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New study finds over 80% of ICOs to be scams, and most others flops

Andrew Munro 26 March 2018 NEWS

Most of the scam background noise has already been filtered out by the time an ICO gets anywhere.

One of the recent missions of analyst Sherwin Dowlat has been to categorise ICOs to find out whether most of them are actually any good, and if so how good. The results aren't promising.

In brief:

  • 81% are outed as scams.
  • 6% fail before launch.
  • 5% go dead before launch.
  • 2.8% of those examined are dwindling on exchanges.
  • 1.9% have been successful.
  • 1.8% are looking promising.

Source


What the categories mean

  • Scam: Expressed availability of an ICO without any intention of following through, or was determined by communities to be a scam.
  • Failed before launch: Did not complete the ICO process, either because it failed to hit the soft caps or otherwise was abandoned before reaching targets.
  • Dead pre-launch: Succeeded in raising funding, but has not had a code contribution on Github in the three months since.

Of those that made it into exchanges, they were categorised according to three success criteria and only included tokens in the $50m to $100m range. Dwindling coins achieved none or only one of the following criteria, promising coins managed two and successful coins managed three.

  1. Beta, at least, deployment of a distributed ledger or product.
  2. Posted a transparent project roadmap on the website.
  3. Had Github code contribution activity in a surrounding three-month period.


There are different ways of studying and categorising ICOs, and this might be one of the more thorough examinations of ICOs from the initial announcement.

Others have found that most projects die within a year of launch, but put the rate of outright scams much lower. The exceptionally high number of scams uncovered by this study is probably because it counts all projects that were announced, rather than the ones that actually raised some funds.

The success rate of ICOs might be slightly lower than other measurements here because it only measures coins with a market cap of $50m to $100m. If there were any exceptionally successful ICOs in this study period they might not have been accounted for. Similarly, neither are the unsuccessful ones.

Other estimates have pointed at about 10% of all funds raised in ICOs going to scams or being stolen. This squares with most other findings which suggest that scams abound, but the vast majority of scams flop much harder and faster than legitimate ICOs.


Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, XRB

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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