Initial Coin Offerings Success Research Articles

FinTech Projects and Initial Coin Offerings: A Research Note

We explore the determinants of success of Initial Coin Offerings (ICO) defined as whether the ICO was successful in raising the funds. We look at financial and technical information disclosed by the ICO as well as the information disclosed by third parties about the ICO and the level of legal protection granted. We discover that even if both hard information (financial and technical) and soft information (social media and legal protection) matter, nevertheless a more relevant role is played by the technical information. Based on our analysis, we identify areas that need further investigation in the context of ICOs.

Success of Initial Coin Offering. The Empirical Evidence from 2016-2019

Since 2013 Initial Coin Offerings (ICO) have allowed companies to attract financing with the help of cryptocurrencies. In August 2017, the total capitalization of the crypto currency market exceeded $150bln. From the 1st quarter of 2015 to November 2017, the volume of funds raised amounted to $3,78bln. Statistics of ICO shows that demand continues to grow with claims of over $15bln raised in the first half of 2018. The first quarter of 2019 ended with $902 million total raised funds and $8.4 million average raised funds. The increasing number of projects financed by ICO (4954 projects during 5 years) as an alternative method to venture capital (VC) or initial coin offering (IPO) is caused by several reasons: the possibility of reselling the received tokens at a higher price after the launch of the project or earlier; the possibility of obtaining the company's services at lower prices; the increased popularity of crypto currencies (e.g. Bitcoin, Ethereum, etc.); the expectation of high profitability; the high speed of transactions (including the speed of attracting initial investments) and anonymity. However, due to difficulties in regulation, the ICO market attracts smaller investments on average (average investments in ICO projects equal to $19 million in comparison with the average size of IPO - $207,2 million) and there exists more chance for manipulation in the market, which leads to the fact that the results relevant to the IPO market cannot be applied directly to ICO. Due to the fact that blockchain technology and cryptocurrencies are new tools in finance, and the data for research has just begun to appear, there is a limited number of academic papers in this area of studies. Moreover, they are devoted mainly to the description of the mechanisms of the ICO, the advantages and risks of ICO, the review of existing ICO and crypto exchanges, legislation. The absence of fundamental works emphasizes the relevance and scientific novelty of the forthcoming research. The contribution to the existing literature is the identification of factors that affect the successful of ICO. Scientific novelty consists in the formation of the model evaluation of ICO success. Empirical results show that volatility of main cryptocurrencies has significant impact on the success of ICO. The constraints of the platform for Smart Contacts (ERC-20) and dependence on the Ethereum volatility overcome all other factors. Our data contributes with existence literature and shows the insignificance of sector of the project, almost all location region and fluctuation of influence of quality of team. This result may be explained by the uncertainty of the investor about the project (weak signals), absence of the regulation and legal framework. This result is beneficial for owners of companies since it is an argument for decreasing costs for marketing.

ICO vs IPO: Empirical Findings, Information Asymmetry and the Appropriate Regulatory Framework

Initial coin offerings (ICOs) are a new form of fundraising whereby blockchain-related ventures raise public capital in exchange for newly issued digital tokens. In recent years, ICOs have been a prominent focus of legal and economic studies, which analyze their characteristics and determinants of their success. In this paper, we systematically review these studies and identify key ICO success factors. We then offer theoretical explanations for our findings, and in certain cases, connect the empirical results with the IPO and crowdfunding literatures. The results of our analysis are important for two reasons. First, because there is no single formal data source, and there is evidence of inconsistencies across the different data sources available. Second, our results show in what circumstances ICO investors and initiators behave like IPO investors and initiators, and hence contribute to the literature on tokens as securities. In the second part of our paper, based on our analysis, we show that a high degree of information asymmetry exists in ICOs, identify three sources of informational asymmetries, and discuss the role of signaling theory and rating websites in mitigating these asymmetries. Finally, we discuss the regulatory implications of our findings, and propose specific disclosure requirements tailored to ICOs.

The Marriage of Technology, Markets and Sustainable (and) Social Finance: Insights from ICO Markets for a New Regulatory Framework

It is generally agreed that gaps in sustainable and social finance should be met by increased marketization. However, there are significant challenges in galvanising the investment community used to conventional securities and other investment market instruments. Our article proposes using technological innovations in fund-raising, observed in the initial coin offerings (ICOs) market, to transform the asset class of sustainable and social finance in order to achieve greater marketization, creating an integrated form of social-commercial value for a variety of different investors, from conventional to crowdsourced marketplaces. Key to our proposal is the innovation of tokenisation introduced in ICOs. We argue that tokenisation holds transformative potential for restructuring investment opportunities, as assets need not be tied to the expectations and obligations of conventional financial value creation. Tokens can offer different classes of financial and non-financial rights and rewards. We propose that sustainable and social finance can be raised by corporate structures dedicated to sustainable or social purposes, as dual-class offerings. One class of tokens allows holders to commit to the sustainable or social ends and exercise governance rights as part of their investment. Such token-holders are also expected to be long-term investors and subject to lock-in periods, in order to support the ultimate fulfilment of the sustainable or social project. The other class of tokens would carry no governance rights but be immediately tradeable. This class of tokens likely attracts more transient investors but would provide an important source of finance for sustainable and social projects. The success of ICOs reflects the importance of market conditions and liquidity for this class of investors and we make some proposals as to how such markets can be made more robust by appropriate regulation.

Are Tokens Securities? An Anatomy of Initial Coin Offerings

We compile a comprehensive dataset of initial coin offerings (ICOs) from 19 data sources including 11 ICO aggregators. We alleviate severe limitations of available ICO data by performing the first systematic analysis of ICO data quality and use our dataset to study determinants of ICO funding success as well as post-ICO operating and financial performance. We highlight determinants of ICO success that are new to the literature and overturn some findings in existing studies. In addition, we provide evidence on some determinants of initial and longer-term ICO success on which existing literature has not reached a consensus. We also show that entrepreneurs' skin in the game is an important determinant of venture's post-ICO operating performance. Finally, we demonstrate that post-ICO operating success translates into financial one.

Decrypting Coin Winners: Disclosure Quality, Governance Mechanism and Team Networks

Using a proprietary dataset of initial coin offerings (ICOs) and cryptocurrencies, we systematically examine whether disclosure quality, governance mechanisms, and team quality can differentiate legitimate ICO projects from fraudulent ones. The three fundamental factors positively affect ICO deal completion, ICO listing status, and the amount of raised capitals. In addition, we directly track entrepreneurs’ effort after fundraising activities using the post-ICO technological development. We find that while the three factors have the same positive effects, the team with strong influence, one sub-indicator of team quality, positively predicts ICO success but negatively correlates with the progress of development. These results suggest that ICO events are plausibly prone to coalitions of powerful players whose main objective is likely to be cashing out after ICO without pushing for the development of its purported project. Finally, we construct a token valuation measure and show that technological development and user base are two significant drivers of the token value.

Trust is All You Need: An Empirical Exploration of Initial Coin Offerings (ICOs) and ICO Reputation Scores

Initial Coin Offerings (ICOs) are increasingly discussed as a viable option for start-up companies to raise capital for new projects. In an ICO, a company issues a virtual coin, similar to bitcoin, to raise money. Investors purchase coins in expectation that these coins and their underlying value will rise in the future. Described as a hybrid of an initial public offering (IPO) and a crowdfunding campaign, an ICO poses unique opportunities and risks for both entrepreneurs and investors. Entrepreneurs can attract millions in public investment without the legal and financial restrictions associated with an IPO, and investors can directly finance start-ups and receive a substantial return on their investment. Given the recent emergence of this technology, there is limited empirical research about the ICO landscape. Using data from multiple platforms, this paper provides an overview of the ICO landscape such as the number of ICOs that are KYC-compliant and that exclude residents of the U.S. and China. In addition, the empirical findings suggest that some variables associated with quality, such as the number of bugs in the smart contract, influence ICO success metrics. Furthermore, this paper analyzes the ICO reputation scores across multiple data sources. There is an inconsistent association of reputation with success metrics and a low correlation of ICO reputation across data sources, highlighting the challenges faced by investors in finding reliable information about ICOs. Given this new landscape, this paper provides a number of potential avenues for research into ICOs. In particular, this research underscores the need for reputation systems to facilitate trust, a bedrock of digital economic transactions.

Are Blockchain Crowdsales the New 'Gold Rush'? Success Determinants of Initial Coin Offerings

Initial Coin Offerings (ICOs) are a new and unregulated form of crowdfunding that raises funds through a blockchain by selling venture-related tokens or coins in exchange for legal tender or cryptocurrencies. In this paper, we establish token or coin tradability as the primary ICO success measure, and we develop a theoretical framework for how venture uncertainty, venture quality, and investor opportunity set interrelate. We use the largest available dataset to date, consisting of 1,009 ICOs from 2015 to March 2018. Our data highlights that venture uncertainty (not being on Github and Telegram, shorter whitepapers, higher percentage of tokens distributed) is negatively correlated, while higher venture quality (better connected CEOs and larger team size) is positively correlated, with ICO success. Moreover, providing a hard cap in a pre-ICO can help investors measure success in the pre-sale. This is another positive signal of funding success.