Bitcoin created a revolution simply by introducing the first-ever decentralized digital currency in which often people and businesses handle their transactions instead associated with banks and debit cards. Nowadays, we have another trend in the form of Initial Coin Offering (ICO).
What Is An Initial Coin Offering (ICO)?
ICO is a fairly new fundraising tool which usually startup businesses use to raise capital through cryptocurrencies/tokens. Here, investors raise revenue either Bitcoins, Ethereum or even other types of cryptocurrencies. It’s like another kind of crowdfunding.
Advantages of ICOs
Like Bitcoin, ICOs primary benefit the startups avoid to have to deal with third-party authorities such as banking institutions and venture capitalists. ICOs provide a big quantity of advantages and benefits, namely:
○ Raising capital coming from anywhere in the globe.
○ Potentially high returns to the shareholders.
○ Fast and effortless fundraising.
○ Limited supply-demand, a basic principle in which cryptocurrencies raise in value in the future.
○ Tokens have some sort of liquidity premium.
○ Little to zero transaction fees.
ICOs started gaining popularity in 2017. An excellent example coming from May 2017 was the ICO for a brand new web browser known as Brave. This ICO generated more than $35 million in under 30 seconds. On October of the same year, the entire ICO token sales conducted at that time were worth $2. 3 billion, which seemed to be 10 times greater than their performance in 2016.
Danger and Perils of ICOs
Like any new bit of technology, especially considering the huge amount of money involved, there has recently been criticism and scrutiny coming from regulatory authorities. ICOs have got involved risks, scams, plus controversies that have brought them under the scrutiny of professional businesses and governments officials. Some common hazards associated with ICOs are:
○ Insufficient Regulation: one of the biggest problems ICOs facing.
○ High Possibility of Scams: another thing along, with ICOs being unregulated, is usually that there may be potential fraud or scamming disorders.
○ Higher Chances of Failing: a startup getting their capital through ICO have a higher chance of screwing up.
In the end, ICOs are quick and efficient crowdfunding options but with pretty significant risks in terms associated with security, regulation, higher failure chances. ICOs functions for some startups, yet a large majority associated with them don’t make it. Whether it is something moral or not, it up to you to decide about it.