"Grotesque" might not be the word you'd think ethereum developers would ascribe to today's ICO scene.
But that's exactly how some of the platform's ardent supporters described the current state of affairs. At Devcon3 in Cancun, Mexico, last week, developers were decidedly unenthusiastic when approached for thoughts about the new funding method, some going so far as to allege that many projects that use it to raise money are little more than "scams."
Even Fabian Vogelstellar, the developer behind the technology standard that helped make ethereum tokens so easy to launch, was keen to join the ranks of ICO critics, echoing remarks made by a colorful cast of commentators as diverse as MIT Media Lab Director Joi Ito and the "Wolf of Wall Street" Jordan Belfort.
Vogelstellar told CoinDesk:
Yet, ethereum has seen meteoric growth this year, in part, due to the success of ICOs for open-source project and startup funding.
However, that path to capital still has a stigma.
"Many [ICOs] seem like a cash grab from people who were unable to raise money from venture capitalists. In many cases, these are poorly thought out tokens predicated on centralized products," Jack du Rose, co-founder of ethereum startup Colony, said.
It's an interesting take seeing how ICOs are typically touted as a means to circumvent traditional fundraising methods. But, du Rose's sentiments hint at a crucial criticism: that many ICOs are simply executing incorrectly.
Product, then ICO
Only intensifying developer distrust of ICO issuers is the fact that many of today's projects collect money – often millions of dollars – before they have a product.
Ethereum developers largely believe that, at the very least, the individuals or company behind an ICO should have a prototype to prove their idea could theoretically work in practice. For instance, ethereum-based casino game platform FunFair launched an ICO over the summer, but only after releasing several prototypes.
And FunFair founder and CEO Jez San Obe had strong words about issuers that do it differently.
"You should have a product before you ICO, you should know how to run a company, you shouldn't have an anonymous team and you should release a prototype first," he told CoinDesk, adding:
According to du Rose, it's not worth it to "risk other people's money on something, when there’s a reasonable likelihood we'd be prosecuted."
To him, issuing a token before the product is not only foolish from a regulatory standpoint, but also "incompetent and greedy."
Keep it decentralized
And that aligns with du Rose's ideas as a "purist" (a description he said applies to many developers on this topic), meaning that tokens and the products they'll be used for should have some sort of decentralized component.
ICOs have gained notoriety not only because they've allowed individuals with novel ideas and startups to raise substantial amounts of money, but also because the decentralized structure allowed them to circumvent traditional fund-raising methods.
But when a decentralized token sale funds a centralized product, many developers feel there's something off.
"For a token to be interesting ... it should be a totally decentralized protocol, not just glitter on top of a centralized company with its own revenue models," du Rose said.
In this way – although probably curiously for some – Giveth founder Griff Green pointed to The DAO as an ICO success story. Though its code had a bug that led to millions of dollars in ether being stolen from users, it was at least decentralized, said Green, who was the community organizer of the project.
He thinks about The DAO in a more abstract way, though, saying that, in the future, people will be able to launch their own cryptocurrency to push against the power of the banks.
"The power of creating currency is unfathomable. Banks are in a really good spot today. They have a lot of money and a lot of power. They can create money out of nothing. Instead, with ICOs, you can give that power to every person," Green said.
While many stakeholders in the cryptocurrency community believe the ICO space is fraught with bad actors, others more judiciously see it as all part of the learning process, with people trying to figure out just what ethereum and other blockchain technologies are (and aren't) capable of.
"What I've seen is kind of unsurprising," said DappHub software engineer Andy Milenius. "People's first experience with an idea is allowed to be wrong."
That said, he hopes the community will begin to turn a more critical eye towards projects using the ICO model.
"The one thing that unites people in blockchain is skepticism of the status quo, but when ICOs appear, skepticism flies out the window sometimes," Melenius said.
Although, there could be some reversal happening already, he said, pointing to October's totals – when ICOs raised less than the month before, the first time that's happened since the boom started.
But, Milenius concluded, with what seemed like a tender reminder that experience is the best teacher:
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