The emergence of blockchain technology has sparked immense imagination, and the rise of the "blockchain + ICO" model for fundraising has introduced a new wave of chaos. As the complexity grows, so does the panic. The current blockchain industry is still fragile, with systemic risks looming on the horizon.
On September 4th of last year, the central bank and seven other regulatory agencies classified initial coin offerings (ICOs) as illegal fundraising and urged investors to withdraw. Domestic platforms were shut down, and most projects were halted or returned. However, despite this brief setback, ICOs have quickly rebounded, adapting in various ways to evade regulation. Participation methods have become more subtle, and the resulting chaos has grown even worse than before.
Blockchain itself is just a technology, but it goes beyond that. What excites people is the vast potential it brings—enhanced efficiency through decentralization and the redistribution of value. However, the distinction between the "chain circle" and "coin circle" remains unclear. In many cases, they are not entirely separate, and digital tokens are now part of the broader blockchain ecosystem. The industry is large but still highly vulnerable.
**ICO Reemerges with New Chaos**
In mid-December 2017, an individual involved in ICO investment told the Securities Times that the current ICO environment was even more chaotic than during the peak months of July and August. New projects kept emerging, and some investors were earning millions each month.
After the central bank’s announcement on September 4, 2017, two groups continued to push forward: a small number of believers and speculators who remained committed. ICOs rebranded themselves as "crowdfunding" or "private placements," shifting from public platforms to private social networks like QQ groups, WeChat groups, and Telegram.
Wang Da Can, founder of Chain Survey, a blockchain rating agency, explained that while the core of ICO had not changed, there were clear new developments. For instance, engagement channels moved from public online platforms to offline and private ones. Previously, participation was straightforward through platforms like ICO.info, but now, due to restrictions, Chinese users are largely excluded from overseas platforms, which require extensive documentation.
From a transaction perspective, private placements have increased significantly. While public offerings once accounted for 80% of the shares, the trend has reversed, with private placements dominating. These do not require strict KYC procedures, making them more flexible, yet still risky.
Moreover, the process often involves running on the road, where participants and agents connect through online groups. These relationships are weak, and information about project quotas is limited. Some projects end up disappearing after raising funds, while others falsely claim failure to avoid responsibility. In both cases, investors lose out, and profits are siphoned off through exchanges.
**Industry Chain Fragile, Systemic Risk Looms**
Chen Jiezhi, founder of Qian Chain Capital, warned that the deeper the blockchain market goes, the more panic it generates. He compared it to the tech stock bubble of the late 1990s, suggesting that 2018 could be a dangerous year for the sector. “If you're in the abyss, you're walking on thin ice,†he said.
With years of experience in traditional venture capital, Chen developed a strong sense of risk. While acknowledging the value of blockchain and digital assets, he remains cautious. He believes the industry is entering a phase where many projects will fail, leading to a potential avalanche.
Many white papers describe ambitious technical routes that are difficult to implement. Bottlenecks in underlying technology and pseudo-application scenarios make many projects unsustainable. Without proper oversight, fraud and mismanagement are common, further weakening the industry.
Additionally, numerous internet companies and even listed firms have jumped on the blockchain bandwagon, often using it as a marketing tool. Their poor liquidity and limited financing options drive them to use "blockchain + ICO" to raise money, creating a more complex and unpredictable ecosystem.
Digital currencies like Bitcoin are also facing greater volatility. Institutional investors now play a significant role, controlling prices through futures trading. Retail investors find themselves at a disadvantage, caught in a volatile market driven by institutional manipulation.
Chen is increasingly concerned about the growing illusion of prosperity. “Many projects are just fake code, and the whole system is built on shaky ground,†he said. “We hope blockchain becomes a great social practice, not a disaster.â€
This isn’t just hype. History shows that bubbles burst suddenly, sometimes triggered by a single trade. Currently, over 1,486 cryptocurrencies exist, with most issued as tokens. Many blockchain projects are launching their own tokens through ICOs, creating a massive bubble that is widely acknowledged but often ignored.
As one angel investor famously said, “The bubble in the blockchain is like beer foam. Most people get killed by it.†Another version adds, “To drink beer, you must first drink the foam.â€
While some see the bubble as inevitable, Wang Da Can argues that not all projects are speculative. “Not every project is a bubble. Some are real and valuable,†he said. “But we need to distinguish between the good and the bad.â€
**Token's Argument: It's a "Pass Card," Not a Token**
"Why must a blockchain project have a token? Can't we just use regular currency?" a reporter asked an insider at a blockchain event. The response was a smile: "If you ask that, you haven’t even started."
A token is a key concept in blockchain, often referred to as a "token." But in the eyes of professionals, it's more accurately called a "pass"—a proof of equity on the blockchain, not a currency.
Recently, during a discussion between Meng Yan and Yuan Dao, three elements of a token were highlighted: digital rights, encryption, and network mobility. These features ensure authenticity, privacy, and accessibility.
Meng Yan believes that blockchain and tokens can be separated technically, but from a business perspective, a blockchain without a token may be less effective than a distributed database.
There is a clear divide between insiders and outsiders regarding what a token really means. While the former view it as a crucial component, some in the financial industry dismiss it as mere jargon.
This contrast reflects the tension within the blockchain community. On one side, there's excitement and ambition; on the other, skepticism and caution. Despite regulatory challenges and market fluctuations, many still believe in the future of blockchain, even as they fear missing out on the next big opportunity.
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