Why did the MoxyOne ICO failed ?
If you’ve been following the world of cryptocurrencies, you might be aware of the flurry of ICOs these past few months, arguably the height of the ICO craze happened sometime around Dec 2017 to the tune of 1.6 billion USD raised in that month alone.
This year is interesting since it could be considered as a consolidation year for ICOs, for me personally it is also important since I am currently working on an ICO along with a very traditional company that is experimenting with the concept.
I recently contributed to a promising ( at least to me ) ICO, the MoxyOne project, to my surprise the project failed to reach its modest soft cap of 4,000 ETH ( they raised around 2,600 ), the rest of this post will deal with what I consider to be some contributing factors and the short term future of ICOs.
In a nutshell, MoxyOne aimed to provide debit cards for cryptocurrencies & tokens you could use as regular debit cards, I think the project was worthy since currently if you want to cash out of your altcoins or Ethereum tokens, you need to first go to an exchange that supports your token, convert them to Ether or Bitcoin and then once more exchange them to native fiat, the whole ecosystem is fractioned and this project aimed to try an give you a seamless experience.
The Token Sale:
MoxyOne tokens called SPEND were minted through a smart contract that received Ether in a crowdsale, there was also a pre-sale with multiple discounts or bonuses and additional marketing campaigns that promised additional tokens via airdrops if certain conditions were met, pretty standard stuff for an ICO these days, there was also a collaboration with Cobinhood ( the exchange ) which would have listed the token soon after the crowdsale ended.
Perhaps the biggest factor was the market conditions, Cryptocurrencies were down across the board during Q1 ( around 50% )which covered most of the sale period, check my overview of Q1 for more details:
why this happened is hard to tell, for instance ICOs generated a whopping 1.3 Billion USD in January 2018 (at least 10 times more than in January 2017), but fell abruptly to 650 Million USD in March, which while still orders of magnitude higher than the previous year represent a change in the trend. I would have to attribute this to a non linear relationship between ICOs and price changes, so after a steeper decline in Bitcoin and Ethereum, ( say 25% ) it is considerably harder to raise funds.
2. Stiff Competition.
In the first 15 days of April, about 80 ICOs ended with only 30% receiving 1 million USD or more, notable exceptions still exist, EOS, which has received more than 5 million ETH ( around 2.6 Billion USD !) still had high contributions during Moxys ICO. Additionally in Janaury, 152 ICOs ended and the significantly funded metric ( more than 1 million USD ) was around 50%.
3. Regulation and global markets.
It is also worth mentioning that during this period (Q1), wall street saw the return to volatility which in turn affected crypto markets and presumably the ICO space, additionally regulation and acceptance of ICOs is still a negative factor since more companies are opting to ban ICO advertisement and both China and the US remain off limits to most ICOs.
I think that these factors are not as dire as one would think since there exists alternative channels for spreading the word on a promising ICO and plenty of investors in non regulated or friendly markets, it is also still trivial to participate in an ICO even if you live in the US or China…
The following are my personal opinions based on my experience with the Moxy one ICO, and are meant not as a way to disparage them, but rather as a way to analyze what could have been improved or done differently.
4. Sale structure & broken, vague promises.
There was a pre sale that promised to give you a 60% bonus, it was not clear this was to be a vested bonus, that is you had to wait some time before receiving it. When the pre sale started they reneged and only gave 40% unless you contributed a higher amount, all trust evaporated in that moment, in hindsight things were never properly explained and should have been a red flag.
In general I dislike ICOs with multiple tiers of bonuses, sales and airdrops, if you have a promising project, get a fair price and stick to it, at the most give 1 or 2 discounts to get the ball rolling an be clear about it and any changes you might do once your sale starts.
In order to participate you had to have a whitelisted Ethereum address, an added barrier to entry which I think is unnecessary and can break an ICO unless it is really needed for technical or regulatory reasons, how to contribute and how the contract worked was not explained as well as I would have wanted.
6. Scams in the telegram chat room, communication problems.
At one point I had 4 people messaging me in Telegram asking for my address and private keys and representing themselves as part of the project, Telegram is simply not a suitable place to provide support for your ICO, scammers abound and the experience is terrible, there are better chat options (rocket chat), and channels like reddit, it might also be worth spending more time and resources explaining how to contribute in detail as to avoid these last minute questions.
7. The refund process.
One last thing ( the cherry on the mud pie ), is the refund process, pre sale investors will have to wait for the team to deduct marketing and other unknown costs before getting a refund, something that was also not properly explained and sounds like punishment for being an early backer, I should note that I received my refund for the main sale without any issues, so in that regard they delivered an ok experience, but if they wish to make a second offering they might consider not charging early backers and making a seamless refund process for everyone.
It failed in great part due to market conditions and in an unknown part due to how the offering & project were made.
Update ( May -18 -2018) :
The Pre-Sale Investors have now started to be refunded after a lenghty period; the terms are dire. Only 25% of contributions are being handed back to cover the ICO costs, so if you invested 1 ETH you lost 0.75 ETH.
The costs in particular are suspicious, Moxy One Stated that they raised some 1,000 ETH in pre-sale, that would put costs at about $500K Dollars, an average ICO usually goes for something like $100–200K.
Whatever the reasons…They pocketed some of the Ether, they inflated costs or simply overpaid themselves, it is another sign that unscrupulous, inexperienced and greedy actors are still a big part of ICO.
So now what ?
I don’t think the ICO market is dead, 2018 at the least should be on par with 2017 in terms of money raised if not higher, if you are trying to raise funds through an ICO though, you might want to wait for prices to stabilize and fine tune your offering as to better your odds of reaching your softcap.
This space is rapidly evolving and what was of little concern a few months back might be the difference for an ICO to succeed.
For the investor I can’t stress how important it is to review the terms before sending ether to an ICO, and even then expect a high rate of failures akin to VCs.
So. What did I miss?, leave a comment if you have other theories on why ICOs fail or succeed these days,or if you particiapted in the MoxyOne ICO and want to vent and follow or like if you enjoyed this post.
About the Author :
Born Eugenio Noyola Leon (Keno) I am a Designer, Developer/programmer, Artist and Inventor, currently living in Mexico City, you can find me at: www.k3no.com