Upon publishing its whitepaper in 2014, PayCoin seemed very promising: it offered the potential to make payments instantly to anyone, anywhere in the world via a sophisticated proof-of-stake (POS) system. It enjoyed a huge launch, and swiftly became one of the largest cryptocurrencies in the world by market capitalisation.
So, what went so badly wrong that it ended up in a list of failed ICOs?
Why did PayCoin’s ICO fail?
It’s always wise to resist oversimplification: you can argue that DAO’s failure was due to security issues – but not without acknowledging the role of hubris, hype, and insufficient preparation.
However, the fall of PayCoin is a rare exception to this rule: it’s all CEO Josh Garza’s fault. PayCoin was a scam.
Though its whitepaper was full of promise, the cryptocurrency was soon turned into a generic altcoin clone so it could be rushed to market as quickly as possible. But soon, GAW Miners – the company behind PayCoin – began backtracking on several promises, including its $20 payment floor. It also suggested that its payment platform would allow customers to spend its currency at several major stores, including Amazon, Walmart and Target. This was news to Amazon, Walmart and Target, who could not confirm any prospective partnership deal.
When GAW Miners collapsed in 2015, federal authorities launched an investigation into the company, and Josh Garza was eventually held liable for over $9 million USD in wire fraud.
Many ICOs fail for many different reasons: the subtleties of the cryptocurrency market can make it a challenging environment for companies that can boast innovative technology, an irresistible hook, and a viable business model. Happily, PayCoin’s fall proves that it’s also a challenging environment for Ponzi schemes.