The Evolution of the ICO War (And How Investors can benefit from It)
The ICO War Transforms Crypto Coins into Lucrative Investments
Investors Reap Huge Profits with ICOs
The evolution of ICOs over the years can be likened to the transformation of an ugly duckling into a white swan— at first, not everyone understood it or wanted it. But now, everyone wants it. And along with it, there are lots of benefits when it comes to investing in ICOs. But to appreciate these benefits, we first have to understand the evolution and history.
The ICO, or the Initial Coin Offering, entered the public domain in 2017 when cryptocurrencies were experiencing massive growth. However, iterations of ICOs can be traced back to six years ago. You see, ICOs are simply a type of crowdfunding. It’s similar to Kickstarter campaigns but instead of selling t-shirts and accepting payments via credit cards, ICO projects are selling their brand through digital currency.
With that understanding, let’s go back to when it all started.
MASTERCOIN — the father of all crowdsource ICOs
The very first ICO took place in 2013 when OMNI (a Mastercoin project) raised a whopping 4740 bitcoins to aid in building a new platform. In 2013, these bitcoins were worth about $500,000, which today would have a staggering worth of $30 million.
Instead of having strict AML/KYC verifications and expensive marketing campaigns, the Mastercoin project was handled in a minimalist way — through a thread on bitcointalk.org. Interested investors simply sent their bitcoins to an address (specified) and they were done. And since the term ICO hadn’t been invented at the time, investors simply called the whole thing a fundraiser.
Many people think that the cryptocurrency industry was unregulated and wild but this gives us a perspective of how much the industry has transformed and has developed its own order and system.
Ethereum is born
For some time the fundraising model inspired by Mastercoin was a success except for the famous ‘Proof of Burn’ model by Counterparty. In this model, investors were required to ‘burn’ their bitcoins. They did this by sending bitcoins to invalid addresses in exchange for a new coin. However, this model didn’t quite stick. Anyway, after several successful ‘ICO’ projects, people started questioning its legality.
To help qualm these doubts, Ethereum decided to join hands with lawyers to create a fundraising method. The collaboration gave birth to the charitable foundation model which worked by receiving ‘donations’ from participants. Through this model, Ethereum raised an impressive $18.3 million.
The ICO Golden Age
In 2016, Decentralized Autonomous Organization, or DAO for short, was built. This project was based on Ethereum. The purpose of building DAO was to come up with a decentralized funding model through which participants could pitch projects to investors and disperse funds however they pleased in the hope that when the project was a success they’d make loads of cash.
However, the DAO model and dream died when a hacker exploited the vulnerabilities in the DAO and went away with almost 1/3 of Ethereum tokens that were in circulation. In the process of picking up the pieces and getting back up, there was a split which resulted in Ethereum Classic (ETC) and Ethereum (ETH).
And though the hack was a shock, developers moved on fast and launched new projects based on Ethereum (ETH). In no time, the ICO craze was in full swing. The BAT (Basic Attention Token) fundraised $35 million. But here’s the impressive part. The $35 million was raised in just 30 seconds. Other projects like SNT (Status) fundraised $100 million in several hours. It is this growth that reeled in the masses and caused the ICO golden age between 2015 and 2017.
How do I benefit as an investor?
For most investors, the allure of the ICO is the fact that they are investing in a new and constantly evolving technology. Furthermore, ICOs hold more benefits that investors can reap from the nascent technology, and these are some of them:
No Entry Barrier
The good thing about ICOs is that most set low prices for the tokens. This allows a small investment to reap insane benefits upon sale. With traditional IPOs, you are locked out if you were a small investor. And the fact that ICOs thrive in scarcity, the coins have the potential to gain a lot of value fast. As an initial investor, you could leverage on this fact and profit several times over your initial investment.
Now, note that ‘ICO’ defines the fundraising process of projects where participants are rewarded with coins instead of shares such as the case with IPOs. These coins confirm your stake in the said project. Here’s why this is such a big deal: You see, in the US, equities can only be sold to individuals worth more than $1 million. And unfortunately, they only make up 3% of the general public. On the other hand, the US government cannot possibly restrict API key sales to certain investors without negatively affecting the IT industry. For this reason, the coins can be sold to anyone — there are no restrictions.
Potential Exponential Growth
The latest ICO model is based on tokens. These tokens are used to buy services that a company is offering. And in the event the coin becomes popular and gains the trust of the market, then you can use it to purchase pretty much any service or goods you want — just like it is with bitcoin.
It should be noted that tokens aren’t equity, but rather are paid API keys. As such, contributors don’t measure a token’s attractiveness based on equity cost but based on its future use, its demand and number in circulation.
A quick summary — in case you missed anything
ICOs have lots of advantages for the contributor in comparison to equity holdings. And as an early contributor, you will have a little more liquidity in a startup. You’ll also have access to a coin that could grow into something huge. The tokens are not regulated or registered by the government and are as such a great way to protect yourself from economic and political shocks.
Faireum: Invest, Play… or Why Not Both?
Faireum is an ICO project which aims to give opportunities for large-scale and small-scale investors alike. Leveraging on the benefits of blockchain’s capability to cater almost anyone in the world who wants to crowdfund nascent technologies and benefit from it, such as Faireum’s very own blockchain-based solutions for online gambling platforms, Faireum opens its doors to everyone who wishes to engage in fruitful and lucrative investment opportunities that would be fair and profitable for everyone.