[Note: This was originally published on January 6, 2015 at Melotic.com and is not an endorsement nor should it be construed as investment advice. Conduct thorough due diligence.]
Below are a bakers dozen projects undertaken in the past 18 months that used some form of crowdsale (ICO, ITO):
- Mastercoin raised 4,740 BTC in August 2013
- NXT raised 21 BTC in November 2013
- Maidsafe raised 7,368 BTC and “95,000 MSC” / BitAngels ‘loan’ in April 2014
- Swarm raised 1,252 BTC in June 2014
- Bitshares AGS raised 5,621 BTC and 415k Protoshares in July 2014
- Viacoin raised 610 BTC in July 2014
- Ethereum raised 31,529 BTC in August 2014
- StorJ raised 910 BTC in August 2014
- SuperNET raised 1,201 BTC and “4,536 BTC equivalent” in Sept 2014
- Peertracks (Bitshares music) raised ~1,436 BTC in November 2014
- Bitbay raised 5,000 BTC in November 2014
- Ziftr raised around “2,000” BTC (more than $650k) in Dec 2014
- Gems raised 2,600 BTC in Dec 2014
The noticeable trend is that despite claims of their upcoming demise, neither appcoins nor altcoins stopped being created. Perhaps this will change in the future, but portions of the cryptocurrency community as a whole seems to want to continue to try and fund projects in this way.
Developing new features costs man-hours and even with a highly skilled team, it can be cost prohibitive. For instance, last October, Blockstream raised $21 million from 40 investors to create new extensibility to Bitcoin’s blockchain through a two-way peg called “sidechains.”
On the face of it would seem as if this type of infrastructure (reusing a tested system like Bitcoin’s blockchain) would incentivize altcoin developers to move or start their project on one of these chains. But from a funding perspective, it may be cost prohibitive in that development teams need to be paid and historically have found pre-sales, pre-mining and pre-allocations – such as those above – as a way to fund continued development.
How to compete with that?
For example, according to Coinmarketcap there are currently 10 “coins” that have a ‘marketcap’ larger than $10 million (recall that Jonathan Levin’s definition of a ‘narrow money stock’ is probably more appropriate). While some coins are more liquid than others, it is unlikely that an entity like Blockstream could provide a similar amount of funding for those projects (perhaps they or others will set up a fund for this at a later date to do that).
Either way, the merits of sidechains (there are multiple proposals, of which Blockstream’s is the farthest along) is a topic for another time.
What about other methods of distribution such as “proof of burn”?
- Counterparty “burned” 2,130 BTC in January 2014 which effectively removed 0.01% of the monetary base.
- Dogeparty “burned” 1.85 billion dogecoin during 28 days in August/September 2014. Roughly equivalent to 2.01% of the monetary base at that time.
What about airdrops and giveaways?
- XRP (from Ripple Labs) was distributed through the Computing For Good project where a user could earn points for contributing to the World Computing Grid. Because XRP were pre-allocated, this allows for a different distribution. It ended in May 2014 due to abuse by botnets. And over the course of the endeavor, roughly 0.002 XRP were awarded per WCG point.
- Stellar initially gave away up to 6,000 stellar per verified Facebook account but was quickly abused via oDesk / Mechanical Turk (a large majority of accounts were generated via abuse). For instance, Everett Forth received 2 million on launch day.
- Ribbit.me airdropped ~200 million RibbitRewards in December 2014 to 13,730 users.
- Let’s Talk Bitcoin grandfathered in previous contributors (e.g., writers, show hosts) to receive LTBCoins. 51 million LTBCoins were handed out in its first distribution on June 27, 2014.
What does 2015 hold for these methods of fundraising and distribution? Perhaps they will indeed terminate as predicted, or perhaps market participants will use a different method of fundraising that has not been tried.