ICOs Half-Life 1.09 Years - 46% of 2017s Have Failed - These Are Gambles!

A recent study conducted by Bitcoin.com found that 46% of 2017s ICOs have already "completely failed". A further 13% were "partially failed", which brings the ratio of "firms managing to last a year" well under 41%, given these ICOs did not average a January 1st, 2017 run date.

One of these things is not like the others...

ICO tokens aren't really an asset class like stocks, bonds, commodities and established cryptocurrencies - despite many speculators and investors treating them that way. They are more like a "gift card" you are purchasing to a (future, hypothetical) network - or, in other words, a store that may not ever actually open. This analogy has grave implications for how they should be treated in your portfolio.

In truth, you are granted no rights you can pursue (in court or otherwise) from holding most ICO tokens. Much ink has been spilled covering how the EOS token terms and conditions notes that you are actually guaranteed nothing at all by holding the token. Really, EOS is simply being more up-front about this than 95% of other ICOs are.

As a result, you need to be exceedingly careful with your allocations to such projects. I advise treating them more like gambles with good odds than true investments. For most tokens with no staking rewards, future profit potential depends entirely on finding someone to resell to at a higher price.

Except EOS, that one I'm pretty confident in. Also, it stakes.

What ICOs really are are a funding mechanism for raising capital, ostensibly to be used for "development and production." This is where their similarity with assets like stocks end.

Unlike stocks, which give you some legal rights and enforces some restrictions on the operation of publicly traded entities, ICOs give you no protections and provide no restrictions upon the issuing "bodies". This makes them a dream come true for furthering fraudulent products, and indeed accounts for the very high failure rate cited above by Bitcoin.com's study.

Perhaps more importantly, ICOs are investments in hypothetical products given that they are still under development, or in some cases, still in the pre-coding concept phase. Anyone who has followed the development of computer and console software over the last 20 years knows of the term "vaporware" - products that are funded and hyped, but never actually released or finished. All ICOs innately carry this "vaporware" risk.

At first glance, this might appear to indicate a need for regulation. However, I would say this is actually the result of a functioning and relatively efficient market. I'm actually quite surprised that so many disreputable projects were rooted out in well under 1 year (on average). All bagholders involved knew the risks, so unless direct fraud or insider trading is involved, such is the risks you take when gambling.

Regulation by a benevolent and non-corrupt body could actually help protect investors in this environment...if one ever is created, I'll support its oversight.

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Sources: Google, SovereignMan.com, Bitcoin.com, Steemit
Copyright: EOS, Kontrol Magazine, Bancor, Tezos