A controversial take on ICO's and early investor benefits.

By Dibbler | Dibblers Dabbles | 25 Apr 2021


Love it or hate it, new projects need the backing of early buyers to get off the ground. Often those projects offer major incentives to get involved in the early stages of development to investors willing to fund a project before it has found its feet or sometimes even tested its concept. I fully understand the reasoning behind this. It makes sense to reward early investors somehow. After all many of those early adopters will be the biggest advocates for the project as it grows and establishes itself. The early buyers have the advantage of purchasing tokens before they are widely available- in some cases before the token is listed on any exchange. There is some risk to that because the token has never been traded and so price discovery and supports are none existent. With that being said the additional benefits of backing a project early are tempting enough to pull investors in and take that risk. So what are some of these benefits of backing projects early?

Often early investors are able to buy before the market, they may receive special pricing incentives when buying tokens, get additional staking or hold bonuses compared to average users, receive airdrops, limited run NFT's, access to ambassador or referral programs, and often have the opportunity to provide feedback to dev's and access to new updates and features as they are rolled out ahead of the standard user. Most, if not all of these features allow early investors to generate returns above and beyond what is possible for the average user of the platform. Some projects provide these sorts of additional returns to early backers indefinitely, usually in the case of hold rewards or staking bonuses that come out of transaction fees or held liquidity pools for the full lifespan of the project. These opportunities seem amazing right? They are- and its the main reason people are willing to jump through so many hoops to get involved in projects from the very earliest opportunity.

There is a problem here though... at least in my eyes. Isn't the opportunity to get involved in a project super early incentive enough? Aren't early adopters already ahead of the curve by buying before the market has had its say? Or by setting up a node and mining before most people have heard about the project? At some point all of these additional benefits for early investors detracts from development of features intended for all users, and it can lead to misinformation about the potential gains for average users. If I get involved with a project because of information provided by early adopters but I do not have access to some of those returns because I'm too late its a let down and may make me regret buying those tokens. At what point do we say enough is enough? Compounding hold returns are awesome. But should someone that invested early really be able to claim a higher rate on those compounding returns forever? Why does the person who bought 1 million tokens at $0.50 deserve a lower hold return percentage than the person who bought 50 million at $0.01? Isn't the low entry price alone enough of a reward for early backers? In my opinion it is. For several reasons.

First. Early backers that see a list as long as my arm of boosts, bonuses, and rewards for getting involved early may not actually be as dedicated to the project as an investor who buys after ICO purely because of the potential they see in the project itself. They may see an opportunity to capitalize and sell early because they have been able to accumulate a token rapidly or because of a steep price increase during price discovery. 

Second. It creates a feeling of entitlement. "I'm an early investor and as such I deserve better treatment than the newer users." The mindset that because you discovered a project before most people entitles you to some sort of benefit above and beyond the discounted price is absurd. It prevents a project from flourishing, it forces devs to cater to the demands of initial investors and try to guarantee returns on investment for a select few- and isn't that the kind of mindset that made most of us turn away from conventional banks and corporate stocks to crypto in the first place? An entitled and vocal minority can crush a project faster than almost anything else. Especially when it comes to necessary changes to projects to aid in adoption- like reducing mining rates, or reducing staking rewards, or increasing the necessary staked amount. Any one of these things might need to be changed or tweaked by a development team to achieve the stated goal, but if you have a group of entitled users that have gotten used to a certain rate of return then you are going to run into problems. How many times have you heard someone talk about a phase of a project that no longer exists as if that was the only time the project was any good? Sometimes changes need to be made to further adoption and drive usage.

Third. It perpetuates the concept that the only real way to make a solid profit in cryptocurrency is to be super early to the party. Projects need to be able to function and provide use cases and drive returns for their entire life cycle. If a project engages in any or all of the benefits listed above then of course they are going to look good to ICO investors and for at least some period of time afterwards. But are they able to drive use cases and adoption beyond that with the regular users who wouldn't have been interested in the ICO anyway. If a project fails to find support because new users cant find a way to earn with it, or because the use cases don't materialize fast enough while the devs are busy implementing airdrops and other ICO bells and whistles then what's the point?

 

ICO buyers are weighing in too heavily on development and too much energy is being expended to appease them. I've been witness to ICO investors complaining that not enough had been done for ICO buyers by the dev team on projects over 2 years old. I've been a newcomer to a chat channel excited about some feature of a project that allows me to mine the token only to find out that feature is being limited and/or removed because ICO buyers are concerned that the price will drop when withdrawals are available and people could withdraw from the app and sell. The irony being that the only users who would have enough of the token to tank the price in the first place are the ICO buyers who had access to the app from the very beginning. That alone was enough to turn me off that particular project even though I had already purchased several hundred dollars of the token... because the developers listened. They took out a feature that would encourage users to get involved with their app- encourage users to get involved with crypto in general- all because the very people who had the earliest access to the app were concerned that new users might mine and sell 10 tokens at a time.

 

Please don't misunderstand. I fully get the logic behind providing ICO benefits and additional returns. New crypto projects need access to cash injections no doubt about it. It's just getting a little over the top with some of these projects. There needs to be a consensus about what is acceptable to give as additional bonuses to ICO buyers. There is no way they need to receive additional hold bonuses, airdrops, early access, discounted token prices, influence over early stages of development, and all the rest. Pick one and be happy that you get in early. That's more than enough. Think what happened with BTC . People had to deal with everyone calling them crazy for mining an electronic coin that seemed useless. But the ones that stuck with it because they believed in it managed to build it up from nothing.... Lets get back to something close to that if we can. Maybe then we wont have to deal with so many shitcoins.

 

 

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Dibbler
Dibbler

Just exploring the crypto world!


Dibblers Dabbles
Dibblers Dabbles

A newcomer to the cryptocurrency universe recording his adventures, successes, and failures from the lay-persons perspective. Armed with only the most basic understanding of the technology and a drive to learn how to be successful in this space and generate real returns.

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