New ICO Test

Author: Prathik Desai   Translator: Block unicorn

The beginning of this year has seen several major events in the cryptocurrency field. A new round of tariffs between the US and Europe has once again pushed uncertainty to the forefront. Then, last week saw an unprecedented wave of liquidations.

Tariffs are not the only negative news at the beginning of the year. Several Initial Coin Offerings (ICOs) in the past week have also given us ample reason to re-examine popular topics in the cryptocurrency community nearly a decade ago.

Those familiar with cryptocurrency history might argue that cryptocurrencies have already surpassed the ICO era of 2017. While ICOs have changed considerably since then, last week's two ICO deals raised many important questions, some long-standing and others entirely new.

Both Trove and Ranger's ICOs were oversubscribed, but without the massive Telegram-style countdowns of 2017. Nevertheless, these events serve as a reminder to the community that fairness in the allocation process is crucial. In today's story, I delve into how the launches of Trove and Ranger reflect trends in ICOs and the trust mechanisms among investors during the allocation process. Let's get to the point. Trove's ICO, held recently from January 8th to 11th, ultimately raised over $11.5 million, more than 4.5 times its initial $2.5 million goal. The oversubscription clearly demonstrated investor support and confidence in the project, which was positioned as a perpetual exchange. Trove initially planned to build the project on Hyperliquid to leverage the ecosystem's permanent infrastructure and community advantages. However, just days after the funding round was completed, before the token generation event (TGE) began, Trove abruptly changed its mind, announcing that it would launch the project on Solana instead of Hyperliquid. This disappointed investors who had placed their faith in Trove based on Hyperliquid's reputation. This move unsettled investors and caused confusion. The confusion was further exacerbated when another detail came to light: Trove stated that it would retain approximately $9.4 million of the raised funds for a redesign, only refunding the remaining few million. This was another red flag. Ultimately, Trove was forced to respond. "We won't take the money and run," they stated in a statement on X. The team insists the project remains construction-centric, only the approach has changed. Even without making any assumptions, one thing is clear: it's hard to imagine the investors not being treated unfairly and retroactively. While the funds were originally promised to be invested in an ecosystem—Hyperliquid, a single technology path, and an inherent risk profile—the revised plan requires them to accept a different set of assumptions without reopening participation terms. This is like changing the rules of the game for one player after the game has already started. But by then, the damage is done, and the market has punished the loss of confidence. The TROVE token plummeted by over 75% within 24 hours of its launch, virtually wiping out its implied valuation. Some in the community are no longer acting solely on intuition but have begun analyzing on-chain transaction dynamics. Crypto detective ZachXBT discovered that approximately $45,000 of USDC from the angel round ended up on platforms like prediction markets and even flowed into a casino-related address. Whether this is an accounting oversight, poor fund management, or a genuine security risk remains to be seen. Many users have criticized the refund process, pointing out that only a small percentage of those entitled to refunds received them on time. Amidst all this, Trove's statement failed to reassure investors who felt betrayed. While the statement emphasized that the project would continue—namely, establishing a perpetual exchange on Solana—it did not adequately address the economic concerns arising from this transition. The statement did not provide updated details on how to deploy and manage retained funds, nor did it offer any further explanation of the refund roadmap. While there's no concrete evidence linking the team's transition to misconduct, this incident demonstrates that once trust in the fundraising process wanes, every data point becomes more susceptible to skepticism. What makes this situation even more problematic is how the team handled the situation after the fundraising campaign. Oversubscription effectively shifted both funds and influence to the developers. Once the team transitioned, investors had virtually no choice but to exit through the secondary market or exert public pressure. In some ways, Trove's ICO resembled many previous ICOs. While its mechanisms were clearer and its infrastructure more mature, both cycles shared a common problem: trust. Investors still had to rely solely on the team's judgment, without a clear process to depend on. Ranger's ICO, conducted a few days earlier, provides a stark contrast. Ranger's token offering took place on the MetaDAO platform from January 6th to 10th. The platform requires teams to predefine key fundraising and allocation rules before the sale begins. Once live, these rules cannot be changed. Ranger sought to raise at least $6 million and sold approximately 39% of its total token supply through a public offering. Like Trove, this offering was oversubscribed. However, unlike Trove, due to MetaDAO's restrictions, the team had prepared for oversubscription in advance. When the token offering was oversubscribed, the proceeds were deposited into a vault managed by token holders. MetaDAO rules also stipulate that teams can access a fixed amount of $250,000 in the vault each month. Even the allocation structure is more clearly defined. Participants in the public ICO gain full liquidity at the token generation event, while pre-sale investors face a linear lock-up period of 24 months. The majority of tokens allocated to the team will only unlock when the RNGR token reaches specific price milestones. These milestones, such as 2x, 4x, 8x, 16x, and 32x of the ICO price, will be measured using a three-month time-weighted average, with a minimum wait of 18 months before unlocking. These measures demonstrate that the team sets constraints within the fundraising structure itself, rather than relying on investors' discretionary power after fundraising. Control over funds is partially delegated to corporate governance rules, and any profits for the team are tied to long-term market performance, thus protecting investors from the risk of losing funds in the early stages of the project. Despite this, concerns remain about fairness. Like many modern ICO projects, Ranger adopted a pro-rata token allocation model in the event of oversubscription. This means that everyone should receive tokens proportionally to their investment. At least in theory. However, research by Blockworks indicates that this model tends to favor participants who are able to oversubscribe. Participants with smaller investments typically receive disproportionate token allocations.

But there's no easy solution.

Ranger attempted to address this by reserving a separate allocation pool for users who had participated in the ecosystem before the sale. This mitigated the impact, but didn't completely eliminate the dilemma of choosing between widely acquiring tokens and actually owning them.

Data from Trove and Ranger together shows that ICOs remain heavily constrained nearly a decade after their initial explosion. The old ICO model relied heavily on Telegram announcements, narratives, and market hype.

Newer models rely on structured mechanisms to demonstrate their restraint, including attribution schedules, governance frameworks, fund management rules, and allocation formulas. These tools, often mandated by platforms like MetaDAO, help limit the discretionary power of the issuing team. However, these tools can only mitigate risk, not eliminate it entirely. These events raise crucial questions that every ICO team will need to answer in the future: "Who decides when the team can change its plans?" "Who controls the capital after fundraising?" "What mechanisms are available to contributors when expectations are not met?" These events raise key questions that every ICO project team will need to address in the future: "Who decides when the team can change its plans?" "Who controls the funds after fundraising?" "What remedial mechanisms are available to donors when expectations are not met?" However, Trove's case does require correction. Changing the chain on which a project is scheduled to launch cannot be a decision made overnight. The best way to mitigate losses is for Trove to properly manage its relationship with investors. In this case, this might mean full refunds and a resale under revised assumptions. While this is the best solution, Trove faces significant challenges in achieving this. Funds may have already been invested, operating costs may have been incurred, and partial refunds may have already been issued. Reversing operations at this stage could introduce complex legal, logistical, and reputational issues. But these are the costs of mitigating the current chaos. Trove's next steps could set a precedent for ICOs this year. The ICO market is returning to a more cautious one, where participants no longer mistake oversubscription for consensus or participation for protection of fundraisers. Only a robust system can provide a trustworthy (even if not foolproof) crowdfunding experience.