I'm sure many of you are aware of the recent BATcoin ICO that raised a staggering $32,000,000 in less than a minute at its ICO a few days ago. While this may be taken by some as an indicator that the investment potential in cryptocurrencies is huge right now, I would be more inclined to take this as a warning that we need to be a LOT more careful with how ICOs are conducted. There are some huge problems with this method of coin distribution and I don't believe the currents trends in ICOs are doing the crypto economy any favours at all.
The most worrying aspect of the BATcoin ICO was it's distribution.
At the end of the ICO we can see that only 3 people managed to secure over 40% of the total coins released and one person owns almost 25%. The top 25 wallets after the ICO held 84% of all tokens and the top 100 currently own almost 97% of all tokens and only 125 people bought 100% leaving the entire market open to manipulation by these whales. Interestingly the person who bought the largest share of the ICO managed to do so by adding a $1000 transaction fee to his BTC deposit ensuring that his transaction reached the ICO wallet before anyone else, smart move. Expensive but smart, though I guess a $1000 fee when you are sending an $8mn transaction is peanuts. Either way it instantly made them a fortune, as soon as BAT hit its first exchange it began trading at around 3x its ICO price.
The entire point of an ICO raising capital and distribution, in my opinion the BAT team have failed epically at the latter. With an initial market cap of $322mn on day one of token trading, having this much wealth concentrated among so few initial investors just seems crazy to me. No startup is worth that on day one, especially when all BAT is right now is a token on a blockchain, a browser, a whitepaper and some experienced developers. What seemed like a company/token with great potential is permanently marred by this unfair ICO and it is a shame that that is the case.
As investors and as blockchain enthusiasts we all need to be away of these kinds of practices and how simple mistakes in distribution may irreparable tarnish the reputation of a project that otherwise seems promising.
The way we do ICO has to change, right now I feel that going back to day 1 POW mining would be a step forward for most new projects, at least that was distributed somewhat.