ICO - Future of fundraising or some crypto-scam!!
People who have the slightest of interest in cryptocurrency must have heard of the term ICO. Today we will discuss everything you need to know about ICO and we will know whether it is the future of fundraising or some crypto-scam.
If you are new to crypto world then we would like you to go through the basics of cryptocurrency first - here.
What is an ICO?
ICO is the abbreviation of Initial Coin Offering. In an Initial Coin Offering the developers or the creators of the cryptocurrency create some tokens that can be bought by the investors. These tokens can then be exchanged for other cryptocurrencies on any exchange upon successful integration of these tokens into the project. The money raised from this pre-token sale is used to raise funds for the future development of the cryptocurrency. With the success of Ethereum more and more ICOs are being oraganised for fundraising. These tokens can be used as securities or shares in the future.
How it all started? - History of ICO
Most probably, the first cryptocurrency distributed by an Initial Coin Offering (ICO) was Ripple. In
2013 Ripple Labs started the development of their cryptocurrency Ripple. Ripple Labs named it as payment system and a total of around 100 billion XRP tokens were created. The company sold these
tokens to fund the development of Ripple.
Also, later in 2013 Mastercoin also sold about a million of their Mastercoin tokens to raise funds for the project and ended up raising about $1 million.
Apart from these, several other cryptocurrencies have been funded using ICO, for
example, Lisk, which sold its coins for around $5 million in 2016. The most famous however is the Ethereum ICO. Somewhere in the middle of 2014 the Ethereum Foundation sold
ETH tokens against 0.0005 Bitcoin each and they received nearly $20 million,
which is one of the largest crowdfunding ever and serves as the
capital base for the development of Ethereum.
Ethereum – Initial Coin Offering
The most easy implementation of the Ethereum's smart contract is that it can be used to create a token that can be transacted on top of the Ethereum blockchain instead of ether. This has made the Ethereum smart contract system one of the most widely used system for fundraising and crowdfunding activities.
The most prominent demonstration of the potential of this system has been the DAO. The distributed investment company was initially provided with Ether worth $100m.The DAO was hacked and then it eventually failed. But thanks to DAO, the concept of funding projects with a token on Ethereum became the
blueprint for a highly successful generation of crowdfunding
projects.
Examples for successful Initial coin offering on Ethereum are:
- Augur
- Melonport
- Golem
- ICONOMI
- Singular DTV
- First Blood
- Digix DAO.
There are dozens of ICO which are held every month which explore new and creative
ways to connect some application with a Ethereum based token and add more features to these tokens.
The Ethereum's smart contract system potential is immense. ICO enables any individual
or any company to easily release freely tradable tokens to raise
funds.
Should we invest?
Well, it depends on a number of factors that a cryptocurrency will flourish or not but there are instances where many ICO has been a lucky choice for investors. ETH, for example, was
sold at 0.0005 Bitcoin and is worth today 0.11 BTC. This amounts for about a 22000 percent profit.
On the other side,there also are many ICO which have ended with losses. Cryptocurrencies like
Lisk, IOTA-token or Omni did ended up as losses for the investors as they failed to keed up with their expected value in Bitcoin (or struggle to keep it). Often ICO is even
used by scammers so, one should be very careful before investing in any ICO as they are still largely unregulated with no authority incharge.
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Hello, my name is Shubham. I am a B.Tech Computer Science graduate. I hope you have a nice stay here!
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