Sasha Ivanov: ICO Bubble is About to Burst
In an exclusive interview with Binary District, Waves founder and CEO Sasha Ivanov discussed the potential of blockchain technology, its applicability in the finance sector and the current state of the initial coin offering (ICO) market.
The majority of experts within the blockchain and cryptocurrency sector can agree on the disruptive nature of ICOs, and acknowledge their ability to raise funds without the involvement of third party service providers and mediators.
“In Russia, there is a lot of interest in blockchain technologies, we can even go so far as to call this interest “hype”, and it is bigger than anywhere else in the world.”
Through smart contracts and flexible blockchain networks like Waves and Ethereum, ICOs can be carried out autonomously - allowing startups to raise millions of dollars in a matter of minutes. As opposed to traditional forms of investment such as venture capital, ICOs appeal to early-stage blockchain startups as a seamless and simpler method of raising capital.
Bubble-like State of the ICO Industry
Like many analysts in the bitcoin industry, Waves CEO Sasha Ivanov admits that an ICO market bubble is forming. The number of viable products and applications does not correlate with the sheer amount of money that has been raised by ICOs, which is nearing $2 billion. Despite an obvious lack of real-world applications or active user bases, more startups are attempting to raise millions of dollars through ICOs.
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Earlier this year, Aragon founder Luis Cuende, who raised over $30 million in an ICO conducted in July, claimed that he does not know of a single “good” Ethereum developer that is not a millionaire yet. The market is bloated with projects with very little substance or practicality, looking to take advantage of this new industry.
“Yes, there’s some kind of bubble, ICO bubble, and the ICO market is about to pop”, confirmed Ivanov. “Regulators are going to put some walls, it is natural, there is some kind of hype, but all new technologies develop like this. There is some kind of hype, there is a cycle - an upward cycle, downward trend. So, it is normal, it is going to slow down in a half a year, maybe in a year. It is going to be regulated, and people will understand how they can do an ICO legally in a compliant way.”
In the traditional finance industry, founders of large-scale projects are reluctant to criticize the product or service that is bolstering their market cap and value.
Currently, the largest application and market for both Waves and Ethereum is the ICO market. Nevertheless, Ivanov and Ethereum co-founder Vitalik Buterin are willing to concede that there is a market bubble.
“There's no ‘cure’ for bubbles except to let them run their course and pop, unfortunately”, wrote Buterin in response to criticisms levelled at the ICO bubble and the many projects emerging without a viable product or unique vision.
“You can do so many things with tokens. It is a very effective and cheap financial instrument. You issue a token and everybody can attach some value to it, only your imagination limits you here.”
For the most part, Buterin and Ivanov are correct. There is not much that either Waves or Ethereum developers can do to prevent this trend in the ICO market. The market has become a gambling sector within the cryptocurrency and blockchain space, with investors betting on certain projects to hit the jackpot.
However, Ivanov asserted that ICO tokens and this entirely new infrastructure of blockchain networks have great potential. He emphasized that smart contract protocols based on blockchain technology are creating a new standard and a new tokenized economy.
“You can do so many things with tokens. It is a very effective and cheap financial instrument. You issue a token and everybody can attach some value to it, only your imagination limits you here. It’s a new kind of financial instrument - great application that can be used already now. New applications are coming, tokenization of real assets, for example. There are some assets that you want to tokenize - gold, or oil, or pieces of art. You tokenize and you sell token backed by real assets. It is a new standard,” said Ivanov.
Ivanov on the State of the Russian Blockchain Market and the Probability of Commercial Success
According to Ivanov, who is CEO of Russia’s largest blockchain platform, the hype around blockchain technology in Russia is at an all-time high. Government institutions, research centers, technology conglomerates and financial service providers are actively focused on the research and development of blockchain technology.
“In Russia, there is a lot of interest in blockchain technologies, we can even go so far as to call this interest “hype”, and it is bigger than anywhere else in the world. It's very cool because when we started, the situation was completely different. Now we see a radical change - there is a massive interest being shown by both government institutions and wider population. Blockchain may just be the thing that will give the Russian economy a new push”, said Ivanov.
He maintained that ICOs play a vital role in providing the capital and resources needed by blockchain projects to succeed in the Russian market, and eventually the global blockchain market. Many blockchain projects are cooperating with both state-owned and commercial banks in Russia.
He explained that banks are starting to understand the value of blockchain technology in creating immutable financial systems, and automating costly, time-consuming and inefficient operations.
“It is a technology that can fundamentally change the banking industry - it can add transparency and reduce the cost of banking operations; a lot of banking projects are popping up”, Ivanov noted. “So far, there haven’t been any breakthroughs, but it’s all ahead of us, and we are also trying to help on this front.”
Picture this: 18th century France - crippled by overwhelming government debt and a currency shortage. In comes John Law, who proposes using paper currency. He opens the Mississippi Company and starts selling stocks. The price per stock increases by 3600%. Then boom! There's not enough gold to cover the investors’ claims, so the whole system comes crashing down.
Oh, you've heard this one before? When will we learn?
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