Initial Coin Offering is the latest term that has been creating a trend and has brought a revolution in the tech and finance world. Due to Initial Coin Offerings, start-up companies are successfully able to launch sufficient funds by selling cryptocurrency tokens to interested investors. Last year, in 2017, the startup companies have raised nearly 3 million dollars through Initial Coin Offerings. Honestly speaking, the fundraising through Initial Coin Offerings have totally surprised the conventional venture capital funding that took in the year 2017 of first and second quarters.
For starters, now what is an initial coin offering?
ICO stands for Initial Coin Offering and they are a type of fundraising for startup companies who deal with blockchain technology and especially Bitcoin and Ethereum. It is very much similar to crowdfunding or venture capital. For the last couple of years, these startup companies are utilizing Initial Coin Offerings to get enough funds instead of utilizing venture capital method. For more info, click here to know how to launch an ICO.
Now how does it work?
When a team of enthusiastic professionals comes up with a business idea, they write an ICO white paper or create a minimum viable product (MVP), and issue their own coins or cryptocurrency tokens. Then the tokens will be sold to the investors and later will be utilized in the platform once the product gets launched.
Interested parties will buy by these tokens utilizing Bitcoin or Ethereum anticipating that they will appreciate as the product gets attraction and the adoption improves. In simple terms, investors will be purchasing one type of currency which can only be utilized on a platform which does not exist or that the group has just begin to develop. I know, it’s strange.
For example, the Ethereum’s Initial Coin Offering is the biggest hit in the history which started from 20 in the year 2014 of the July month to the same year of the September month and collected around 19 million in the form of tokens during the process.
Are Initial Coin Offerings a scam?
There are some critics across the globe who are against to the whole subject Initial Coin Offerings and saying that it is similar to an asset bubble which will crash in no time. In fact, the governments of South Korea and China have already banned Initial Coin Offering in their countries.
Due to their process, Initial Coin Offerings are not regulated. and hence people or companies will be less secured as an Investor. on the other hand, venture capital or Angel funding companies are at the edge to prove themselves and adhere to stringent regulations of initial public offerings and there will be no need for Initial Coin Offerings to offer any sort of formal strategy or even contract to their investors. The only point Here you need to understand is that Instead of shares for initial public offerings, Initial Coin Offerings provide tokens Whose value is frequently not connected to any financial metrics of the organization.
And still, it doesn’t mean that Initial Coin Offerings are a scam and or not to be trusted. However, there are a few things that startup companies need to understand before getting their feet wet.
Initial Coin Offerings attract a lot of scammers
The reason behind I said this because of the lack of paperwork, Initial Coin Offerings attract people whose job is to just to scam. Such people can easily create a fake whitepaper, fill it with PR, and then abscond. For example, you can check Confido’s scam and for more details, you can click here.
Completely understand before investing
Investors should invest in Initial Coin Offerings with the same kind of mindset that they have during investing in a normal company. Which means because investors believe in the target audience, the founders of the company, and the whole idea behind them. But the latest valuations of Initial Coin Offerings seem like investors were more interested in return due to the hype that was created for the cryptocurrencies and the blockchain and not because they have done a fundamental analysis of the company.
Storing the tokens
Ethereum coins are easy to be stored in a wallet. otherwise, it will be hard for investors to keep them safe.
Then why should we buy initial coin offering?
They are not as bad as you think. Initial Coin Offerings provide great opportunities for both startup companies and investors. If you take Ethereum, from being the second biggest digital currency to offering a great platform for the development of DAPP projects, Initial Coin Offerings are indeed successful.
The below are some of the good reasons so why you should consider Initial Coin Offerings
— Initial Coin Offerings to not require unwanted paperwork. There are hundreds of projects which are still in the paperwork stage and haven’t reached implementation stage at all just because they are stuffed with lots of paperwork.
— Initial Coin Offerings provide the owners of the company great opportunity to develop an interactive community around their projects. Doing this will not only hold the founders responsible but also offers a valuable feedback to improve their product and service.
— Initial Coin Offerings provide the investor’s tokens that are potentially valuable.
— The existing Hype about the cryptocurrencies and the Initial Coin Offerings has been getting a lot of New Talent. The upcoming entrepreneurs will certainly drive more innovation and attraction into this domain and furthermore, curated platforms will be developed.
What does the future hold for Initial Coin Offerings?
Initial Coin Offerings will continue to evolve as an essential part of cryptocurrency and blockchain technology. And certainly, investors cannot ignore this type of unique fundraising concept. However, it will be up to the investors whether they want to continue with the Initial Coin Offering or to the traditional venture capital or Angel book method.