ICOs are getting more and more attention in the Cryptocurrency sphere, considering how much money they generated in 2017 (conservative predictions are that they raised more than 4 billion USD alone last year). They play into our celebrity-heavy news cycle perfectly, with numerous celebrities endorsing a variety of ICOs, at the same time as BTC prices skyrocketed, making the celeb endorsements seem like brilliant investment tips. The crypto-market has proved to be more volatile this year, proving that skillful investment is required, at times. Nay-sayers from 2017 are racing to be the first (or loudest) to say; “I told you so”, however, short-sighted that turns out to be.
The question is, where does this leave ICOs? Are they merely a by-product of the hype surrounding BTC and Cryptocurrency last year? Snake oil salesmen looking to make a quick unregulated buck? Or, are ICOs actually, much like the story of Bitcoin and Blockchain technology themselves, a revolutionary counter-cultural method of making huge profits for investors and society, as a whole?
More bang for your buck:
2018 is truly an idea economy. Never before have we been encouraged to think more out the box. Unfortunately, however, rallying a great team around a great idea is useless if you don’t have startup capital. This is where ICOs come in – they allow you to obtain funding your great idea through the creation of a token. The token systems allows startups to hang on to the equity of the business and maintain control of the direction it takes, avoiding the problem faced by so many start-ups where the company is carved apart before even having the chance to establish itself. Not having to answer to shareholders also means that idea-holders can think long term.
Hardwiring the token system into Blockchain/Cryptocurrency technology creates a level of trust that is lost with conventional fund raising. Blockchain technology creates scope for smart contracts, meaning that you are certain of the results of a fund-raising initiative once the pledges come in. This makes it easier to plan. On the investor’s side, it is equally transparent where your funding will be going. The rules and lack of middlemen that comes, as a byproduct of Blockchain technology creates rules and a system that all parties can rely on.
Despite all that has been spoken about BTC over the last 18 months, it, like all Cryptocurrency, is still new. Still developing. Yet, those who got in early have already made many times conventional fortunes due to how BTC prices have risen. The incentives at the outset were small, but the idea was one people wanted to get behind.
Unfortunately, the majority of ICOs will back startups that fail. This is the nature of investing. The radical nature of ICOs and the fact that they are, currently, free from rigorous investment regulations means that a lot of ICO funds will see zero returns. More problematic than this, however, is that scammers have entered the ICO market, capitalizing on the public misunderstanding and lax market checks to prejudice the weak.
So, where does this leave us? Are ICOs harming the industry? The truth is, its too early to say what their overall impact will be. However, they are a fantastic opportunity for all parties to get involved in some fantastic, era defining project and make amazing returns. Equally, they carry risk of failure. As always, it pays to be careful and to be well-informed when investing your money.