What is Vaporware?
In cryptocurrency, vaporware is a term for projects or dApps that are heavily advertised to solve a non-existing problem. They are usually heavily funded and have high community expectations, but they underdeliver on their promises.
The term has been around for decades and gained popularity during the Dot-com bubble, a stock market crash where Internet startups gain massive popularity but never deliver on expectations.
Identifying vaporware is difficult, as traders can never get direct insights into the company’s operations.
Why Does Vaporware Exist?
Vaporware exists due to a simple human trait—greed. Investors want maximum profitability, while developers and entrepreneurs want millions in funding and will, unfortunately, say anything to get it.
After the Dot-com bubble, traditional tech saw little examples of vaporware, but they still exist. Theranos is one of the biggest vaporwares after the 2000 stock market crash.
With $1.1B in funding, the company promised to revolutionize blood testing, insisting they had developed a technology that would allow doctors to perform the same tests with a fraction of the blood volume that’s usually required. Of course, that never happened.
Vaporware in cryptocurrency
With crypto, it’s even easier to create a vaporware project. Vaporware appears in sections like DeFi, NFTs, GameFI, or Metaverse. The latter has taken a bigger hit of vaporware accusations since technology and immersiveness are not developed enough to live up to the hype it has.
Firms usually get their funding after writing a whitepaper – a paper that can promise solutions about decentralization. That’s how EOS, the blockchain with the biggest ICO in the history of crypto, got its vaporware status.
They promised better tech than Ethereum, lower fees, and faster transactions. However, they never delivered on the promise, and now a blockchain that raised $4.21B in three funding rounds with over $300k in daily volume. Ethereum has over $2.5B in daily volume compared to EOS.
How to Identify Vaporware?
Yes, identifying a vaporware is possible. Here’s how traders can do it:
- Research: Getting as much information as possible is key. Traders shouldn’t only focus on the whitepaper and roadmaps – anybody can write anything. Instead, researching the team, the backers, and partnerships might be better. If the project is backed by a decent VC or has a team that worked on other legitimate projects, the chance of it being vaporware diminishes.
- Background: Before investing in cryptocurrency projects, especially those without a working product, investors must ensure they have as much knowledge as possible about the field they want to invest in. For example, biochemists always knew Theranos was a vaporware project because they knew how our blood works.
- Critique: Investors that go beyond mere promises and value a project’s solutions. Legitimate projects would describe the problem and how they intend to solve it in detail. Vaporweare projects will promise the moon on social media, describing the problem and how the world will get better after they solve it. However, they won’t describe how they intend to solve it.
Conclusion
To summarize, vaporware is a term for projects that overpromise and underdeliver.
These projects are much more popular in the cryptocurrency sphere, as crypto investors often inject money into projects without a product.
