The Crypto Paradox: ICO failures, and the rise of STOs — 2019

The cryptocurrencies at present are not threatening any traditional currencies like the Devil Dollar, why because they are already battling intrinsic issues like unanticipated price manipulations, pump and dump of schemes, and acts of cybercriminals that contribute to this ongoing paradox.

They are overly expensive to store, difficult to scale, a gamble for investors, tricky for the audience, unpredictable for media, and above all caged in by their anonymity. Since new ICOs are emerging out of the soil laid by government assumptions, in an aim to solve these problems, they are on the contrary downsizing the older ICOS, further creating a congestion paradox.

The conventional medium of exchanges like social media platforms are benefiting largely from economies of scale, like the more the users the more the money, as the cyber population is primarily attracted to “number of users”. The average costs are largely lowered as they are spread over the transactions, but in the case of cryptocurrencies, this does not apply. Cryptocurrencies declared capacities are largely fixed and costs are variable, which means that they are vulnerable to congestion; more patrons apparently reduces the “attraction”.

More competing transactions create significant delays, which directly implies the fact that transaction costs have to rise in order to eliminate the excess demand. As transaction demand expands, high transaction costs get worse and worse, which is why Bitcoin is continuously drowning.

It is correct, that Bitcoin, Ethereum and Ripple were created from emergent disruptive technologies, fixating the flaws of the present fiat currency establishments, and further creating their own buoyant fate. On the other hand, the power of anonymity did fulfil a percentage of promise but became a burden later as questions of tax evaders, money launderers, and attendants of illicit goods started to surface. Since the detection of nefarious behaviour became harder and harder, risks of market manipulations, scams and outright frauds, raised a lot of controversies. The concept of “up front” money becomes a risk that restricted a big pool of willing transactions.

The decentralization mechanism on which the promise of Blockchain is based, offers some critical benefits, like a guarantee of security, fault tolerance, authenticity and political neutrality, but the limitation of participating nodes is still a concern. The scalability of Blockchain is highly dependent on restoring the network’s trust by validating each transaction, which is technologically difficult and a few more ICOs crashes away.

By the starting of 2019, it was predicted that Bitcoin price will jump, and it did happen. But it should be noted that the flirt of Bitcoin price will continue and should not be anticipated as the flag bearer for the crypto community.

Apart from this, the issues that current ICOs are styling or are facing validity errors will soon die out further leaving a stage for the growth of STOs or Security Token Offerings, which creates ownership that can be further tokenized along with having a lower economic interest rate. I feel the growing popularity of STOs and their capability to offer liquidity, equity and profitability to serious venture capital investments, will change the whole standing of the crypto community and pillar the blockchain reputation.

Speaking about the reports of investors interests waning, is false, as people continue to interpret blockchain’s success with Bitcoin’s price collapse. The cryptocurrency is a bull and bear market, where the drama will continue but it should be noted that only the institutional cryptos, and STOs (because they have a potential to unlock trillions of dollars) will do well. The condition still remains the same that these evolving ICOs and STOs, add value and not burden to the growth of the volatile industry. What happens next, only the period of 2020–2024 will narrate.