An Initial Coin Offering (ICO) is a means of raising funds, normally for a blockchain tech project. As the tech is very new still and there’s a rather small circle of crypto enthusiasts it is a great way of raising capital for these innovative ventures. In an ICO sale you can purchase tokens for a set price before they are released to the market. Normally giving you an advantage, getting in at a very low price. Most tokens are sold for Bitcoin or Ethereum.
In essence it is similar to an IPO – Initial Public Offering or a crowdfunding campaign.
ICO sale differs from a crowdfunding campaign by handing out tokens in return for the investment. Crowdfunding is mainly accepting donations and sometimes gives out gifts in return. It is very similar to an IPO, however here again the difference is the fact that as a reward you receive tokens or coins rather than stocks or equity in the company. The big difference between ICO’s and IPO’s is the lack of government regulation in the ICO sales.
Why is there an ICO boom?
Let’s look at it from both angles. From the investors’ point of view:
This is a great way to firstly back a project that you have faith in, also if the project is successful the coins are likely to rise in value by a huge deal. From the fundraisers point of view – it is a good way of raising capital and getting support from people who already believe in the tech and it doesn’t come with much regulation yet. Because ICO is the latest buzzword, new projects are popping up left, right and centre.
Looking back at the first successful ICO that Ethereum held, here are some stats:
The Ethereum ICO was launched in 2014 and raised $18 million in Bitcoin. The price per Ether was $0.40. Ethereum went live in 2015 and the highest Ethereum price in 2017 at the time of writing was $400. Just imagine that. If you had invested $1000 back then and sold when the price was $300 you’d now have $750 000. That is a return of 74900% in less than 3 years.
That has confirmed that cryptocurrencies aren’t just a one trick pony called Bitcoin. It can happen again, and it most certainly will. The core technology itself is paving way for so many new opportunities and it can completely change the way we do things on the internet. We are witnessing something remarkable. It is probably the same feeling that the ones old enough had at the start of the dotcom bubble.
So far in 2017, blockchain entrepreneurs have raised $327m through ICO offerings, this now exceeds the $295m raised through VC funding, according to CoinDesk data.
Who is getting in at the ICO gold rush? Is it the ones that still wish they’d bought some Bitcoin back when it was worth less than $1? Is it crypto enthusiasts? Is it hardcore VC investors? Perhaps even all of the above.
Is it worth getting in the ICO game?
A lot of speculators are cautious and you will find different opinions on this. The speed that the new ICO’s are popping up at is really something. In a way you should have some sense of caution as it just isn’t plausible that every single one will sail its way to glory. Why is this? Because not all businesses succeed. The hard truth is even more difficult to stomach – 9 out of ten startups fail. Does that mean that people should stop trying? Absolutely not! From failed projects and ideas you will gain the knowledge and experience to move on to greater things.
As an investor the ICO bubble is of course risky, the volatility of these tokens and coins is incredibly high. But guess what, people make a lot of money on volatility. Yes it can go the other way but then again a safe and secure 3% interest on a deposit never inspired anyone.
The most successful ICO sales so far
- Bancor protocol
$150m raised in just one day. The Bancor protocol is a standard that allows anyone to easily create completely liquid “smart tokens” that calculate their own prices. This allows a single party to convert any token to another, without requiring a second party to change the tokens with.
$103m raised also in a day. Status is an open source messaging platform and mobile browser to interact with decentralized applications that run on the Ethereum Network. Could this be the crypto Facebook?
$80m raised. This is a COMIT compatible wallet that promises to make global payments as cheap, fast and simple as sending a text message.
- Basic Attention Token
$36m raised. Basic Attention Token seeks to completely redo the advertising structure. It promises to improve the efficiency of digital advertising by creating a new unit of exchange between publishers, advertisers and users.
$18 million raised. The start of it all. This project is what made most of its followers possible.
Which ICO to invest in?
This is probably the million dollar question. Sadly we don’t have the answer. It would make sense to invest into something that you believe in. Something that gives value to the world. Blockchain tech and cryptocurrencies have the means to change and innovate so many areas, perhaps even in unthinkable ways. This is a great disruptor to the way things are done nowadays. It started as a idea of altering the way money changes hands yet has grown into so much more.
A great concept of course doesn’t guarantee success. Great ideas and projects fail frequently, mostly due to human error. This doesn’t and shouldn’t stop us from trying though. To infinity and beyond…
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Not sure about ICO tokens? Read more how you can easily buy bitcoin.
This is not investment advice, merely an abstract look at what is going on with ICO’s currently. There’s always financial risk involved in investing in any sorts of assets.