The blockchain was conceived as a transparent platform by which middlemen are removed and no one controls the data which are viewable by all. DLT (Distributed Ledger Technology) and Decentralization are catchwords meant to motivate success but why have so many ICOs failed?
A survey earlier this year by news.bitcoin.com found that despite raising $3.88 billion in 2017 (per Coinschedule.com) 46 percent of all the ICOs launched in 2017 ended as failures. The survey looked at data for over 900 crowd sales and concluded that nearly half failed either during their fundraising, or later by not delivering a product.
Lofty intentions outlined in roadmaps, onboarding of venerable advisors, skilled developers, security testing before launching — what could go wrong? Well, many things, due to ineptitude, wrong assumptions, misplaced trust, the unpredictability of operations, variations in cost centers, and a host of other unseen factors popping up throughout the proposed roadmap.
Thus, any proposed project needs to pass through a simple screening of SIX questions which I will soon demonstrate.
Comparing POTS versus IEO
Two new players on the block are pitted against each other and have everybody jumping — Production-Oriented Token Sale (POTS) and Initial Exchange Offering (IEO).
WeBuy is pioneering POTS, a new concept for blockchain based projects which is formulated in order to meet the challenges normally faced during and after an ICO. It relies on a realistic, transparent, round-for-round funding, that requires detailed feedback and reporting, including a clarification in terms of how demand for the WBY token will be created.
Meanwhile, we also have IEOs which rely on having an exchange (or set of exchanges) function as the counterparty. Developers mint the project’s tokens and send them to the exchange, which will then sell the tokens to individual contributors for Ether.
As you can see, POTS goes past the ICO-funding stage and to the most critical stage of project implementation.
Let’s apply my screening questions.
Were there any assets used as security that an MVP can be created to test the project’s blockchain functionality?
POTS funding provided by the project’s founders will be used to complete development of the minimal viable product (MVP).
IEO acts as an intermediary between a developer (who conceptualized and launched the project) and the buyers of the tokens. Other than this relationship, nothing else is required from exchanges or developers.
Were there any ongoing successful businesses which served/will serve as prototypes in envisioning the success of the project?
The first round or stage of POTS-related funding will start and run in unison with the full-scale pilot. The full-scale pilot aims to monitor real life penetration of the WeBuy model, generate feedback and suggestions in terms of improvements and best ad products to use, shed light on limitations or challenges, and a real-time estimate of how much funding is needed for market penetration (based on a single market example).
IEO participants have no direct influence on the outcome of the project itself, not even on the values of the tokens as bought from the exchanges. All the conditions concerning tokens are set between the developer and the exchange. An exchange does not have to be decentralized (till date there have been no IEOs conducted on decentralized exchanges) to conduct an IEO which places contributors in a very precarious position.
Do the contributors play a key role in the direction of the roadmap?
Participants have a major role to play to make POTS successful. The WeBuy application (Android version only) will be available for download via Google Play in pre-defined geographical locations — it will feature general info, user guides, and a portal to report bugs or make suggestions. An End User License Agreement (EULA) will be available via both the app and WeBuy website. Email support will be available 24/7.
For IEO, conditions which include capping the contribution per individual and having a fixed price per token are set ONLY between the developer and the exchanges.
Are the participants direct beneficiaries of the POTS?
Registering and passing the KYC on the WeBuy website will allow individuals to receive a bonus. Bonuses will be announced and made available by registering with WBY.io/Join as soon as POTS stage 1 begins.
IEOs make it significantly more difficult to scam contributors who know that they can only purchase the token from the exchange. This is a benefit for participants/contributors but there is no guarantee for project success.
Token prices may fall based on supply and demand and many other factors, but if a project is based on an actual product, as in the case of POTS, there will be the utility to add to the value of the token, in this case, the WBY token.
Are risks taken by the founder as well?
For the POTS, the founder had put his money in his money so that an MVP could be fully developed and tested in a pilot. Every business owner needs to take the risk and invest with his money on the project.
For the IEO, the risks are more on the funds from the exchanges finding their way back to the developer/founder at the point of his need. While the intention is to prevent the founder from “misusing the funds”, there is still no built-in guarantee that the funds will be in ”safer hands” and released. Will there be a successful implementation for moving the project?
Tapping on the existing user base of the exchange to obtain contributions for the IEO puts more of the risks on the users and none on the developer.
Are full transparency and reporting implemented?
POTS participants get to know what’s happening everywhere so they can know where the project is going. As previously mentioned, the full-scale pilot aims to monitor real life penetration of the WeBuy model, generates feedback and suggestions in terms of improvements and best ad products to use, shed light on limitations or challenges, and a real-time estimate of how much funding is needed for market penetration (based on a single market example).
The IEO cannot prevent anyone from slipping away with the bulk of the funds but in the POTS, monitoring and reporting before more funds are raised.
After the POTS pilot, WeBuy plans to release the first operational WeBuy platform in April, 2019, have at least one local community using WeBuy, have a market penetration strategy ready based on real-time testing, and have accurate budget estimates for stage 2 of POTS.
In the case of IEO, there was no mention of any reporting or accountability on the disposition of funds to participants. The IEO also functions as a vote of confidence from the exchange and sponsor, which has to conduct its own due diligence on the developer’s project. This can turn up like a spider’s web welcoming the hapless contributor who also needs to apply his own due diligence on the project.
Summing up, I daresay, IEOs are money making ventures where the influx of new users and their deposits are the main agenda. Some of these new users may eventually become loyal users of the exchange. I expect several exchanges attempting to carve out a niche by running IEOs.
On the other hand, POTS are run in order to build up industries and improve lives utilizing the full benefits of the blockchain in some or most of its operations. It can transform whole systems, improve operations, generate more jobs, and uplift economies.
IEOs and POTS may be countercultures but I’m hoping there will be a crossroad where the two can meet and be merged into something more humane and life changing for the greater population.
Learn more about POTS here.