Blockchain technology has many virtues. Above all stands the fact of it being a trustless system enabling two entities to remotely engage with digital assets without the need of an intermediary. With the above phrase probably turning into one of the most worn cliches nowadays, it appears that somehow many projects in their ICO run are simply failing to recognize it.
Blockchain being a trustless system is possible due to its transparency factor. Each of us has the possibility to monitor the distributed ledger containing all validated transactions. Add to that the complex Cryptographic functions and you have an impermeable database open for collaborations.
Transparency is inherent to the blockchain and plays an essential part of what makes it the promising technology it is. ICOs on the other hand, are eventually a business plan initiated to acquire funds and build an incentive based ecosystem of data units. The degree of transparency in each project is a direct result of its founders efforts making as much information available to their contributors and sharing the project’s developments in real-time.
Transparency as an engine for token performance and ICO success
During the ICO process projects are collecting private and public contributions of cryptocurrencies in exchange for their shiny new tokens and coins. Those proceeds will fund the projects operations and development of their desired product or tech. Assuming we are only talking about legitimate projects with a healthy correlation between their projected expenses and Hard cap goals, those proceeds will eventually get burned a few years later, making way to those projects biggest assets - their tokens, to become their monetizing engine.
With a market average of around 40% of the generated tokens allocated for the public, we are left with the remaining 60% in the hands of the project reserves, its founders, team and advisors. So economically speaking, in almost all cases the value of tokens held by the company and its personnel a minute after the ICO is actually greater than the value received from the public. This leads us to the inevitable conclusion that after all, success should not be only measured by the ICO stats rather by its later token performance.
Keeping high transparency levels is perhaps the easiest way to gain your audience trust and engagement both during and after your ICO. In fact, trust and transparency levels have now become a major parameter in most ICO listing and evaluating sites, see ICOmonitor for example or Project Transparency powered by Sentiment.
The lack of certainty is a widespread issue in Crypto market as a whole and perhaps one of the biggest challenges standing in the way for Cryptocurrencies mass adoption. The fact we are sending funds across the universe without any regulatory body overseeing it or approving it is exciting and frightening at the same time. This feeling of uncertainty is especially greater when sending funds to an ICO where we constantly ask ourselves “Am I sure these guys are actually legit!?”
Transparency builds trust, trust converts into community engagement eventually urges the public to support your project by contributing or by just sticking around supporting you on your community channels, sometimes considered even more valuable. Simple as it may sound, too many projects fail to get that. Others even go further using the current market low standards and deliberately acting without transparency. A recent study by ICOratings shows that projects deliberately remove their Whitepaper and Roadmap from the site after their ICO in order to avoid being questioned about their performance and milestones.
"13 projects have removed the version of their white paper presented during the ICO from the token sale website. The same is true for roadmaps."
BITSME's tips for keeping your ICO high transparency levels
As we at BITSME never give up trying to fix and amend the wrongs in our industry, we came up with few simple habits that projects need to adapt to increase their transparency levels, favoring the odds of them having a successful campaign and secondary market. The following is a non-exhaustive list based on our experience in the field:
Use of proceeds
If you decide to initiate a move asking for Millions from people you never met before, have the decency to describe what you need the money for and what kind of expenses you are expecting to have. By adding a small chart or a break down of few lines regarding your projected expenses, your audience will be much calmer regarding the possibility of you raising money just because you can. This simple act, even if not calculated “on the spot” is a great way for you to eliminate hundreds of questions regarding your hard cap.
Another example relating to the use of proceeds will be their handling right after the ICO. After concluding the process and announcing everywhere your success, provide with the wallet address holding the TGE funds. While it is clear to everyone those funds will be liquidated over time to fund your operations, make sure to announce doing so BEFOREHAND and not after your community is shouting at you for answers regarding output transactions.
Right after the Matchpool ICO back in April 2017, the company withdraws 37,500 ETH (back then only 1.5M dollar's worth) from the TGE wallet for hedging purposes. Although in retrospect it turned out to be a very wise move, the guys at Matchpool forgot to announce it to the public which created a huge mess and fierce allegations presenting Matchpool unjustly as a scam exit
Constant Progress Reporting
Perhaps the most important of them all. Constant progress update work methodology can do wonders for an ICO project. Sharing every step of your journey with your community is the most effective way to enhance community engagement with your project. The ways to do so are endless and can be executed either by publishing a weekly blog, newsletter, share photos and insights on your social channels of your team, conferences, offices and every other thing you can think of.
This road of in-house content creating ensures you have written material about your project scattered all over and create a sense of commitment letting your audience get the feeling they are part of the process being there all along the way and probably will not easily discard your token right after the sale. If your newsletter subscribers is not receiving any updates from you why going through the effort of getting them in the first place? Even those who subscribed just for the sake of it can turn to be your contributors if you keep them in the loop at all times.
Consider using an Escrow service
What was once a basic component in every ICO has been overlooked long ago due to the crazy ICO FOMO race. An escrow is an entity used to keep the contributors interests by holding one of the keys to the project’s multi-sig wallet holding all of the ICO proceeds. Back then in the normal days, projects used to tie their ability to redeem the collected funds only when certain milestones, mostly development related, were achieved. This ensures projects will not withdraw all the TGE funds 2 seconds after its conclusion and vanish or do whatever they desire with it.
Obviously, the use of such escrow service can’t be implemented in a binary way and can sometimes make the lives of the projects a living hell even when they have good intentions. However, if you are looking for the best possible way to gain trust, consider taking a distinguished community member to serve at least as an observer.
Things to be non-transparent about
Overall be as transparent as you can in everything you do. However, due to some growing regulatory issues, some things are better left unspoken about. Generalizing the last statement, be as transparent as you can when talking about your product, Roadmap, collaborations, intentions and everything under your control. Avoid discussing trading, speculations and token performance. Questions in the likes of “Which exchange will you be listed in?”, “When 1 Dollar?” and “When Moon?” should be answered with a plain short text basically saying: please leave us alone and let us do our work, we are focused on the product and do not wish to speculate over our token price.
Any deviation from the above guidelines might put your project in a regulatory risk deeming you as a solicitor and your tokens as securities.
Conclusion
Like any other maturing industry there is no doubt it will take time until we no longer suffer from growing pains and witness more exit ICO scams, proceeds misuse and improper management of public money.
With more ICOs and TGEs rising every day the best way you can differentiate your project from those rotten apples is by maintaining the highest level of transparency possible, gaining the trust of your community. The most effective way to do so is by keeping a regular open line of communication between the teams and the communities around them on a daily basis. And generally speaking, talk to your community they probably know better than you anyway
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