Thought provoking, right?
It is not a new phenomenon in the crypto space that launching an ICO is the de facto way for blockchain start-ups to raise capital.
An ICO provides a more convenient and easier way for blockchain companies to raise funds through cryptocurrencies.
However, given the fact that ICOs are largely unregulated, over 80% of them fail to fulfill investors’ expectations.
Thus, ICOs are continuously getting a bad rap among blockchain-savvy investors.
An example of such failed projects is OneCoin, an ICO which never had any blockchain related product.
Yet, it was able to raise over $350million through a widely believed Ponzi scheme.
In this ever-evolving and booming industry, there is a need for other forms and techniques of fundraising.
At the forefront of this new fund-raising instrument is what is referred to as the Reverse ICO.
Reverse ICO and How It Works
Reverse ICO in simple terms is an ICO carried out by an existing company.
Although it is still referred to as an Initial Coin Offering, the company carrying out the sale is not a start-up company.
Rather, it is an already established company that wants to tokenize its platform.
These companies already have a proven product or service, a reliable track record, and a strong user base and community.
This technique eradicates problems that regular ICOs would normally encounter such as community building, product development, market acceptance, etc because the companies already have all of these settled.
Advantages of Reverse ICO
- It helps bolster investor confidence in a blockchain project by providing an alternative means to sieve out quality investments.
- This method also helps to increase corporate and institutional attention as established companies and big players become increasingly aware of the potential of blockchain technology.
- Because they are already registered and established, companies running the reverse ICO concept have a working usable product and real-world users and existing communities, with a proven track record.
- Since the company already has a working product with real-world users, the company focuses more on the enhancement of the existing product than on the market adoption of a new product.
Examples of Successful Reverse ICO Projects
- In March 2018, Lition, a licensed energy supplier with real customers and generating revenue in Germany launched an ICO for its blockchain-based P2P energy trading app. The project raised $2 million in less than thirty minutes despite the bearish condition of the market.
- Kik, a social messaging app with 300 million users and 15 million active users was the first mainstream company to transform to tokenomics. Their ICO was rounded up in September 2017, raising nearly $100 million in funds.
- Telegram, the instant messaging app with over 200 million active users launched its ICO in March 2018. From two rounds of the presale, the ICO raised $1.7 billion against its budgeted $1.2 billion from less than 200 investors. Telegram as such had to cancel its public ICO sale launch.
- Kodak, an established company in the camera and photography industry with RYDE Holding on the ICO of KodakOne in May 2018 which was a blockchain-based image rights management platform with its own custom cryptocurrency, KODAKCoin. The project raised about$4.1 million via a simple agreement for future tokens.
- The popular file-sharing software provider, BitTorrent was acquired by the Tron Foundation in July 2018. BitTorrent completed its ICO in January 2018 raising $7 million in 15 minutes using the Binance Launchpad.
Reverse ICO – The Verdict
As of the time of this post, there are over 2,500 cryptocurrencies available.
But 85% of the total market capitalization is been held by the top 10 coins.
This proves that the majority of these coins are shit coins with very minimal value.
Reverse ICO could be a technique to address this problem.
The ICO model has seen various improvements and alterations over the course of the past few years in this fast-growing and ever-evolving landscape of the blockchain industry.
This method seems like the best way forward especially towards the mainstream adoption of cryptocurrencies and blockchain technology.
As investors, it should be noted that past performances do not really determine future successes.
While the reverse ICO most times guarantees the legitimacy of a project, always do your due diligence for each and every investment.