Bitcoins may still be popular, but there is something better in the finance market right now. ICO or Initial Coin Offering is similar to an IPO. The experts will tell you that it is the temporal reverse of an IPO and they are correct. This new cryptocurrency is taking the world by storm. It is the new way to invest, save and grow money within a few days’ time!
From pizzas to palaces
The ecosystem of cryptocurrencies has matured and exploded ever since Bitcoin came into being in 2009. It has not even been an entire decade and yet, the value of many of these cryptocurrencies is crossing 8-figures. There was a time long ago when Bitcoins was good for pizza parties and a couple of crates of soda, but now, finance masters are running corporations using Bitcoins. There are more companies than you can imagine whose basic financial structure relies on cryptocurrencies. If you look in the right places, you can buy shares of small businesses and startups with similar currencies. That is exactly where ICO is becoming so important by the day.
ICO as a fundraising tool
You can see initial coin offering as the fundraising instrument for new companies and start-ups that do not want to bother with the traditional finance systems. This tool rather trades future cryptocurrencies for cryptocurrencies like Bitcoins and Ethers (of the Ethereum platform) that exist today. While this can be a little confusing for amateurs, you can think of it this way – ICO is the unregulated supply of cryptocoins. Investors can buy shares or raise real money in existing cryptocurrencies. In fact, this is in line with what The Financial Times recently said about ICOs.
What are you exactly buying?
ICOs are virtual tokens, which hold certain monetary value depending on which cryptocurrency you are using right now to buy in. When a startup or an agency wants a “fund-raiser” without going through the trouble of middlemen, angel funding, and crowdfunding, they usually create a white paper plan. It includes information about the project including the financial requirements of the project.
Once this project goes online, you can buy the cryptocoins or digital tokens that the company owners are distributing. You can buy them using any form of fiat or cryptocurrency of the same value. That is why most experts are viewing them as similar to IPOs or Initial Public Offering transactions.
What happens if the money does not meet the funding requirement?
It happens a lot in case of crowdfunding and angel funding. Many times, company owners and entrepreneurs cannot raise the money they need from a particular campaign. In case of “real” money, it becomes much easier for investors to ask for money back since the project is about to fall through. However, many cryptocurrency investors are rather worried about the refund policy for ICOs in case companies cannot raise their required funds. In case that happens, the entrepreneurs need to return the money to the investors. Quite similar to any other funding campaign, the ICO is considered unsuccessful. Now, there is a specific timeframe for such fundraising campaign. Therefore, if the entrepreneurs and marketers can raise the money within that given timeframe, the project moves forward, and the money initiates a new scheme or project.
How safe is ICO?
You must have already noticed the legal discrepancies surrounding ICOs. While some companies sell them as software presale virtual tokens, others include terms like “donation” or “crowd-sale.” Just like Bitcoins, there are several legalities involving ICOs you need to know before you invest in ICOs. Firstly, the lack of stringent rules and regulations is a blessing in disguise for most investors. It allows the value of ICO to grow and the market to innovate at a fast rate. Secondly, if you are looking in all the wrong places, you will find frauds everywhere. It is true for real-life investors and bitcoins too. You need to check the details of the company whitepapers before you buy in a big chunk. Investment is always subject to market risks and personal risks, you should weigh the reputation of the company, the entrepreneurs and the history of the company’s returns before you invest in ICO.
Why do people invest in cryptos?
The common notion is – these projects will go through, and cryptocurrency has a glorious history, which shows that their value keeps increasing with the passage of time. While Ether was estimated at $0.40 per coin in 2014, by the end of 2016, the value was close to $14 per unit. The market capitalization was over $1 billion. Now, that is a history people will want to be repeated for their cryptocoin experience. Most people invest in cryptos for quick rewards, which is almost always the norm with most fiat currencies.
Can ICO ever slow down?
As of 2017, people have already invested in $250 billion worth ICOs. Almost $170 billion came in on 2017 alone, but that was yesterday. The value of cryptos depends on many factors. From tech alliances to the value of the real currency, many factors can potentially govern the value of any cryptocurrency.
Unless you are doing your doctoral research on cryptocurrencies, it is quite impossible for anyone to unearth all factors, which can govern the value of ICOs. The hype might be a hangover from Ethereum adoption that has made generous returns or Bitcoin resale values skyrocketing and making gamers millionaires. However, there is no telling, how the value of ICOs will fare tomorrow, for sure!
So, the cryptocurrencies are hot once again with new members stealing the show. We just have to wait and watch which ones are here to stay. As always, a host of altcoins is competing in the demanding market. It is for us to decide which ones have a real shot.
Author Bio: Martin Riley is a cryptocurrency expert. He has been traveling the country giving lectures on Bitcoins, Ethers and their contemporaries. Initial coin offering or ICO is his latest passion. His recent lectures on ICOs and ICO calendars have earned him numerous accolades.
