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How Multi-Billion Dollar Companies are Entering the ICO Market

Last Updated March 4, 2021 4:57 PM
Joseph Young
Last Updated March 4, 2021 4:57 PM

On July 4, multi-billion dollar professional services firm Deloitte entered into a strategic partnership with blockchain infrastructure provider Waves Platform.

The signed memorandum between Deloitte and Waves Platform marked the first entrance of a multi-billion dollar conglomerate into the rapidly growing ICO market, which has started to attract both high profile and casual traders globally.

Most recently, billionaire investor Tim Draper-endorsed Bancor Network’s ICO raised around $150 million and Marc Cuban, NBA’s Dallas Mavericks owner and billionaire entrepreneur, is planning to invest in an ICO campaign run by eSports gambling startup UniKrn.

In an interview with CNBC, Cuban revealed that like he did with bitcoin and other cryptocurrencies such as Ethereum, he is investing in the UniKrn ICO in the near future in order to learn more about the market and the mechanisms of ICOs.

“I want to learn more about them. I haven’t signed the paperwork yet. But it’s likely it will happen,” said  Cuban.

However, Cuban’s plan of establishing paperwork between himself and UniKrn wholly defeats the purpose of participating in an ICO as the fundamental concept of an ICO is to obtain capital and investment in a decentralized and autonomous manner.

Cuban’s mindset in regard to his potential investment in UniKrn also reveals a lot about the ICO market, Like Cuban, the vast majority of investors are participating in ICOs without proper understanding of the market and the purpose of ICOs. For instance, hundreds of millions of dollars were invested in the ICO of EOS, despite the clear emphasis given by the EOS development team that its token have no purpose and use cases, and that it should not be considered as a currency, commodity or investment.

Essentially, the entire ICO market at this stage is completely speculative as none of the projects are yet to present viable projects and products. EOS, Bancor and most ICO campaigns have not released tested versions of their software and products, with the vast majority of blockchain platforms being pre-alpha software.

The involvement of a large-scale auditing, corporate finance, consulting and legal service provider such as Deloitte will likely trigger the growth of the ICO market in the short-term and drastically increase confidence of investors. However, the issue to consider is, whether if it is too early for companies such as Deloitte to enter the ICO market and expand it to a multi-billion dollar market.

On June 28, Coinbase co-founder Fred Ehrsam noted that the Ethereum network will need to improve or scale by a factor of 100x to allow the emergence of a 1 to 10 million user app. The assessment of Ehrsam means two things:

  1. Ethereum network and its infrastructure for decentralized applications are yet to see a major application with an active or actual user base
  2. Thus, most ICOs have no actual users and market value at this point, given that their valuation is completely speculative.

“While it’s tricky to make accurate estimates when combining scaling improvements, it’s conceivable we could see a 100x improvement by the end of 2018, which would allow a 1–10m user app. Scaling is multidimensional. Different methods address different things. So it’s hard to measure with a single and global “transactions per second” metric,” said  Ehrsam.

The valuation of ICOs have to be speculative because they can’t be valued with actual measures such as revenue, user base, activity and profit. Most ICOs don’t even have viable prototypes and test platforms yet.

Artem Tolkachev, the director of legal services for technology projects at Deloitte, stated that it will focus on at least providing proper legal grounds and frameworks for blockchain projects and ICO campaigns in Russia and the CIS.

“The cryptocurrency market is relatively young, and not all the regulatory mechanisms are in place. This is why we are glad to cooperate with Waves Platform and are confident that our joint effort will help create the necessary conditions for putting together the legal framework for blockchain projects both in Russia and the CIS,” said Tolkachev.

Companies running ICO campaigns have already become more aware with the potential legal consequences and conflicts with the US SEC that may arise if they conduct ICOs in the US. Successful ICOs such as EOS and Bancor have been extremely careful in dealing with regulatory frameworks in some regions and the entrance of professional services firms such as Deloitte will help create a safer environment for ICOs.

Featured image from Shutterstock.