September 3, 2018
Initial coin offerings (ICOs) have gone through a free fall since the crash in cryptocurrency prices. The boom of mid-2017 gave rise to many multi-million dollar ICOs with projects challenging the flaws of existing blockchains such as Ethereum and Bitcoin or launching as decentralized apps (dapps) built on existing popular blockchains. \ \ In a bid to explore the ICO market, MEDICI analyzed 21 major ICOs since 2017 to gain an understanding of their performance. The analysis was conducted based on several parameters – no. of partnerships, developer activity, community growth, no. of transactions, no. of token holders, and project status. The analysis highlighted the fact that despite raising huge funds, most of these ICOs are still far from meeting their promised potential. In terms of fundraising, EOS was the largest ICO with total funding of $4.1 billion; in fact, EOS does skew the whole picture considering that the total amount of funds raised by the next 20 ICOs was around $2.72 billion.
The most critical parameter for the success of any ICO is the amount of developer activity. For our analysis, we took Github data as a proxy for developer activity. The ICO community doesn’t seem to be faring well in terms of Developer activity as around 63% of the ICOs under consideration had low developer activity in terms of Github commits. The only ICO which fared well in terms of developer activity – based on the total GitHub commits – was that of Status, an open-source messaging platform. About 31.6% of these ICOs had a medium level of developer activity.
When it came to partnerships & collaborations with businesses and other projects, the picture was still not very good as almost 57% of these projects were under the low category in terms of partnerships. Only a few of these ICOs, such as EOS (22+ partnerships) and HDAC (24+ partnerships) fared well in this parameter. About 33% of the large ICOs under consideration were found to be under the medium category in terms of the number of partnerships.
The only parameter in which these large ICOs fared reasonably well was community growth (Telegram/Twitter) with almost 24% of them under the high-growth category and 43% under the medium-growth category. However, the growth in the number of Twitter/Telegram followers and the activity on these platforms doesn’t necessarily provide an objective view of the success of these projects.
The picture painted by the above parameters shows that most of the projects have not been able to match up to their potential. Especially, the low developer activity as well as the medium-to-high community growth indicate that the focus is more on the marketing & PR activity – and that is where most of the money is being used rather than actual development.
About 62% of the large ICO projects were found to be in the TestNet/Development phase. Also, the token distribution was heavily concentrated with an average of 40.6% of tokens held by the sole biggest investor. Almost 57% of the projects had fairly concentrated holdings with a low number of token holders (<20K), thus wholly negating the decentralization philosophy of blockchain. In fact for TRON, as of June 25, around 95% of the coins were held by only one account. Only 14.3% of these ICOs under consideration had a high number of token holders (>60K).
In terms of no. of smart-contract transactions, only 14% of the projects were in the high category, whereas 35.7% and 50% of the projects were in the medium (100K-500K) and low (<100K) categories respectively. Significantly large projects with high funding rounds, such as COMSA ($95.4 million) and Polkadot ($145 million) had meager numbers of transactions as they’ve been in the development phase for a very long time, and this makes us think about the future viability of these products.
Our analysis showed that overall, ICO performance hasn’t been good in terms of the development of the products. It is highly unlikely that most of them will recover their previous high as the recent fall in the cryptocurrency prices has resulted in more scrutiny, thereby exposing projects which have not stayed true to their promises.