An ICO is an initial coin offering designed to raise funds for start-up crypto companies. It’s like a public offering. However, with cryptocurrencies, there are different regulations and twists you must adhere to. The hoops can be difficult to jump through, but it’s starting to change in a major way.
The simplest way to describe an ICO is, it’s a way for a company to raise funds by attracting major investors who are looking to be the first on a potentially big crypto launch that could generate massive amounts of revenue. The company does this by creating its own form of cryptocurrency in exchange, usually for Ethereum or Bitcoin. There are literally dozens of ICOs being launched all the time. So many that it can be overwhelming.
Even the second largest cryptocurrency in history, Ethereum, had an ICO back in 2014. They were able to raise more than 18 million dollars in bitcoin or about $40USD for each Ether (Their Unique Token). After a massive spike, Ethereum is now the second largest cryptocurrency in the world. Which is a considerable amount considering where they started.
Some ICOs have raised as much as $150 million in just a few hours, around $2.5 billion in ICOs have been raised in 2017 alone. The amount of total ICOs being sold each week has doubled since 2016. The number of them is still growing on a massive scale.
What is the History of ICO’s?
They were originally designed to capitalize on the decentralized market. Mainly on the decentralization of capital markets. Many claim that ICOs are the long-term future of world markets. There is an increasingly growing interest in start-ups. They bring millions of dollars due to using blockchains and virtual tokens which is all the rage right now.
They were created as a type of crowdfunding, being able to reach a larger pool of investors. However, even today, there is a serious need for consistency when it comes to ICOs. The inconsistency has lead to a lot of negative views on ICOs. Some ICOs in the past, were thought to be on point, only to find they were scams that ripped people off.
Why Do They Have Such a Negative Stigma?
A lot of people see ICOs as negative because they are often built on a lot of hype. Sometimes they are downright scams and unknowing investors who don’t have experience end up getting ripped off. It’s worked great for a number of projects but there is an equal amount of projects that crash and burn, leaving investors angry and out of pocket. The co-founder of Ethereum spoke about it recently, Charles Hoskin stated that it’s like a time-bomb waiting to go off. This was during an interview with the financial giant Bloomberg. Basically, there are too many tokens being issued when they could use already existing blockchains to do the same thing they are trying to sell.
The problem is that people are into fast money. They seem attractive, fast and easy. But to people with no experience, it’s very easy to get taken for a lot of money fast. The ICOs make attempts at raising fast money, to get around regulations, by getting individual investors instead of banks and financial institutions or venture capitalist like most companies would typically have to.
It sounds a little shady, but that is because often it is. That’s why governments and the Exchange Commission have entered the fray.
One of the major controversies, that that people have issues with the validity of liquidity that has occurred in the past. Controversy often revolves around the difficulty of transactions that commonly occur.
What are the Benefits of ICO’s?
One of the major benefits of ICOs is companies have the ability to raise capital for a startup fast. And the investors at the same time, have a chance to make massive return fast. Bancor, for example, was crowdfunded $153 million, it was a controversial move by many standards. The company was given over 390,000 Ether, making it a record ICO for the market at the time.
Another benefit of ICOs is there have been a lot of successful ICOs that are unique and bring a lot to the market. For example – Ethereum, Ripple, Litecoin all started off as ICOs. And those companies are making major headway in the cryptocurrency space.
One of the major benefits of ICOs, or more specific, the companies behind them is that they are typically meant to compliment Bitcoin and its users. True startups rarely see Bitcoin as competition, instead, looking at it as the grandfather of them all, and aiming to create the next platform to help improve it.
What is the Future of ICO’s
ICOs don’t seem to be going anywhere anytime soon, although China has put a ban on them. Time will tell to see if other major governments and financial institutions do the same thing. As of now, they are available in most countries, although some ICOs are not allowed in certain countries. Singapore for example has a lot of regulations, as does the United States.
What are Most Successful ICO’s So Far?
The largest ICOs are as follows:
Filecoin – The company has raised more than $250 million and is still rising.
Tezos – An estimated 232 million dollars have been raised by the company in 2017. And that was only for a two-week period of time.
Bancor – We spoke of them earlier, at the time of their ICO, they were able to generate more than $150 million in a short period. And that was the largest ICO project at the time. Although, it was also one of the most controversial ICOs as well.
Status – Another big hitter in term of ICOs goes, this startup was able to generate $108 in funding through an ICO. The official date of that was June 20th of 2017.
EOS – The Cayman Islands, exempted one blockchain company. They EOS was able to raise as much as $185 million during its ICO in July of 2017.
ICOs are going through a lot of change, the SEC will start to regulate them and exercise their authority when it is needed. The regulations could be detrimental to the industry, however, great projects are being created at an exponential rate so the future seems bright.