WTF is an ICO?

What’s more of a bubble than Bitcoin?

The phenomenon of the initial coin offering, or ‘ICO’, may qualify as THE bubble of the year. ICOs emerged as a major thing during 2017; in total they have raised over $3.6bn.

The term ‘initial coin offering’ evokes the more traditional initial public offering or IPO. An IPO happens when a company ‘goes public’ and lists its shares on a stock exchange, for the public to be able to buy and sell.

ICOs work in a similar way; the company issues ‘tokens’ in exchange for cryptocurrency. Individuals (high-net-worth or accredited investors) hand over usually either Bitcoin or Ether and receive a number of tokens in return. Each company doing an ICO will often create its own tokens, with the name linked to the name of the company.

 

The whole point of the ICO is for the company to raise funds for its current/future projects.

Types of ICO

There are different types of ICO: sometimes the company has already built the thing they say they want to build and it’s live in action.  Sometimes no one has built anything but they’ve written lots about it and how amazing it will be (in what’s called a ‘whitepaper’).

Often the tokens will be used in the company’s ecosystem, for example by using the token to pay for a product or service through their network. Sometimes they will give you rights to vote on the strategy of the company, like a normal share, and other times they won’t have much use at all (there is even a Useless Ethereum Token out there aiming to prove this point).

What kind of tokens are out there?

Some of the biggest and most well-known ICOs involved companies like Filecoin and the DAO (Decentralised Autonomous Organisation).

The DAO was one of the early ICOs to occur, in April 2016. The organisation raised around £150m in the cryptocurrency ether and it operated as a venture fund. The tokens issued to the people handing over the ether did not give them ownership of the DAO, like a traditional share of a company would. But they did give voting rights on which projects the DAO should invest in, and meant the organisation should be run in a ‘democratic’ way.

Unfortunately, the DAO was hacked in June 2016 and $60m of ether was stolen. This highlights the risks with ICOs and blockchain tech more generally as a new phenomenon that is still constantly developing.

Filecoin raised more than $200m in its ICO in August 2017. Filecoin is a decentralised storage network built on a blockchain. It makes use of unused storage space on computers in the network; people who need storage pay people who have extra space available to host their files, at market prices. Filecoin created their filecoin token, which can be exchanged via online wallets for other cryptocurrencies like Bitcoin, or fiat currency like USD. So Filecoin is an example of a token being used within a network to pay for a service.

How does it work?

In many ICOs the idea is once you have the tokens initially, you will want to sell them later at a profit, and it’s this bit that attracts people looking to make a quick buck getting in early and selling at a high price later on.

ICO tokens are digital things recorded on a blockchain network. See my previous posts on WTF is blockchain, How blockchain works Part I and Part II for more info on those. Although from all different companies, tokens have developed standardised formats.

The ERC20 token type is an example of the ICO industry standardising code for tokens. This makes them similar to other tokens, and also makes it easier to interact with different platforms like exchanges or wallets.

Why do an ICO?

Usually at early stages of development, funding sources are limited to people like venture capital (VCs) firms with large amounts of money who are looking to make a return – in exchange they may want some control over the direction of the business. An ICO is a simpler and much cheaper way for companies to get a short term inflow of cash for the product/app/thing they are building.

ICOs have become popular with companies working with blockchain because they can do the same thing – get loads of money off people – without the same kind of costs involved in listing on say the London Stock Exchange, and without needing to hand over the control wanted by VCs.

What is the future for ICOs?

There is huge disagreement over the ‘status’ of ICOs and tokens from a legal and regulatory perspective. The views range from outright bans in China, to a cautiously welcoming stance from Japan, Singapore and the US.

The US Securities and Exchange Commission is one of the only regulators to have issued an opinion on the DAO ICO – stating that the tokens released in that event were ‘securities’ and therefore should be regulated by them as normal shares would be. Clearly across the globe regulators are becoming more aware of the phenomenon and are likely to start writing rules for companies around ICOs.

ICOs look like they’re here to stay, and we will undoubtedly see many more companies creating their own tokens of various kinds.  Already there are a long list of companies lined up for a future ICO event.

ICOs are an interesting and exciting thing to come out of blockchain and the crypto space. But beware the hype!! There are many benefits to both the companies and the individuals participating in an ICO, but there are also many risks. So don’t believe everything you read/hear.

120 Trackbacks / Pingbacks

  1. viagra online
  2. cialis dosage 40 mg
  3. buying cialis cheap
  4. viagra pills
  5. goodrx cialis
  6. generic cialis online
  7. printable cialis coupon
  8. viagra 100mg
  9. viagra 100mg
  10. erectile dysfunction pills
  11. top rated ed pills
  12. otc ed pills
  13. buy cialis
  14. online pharmacy
  15. walmart pharmacy
  16. Buy cheap cialis
  17. cialis generic
  18. vardenafil online
  19. levitra 10mg
  20. levitra cost
  21. casino moons online casino
  22. casinos online
  23. viagra without doctor
  24. online casinos real money
  25. hollywood casino online real money
  26. generic cialis reviews
  27. personal loans
  28. cash payday
  29. best real money online casinos
  30. viagra 100mg
  31. generic cialis
  32. cialis 5 mg
  33. efcaxdszdfszgd
  34. m980u9oy9y98o8y9pm
  35. m90uojmuy7hjhhhh
  36. 5 mg cialis
  37. rxc43rw435tr53t453t
  38. 5 mg cialis
  39. 5 mg cialis
  40. real casino
  41. car london brighton
  42. chlid seat policy
  43. free slots online
  44. casino game
  45. slots online
  46. viagra alternative
  47. generic viagra
  48. viagra buy
  49. buying viagra online
  50. canadian pharmacy king
  51. Face Mask Washable
  52. cxqw234xracrwcr4
  53. buying cialis online safely
  54. xdsffx4crta4rtxa34w
  55. generic viagra online
  56. cheap viagra
  57. viagra for men
  58. cialis pill
  59. buy viagra online usa
  60. viagra online no prescriptions usa
  61. slot machines
  62. casino slot
  63. countries you can buy viagra over counter
  64. over counter sildenafil medicine
  65. viagra for sale
  66. where can you buy viagra in china
  67. buy viagra using paypal account
  68. best price on cialis
  69. viagra prices
  70. cialis coupons
  71. cheap generic viagra
  72. rxtrust pharm
  73. generic viagra cost
  74. RxTrustPharm
  75. viagra buy
  76. viagra pills
  77. viagra cheap
  78. viagra for sale online
  79. cialistodo.com
  80. http://grassfed.us/
  81. cialis upset stomach
  82. viagra generic availability
  83. generic cialis work
  84. generic cialis soft tabs
  85. rx trust pharm
  86. viagra recreational use
  87. rxtrustpharm.com
  88. viagra coupons
  89. uscojufm9r4tue4urtse4
  90. ka-insider
  91. chương trình sinp canada
  92. https://www.manytube.net/
  93. https://royalcbd.com/product/cbd-oil-2500mg/
  94. https://royalcbd.com/product/cbd-cream/
  95. https://royalcbd.com/product/cbd-gummies-10mg/
  96. https://royalcbd.com/product/cbd-oil-1000mg/
  97. https://royalcbd.com/product/cbd-roll-on-gel/
  98. united states online pharmacies viagra
  99. https://royalcbd.com/product/cbd-capsules-25mg/
  100. best cbd oil
  101. royal cbd gummies 2020
  102. cbd oil for sale
  103. royal cbd
  104. how to get an erection to go away
  105. Lowest price for viagra
  106. 50 mg viagra
  107. como gravar chamadas
  108. canadian viagra scam
  109. bestratedmerch
  110. marley generics viagra reviews
  111. 메리트카지노 주소
  112. 918kiss
  113. price of viagra in delhi
  114. organic skin care
  115. little river state bank 310 main st in little river ks 67457
  116. 메리트카지노 추천
  117. Canada meds viagra
  118. proven supplement
  119. Buy generic viagra online
  120. cialis from india

Leave a Reply