The days of the ICO craze are over. For a brief moment in history, the new fundraising method was pulling in unprecedented amounts of capital; hundreds of millions–even billions of dollars went into funding thousands of new projects, some of which had absolutely no technical substance.
Things have changed. A year of scams, failed projects, and hacks has whittled down the investor pool into a group that is much more skeptical, and much more aware of what can go wrong.
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Still, there have been some efforts to pump new life into the token sale market. But what happens when those efforts go south?
US-based cryptocurrency exchange Bittrex made headlines earlier this month that it was canceling a so-called “initial exchange offering” (IEO) less than 24 hours before the offering was set to begin. The IEO was associated with RAID, a blockchain gaming company with headquarters in South Korea.
The “IEO”: An Attempt to Rebrand ICOs?
Bittrex originally announced that it would be launching the IEO–the world’s ‘first-ever’–on March 11. The IEO was to be conducted similarly to an ICO (initial coin offering), but with Bittrex as the hosting platform. Allegedly, the fact that IEOs are held on established cryptocurrency exchanges could reduce the risk associated with buying into an ICO that is hosted by the project itself.
“In the early ICO days, sellers simply built a website, posted a wallet address and started the countdown clock. It didn’t take long for hackers to exploit vulnerabilities,” wrote Jeff Koyen, publisher of token sale evaluation site ICO Ranker, in an email to Finance Magnates. “Then along came vendors like ICOBox, offering turnkey token sale services, including end-to-end security. But even this was never foolproof. Hackers gonna hack.”
On the other hand, By hosting a token sale on a major exchange, you’re outsourcing security to someone who’s probably much better at it,” Koyen continued.
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“Think of it this way — Binance and Bittrex, to name two, already hold untold fortunes in crypto. If hackers can compromise the exchange wallets or its user accounts, they’re going siphon off billions in BTC before worrying about a couple million from an IEO. If you could break into Fort Knox, would you steal the TVs?”
“IEOs aren’t bulletproof. Nothing’s bulletproof in crypto. Exchanges get hacked, and centralized token sales are anathema to crypto OGs for good reason. As the saying goes — not your keys, not your bitcoin. But I still think IEOs can play an important role in crypto’s wider adoption and the reinvigoration of public-facing token sales.”
And indeed, the idea that this re-branding of a traditional token sale could stir some interest (and some capital) in a stagnant token sale market has been circulating around the cryptosphere.
“Speaking as someone who misses the wild ICOs days, I like IEOs. They have a bright, interesting and quite possibly very brief future,” Koyen quipped.
Indeed, the IEO concept could be nothing more than a fleeting moment in token sale history. “That’s how crypto works. It’s a Gibsonian experiment in accelerated Darwinism — forever adapting, often on-the-fly, to remain defiantly independent of federal regulators and other central agencies. Of course, skeptics decry the centralized aspects of IEOs.”
“Still, I get more excited about IEOs than STOs, which have become boring vehicles for VCs and other unimaginative investors.”
Even if the IEO concept’s fresh take on token sales does provide some new and attractive features, the RAID debacle may have cast a long shadow over the practice. Here’s what happened.
For a Brief, Shining Moment, Everything Was OK
Following Bittrex’ announcement of the IEO, RAID delivered 17 billion XRD (its native token) to Bittrex with the goal of raising $5.95 million. A single XRD token was to be sold for 10 Satoshis (a ‘Satoshi’ is one hundred millionth of a single bitcoin); the minimum buy-in for the sale was the equivalent of $10, and the maximum was $20,000.
The sale was all set to begin on March 15, 2019, at 10.00 KST time. Bittrex’ CEO, Bill Shihara, expressed his enthusiasm for the sale: “We are committed to increasing adoption and moving the blockchain revolution forward. The ability for projects like RAID to innovate, advance, and promote the gaming industry on our platform is a game changer for all involved and not just for RAID and our team,” he said in an official statement.
The arrangement was set to benefit Bittrex as well–in order to participate in the IEO, token buyers were required to open a Bittrex account themselves.
Bittrex Cancelled the Sale
After all of the advertisements had been sent out, official statements praising the collaboration had been made, and the tokens were set to sell, Bittrex abruptly canceled the RAID IEO.
The cancellation reportedly came as a last-minute response to the termination of a partnership between RAID and OP.GG, a 32-million-user company started by Raid’s alleged co-founder, Cheonwoo Park.
As soon as we were notified of the change in partnership, we made a decision. https://t.co/2pbaZ2X9Dp
— Bittrex International (@BittrexIntl) March 14, 2019
However, the project’s social media has stayed silent in the time since the cancellation of the IEO. Additionally, the desktop version of the site has gone offline, replaced by the following message:
(Translated quote (Google Translate): “The RAID project team decided that it was not right to proceed with the Bittrex IEO due to unexpected variables, and decided not to proceed with the IEO after consulting with BitRex. In order to minimize the damage of users who have invested in RAID in the past, we will carry out all necessary procedures as soon as possible for all those who participated in our project. A related announcement will be made on the 15th. I apologize to all those who have once again expressed an interest and have expressed love for our project. Thank you.”)
Indeed, to its credit, RAID does not seem to have pulled a complete exit scam–at least, not yet.