What is an Initial Coin Offering (ICO)?

With over $3.8 billion raised by Blockchain start-ups, is it time to learn all about Initial Coin Offerings? Some of you are already experts but if you are new to this concept, here is quick guide.

Top 10 ICO’s of 2017

  1. Filecoin: $257 million
  2. Tezos: $232 million
  3. Sirin Labs: $157 million
  4. The Bancor Protocol: $153 million
  5. Polkadot: $145 million
  6. Status: $107 million
  7. Qash: $106 million
  8. KIN: $98 million
  9. TenX: $80 million
  10. WAX $68 million

What is an Initial Coin Offering (ICO)?

An Initial Coin Offering is a fundraising mechanism in which new projects sell their underlying crypto tokens in exchange for Bitcoin and Etherum. It’s somewhat similar to an Initial Public Offering (IPO) in which investors purchase shares of a company. However, in an ICO, tokens (coins) are issued instead of shares.

What are ICO Coins / Tokens?

ICO “coins” are essentially digital coupons, tokens issued on an indelible distributed ledger, or blockchain, of the kind that underpins a crypto-currency. That means they can easily be traded, although unlike shares they do not confer ownership rights. Investors hope that successful projects will cause tokens’ value to rise.

Benefits of raising funds via ICOs vs. Venture Capital?

ICOs are means of CrowdFunding via use of CryptoCurrency and are applied by fintech (Blockchain) businesses as an alternative to the rigorous and regulated capital-raising process required by venture capitalists, banks or stock exchanges. The process is quick and easy requiring the publishing of a White Paper, company Information and a link to the token sale on the website. Over 200 startups have cumulatively raised over $3.3 billion through ICOs.

What are the risks involved?

ICOs are mostly unregulated and governments are in the process of introducing guidelines. Some countries have banned their citizens from participating in ICO’s. However, some jurisdictions are trending to be more friendly towards ICO’s and crypto currencies. Digital currencies are still in their infancy causing volatile fluctuations in their value. There are specialist legal advisory firms and exchanges that can help in managing an ICO.