Despite undeniable global enthusiasm, which manifested as a $700+ billion market cap in January of this year, cryptocurrencies have faced their fair share of hurdles on the road to mainstream acceptance. In particular, the “token sale” funding mechanism has recently drawn criticism from big establishments almost across the board. Facebook, Google and, most recently, Twitter have banned advertisements for token sales or “ICOs” (initial coin offerings) altogether.
Broad Strokes For A Complicated Market
As an executive at a software R&D firm that has used Facebook, in particular, to acquire tens of thousands of global users for distributed systems software, I know that their ad platform is an effective way to introduce cutting-edge technology and educate diverse audiences. There’s no denying this decision is a disappointing blow to increasing global awareness of blockchain technology.
Unfortunately, there are bad actors capitalizing on the enthusiasm for blockchain-based projects to scam would-be token purchasers in what is still a young space. Rather than leave users with the responsibility of distinguishing between bad actors and those leveraging blockchain and decentralized funding in earnest, the advertising giants have opted for what Facebook describes as an “intentionally broad” ban until a better way to vet crypto projects is established.
For example, the recent Telegram ICO, which raised a staggering $1.7 billion, also made a hot target for scammers, who successfully impersonated Telegram online to raise millions of dollars from participants excited about the real project. That $1.7 billion was raised at all points to incredible enthusiasm for “ICO”-type models and blockchain technology, but it is also clear there is room for improvement when it comes to properly vetting projects. In response, participants in the space are turning to guidelines, like this one issued by VC giant Fred Wilson, that urge participants to check characteristics like the team’s credibility, progress of the technology, necessity of decentralized technology to the project and more.
For crypto enthusiasts, the potential of decentralized tech and broader access to investment opportunities is worth the added vetting challenge. For Facebook, Google and Twitter, though, the fact that the average person is vulnerable to making a bad bet (even for the pros, losses are a fact of life) has overshadowed the upsides of a more inclusive early stage market – at least for now.
At their core, cryptocurrencies enable transactions directly between participants, without having a central point of control. The model depends on group participation, as the ledger of transactions must be agreed upon and stored across participating computers. By extension, the token sale is a funding method by which a group of supporters buy tokens, often at an early stage, to provide capital that will be used to build and maintain the cryptocurrency’s network.
Thus, most crypto projects are funded by a mass of participants passionate about the project, instead of being backed by a handful of VC firms. For example, we believe that participants in our early funding round were genuinely interested in Fog Computing and the role it will play in providing processing power for IoT, AI, VR and more. The token sale-like model provides a way for these supporters to seize what they see as an important opportunity in the space and help shape the future of that technology.
From decentralized file storage to global credit infrastructure and mobile gaming, decentralized funding models are providing blockchain-based projects both the capital needed to build innovative technology and ready-made communities of supporters not always found in traditional models. While most of these projects are still in their infancy, the billions raised in ICOs suggest that both issuers and their supporters see that duality as a positive.
Crypto’s Quiet Philanthropic Movement
Surprisingly or not, another upside of the crypto market is its tendency toward charitable giving, which is quite common in the space. We were thrilled to see Ripple make an enormous charitable contribution in the form of a donation equivalent to $29 million that will fund public schools. For our part, we recently gifted 2% of FogCoin to educational institutions near to our cause.
Individuals in the space have done their part, too. Cryptocurrencies have generated a lot of wealth, even producing a handful of new billionaires. The effects of those cash windfalls are being felt at charitable organizations that accept crypto, like Fidelity Charitable, which saw a ten-fold increase in cryptocurrency donations from 2016 to 2017, amounting to $70 million. The Pineapple Fund is another great example; it was started by an anonymous donor whose website simply states, “Donating $86 million of bitcoins to charity – because once you have enough money, money doesn’t matter.” As DonorsChoose founder Charles Best discovered when he took a gamble asking Ripple for a donation, exceptional things can happen when you’re open to the positive potential of cryptocurrencies.
Lose The Battle, Win The War?
Unfortunately, blanket bans on cryptocurrency issuers from Facebook, Twitter and Google (Google, ironically, is an investor in cryptocurrency Ripple) may keep their users from discovering the good and even philanthropic projects along with the bad. Whether the move will serve legitimate crypto projects in the long term remains to be seen, but I believe that addressing a vetting challenge with an all-out ban will certainly make things more difficult for them now.
It’s not surprising these rulings from organizations with so much public mindshare have influenced media sentiment in the crypto space. However, it’s proven a vibrant, resilient community thus far even as it navigates the growing pains of a young market. Thanks to this community and the organizations born from it that are capitalizing on crypto’s power for good, we’re confident that those seeking to understand blockchain’s potential will find no shortage of positive applications across the globe.
Read more at: Forbes