Forget ICOs. The Initial Exchange Offering is here to take your money and do whatever the hell they want with it.

Back in 2015, a 21-year-old named Vitalik Buterin needed capital to bootstrap his new blockchain network, Ethereum. So, Buterin set up an Initial Coin Offering, a system whereby people could deposit bitcoin and receive a certain amount of the soon-to-be-released Ethereum token in return – price: 30 US cents.

Over the next seven weeks, people contributed US$18 million to the Ethereum Foundation. Two-and-a-half years later those 30c tokens were worth US$1400 apiece, a return of 466,667%. I mean, what the actual hell.

Thar be gold

Ethereum’s success paved the way for the outright insanity of the 2017 ICO boom. Investors sank more than US$10 billion into 966 projects, most of which had little more to them than a catchy name, a website and a vision. (Vision optional.) Tezos raised US$232 million, SIRIN Labs US$157 million and Bancor US$153 million. The , a coin that openly admitted to having no purpose or function, raised US$80,000.

So, what do we have to show for all the money and hype? One study showed that more than half of all ICOs failed . Another suggested that 80% of all ICOs launched in 2017 . According to , only 40 ICOs in total (out of well over 5000) are profitable investments at their current prices.

Enter the IEO

Now the Initial Exchange Offering is claiming it can fix the ICO model. An IEO is an ICO staged through an exchange, which also offers the coin for trading. For blockchain companies, it solves a primary issue crippling most ICOs, namely getting listed on an exchange. For exchanges, it helps keep customers inside their ecosystem, while theoretically improving the quality of projects on offer.

The uptake has been predictably frenzied. Binance, Bittrex, OKex, KuCoin and others have launched more than 150 coins since the beginning of the year. Coins like Fetch.AI, Harmony, Celer and Matic are commanding valuations in the tens of millions of dollars. What do they do? Your guess is as good as mine, but people are falling over themselves to throw money at them.

TAKE MY MONEY!!1!

While we all wish we bought Ethereum at 30 cents, the lessons of the ICO supernova remain. These are untested companies, with untested products in an almost entirely untested market. Like all start-ups, 90% of them will fail. Investing in cryptocurrency has enough risks as is; cut yourself some slack and focus on those coins who’ve shown they have what it takes to survive in this bizarre, fascinating market of ours.

One more thing

John McAfee – digital pioneer, crypto evangelist, and raving paranoiac – has been treating his almost to a show recently. In the last few weeks he’s threatened to unmask Satoshi Nakamoto, announced his candidacy for the President of the United States and launched his own crypto exchange, – all while fleeing a secret CIA project that may or may not be working with the Bahamanian police to have him killed. You gotta love crypto.

Go deeper

• – Konstantin Capatina
• – Crowdfund Insider
• – Hacker Noon

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