A possible Fix To ICO Corruption
Teeming with corruption and scams, there is no doubt that the ICO market is broken. A recent article blew the whistle on advisors and rating sites, bringing the basis of this corruption to our attention. The problem is real and is predominantly related to the credibility of online advisors and the degree of diligence in the so called “due diligence” process. The budding advising and benchmarking industries in crypto are inherently flawed. They allow people and organizations to act dishonestly to promote their own interests and/or get away with providing less-than-perfect (we are being generous here) analysis. Fortunately, when it comes to ICOs the solution for these downfalls is attainable: the key lies in having skin in the right game, which stems from adequate due diligence. What is more, the solution may very well have emerged out of this market itself, in the form of the first ICO token aftermarket called Vertex.
Vertex was created to make quality ICO information and tokens available to all. It came forth from the (seemingly unlikely) forest of equity and angel investing to create a token aftermarket that will expose the average investor to transparent information and make the strongest ICO projects in the market available to them. To do so, its solution tackles the two aforementioned flaws of the ICO market: having skin in the game and providing the best possible analysis on ICOs.
Having Skin in the Right Game
The first salient conclusion from the Cointelligence article linked above, was that people and organizations act dishonestly because they benefit from it. Advisors get compensated from lending their names to ICOs that they are unfamiliar with, while rating sites charge for giving ICOs better ratings or featuring them at the top of their lists. In this case, these actors benefit from recommending ICOs they are involved with, not the ones that show enough evidence of future returns for investors.
The team behind Vertex created a mechanism that incentivizes the team itself to only list ICOs they deem likely to succeed. A succinct explanation of how it works (you can read the whitepaper here) is as follows: the Vertex team of experts evaluates ICOs through a rigorous vetting process. They proceed to buy into projects they consider likely to be successful, listing those tokens on their platform for users to buy from them. Additionally, Vertex’s own utility token is the vehicle through which people can participate in the ICOs listed by Vertex, which directly ties its value to the demand for it. As such Vertex’s advisors have their skin in the game twice: by only benefiting from selecting and listing ICOs that may succeed and by having that success directly linked to the value of their own token. This is definitely an innovative way to share the benefits of participating in successful ICOs while getting rid of the dishonest peddling of weak projects or scams.
Diligent due diligence
ICO advisers give “advice” to ICOs for profit, which leads them to market or lend their names to projects for which they have not done the proper analysis. Additionally, ICO ranking sites use crawlers to collate and display information that has been found to be factually incorrect. They are an extension of the corrupt review industry that plagues the internet at every level. By having a stake in the success of the ICOs listed in their platform, Vertex is incentivized to run the proper due diligence on these projects and avoid the trap of false reviews because the project is not selling reviews; it is selling its own expertise and the tokens it acquired by risking its own funds.
Success in the Venture Capital Industry
Though it is hard to guarantee success in any venture, there is hope that Vertex could showcase a way to curb corruption in the ICO space by bringing a solution to the market, based on funding the strongest, projects in the space. The basis of this system is a rigorous vetting process and incentivizing the team to be aligned with the project. This will help markets free themselves from the stranglehold of the advising and benchmarking industry. If that is the case, we are sure to shortly see a market where the best ICOs get the funding they need to succeed as well as a great initial user base which will have had the right information to decide which projects they want participate in.
Visit our website to learn more about our project: here.