While some cryptocurrencies are thriving and gaining traction in the market, not all contenders have managed to survive.
According to two sites (Coinopsy and DeadCoins) that actively catalogue failed crypto projects, over 1,000 crypto projects have failed so far just in 2018.
Some of these projects are legitimate but have fallen under the realm of abandonware that has been dropped by its developer and is no longer supported. Others are outright scams, such as Titanium (a project that met its demise during an SEC investigation) and BRIG, a scam orchestrated by two “brothers,” Jack and Jay Brig.
Most startups are generally expected to fail. In the crypto space, these failures are happening en masse. When startups have too much fuel too quickly, many burn out due to funding running out, internal conflict, software issues, delivery problems or any other reason. Massive token fundraising has allowed startups to emerge but when they fail, they fail big, and usually, investors are left high and dry with little recourse.
It’s clear that the cryptocurrency space needs to create its own set of rules; and it’s happening, but the massive influx of money into Initial Coin Offerings (ICOs) has contributed to the perception that cryptocurrency is, well, crazytown.
Startups fail everywhere, and the consequences are big. 297 questionable startups failed… scam and dead ICOs raised $1billion in 2017 alone… and of course, now there’s a growing industry of ‘janitors’ dedicated to repairing broken ICOs. As with everything else, some are legit, others not.
Many ICO-funded crypto startups are using multi-level marketing tactics to generate interest and secure funding. That’s bad news for investors. The pyramid-shaped structure of a MLM organization means that most people don’t profit – the trickle-down approach really doesn’t work (“99.25% of all MLM participants,” according to Wikipedia, “participate at either an insignificant or nil net profit.”). Only a few individuals in the highest tier of an MLM pyramid can expect any significant profit and it’s those earnings – unrealistic to nearly every other participant – that are used to encourage continued participation and engage new investors.
The current ICO market banks on greed, and many ICOs are exceptionally good at securing funding. Unfortunately, this just hurts the industry. Many of these ICOs fail and therefore fail to provide a ROI to their investors, and this leaves a bad taste in the mouths of those interested in investing.
With crypto startups springing up like weeds and most of them failing miserably, it’s up to the individual investor to do their due diligence. If a crypto start up is transparent – if they present investors with collateral that defines the future of the idea, the team, the project, and the risks – they will attract savvy investors who understand the risks and aren’t swayed by greed.
Ultimately, if you invest in a crypto start-up, don’t invest more than you’re willing to lose. Expect it to fail, and be pleasantly surprised when it doesn’t. It’s sad, but unfortunately the case for most crypto startups. As the industry matures, investing in startups may become safer and more lucrative. For now, it’s a gamble.