We are living in the consecrated modern digital world. First, we got a digital computer then digital watch, digital photo, cellular phone, internet, digital marketing, and digital sex also. When first digital currency(cryptocurrency) Bitcoin was born, the world was ready to grip cryptocurrency. So, no wonder that digital stock has joined the party in a very short time.
This new phenomenon is changing the way in which startups raise capital, shifting away from IPO (initial public offerings), crowdfunding or seeking the assistance. If you are seeking for the greatest trend in cryptocurrency today, a look at Initial Coin Offering (ICO) might be a smart beginning.
Here, we’ve designed this guide for an overview of Initial Coin Offering- ICO and presents the hottest past, current, and future ICOs.
Let’s get started!
What is ICO?
ICO is the abbreviation of Initial Coin Offering and in concept, it is pretty close to the well-established initial public offering (IPO). But still, there are two major differences:
- You are not going to own a part in a future company.
- It must be somehow linked to a blockchain.
ICO is an investment that gives the investor a cryptocurrency, more commonly known as a crypto coin or a token in return for the investment.
Cryptocurrencies like Bitcoin or Ethereum. ICOs are often utilized to fund the development of new cryptocurrencies since 2013. if there is demand for the pre-created token, it can be easily traded on all cryptocurrency exchanges.
With the success of Ethereum ICO are largely used to fund the development of a crypto project by issuing token which is somehow connected into the project. With this change, ICO has become a medium that could revolutionize not just currency but the whole financial system.
History of Initial Coin Offering – ICO
Perhaps, the first cryptocurrency issued by an ICO was Ripple. First, Ripple Labs started to develop the Ripple called payment system and created around 100 billion XRP token in 2013. The developer sold these token to fund the development of the Ripple platform.
Next, in 2013, Mastercoin promised to create a layer on top of Bitcoin to perform smart contracts and tokenize Bitcoin transactions. The company sold some million Mastercoin token against Bitcoin and received around $1mio.
Moreover, there are some other cryptocurrencies have been funded with ICO, for example, in early 2016, Lisk sold its coins for around $5mio. Most notable however is Ethereum. In mid-2014, It sold ETH against 0.0005 Bitcoin each. With this, they receive nearly $20mio, which has become one of the largest crowdfund raising ever and works as the capital base for the development of Ethereum.
As Ethereum itself released the power of smart contracts, it started a way for a new generation of Initial Coin Offering.
Why will a startup company prefer ICO?
The idea is almost new, and the old IPO might seem safer, but some ICO advantages are just unbeatable:
- Retaining control: you are not connecting your company with an investor, you trade him a scheduled service. That’s a major difference, you will make the money but still, control your business.
- Globalization: while other companies go door to door to search an investor, with ICO you can instantly raise funds from anybody in any country worldwide.
- No regulation: That means no government which could take months. Tech startup success is very much a concern of being first on the market. Otherwise, you will be yesterday’s news and somebody else will take the success.
How does ICO work?
First of all, we need a group of guys with a cool thought somehow related to a blockchain. For example, a startup that will enable you to trade a genetically modified tree and when it will grow- it will have your name on its leaves for a Bitcoin. Sounds pretty crazy, but I’ve heard much weirder thoughts that turned into a strong business.
ICO is one of the simplest and most efficient systems for companies and individuals to fund their projects and for regular users to invest in projects they see value in. An Initial Coin Offering is an event that normally increases over a time of one period and in which everyone is entitled to acquire recently issued tokens in exchange for cryptocurrencies like Bitcoin or Ethereum.
Moreover, in an ICO, there can be a dedicated target or limit for project funding, meaning that every token will have a pre-indicated price that will not change during the Initial Coin Offering session, which also means that the token supply is inactive.
However, It is possible to have a static supply with a dynamic funding target, in which the allotting of tokens will be made according to the funds collected, meaning that the more funds the project gets the higher the token price will be.
You can also have dynamic token stocks that will be defined by a number of funds that are collected, meaning that the value for each token is static (e.g 1 BTC – 1 token) but every time one BTC is sent a new token is created. A limit can be set in terms of target or time frame.
Ethereum –ICO? The Crowdfunding Machine
One of the simplest application of Ethereum’s smart contract system is to create an easy token which can be transacted on the Ethereum blockchain. This kind of contract was regulated with ERC#20, which makes it host of such a wide scope of ICO. So, you can securely say that Ethereum found its Killer App as a shared platform for crowdfunding and fundraising.
The most noticeable presentation of the potential of Ethereum’s smart contracts has been The DAO. The investors acquired in exchange against Ether Dao Token which had their own market value and allowed the holder to join in the governance of the DAO. After it was hacked, and failed.
The idea of funding projects with a token on Ethereum became the blueprint for a new and extremely strong generation of crowdfunding projects. If you already tried out, you know that spending in token on top of Ethereum is charmingly quite simple: You transfer ETH, paste the record in your wallet – and, tata: The token issue in your account and available for the transaction.
Some examples of initial coin offering on Ethereum:
- First Blood
- Digix DAO
- Singular DTV
Legality of ICO
The legal status of ICO is often undefined. But the token is trade not as a financial asset but as a digital asset like many other things. This is why ICO is usually called “crowd sale”. In this case, the funding with an ICO is not governed, which makes it more easy and paperless, given a lawyer encountered with the query is on board.
However, some authorities appear to be aware of ICO and direct to manage them related to the sale of shares and securities. The magnificent implosion of the DAO did a great job in kindle regulators attention. So while ICO mostly happens in a gray area, they will most likely to regulated in future.
Moreover, this could have some financial and legal uncertainties for investors. Also, the price and effort to comply with control could reduce the benefits of ICO related to traditional means of funding.
Initial Coin offering of Yesterday, Today, and Tomorrow
Let’s have a look at some wild success of ICO and what’s going on of the market for ICO.
Past Cryptocurrency ICO:
Past Etherum token ICO
- First Blood
- Chrono Bank
Hot ICOs Today:
Currently, you can spend on ICOs like
- Humaniq:- A wallet for the unbanked
- Aeternity:- A smart contracts interfacing with real-world data.
- Internet of Coins:- A distributed network for several blockchains.
- Cosmos:- A network of distributed ledgers.
- Blockchain Capital:- Popular investment company which supports a lot of companies in the cryptocurrency ecosystem like Coinbase, BitFury, Kraken, Blockstream etc.
Hot future ICOs
The launch of EtherEx, a decentralized cryptocurrency exchange, is most expected. While not as notable as Gnosis, EtherEx assures to become a member of a truly decentralized ecosystem on Ethereum. Same goes for Akasha, a decentralized social network based and managed on Ethereum blockchain. ICO is awaited, but no date is listed by now.
Also, With Rootstock and Hivemind, two sidechain ICO are expected. However, it is not known if the developers of Rootstock and Hivemind design to presale tokens. They did not declare it, but the formation of their projects involves tokens, and anyhow these tokens have to be distributed.
Moreover, some appcoins like Filecoin, which allow the storage of files in the IPFS, and Skycoin, a “third generation cryptocurrency”, should be on the record of any ICO hunter. They did not declare an ICO, but will possible presale the coins.
The Bottom Line
**Note: Information contained in this guide is not an offer or solicitation to buy, hold, or sell any security. We’re not financial advisors and are simply providing information for educational purposes. Investing in ICO involves a high degree of risk and should be considered only by persons who can afford to sustain a loss of their entire investment.
Investors should consult their financial advisor before investing in ICOs. Furthermore, the SEC has warned investors residing in the United States and other jurisdictions that ICOs may constitute securities.
Hope! this guide helped you to understand what is initial coin offering and also, we’ve discussed the working of ICO and ICO cryptocurrency.
If you have any query, feel free to tell us in the comment section. We are happy to help you.