ICO study: Invested capital increases by 15,000 percent in 3 years

In an analysis, the Center for Innovative Finance at the University of Basel approaches the development of ICOs between 2014 and 2017. The analyses by Remo Nyffenegger and Dr. Fabian Schär show, among other things, that invested capital has increased by 15,000 percent. In addition, the researchers propose a framework for categorizing token sales.

ICOs are both a curse and a blessing for Bitcoin trader

On the one hand, they are a great source of food for Bitcoin trader of all kinds – reports of fraudulent ICOs have risen significantly in recent years. On the other hand, they offer a new vehicle for financing young tech Bitcoin trader start-ups.

These latter possibilities also arouse the interest of science – Remo Nyffenegger and Fabian Schär from the University of Basel took up the topic. The result: the invested capital increased by 15,000 percent (!) between 2014 and 2017.

In the analysis, the researchers only considered token sales, which were successfully concluded between 01.01.2014 and 31.01.2018:

„The enormous increase in both the number of token sales and the volume of financing is striking. While only eight token sales with a total value of just over 31 million US dollars were successfully carried out in 2014, thirty times more such sales could be observed in 2017“.

According to the study, this increase increased again, especially in the second quarter of 2017:

„Especially from the second quarter of 2017 onwards, an extreme increase can be observed, which is probably due to the increase in general interest in blockchain technology. Whereas in the first quarter of 2017 around 20 million US dollars were invested in token sales, in the second quarter of the year the accumulated capital already amounted to 950 million US dollars.“.

Token Sales Classification crypto trader Framework

Outside the increase in crypto trader, the study focused on the nature of token sales. From their analyses, they were ultimately able to derive a crypto trader framework for classifying Token Sales. Here is an excerpt from the study:

„Our framework is divided into four dimensions: Representation, functionality, capping and sales process. The representation describes the way in which a token is mapped to a block chain. Here we define three categories [Colored Coins, Smart Contract Token, New Blockchain]. Furthermore, different tokens can be used differently depending on their functionality. Here, too, three categories are distinguished [payment token sale, usage token sale, creation token sale]. If representation and functionality of a token are defined, the issuer determines whether he wants to make a ‚capped‘ or an ‚uncapped‘ sale. Finally, it is determined how the token is sold [Dutch auction, threshold auction, interactive coin offering, auction with several rounds]. This can be a sale with a fixed price and an offer or an auction.“

With its breakdown of ICOs, the study ultimately offers an orientation for companies that want to deal with the blockchain-based financing option in the future.