When Blockchain & Crowdfunding had a baby
The concept of Initial Coin Offerings (ICOs) is buzzing at the moment. Largely due to the flippening situation which is believed to be greatly influenced by them. ICOs essentially, are a new way of crowdfunding for the blockchain community. The way it works is, a company who is building a blockchain based product or service, issues digital tokens to their investors in lieu of raising funds. They differ from traditional IPOs in the sense that they are usually used for early stage investments. Also, since these offerings are not restricted to traditional venture capitalists, ICOs have emerged as potential moneymaker for the people who believe in the projects. It all came to the light with Ethereum’s recent market cap boom. Ethereum was one of the earlier projects to be funded by an ICO and its recent spree has sparked a lot of interest in the idea behind ICOs.
But wait, all of this might just be another gimmick. As with any hype, there seems to be an underlying factor which could screw it all up. The crypto space has always been vulnerable to frauds and scams, and it won’t be a surprise if the same goes down with ICOs. The lack of regulation could mean none of the funds invested will be repaid, in case of a crash. Exactly what happened with the infamous The DAO which raised $150mn through an ICO in 2016, but was hacked shortly after and lost $50mn. Seems much more risky now, does it?
While it remains to be seen that if this ICO bubble bursts or not, one this is for sure — ICOs along with the flippening have stirred the crypto market once again.