During the ICO boom of 2017, projects were not incentivized to finish their proposed products. Instead, they’d create perpetual hype cycles based on their hypothetical future plans. This toxic environment led to ICO projects developing nothing nearly two years later, leaving us with the state of tokens today.
The formula for a successful ICO seemed simple enough: you take anything and tack a token onto the end of it and you were good for exponential gains. People bought tokens no matter the sustainability. But, projects that raised money are failing or abandoning their tokens original planned utility.
Mercury Protocol, Civic, and Iconomi reimagined their tokens. (Kudos to them for being adaptable in a swiftly evolving industry) Cofound.it abandoned crowdfunding altogether and their site now redirects to a 404 Page Not Found. Projects bought tokens back, discontinued theirs, converted it into equity or another security. Civic introduced a new white paper on its token’s updated usage.
These companies generally steered away from their payment tokens. They rather try to capture value more effectively. It’s much harder to pay with a token than with Bitcoin, Ethereum, Litecoin, Stellar, etc, placing payment tokens at an instant disadvantage.
The vast majority of tokens are not going to capture any meaningful value. Many token projects simply failed at mechanism design. They didn’t know how to capture a token’s value. And thanks to these pioneers, we know now what not to do.
There are four things a token can do.
The first is to be a payment token.
Users have little incentive to hold onto them. This presents a problem, as the game theoretics morph into a game of redeeming the payment tokens as fast as possible,