What a difference a year makes.

On December 18, 2017, Bitcoin hit an all-time high price of $19,498.63. Just a year later, it's trading at $3,683, the same price from September of 2017 from where it started its meteoric run. Part of this has had to do with ICOs and the "buzz" around blockchain.

But that's changing, and fast. Recently, both DJ Khaled and Floyd Mayweather were hit with fraud charges for promoting ICOs without disclosing that these were paid endorsements -- similar to the charges Elon Musk faced for his not-so-harmless 420 tweet manipulating the stock price of Tesla.

Additionally, other projects touting Blockchain have been caught out as fraudulent, such as the Bitcointopia land development project in Elko, Nevada. While expressing a desire to use Bitcoin for land payments and the blockchain for everything from title registration to mesh communication networks, all it allegedly did was act as a vehicle to steal people's money.

And the charges are eerily similar to those against Arisebank. Jared Rice, CEO of AriseBank promising a decentralized banking platform built on the blockchain, raised $4 million in an ICO -- where he issued unregistered securities. He allegedly misled investors on how much they'd raised, he claimed $600 million, and misused company funds for personal hotels, clothing, food and more.

With all the negative news, it's time to ask: is "blockchain" just an elaborate hoax?

To answer this question, two independent groups have started their own research.

According to ICOrating.com, out of 800 ICOs completed in 2017, only half raised more than $100,000. In 2018, less than 50 percent of ICOs hit their funding target, and by the end of the year, 76.15 percent of ICO projects had nothing but an idea behind them.

According to MERL, out of 43 advertised blockchain projects they investigated, not a single one has created any financial returns for investors, released a product, or even published peer-reviewed research papers to prove that their blockchain solution is even feasible.

It's enough to make even the least skeptical among us start to wonder if there is something fishy in the crypto waters.

And that's the point, but don't let that intimidate you. Here's a primer to level-set your blockchain expectations:

It's new.

Blockchain is a nascent technology, a framework that is looking for a solution. It is currently in what I call the "throw spaghetti at the wall" phase of development. This is the "wild, wild west", where anything goes. Like it's spiritual buzzworthy cousin, AI, there's a lot of promise, and not many results, yet.

But, like Monsanto Director of Digital Partnerships Anju Gupta says of their AI projects, a 99 percent failure in projects is acceptable because "that 1 percent is going to bring exponential gain."

The market is getting smarter.

Remember those stats I quoted above -- that there are more ICOs than ever who are trying to get funded with just an idea, and that more ICOs aren't reaching funding goals? The flip side of that is that 15 percent of funded projects already had a working business, versus 6 percent the previous year.

It's not that people aren't investing, it's that people are paying more attention to what they're investing in. As an example, one of the largest ICOs of 2018 was in Telegram, a popular decentralized messaging platform alternative to WhatsApp and Skype.

The big players are coming out.

Oracle, Amazon, Microsoft, Samsung and IBM all have Blockchain SDKs (software developer kits) to allow companies to build blockchain solutions, safely, and with scalable technologies.

This allows large corporations and governments to come in and think seriously about how blockchain fits into their business model. As an example, South Korea is developing a blockchain voting system, and the UAE has plans to transfer 51 percent of their government paperwork processes to blockchain systems by 2021.

Cryptocurrency is becoming increasingly more regulated.

When there's money involved, there's inevitably going to be fraud -- and that's why regulations are being passed to protect people against it. While we're still in the early phases, the risk is higher for many.

For some countries, however, cryptocurrency is less volatile than the national currency, which makes it a viable alternate currency.

It's easy to buy into hype when dealing with something trendy and new. If you keep all these things in mind, you'll have a level head when thinking about blockchain.

Published on: Dec 10, 2018
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