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While I am very bullish on the token sale concept as a whole, we are about to see a major correction. What will happen, in short, is the injection of token mania into mainstream industries and culture, something that has happened again and again in the world of tech and, in this case, cryptocurrencies. Now, however, thanks to faster rates of adoption, everything is accelerated to an heretofore unseen degree.
In short, hold onto your seats. We approaching the ICO cliff and it pays to be ready.
The market thus far has existed in a fantasy-land of huge numbers and nebulous products. First, let’s understand where all of this money is coming from. All of those big token raises you’ve seen are powered by a small group of crypto whales+. They move in and out of promising positions like those massive, floating navigator things in Dune. They are smart investors with piles of unaccessible crypto-capital and token sales are their primary method of growing their hoard in expectation of more streamlined ways of getting their cash out.
This “whale” capital can and will become scarce once we pass through the token sale hype cycle. Once the “world” becomes clued into what’s happening, things will change drastically.
All tech hype cycles are the same. There is essentially a four step process that defines them and you can see this process repeated in nearly every industry. Linux. Relational Databases. Django. Reddit. The smartphone revolution. There are multiple points of entry into these hype cycles and multiple points to make money — as long as the proponents keep their wits about them.
- Low-level noise — The first step in any tech hype cycle is the low-level noise. This noise is almost imperceptible at first — think about the first Linux conversations you had or when you first heard about bitcoin — and only the die-hards (and most abrasive) fans stick by the technology. They will talk about it endlessly and it will have very little bearing on the outside world. We are at this stage in the token sale hype cycle but we are swiftly moving into the next one…
- Explosion — Explosions can be good or bad. Some explosions clear out old crud and FUD and some explosions destroy a company. I remember a few of these in the hardware space including the death of the Palm Pre and the Notion Ink Atom. Companies and products that don’t survive the explosion will not make it to the next round…
- General Buzz — In this stage everyone is in on the joke. Folks talk about the tech in taxis and in airport lounges. Your parents send news clippings about it. Technologies that reach this stage begin accreting traditions, guidelines, and large companies that serve the adherents. In short, things are about to get boring.
- The Boring Years — Think about Linux. Ten years ago Linux was a revolutionary tool. Today it’s something you spin up in five minutes when you want to host a website. This is where token sales and all crypto is headed and all of the early hot-heads will end up with cushy jobs in banks where they can’t do too much damage. Things coast along from there into eternity.
Here’s the bad news. Because token sales are moving from stage one to stage two, more and more scrutiny is being put on the concept. This story in the Times is a prime example. I offer two excerpts on which to focus your outrage:
Like many technologies before it, things seem too good to be true. By not respecting the simple concept of “Keep your mouth shut and do good work” folks running token sales risk running the entire concept into the ground.
Ultimately we are at a crossroads. We know that token sales will continue, we know that there are plenty of bad seeds, and we know that there will be regulation. How do you work with these parameters? By building good products for smart people, raising only what you need, and proving that “utility tokens” isn’t just a lie. When the explosion comes it will wipe out the unprepared and the unethical. It’s our job to ensure that it doesn’t wipe out the whole token sale concept.
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You can read more like this in our weekly newsletter, tokenreporter.co.