Challenges of the market for initial coin offerings

Pablo de Andrés, David Arroyo, Ricardo Correia, Alvaro Rezola
International Review of Financial Analysis, vol. 79 (2022), 101966

This article analyzes the main problems and the solutions adopted in the market for Initial Coin Offerings (ICO), to anticipate the future of this market and determine implications for issuers, investors and regulators. ICOs represent an alternative and innovative financing solution that has experienced spectacular growth and notoriety in recent years. ICOs rely on Blockchain protocols and the ICO market is, therefore, characterized as decentralized, disintermediated and unregulated. Our results show that although the ICO market is innovative, it already displays many of the problems of traditional financial markets, and that these problems were at the genesis of the last financial crisis. Our analysis of the problems and solutions adopted shows a tension between what the Blockchain technology offers, and the problems associated with the financing of innovation. Considering the problems and solutions adopted, we no longer expect the ICO market to be characterized as disintermediated, unregulated or even decentralized in the near future. Furthermore, it is a real possibility that ICOs may end up being a progressor model eventually replaced by similar but more specialized financing models, some of which may already exist. With respect to the particular solutions of the ICO market, while some represent the realization of the potential of Blockchain, others such as forks have important Governance implications with the potential to create as many problems as the ones they address.


This research has received funding from the Comunidad de Madrid (Spain) under the project CYNAMON (P2018/TCS-4566), and from the Spanish State Research Agency (AEI) of the Ministry of Science and Innovation (MCIN), project P2QProMeTe (PID2020-112586RB-I00/AEI/10.13039/501100011033), co-funded by the European Regional Development Fund (ERDF, EU).