If you’ve been kicking yourself for not getting in on the ground floor of blockbuster coins like Bitcoin and Ethereum, you might want to consider looking into investing in an Initial Coin Offering (ICO).
ICO is the abbreviation of Initial Coin Offering. It means that someone offers investors some units of a new cryptocurrency or crypto-token in exchange against cryptocurrencies like Bitcoin or Ethereum. Since 2013 ICOs are often used to fund the development of new cryptocurrencies. The pre-created token can be easily sold and traded on all cryptocurrency exchanges if there is demand for them.
With the success of Ethereum ICO are more and more used to fund the development of a crypto project by releasing token which is somehow integrated into the project. With this turn, ICO has become a tool that could revolutionize not just currency but the whole financial system. ICO token could become the securities and shares of tomorrow.
Essentially ICO is similar to an Initial Public Offering (IPO) in which investors purchase shares of a company. One main difference between an IPO and an ICO is that token holders do not own any equity in the company that they’ve contributed to, therefore the company has no real obligation to the contributor to deliver on their promises.
ICO is a fundamentally new way of raising capital for a project or startup. It’s a way to raise money for new ventures trying to follow in the footsteps of digital currency pioneers Bitcoin and Ether. An ICO lets startups bypass the venture-capital process by turning to something comparable to a Kickstarter campaign.
Though many consider it to be too shaky a foundation to build a business on, and there are many controversies arising from fraud, theft and volatile speculation successful ICOs have shown that it’s possible to develop communities of users willing to try unconventional forms of money. Besides, this alternative form of investment has numerous advantages:
– it gives opportunities to up-and-coming projects
– doesn’t require unnecessary paperwork
– it gives the startup creators opportunity to build a community of the project’s supporters
– it gives creators an extra incentive for innovation
–it gives investors the opportunity to get an early access to potentially valuable tokens.
Even though the first ICO was theoretically conducted by Ripple Labs for the XRP token, ICOs would have never gotten as popular as they are today without Ethereum.
One of the easiest application of Ethereum’s smart contract system is to create a simple token which can be transacted on the Ethereum blockchain instead of Ether. This kind of contract was standardized with ERC#20. It made Ethereum host of such a wide scope of ICO that you can safely say that Ethereum found its Killer App as a distributed platform for crowdfunding and fundraising.
Some examples of successful Ethereum based ICOs are: Augur, Golem, ICONOMI, Digix DAO and many others.
There are dozens of ICO every month which explore new and creative ways to connect the application with the token and to leverage smart contracts to add more features to these tokens.
The potential of this trend is immense. ICO enables every individual and every company to easily release freely tradable tokens to raise funds. It could be used to completely reconstruct the financial system of shares, securities and so on. It decentralized not just money, but stock creation and trade.
At time of writing, the growth in initial coin offerings looks set to continue. As the technology matures and the market gains more experience with the concept, and as investors become more sophisticated, the quality of the tokens and the viability of the business models are likely to improve.
Regulators will most likely pay more attention to token sales as the next few years unfold, perhaps even passing blanket laws – or amending existing ones – to protect investors from flimsy or fraudulent sales
Summing up, the phenomenon of ICO has become a tool that can revolutionize not just the world of crypto but the whole financial system. It has already given birth to such innovative technologies like Ethereum and has proven its ability to generate initial seed funds for kick-starting start-ups from anywhere in the world. But don’t forget that now there’s a lot of scam in the field of ICO, so do your homework and do your own research about the ICO project before investing.