products in the comfort zone of familiar economic patterns in order to heighten perceptions of the project's feasibility. The goal is to build investor trust and commitment. This canny marketing cannot conceal some of the concerns surrounding the ICO craze. Many ICO projects seek to raise large amounts of money without being able to answer simple questions such as why they need so much funding or whether they have a clear operational horizon for the project. The key to successful investor attraction lies in providing answers to these questions and presenting the public with a clear plan. Numerous examples offer insight into how this is possible.  


Sportco: media that actually rewards users

Unlike other ICOs that rely on an ambitious vision, Sportco already has something concrete to offer, namely existing sports content websites and community engagement operating under the Sportco brand. Recently the company announced a significant change in the way sports fans will be able to play a role in the future of sports media. The Sportco platform will become one of the first to reward community members according to a customized algorithm that will measure their involvement and the exposure they create in every action they perform. While the company’s existing platforms are already popular in India and elsewhere in Asia along with Australia and the UK with a community of 500,000 users, Sportco plans to expand globally by adding a multitude of sports that are popular worldwide.


NKOR: addressing complex copyright infringement issues

The appeal of this venture lies in the strong records of the founders behind it. These include High 4K CEO Erik Klein, Stox Co-Founder Ophir Gertner, BizProfits Co-Owner Ami Inbar, Ben Tamar & Co Owner Elisha Ben Tamar, BizProfits Co-Founder Gil Vinter, DataRoot Labs Co-Founder Ivan Didur, and Chatbot Summit Founder Yoav Barel. All have impressive innovation portfolios and carry sufficient weight to attract investor attention.

NKOR uses the natural features of Blockchain, which registers every transaction of information executed while remaining impenetrable to changes and manipulations. This allows creators, whether coders or artists, to record their works and protect their intellectual copyright. The ambitious project is currently at the development stage with the tech team currently working on algorithm integration having finalized the architecture and the mechanisms for duplication prevention.


PumaPay: combining traditional payment and blockchain

PumaPay offers a free-of-charge blockchain-based protocol that decentralizes a whole layer of transaction processing services and supersedes traditional and current blockchain-based billing methodologies. By making use of innovative Pull-Contracts and various contracts, it enables complex and widespread payment methods, such as pay per use and recurring transactions that were not previously available as an all-in-one solution for cryptocurrencies.

David Malits, who owns a public relations firm and advises companies seeking to launch an ICO, says the changes in presentation that we are currently witnessing have become a necessity: "The rules of the game have changed. Media has stopped getting excited when they hear about the words "Blockchain" and "ICO". Like other technological developments, in order to get media coverage from a tired reporter who has dozens of similar story requests every day, any ambitious project must show that it involves breakthrough technology with serious investors made up of experienced business people".

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