What is the most worrying situation of blockchain at present?

Coindesk recently launched a new State of the Blockchain report that is not only easy to read, but also adds original graphics, details and quotes to highlight changes and market trends in the public and enterprise blockchain sectors.

As can be seen from the picture below:

Even just looking at this year, the lack of funding for Ethereum-based businesses compared to those relying on Bitcoin is staggering.

Not only that, but this is also worrying considering the positive market sentiment towards blockchain platforms as a whole.

The business case shows that Ethereum has attracted large enterprises and startups by using it to develop decentralized applications (dapps). Most have a relatively clear path to profitability .

Given Ethereum’s business-friendly smart contract capabilities, why hasn’t it gained traction with venture capital?

Part of the answer is in the graphic above: look closely at the text box on the right. ICOs are Initial Coin Offerings , or tokens issued by a dapp and offered to the public.

Consumers participating in the sale are often potential users of the service, or investors who hope to re-buy the tokens at a higher price on the exchange. Obviously, compared with venture capital, ICOs are a more important source of financing for Ethereum companies.

Coindesk recently launched a new State of the Blockchain report that is not only easy to read, but also adds original graphics, details and quotes to highlight changes and market trends in the public and enterprise blockchain sectors.

As can be seen from the picture below:

Even just looking at this year, the lack of funding for Ethereum-based businesses compared to those relying on Bitcoin is staggering.

Not only that, but this is also worrying considering the positive market sentiment towards blockchain platforms as a whole.

The business case shows that Ethereum has attracted large enterprises and startups by using it to develop decentralized applications (dapps). Most have a relatively clear path to profitability .

Given Ethereum’s business-friendly smart contract capabilities, why hasn’t it gained traction with venture capital?

Part of the answer is in the graphic above: look closely at the text box on the right. ICOs are Initial Coin Offerings , or tokens issued by a dapp and offered to the public.

Consumers participating in the sale are often potential users of the service, or investors who hope to re-buy the tokens at a higher price on the exchange. Obviously, compared with venture capital, ICOs are a more important source of financing for Ethereum companies.

Why is this? What's the point?

ICOs have significant strategic advantages: the business can maintain its independence, without having to give up any equity (although this depends on the type of token used), and there is no outside interference with the board.

The app can reach an audience — both users and investors — in a way that effectively handles both fundraising and marketing at the same time.

ICOs are easier to sell than venture capital because the business does not have to be fully vetted by analysts and experienced investors. The “ market ” can decide whether the idea can be executed.

For many, ICOs may be the only option. Venture capitalists may stay away from Ethereum companies due to the relative immaturity of digital currencies. The hack of the DAO and the recent DDoS attack on its blockchain will almost certainly deter venture capitalists from testing the waters in the space.

These compelling reasons highlight why ICOs are a great fit for young startups looking to leverage public blockchains.

However, this also reveals a potential weakness for Ethereum startups that could affect their development and future sustainability.

Let's look at the dangers hidden in these advantages:

1 Less intervention means less support and a lack of “ mature ” management and experienced leadership. Startups that directly develop ICOs miss out on the benefits that venture capital can bring, including relationships, vision and expertise in the industry.

The community of users and investors who accept it may not be long-term and have no interest in the health of the business. If the benefits do not meet expectations or a better product emerges, users may eventually choose to dump. Token investors all hope that the gains from the transaction can exceed their expected profits, and they usually do not share in these profits and can exit at any time.

It is wrong for ICO tokens to use “ market ” judgment as a barometer of sustainability because it generally does not focus on fundamentals. Product-market fit, long-term strategy, and strength of management team are secondary to short-term traction and cooling functions.

As the technology develops, venture capital may pick up again, unless, of course, the market mentality that ICO risk capital has been cut becomes entrenched.

One of the biggest risks you face as an industry is that it gets people addicted to the quick thrill of crowdfunding at the expense of future growth.

Currently, a focus on crowdfunding may be ideal for increasing visibility and getting test models to market. However, this risks ultimately undermining the resources and resilience of the industry in the future.

Noelle Acheson has 10 years of experience in corporate analytics, corporate finance and treasury management and is a member of CoinDesk’s product team. This article was originally published on CoinDesk Weekly .