The integrity of data is of paramount importance. If one is unable to trust the source then a lot of variables creep into any investigation. Thus, Next Autonomous, a site that studies market trends should be commended for their matter of fact analysis.
On the 21st of January, the site published its report highlighting the giant strides the blockchain industry had made. The crypto sphere more than doubled, from $10.1 billion to $24.4 billion, in 2017 as compared to 2018. However, a significant portion of this is via unverifiable self-reported crowdfunding ventures.
Difficult To Ascertain True Numbers
Next Autonomous found that last month saw nearly a billion dollars raised for blockchain related ventures. This was near about evenly done so by traditional capital sources and through ICOs. About $310 million were raised by venture capital funding, while almost $490 million were raised through ICOs.
Unfortunately, while the numbers are impressive, the caveat is that the ICO numbers are hard to confirm. Since almost all are self-reported, the website errs on the side of caution and assumes that some of the numbers are fudged a little; the money might have been raised earlier in the year but has only been reported now, thereby making the whole data set questionable.
Along with that, the report has also noted that the overall quality of the data has declined. Though, there were significant attempts made to “scrub” the information as best as possible. Thus the amount raised via ICOs is a little suspect.
Implications Of An Inflated Value
As noted earlier, the self-reported values were harder to establish. Case in point is Jinbi, the self-reported $47 million raised by the Chinese gold-backed blockchain token has a limited paper trail to confirm its authenticity. In contrast, Bakkt has raised almost $180 million through venture capital and has well-documented paperwork that can easily be used to trace the authenticity of the amount.
Of the $24 billion raised by blockchain firms, only about a fifth came from venture capital while a whopping $19 billion was from ICOs. Thus it is clear that the crypto market is largely driven by the latter, where the figures are self-reported.
The implications of potentially inflated figures are many but the most obvious one is that the lack of transparency leads to trust issues which will not bode well for any nascent industry,
The Future Lies In Security
While the concerns of the industry reporting practices are hard to ignore, so too is the fact that the total amount is rather impressive, especially for a sector in decline. The report laid down the future markers of crypto to focus more on Security Token Offerings (STOs).
Towards the end of last year, STOs had been gaining prominence and this section continues to make progress. The report opines that investor preference could see this to be the future of the entire industry.
” Future activity is indeed trending into Security Token Offerings, with several conferences focused on the space early in the year, as well as players from across industry types competing.”
As a matter of fact, STOs themselves might need to evolve, used either to repackage risky equity or re-purposed to be used for “equity crowdfunding theme.” Neither would be particularly pleasing for purists who would undoubtedly want the focus to remain on building a more sustainable service structure.
Something that would let the industry focus on its prime motivation of being used as a method of payment and store of value.
While the report is a stark reminder of how corrupt practices of the few can erode confidence and undermine an entire industry, it is hoped that as the industry matures and stricter regulations are enforced this can be rooted out.