2017 Will Be Remembered as the Year of ICO
With all the talk surrounding cryptocurrencies and how Bitcoin has been reaching record high numbers, initial coin offerings (ICOs) have been on the forefront supporting and sustaining the expansion of cryptos. Generally used as a crowdfunding method, ICO’s are similar to initial public offerings (IPOs), but instead of traditional stakes, investors receive tokens or coins that can be sold, exchanged and build equity. The concept of ICOs debuted back in 2013. It has produced nearly $3 billion this year alone with November raising $743.2 million; the most in its history. Leading crypto adviser, Coinlist, released analytical documentation showing that 2017 is indeed the year of the ICO.
The very first ICO raised $500,000 for the startup, Mastercoin, in July of 2013. ICOs showed promise the following year with $7 million being raised in just 5 hours for Maidsafe and over $18 million raised for the crypto platform; Ethereum. The next two years after had its ups and downs with inconsistent growth but still brought startups such as Augur, The Dao, and Golem to the surface. This year changed that entirely raising nearly $800,000,000 for 76 ICOs with total funding reaching almost $3 billion.
Recent Popularity and Industries
One of the reasons that likely contributed to its slow start is the unconventional nature of ICOs. In contrast to IPOs, shareholders invest in startups that haven’t been launched yet in hopes of its success later down the line. Despite the risks, nearly 70% of industry insiders have either participated in ICOs or expressed a desire to do so. Coindesk reported the number one industry that utilizes ICOs is infrastructure (37%) followed by the “other” category (27.5%) and trading and investments (12.9%).
How it’s Changing Business
Blockchain technology is taking business by storm because its transparent ledger reduces costs usually funneled towards brokers and other financial arbitrators. Startups from all over are taking advantage of this model and leveraging it to their advantage. Protocol Labs Inc. raised over $250 million in an ICO and is now creating a network where digital storage can be exchanged using its own Filecoin tokens. Rather than selling storage space, Protocol’s decentralized approach builds an infrastructure where people can buy and sell space. Golem is another example that built a blockchain-based platform where users can exchange computing power. Access to these resources is critical during a time in our history where digital information and communication are becoming the standard.
Are ICOs Right for You?
With all of that considered, the question remains whether or not to partake in an ICO. Coinlist’s analysis showed the top reasons to pursue ICOs were for those interested in a long-term investment (60%), attraction to the startup’s tech/product (22%), and to speculate on the company’s potential (18%). However, lack of information or third-party research on the company (42%) and inadequate legal or regulatory framework (16%) are the top two reasons to steer away from a particular offering. So in short, read between the lines and choose your ICO wisely.
We are experiencing one of the most significant monetary transitions in our nation’s history, and ICOs are making it possible for related startups to get ahead. Regardless of how critics and regulators feel about cryptocurrencies and Bitcoin, the numbers don’t lie, and it’s clear that people believe in its viability for the future economy. ICOs reached new heights this year demonstrating that investors are now finally recognizing its value but we’ll have to see if the trend continues in 2018.
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