If you’re looking forward to one of the biggest trends in today’s cryptocurrency world, then you can surely pick Initial Coin Offering aka ICO. It is also regarded as the future of the fundraising amidst global level. A small tech company with the aid of ICO raised over $150 million USD in just three hours. The ICO aims to pre-sale the cryptocurrency tokens or coins, this can lead to raising funds to aid the development of the new applications. The Initial Coin Offering is becoming one of the preferred ways to launch the crypto currency.
Let’s talk about in detail about ICO to get our hands on over the legal parameters.
Initial Coin Offering (ICO), in simpler words it means that in exchange for Bitcoins or Ethereum you offer the investor with some units of the newly launched cryptocurrency or crypto-token. ICO is becoming a popular way to fund the new type of cryptocurrencies since 2013. The most viable part about the ICO is that the pre-created coin can be sold or traded easily amidst all the global cryptocurrency exchanges if demand gets risen.
The Ethereum ICO received a humongous response, they were used more and more to fund the projects by the means of releasing coins or tokens which were somehow inculcated to the project. We can say Initial Coin Offering has emerged as a tool that has a great potential of revolutionising not just the cryptocurrency but the absolute financial system. The token has the potential to become the Financial Securities & Shares of the future. The ICO’s are continuously garnering the limelight in the crypto world, it is obvious that the demand for these is hot in the market, the unregulated issuances of crypto coins is a catchy bulletin for masses.
Previous insight of the ICO
It can be said that Ripple is the first every cryptocurrency dispersed by the ICO, billions of XRP tokens were created by the Ripple Labs in the year 2013. The company later sold these tokens for the purpose of funding the growth of the Ripple apps. Later in the same year, through the means of Initial Coin offerings, Master coin too created a deposit over the Bitcoins to tokenize the Bitcoin dealings.
Ethereum- the ICO?
One of the easiest application amidst the Ethereum contract systems is to promote a simpler token which can be sent or received over Ethereum blockchain. This property made the Ethereum the host of the wide range of ICO based transactions, now you can safely raise your funds through the medium of ICO with the aid of Ethereum.
Working of the ICO
Just like the Initial Public Offerings IPO are widely known amidst the masses, the Initial Coin Offerings is breaking the stereotypes. The ICO is a simpler process of release of any company’s own coins or tokens, the tokens can be the analogue form of shares with exclusive properties. The tokens are further transacted through the cryptocurrency exchanges. The revolutionary Blockchain tech revolutionised with the digital currency bitcoin in the year 2009, which involved a decentralised, non-influenced and permission less public ledger. But with time, several applications have evolved about blockchain cropping that is not associated to the Bitcoins at all.
Ethereum is one of them, it is capable of running its own blockchain & the motive is to look forward to smart contracts or coded agreements that reside in the Ethereum chain on a permanent basis. The Ether is the digital coin or token of the Ethereum. Users around the globe in 2014 bought 60 million of Ether tokens in exchange of $18.5 million of Bitcoins through the Initial Coin offering technique.
Today an array of blockchain start-ups are preferring to use ICO to promote & distribute the digital coins or tokens, in lieu of this the price of the Ethereum has been increased by 130%. The cost of the ICO management is around Ten times cheaper than the charge of managing the old-style IPO’s. For example, the old-style IPO price for any share market can be between $1-$2 million, but through the introduction of the Initial Coin offerings, it can now go down to $10-$200 thousand USD.
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Examples of the successful Initial Coin Offerings:
• FirstBlood is a decentralised online Sports platform based on the Smart contracts, with the introduction of the ICO in the year 2016, the company raised over $5,500,000 USD in just 8 minutes and 48 seconds. The company exchanged & received a whopping 465,313 Ether tokens.
• Golem is used for selling of the computer’s computing time over the net, the company started the ICO, what comes as an astounding fact is that the company received over 820,000 Ether in just a single day, which was equivalent to around $8,000,000 USD.
Overall, we can say that Initial Coin Offering (ICO) is the best tool for the crowdfunding projects, it is most viable for the start-ups.
The risk factor with ICO
You can’t just predict the outcomes in the cryptocurrency market, the regulation of the same is a technical crunch. There are not many people out there that understand the virtual economy processes very well. There is always a risk of fraud since we are managing everything over what? Virtual economy. The Initial Coin Offerings is prone to thieves as well, according to various reports most of the existing ICO projects can be fraudulent as investing in the virtual economy is way too easier.
Without conducting any quality (DueD) that is Due Diligence, people are putting their money on anything without even looking at the company. The other way to stay away from the fraudsters while you are transacting over ICO can be the cryptographic escrow. The process involves the coordination of independent escrow agents, in this way the company in which you are investing doesn’t collect the money directly but gets it via verifier 3rd party. The funds further are deposited in a Multi-sig purse which is accessible to only the deposit agents, in other words, the company can’t just use the money without the digital signing of the investing agent.
Now watch this video that taken in SMU for the Singapore Bitcoin & Ethereum meetup.