2018 Summer Insights Report. Read the full report on trends in the…
By: Shaun Newsum
Tags: ICO, Blockchain, Cryptocurrency, Insights

This is the 2018 Summer Insights report. In this report, I’ll be covering the following information:

Overview of the five biggest ICOs so far for 2018

Trends in the ICO market

Trends for cryptocurrency exchanges

Trends for ICO/cryptocurrency regulation

Trends for blockchain technology

Predictions for the rest of the year and 2019

Overview Of The Five Biggest ICOs So Far For 2018

Telegram

Telegram is one of the biggest, if not the biggest, ICO so far. It’s so big that ICO Watchdog has its own article explaining everything about it. If you’re interested in getting an in-depth look into the Telegram ICO, look no further than our article.

TechCrunch reported that it’s estimated Telegram has already raised a whopping $1.7 billion from private investors. This is due to several factors:

Telegram has massive network effects because of its insanely large userbase. Telegram reported in March 2018 that it has 200 million Monthly Active Users

Telegram’s founder Pavel Durov is already well known for creating Russia’s largest social network, known as VK.

The purpose of the ICO is to build the Telegram Open Network (TON), which will extend the Telegram app to include a variety of services such as a distributed file storage system, secure browsing, and micropayments. A few people have criticized the ICO for being lackluster when it comes to details on how they’ll actually implement what they claim to be able to do in their whitepaper. Here’s what MIT Technology Review said:

The encrypted messaging company’s plan is bold, but short on details… There are no details clarifying how tokens will be distributed, how the network will make decisions and handle disagreements, and how much control the company will maintain over those processes… although Telegram’s blockchain dream may make sense at first glance, many cryptocurrency experts will be skeptical until the company clarifies how it intends to solve some big technical and economic challenges.

So far, Telegram has not conducted an ICO open to the public.

Bankera

Bankera raised $151.8 million for their ICO, making it the 6th biggest ICO ever. The Bankera ICO started on November 27th and ended on February 28th, 2018.

Bankera is an already established financial technology (FinTech) company that has regulatory and IT arrangements to offer individual international bank account numbers (IBAN) that can accept and make payments in the Single Euro Payments Area (SEPA). Bankera’s main goal is to build a digital bank that will offer banking services such as savings and loans accounts, at lower costs and reducing counterparties.

Bankera’s CEO, Vytautas Karalevičius, completed his Ph.D in cryptocurrencies in 2018. He’s also the CEO of SpectroCoin, a European Bitcoin exchange. According to Bankera’s website, they have 810,000+ clients and have issued 65,000 prepaid cards for fiat withdrawal.

More info about Bankera:

_______________________

Bankera Whitepaper

Bankera Website

Elastos

Elastos raised $94 million in its ICO. The Elastos ICO started on January 2nd and ended on January 23rd.

The aim of Elastos is to create a new internet powered by blockchain technology. The new internet aims to allow people to own digital assets and create wealth from these assets. Elastos is well-backed, with sponsorship from Tsinghua Science Park, the TD-SCDMA Industrial Alliance, and the Foxconn Group. Elastos has published 4 million lines of original source code.

It’s not difficult to see how Elastos was able to raise massive amounts of money, given its lofty goal.

The founder and chairman of Elastos, Rong Chen, has significant experience with technology companies. After receiving a Master’s degree from the University of Illinois at Urbana-Champaign, Chen went on to work as a software engineer at Microsoft. He then co-founded Kortide, where its lead product is the Elastos SDK.

More info about Elastos:

_______________________

Elastos Whitepaper

Elastos Website

Envion

Envion raised $100 million from its ICO. The ICO started in December 15, 2017 and ended January 17th, 2018.

The purpose of Envion is to fight against the vast energy consumption from cryptocurrency mining. It aims to do this by packing shipping containers with cheap cryptocurrency mining hardware and deliver these shipping containers anywhere in the world where cheap energy can be accessed. They will use a patented technology that will make these containers more efficient than traditional data centers, take advantage of areas with excess solar energy, and make the system decentralized.

Despite the massive amount of money raised in the ICO, the future doesn’t look particularly bright for the Envion Team. The founding team is suing the CEO of Envion AG Matthias Woestmann for allegedly “unlawfully securing a majority stake in Envion AG in breach of contractual obligations.”

More info about Envion:

_____________________

Envion Whitepaper

Envion Website

Zeepin

Zeepin raised $62.6 million from its ICO. The ICO started and ended on January 18th.

The purpose of Zeepin is to create a decentralized blockchain for the global creative industry and the decentralized sharing economy. This includes helping content creators with asset digitization and rights confirmation, enabling efficient transactions, crowdfunding creative assets, helping organizations improve innovation efficiency, and incubating a large number of for-profit creative organizations for the sharing economy model.

Zeepin’s CEO Zhu Fei appears to have significant experience working in the creative industry, having worked as the CEO of Arting365 and acting as the director of the Shanghai Industrial Design Association.

More info about Zeepin:

_________________________

Zeepin Whitepaper

Zeepin Website

Trends

Trends for the ICO Market

ICO Projects Mainly Focus On Finance And Payment Use-Cases

Image Source: ICO Watchlist

When it comes to ICOs, the top three industries projects are focusing on are Finance, Payments/Wallets, and Commerce/Retail.

The fact that ICO projects focus mainly on the financial industry is reasonable because of the numerous benefits that blockchain technology can provide to the finance industry. The main benefit, of course, is data immutability. Besides that, ICOs are still mainly focused on the payment and commerce use-case of cryptocurrencies, with Payments/Wallets and Commerce/Retail as the 2nd and 3rd top industries that ICO projects focus on.

With that being said, as seen from the above graphic there are now many different use-cases that ICO projects are exploring besides financial use-cases. For example, Gaming/AR/VR use-cases make up 4.9% of ICOs. This indicates that developers are expanding the potential use-cases for cryptocurrencies beyond simply payments.

Overall Increase In Amount Raised For ICOs

Image Source: ICO Watchlist

Despite the fall in cryptocurrency prices since the beginning of 2018, the total amount of money raised by ICOs is elevated from 2017 levels: In April 2018, $963.1 million was raised through ICOs while in April 2017 only a meager $81.4 million was raised.

This suggests several things. First, it suggests investors are not very concerned about investing at the ICO stage of a cryptocurrency. Secondly, it also suggests that there is an increased interest in ICOs from investors in general. This might be the result of ICOs from 2017 legitimizing ICOs and investors realizing that there are significant returns to be made from cryptocurrencies at the ICO stage.

In 2017, on average ICOs had a higher return than ETH and BTC:

Information from FabricVentures

As a result of these returns, investors might believe that there is still more money to be made investing in ICOs than continuing to invest more into BTC and ETH.

What could be the cause for the generally higher returns provided by ICOs compared to BTC and ETH? The simple explanation is that investors are being rewarded with higher returns because they are taking on more risk, given that many ICOs are still unproven in terms of their teams and products.

As seen from the graphic above, returns for ICOs steadily diminished from the beginning of 2017 to the end of 2017. This could be the result of ICO teams putting higher hard caps for their ICOs later on in 2017 as they realized they could more easily raise money, which means the potential upside return for the ICO is diminished.

Although ICOs generally seem to be very successful in terms of returns, a requisite to that is that the ICO is actually completed properly. Out of 913 ICO projects, only 48% of those ICOs are successful. 131 ICO projects in 2017 reported that they failed to meet their minimum threshold for the ICO. 347 ICOs did not report the end result of their token sale and their token sale websites simply disappeared.

ICO Teams Are Geographically Spread Out

Another interesting trend that’s occurring with ICOs is that not only are the products the ICO teams are building decentralized, but in many cases the actual ICO teams are decentralized themselves. About two thirds of all ICOs have team founders that are located in different countries:

Information from FabricVentures

What are the implications of this? It appears that ICO teams do truly embrace the idea of “decentralization”, as many of the teams are geographically decentralized. This indicates that remote work is very common for ICO teams, and it’s evident that globalization is a phenomenon that occurs not only for massive companies but also for startups.

What might be the cause of many ICO teams being geographically decentralized? There are several factors that could be contributing to this phenomenon.

The first factor is, as mentioned earlier, that ICO teams truly believe in the ideals of decentralization. Geographical decentralization is simply a natural extension of technological decentralization. Instead of only hiring the people that must work at one place at any given time, geographical decentralization allows for ICO teams to hire the employees that will provide the maximum amount of benefit for the ICO.

The second cause could be that ICOs and cryptocurrency are truly a global phenomenon, and in many ways it’s very difficult to have a successful ICO without a significant amount of traveling to meet potential investors and users. ICO, cryptocurrency, and blockchain events/investors/users are in many different countries in the Americas, Europe, and Asia. A co-founder being in a different country than another co-founder allows an ICO team to leverage that fact and have the team members meet with different investors and attend different events in different countries at the same time.

Trends In Cryptocurrency Exchanges

Increased Interest And Use Of Decentralized Exchanges

One trend that we’re seeing with cryptocurrency exchanges is an increased usage and interest in decentralized exchanges.

There has been an increased interest in decentralized exchanges from large, well-established companies in the industry. For example, Coinbase recently acquired the decentralized exchange Paradex. Furthermore, Binance is planning on launching a decentralized exchange soon.

Here’s what Binance founder and CEO said about the decentralized exchange they’re building:

“On the decentralized exchange we’ll have less control. More likely anybody can list any coin. That’s the philosophy of the decentralized exchange, it’s freedom of choice, freedom of investments… But with freedom there will be people who are scammers. That’s not something we can control.”

Binance’s decentralized exchange is expected to launch this year.

Besides the interest from well-established companies in the industry, decentralized exchanges are already seeing some use. For example, at the time of writing the decentralized exchange IDEX has $2.6 million USD in 24 hour volume.

There are also a number of different protocols and cryptocurrencies related to decentralized exchanges that did an ICO in 2017 and are now starting to become more developed. That includes 0x (ZRX), Airswap (AST), and Kyber Network.

Despite the increased interest and number of products for decentralized exchanges, liquidity for decentralized exchanges is still lacking compared to centralized exchanges. For example, at the time of writing Kyber Network only has $398,306 USD in 24 hour volume, more than half of which the volume can be attributed to Basic Attention Token.

What could be the reason for this lack of liquidity for decentralized exchanges? There’s a variety of different factors that could contribute to the phenomenon of decentralized exchanges generally lacking liquidity despite the increased interest in it by the cryptocurrency community.

One potential factor could be that the actual benefits that decentralized exchanges provide over centralized exchanges are, in fact, quite limited. As a result, although “decentralized exchanges” might be interesting to end-users from a technological perspective they don’t provide any extra benefits that would make the end-user switch to a decentralized exchange.

Another potential factor is that understanding and awareness of decentralized exchanges is limited, and that many end-users do not use decentralized exchanges because they are unaware of its benefits, and in some cases are not even aware of their existence. After all, it’s impossible to use a service that you don’t know exists.

More Centralized Cryptocurrency Exchanges Hacked (And How That’s A Driver For Decentralized Exchanges)

What are the main drivers behind the interest for decentralized exchanges? I estimate the main factor is hacked cryptocurrency exchanges. Centralized cryptocurrency exchanges can (and often) get hacked by cybercriminals that want to quickly make massive sums of money. In many ways, when it comes to centralized exchanges the security of exchange is outside the purview of the end-user.

The end-user must simply trust that the security of a centralized exchange is robust enough to prevent a hack from occurring. As seen time and time again, in many instances this is unfortunately not the case. As a result, millions of dollars are lost from cryptocurrency exchange hacks. CipherTrace estimates that $731 million in total has been stolen from cryptocurrency exchanges in 2018. The situation has gotten so bad that Ethereum founder Vitalik Buterin said, “I definitely personally hope centralized exchanges burn in hell as much as possible.”

One of the main benefits that decentralized exchanges provide to end-users is that it allows end-users to take responsibility of the security of their tokens, instead of placing that responsibility in the hands of the cryptocurrency exchange team. Frustrated and disillusioned users who have been a victim of a hacked exchange (or wary users who don’t want to be a potential victim in the future) that wish to continue to be involved in cryptocurrency are most likely going to look for a way to prevent from getting hacked again. Thus, that leads them to decentralized exchanges in which the responsibility for security is placed in the end-user’s hands, not the exchange’s.

NOTE: For a real deep-dive into decentralized exchanges, you can check out ICO Watchdog’s article on decentralized exchanges HERE.

Trends In ICO/Cryptocurrency Regulation

Introduction of clearer regulations

One of the main trends is the introduction of clearer regulations for cryptocurrencies and ICOs in general from different countries. For example, the SEC recently clarified that Bitcoin and Ethereum aren’t securities. That is to say, they shouldn’t be regulated in the same manner as stocks or bonds. Thailand also introduced new cryptocurrency regulations, as well as a number of other countries such as Bermuda.

So far, regulators from the United States have taken a “light-touch” regulatory approach to ICOs and cryptocurrencies. Only blatantly fraudulent ICOs have seen crackdowns.

Many Teams Self-Regulating ICOs

There has also been the introduction of a new protocol called the Simple Agreement for Future Tokens (SAFT), which aims to create a self-regulating framework to operate under United States securities regulations.

The purpose of SAFT is to create goodwill between ICO teams and regulators.

Trends In Blockchain

General Increased Adoption Of Blockchain Technology

We’ve seen a general increased adoption of blockchain technology from companies since the beginning of this year. For example, China has seen a sixfold increase in companies with “blockchain” in their title compared to last year.

Increased Number Of Blockchain Patents

A number of different large companies have pursued and filed blockchain-related patents in 2018. These companies include Volkswagen, Mastercard, Walmart, GE, and IBM. This shows that adoption of blockchain technology is coming not only from startups but also from brand name companies.

Predictions For The Rest Of 2018 and 2019

Increased Adoption Of Decentralized Exchanges

As decentralized exchanges become easier to use and more people begin to understand the benefits of decentralized exchanges they will become more and more adopted and used by end-users.

If centralized exchanges continue to be hacked at a massive rate, adoption of decentralized exchanges will increase even more rapidly as users look for alternatives to take control of the security and integrity of their tokens.

More Regulatory Clarification From United States

Throughout 2018 and 2019, the United States will clarify regulations for cryptocurrencies and blockchain technology in general. This might start by regulating specific cryptocurrencies, and then expanding these regulations to a broader general case.

More ICO Teams Working Remotely

More ICO teams will leverage the internet so that team members can work remotely. More teams will be geographically decentralized as teams realize that this provides them with an advantage when it comes to meeting with investors, attending events, and business in general.