The prospect of getting in early on a new technology before the “bubble bursts” is thrilling, uncertain, and drives a lot of the volatility we see in the cryptocurrency market today. All of the hype around cryptocurrency and blockchain has many people eager to try it themselves.
Despite the hype, there are plenty of reasons why launching an ICO could be a terrible move for your business.
Don’t be so quick to jump on the bandwagon! There are many factors at play and your business deserves better.
Regulation
The Security And Exchanges Commission (or SEC) is dedicated to promoting a trustworthy market environment for American citizens. If your business is based out of the United States, then it’s time to consider the significance this organization has on your new ICO.
The world of cryptocurrency is well known to be volatile. Many specific properties and protocols associated with blockchain and cryptocurrency have yet to be recognized officially in law.
When the first cryptocurrencies began to form, so did a gray area in official regulation. Official posts from the SEC have indicated that many commissioners regard ICO’s as a type of security. As such, An ICO would need to be met with the same regulatory discipline as other securities—much like an IPO.
When planning your token, it’s important to consider the exact nature of the technology we’re dealing with.
“The volatility of this emerging technology is met with significant push from the SEC to regulate Initial Coin Offerings as a security.”
Many new businesses are not prepared to deal with the industry regulation standards. Even something as small as celebrity endorsements are subject to penalty if not addressed properly—in this case, public disclosure of promotional funding.
All of these factors come together in an effort on part of the SEC to promote a safe, trustworthy market. The cryptocurrency market is uncertain and subject to vulnerability if left unaddressed.
Monetary Intention
If you’re looking to make a quick buck after hearing about the ICO hype train, it’s time to hop off this ride—because it’s not for you.
Many new ICO’s have launched since 2017, and many of them have been shut down. The SEC is looking closely at the current state of ICO’s. It’s clear the current state of regulation has yet to deter the flood of scam artists from entering the market.
If you’re looking for long term success, you need to choose a business plan that’s suitable for your product, market, and most importantly your client.
“Funding your business with unnecessary technology under the guise of technical understanding will ultimately disrupt the trust you’ve built with your existing customer base.”
If you’re launching an ICO, it should be because the token you are providing to your customer has intrinsic value. The token you are utilizing should be necessary to your customer and provide its value long term. This is lost in businesses who fail to plan their ICO with proper intention.
No Economic Plan
We’ve all heard the tired classic, “A business that fails to plan, plans to fail.”
But how does a business even begin to plan with something so new and uncertain, like cryptocurrency? If you find yourself asking these questions, you should stop to consider why you want to launch an ICO in the first place.
There are two factors to consider when planning your investment in the cryptoeconomics world.
- 1. The platform built around your token should be solid. You need to choose carefully when developing the protocols to which your token will subscribe. Your customers want to know your token is secure. If your token is secure—they, too, feel secure.
- 2. Your business model should provide long term economic value. The token you’re creating should be intertwined deeply with your business model. The plan you choose to pursue should be optimized to take full advantage of the new token and it’s uses long after the ICO.
If your business plan doesn’t incorporate the long term economical impact of your new token, you need to reconsider its necessity.
Lack Of Necessity
Many businesses are eager to jump head first into the new excitement around cryptocurrency. Some see it as a way to attract new customers, ones who find the appeal in emerging technology.
But many fail to realize the significance of their decision. How reliable are you going to come across when your customers realize the buzzwords that sold them aren’t worth as much as they once thought?
Cryptocurrency is an incredible new technology with much capability.
“ICOs have a place in the crypto market—it’s important to approach them cautiously and with intent.”
Successful ICO’s are typically found in businesses whose long-term models strongly incorporate the use of their token. If your business could function well on it’s own without the use of a token, then it’s likely in your best interest to continue without it.