"This, basically, is Tokens 1.0"
Speaking at ETHWaterloo, Ethereum's 23-year-old founder reminded us that 90% of startups fail. The same ratio likely applies to ERC20s. In Buterin's view, 90% of the tokens currently listed on CoinMarketCap are going to zero. (Props to Jordan Daniell for providing the quote.)
The sobering remarks come as billions pour into initial coin offerings (ICOs), a novel but controversial crowdfunding model that allows startups to raise capital by minting their own cryptocurrency. It is estimated that no less than $2.3 billion flowed into the ICO market in the first nine months of the year, dwarfing traditional funding methods like early stage VC.
Regulators have taken notice, but are struggling to define this enigmatic space. For China and South Korea, ICOs are too problematic to even regulate. That's why they rushed to ban them recently.
Although Japan has become the epicenter of cryptocurrency trading due to favorable regulations, the same latitude probably doesn't apply to ICOs. According to a well-known Japanese blockchain entrepreneur, it's only a matter of time before Japanese authorities clamp down on token sales.
Light at the End of the Tunnel
Naturally, you wouldn't expect Buterin to be pessimistic about the future of ICOs. Whereas Tokens 1.0 has a grim ending, the next wave of cryptos is going to be much better. He calls this "Tokens 2.0." This era, which is a lot closer than you think, will see developers build cryptocurrencies that are of significantly higher quality.