Overnight millionaires, skyrocketing prices and a mysterious new tech revolution -- blockchain rocketed onto the world stage in 2017, sending investors and companies into a frenzy to ride the crypto wave to quick fortunes. Words like “token sale” and “blockchain” suddenly made headlines. The crypto space was the new Wild West, a digital frontier of untapped potential and unexplored boundaries.
While some efforts did lead to successful ventures, the Wild West label rang too true by mid-2018. Quality projects crowdfunding through initial coin offerings (ICOs) were overrun by scammers, saturating the market with fake projects.
The legitimacy of cryptocurrency was further dragged down by overly bullish crypto evangelists who only shouted louder in the face of vanishing interest, continuously doubling down on preposterous market predictions. And for serious market entrants, the U.S. Securities and Exchange Commission’s (SEC) crackdowns with no written rules left both companies and investors paralyzed. The West was wild, but for crypto, short-lived.
The entire crypto market is in a rough place now, with Bitcoin trading at just 20% of its high. But while the current market looks grim, I believe blockchain and digital tokens are here to stay. The technology itself was quietly adopted by banks, governments and trade organizations that didn’t need to raise capital to implement it. But for the startups that dreamed of launching disruptive publicly owned applications, ICOs have delivered diminishing returns, leaving many promising technologies stillborn.
(Full disclosure: My company, ICOBox, holds funds in Bitcoin and uses it as a currency for transactional purposes.)
Looking back, I believe careless marketing should catch a lot of blame for the quick burnout of ICOs, but it can also provide lessons on how to conduct future crypto offerings. It is important to take stock now as the market prepares for a new generation of blockchain startups, regulated by the SEC this time, called security token offerings (STOs).
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As the chief marketing officer of ICOBox, a company that provides business, technology and marketing solutions for blockchain startups, I believe we as marketers can do better.
It’s time for straightforward marketing.
Blockchain is complex, and general public understanding often ranges from baffled to hazy. Based on my perspective, instead of educating the public on blockchain’s potential, marketing teams cranked out as much FOMO (fear of missing out) marketing tactics as possible. While this strategy generated lots of investment, it also set up the token market for collapse when poorly conceived businesses never panned out after getting funded. Investors blindly poured money into projects they didn’t understand and often didn’t make sense.
All this hype has turned the general public’s perception of blockchain from promise to Ponzi scheme, leaving only the hardcore crypto community still waving madly from the deserted stands.
The next evolution of token offerings needs to be presented in a straightforward, logical way -- with blockchain just a means to an end, not the focal point of the project. The usefulness of their products will need to withstand the same scrutiny that investors apply to traditionally funded startups. This is partly because the next generation of blockchain projects will be regulated as securities.
The good news is that the hysteria of the last two years has done wonders to spread awareness of blockchain. The bad news is that marketing teams will have to work twice as hard to overcome well-founded skepticism of anything crypto.
Don’t try to outrun regulation.
For many companies, ICOs were an unregulated space to quickly raise funds without a product. It was a world built on unverified marketing claims without the stuffy rules of a regulator.
This turned out to be bad for blockchain adoption and perception in the long run, as many who sought to launch an ICO before it was regulated are now being investigated. As the SEC turned its attention to companies conducting fraudulent ICOs, some projects have been shut down and others forced to refund investors.
This was avoidable, in my opinion. If it looks like a security, acts like a security and investors are buying into it like a security, it will be regulated like a security. Many people made this point as the ICO wave crested, but no one wanted to be a wet blanket while previously worthless tokens were doubling in value every week.
As security tokens launch, marketers must do better. If a client is asking us to make unverifiable claims, we must ask hard questions -- both to protect the client and their investors.
Just say ‘no’ to scammers.
According to a report by Statis Group, reported on by Crypto Currency News, 80% of ICOs conducted in 2017 were found to be scams. While these did not receive the majority of funding, the sheer number of fake projects an investor would have to wade through to find a solid one is unacceptable. Regulation should help clean up this mess, but the marketers hired to sell a cryptocurrency to investors should play a critical role in calling out fraudulent activity.
The next wave of token launches needs to be overwhelmingly legitimate. Scams will inevitably pop up, but it’s part of a marketers job to clearly distinguish legitimate offerings from fake ones. This means educating the public about blockchain and crypto and refraining from the “hypemanship” used by scams to generate interest. Ridiculous promises only look legitimate when everyone engages in them for fear of missing out.
The future of token marketing can make or break STOs.
Marketers have long said “no publicity is bad publicity,” but regarding investment, I believe that is almost categorically false. The Wild West is over. No more meaningless hype. No more sidestepping regulation. No more knowingly pumping shoddy projects.
Most people in the crypto community believe that blockchain has the power to create a more equitable division of resources for millions; but first, as marketers, we must help the world understand it and promote sensible projects honestly and clearly.