The world of cryptocurrencies is something that is still in its infant stage with a lot of ongoing developments. While cryptocurrencies are making a significant impact on the world and all its financial systems, having been poised to challenge and even possibly overthrow the traditional system of banking and finance as we know it, there are a lot of things that need to be sorted out. It has a very long way to go in order to establish itself as something permanent and that is why there are constant changes being made, most of which are subject to criticism and speculation like the concept of cryptocurrencies itself.
At the ETHWaterloo hackathon, which was held in Canada and judged by representatives from a lot of big companies including Coinbase, Consensys, Slock.It and Augur, the co-founder of the Ethereum blockchain network, 23-year-old Vitalik Buterin expressed his opinion on ICOs (Initial Coin Offerings) saying that 90 percent of all ICOs launched on based on the Ethereum protocol will very likely result in a failure.
Buterin said, “It is an established fact that ninety percent of startups fail. And it should also be an established fact that 90 percent of these ERC20s on CoinMarketCap are going to go to zero.”
He has previously been reported as saying that he considers the ICO development’s centralization a big flaw in many of the ERC20 token-based projects (the ICOs based on the Ethereum protocol). He says that even though the infrastructure that these ICOs are based upon is decentralized itself, all ICO projects are conducted by a select group of developers and in many cases by companies which get their funding from venture capitalists.
The fact of the matter is that developers find it challenging to be incentivized for all the services their providing by initially creating, developing and then sustaining applications without the facility of ICOs or any sort of capital funding. Buterin thinks that there is a possible way to incentivize the developers for their services. Instead of using ICOs or venture capital finding, they could be rewarded with a fraction (0.3 percent) of trades being allocated in their name for their services. Buterin said:
“This, basically, is tokens 1.0. There are some good ideas, there are a lot of very bad ideas, and there’s a lot of very, very bad ideas, and quite a few scams as well. I expect that tokens 2.0 and the kinds of things that people will start building in 2018 and 2019 will generally be of substantially higher quality. Especially once we start seeing what the consequences of the first wave of tokens are in the medium-to-longer term … What is a good role for them and what is a role that doesn’t really make sense?”
In the year 2017, companies have managed to raise an amount over $2 billion USD using ICOs with a lot of them have raised $200 million USD by approaching those main stream investors in traditional assets who have not yet had the opportunity to invest in the crypto-world.
A lot of tech startups have gone belly up over the last decade because they were unable to create a sustainable business model, Buterin thinks that many of the companies using ICOs to fund them are going to see the same fate. He doesn’t think that they will be able to successfully commercialize their blockchain networks. He believes as things move along, more stable, efficient and sustainable applications will come along based on the Ethereum protocol.