The usage of crowdfunding isn’t a out of the blue topic, it has been seen over the past years with writers, politicians, and many other companies. Even the great statue of liberty was built over donations of 16,000 people. But only after the usage of internet became a boon, did the funding of project become a nominal task.
After the cryptocurrency gots it’s fame in 2013, only then was it thought to use blockchain as a source of crowd funding. And hence
Initial Coin Offering (ICO) came into play and was used to raise money through technology.
What is crowd-funding?
Since taking loans from banks have become more difficult due to many procedures, crowdfunding came into action. Stating in simple terms, crowdfunding is just a collective effort of different individuals to help start you a business through fundings. These individuals could be anyone from family to friends, colleagues, relatives, etc. who want to help you out. But this help is a two way process where a repayment is done between the two parties. Recently, it was recorded that according to a prediction from the World Bank Group, “global investment in crowdfunding will hit $93 billion by 2025.”
ICO goes through a compact process a little different form the former crowdfunding platforms.
The world’s largest crowdfunding platform came into action for creative projects and became the fund house to drama, theatre, games, music, comics, art and what not. Some networthu works were- The Because Black Life Conference, BLACK DIAMOND, Atlantic City, etc.
A market place filled with striking ideas and innovations on tech, design, etc. with a guaranteed shipping and become the hustle and bustle of the crowdfunding world.
Initial Coin Offering
ICO or Initial Coin Offering is a crowdfunding campaign with the usage of blockchain technology. It is said to be a ‘great strategy for venture capitalists and banks to bypass the regulated capital-raising process.’ It seeks for secured investments from known or interested communities for a project. The mode of the fundings would be used by cryptocurrency and hence could be used to connect other buyers and investors all over the world at a low cost and will not be linked with the workings and requirement procedures from the banks. In return, the investors would receive proportional number of digital tokens.
In 2016, the Bitcoin setups started using ‘investment landscapes’ with ICO that is $200m according to the International Business Times. The project manager can also control the funds received to each token and so you can place limits on your goal the the time to achieve it. Unlike the working of crowdfundings, ICO can connect millions of people around the world for investment regards. And hence you are saved from a lot of altercations.
The rise of ICOs
- Nxt- launched in 2013, and became the first ICO. It was said to be ‘a platform that would allow anyone to create their own tokens and trade them on a peer-to-peer exchange, as well as send encrypted messages and more.’ This helped to earn 21 Bitcoin worth $21,000.
- Ethereum- launched in 2014, was a smart contract that executed codes on it’s own and is a trustworthy status similar to that of the Bitcoin. This raised $18 million in bitcoins over the time period of a month and currently is the world’s largest Blockchain application worth of $20 million.
- Waves- a ‘custom platform’ that allows the anyone who is crowdfunding to launch their own tokens. It is taglined the as the ‘blockchain for people’ and through it’s projects has collected $16,000 million at a time.
- VC- $331 million has flourished in by ICO start-ups and out of which, $140 million came in through due to this Blockchain startup over the past year.
- MobileGo- Earned $45 million through cryptocurrency payments and online gamers but is not in use any longer.
Hundreds and millions of dollars are poured in to ICO platforms and the top project investments mostly launch their tokens through Ethereum and Waves. But Ethereum still takes the upper hand over Waves showing off it’s larger amd enriched community.
- On 31st may, an Ethereum project raised $35 million in less than a minute on advertising application ‘Basic Attention Token’.
- Under ‘Aragon’, Ethereum earned $25 million in less than 15 minutes on May 17.
- Through ‘EncryptoTel’, Waves earned $4.7 million over a period of a month.
- ZRcoin crowdfunded $5 million to Waves for the use of zirconium dioxide as a industrial material.
And hence the list goes on.
Some popular ICO’s of 2018
- FTEC- Intelligence service and neural networks for effective trading activities in the cryptomarket.
- Konios Project- A secure cash to crypto platform.
- Bethereum- A social betting platform.
- Nauticus- Effective and efficient crypto-banking, payments , e-commerce using nauticus coins.
- VLUX- Effective data trading protocols
- Grapevine World- Enables exchange of health related data efficiently.
- CoinAnalyst- Purchase and sales decision of valued data on the basis of artificial intelligence.
- Alt.Estate- Fintech company protocols offering tokenizers.
Some Drawbacks of ICO
ICO is consisted of a complicated structure as compared to the currently used crowdfunding models and hence has led to many hassle and fluctuations in the cryptocurrency industries. Due to lack of proper regulations and backups, scams and frauds can easily be seen to take the the advantage of the negative scenario. ICO startups should provide a level of protection to keep it’s investments intact and also provide proper data of the dealings as providing your investors some assurance is absolutely mandatory. Investors should also make check each data before investing through anything.
Another drawback that the investors may ponder upon is that they are about to stake their money in a project that has on yet started and hence might have many possibility of never being completed.
Having no registered staker but enthusiastic workers with no proper rules may cause some mess ups. The investors wouldn’t be a blessing to tackle down the situation or get remuneration for the lost tokens.
And hence, the saying could be said to be true that ‘everything good has to put something or the other at stake.’
Initial Coin Offering V/S Initial Public Offering
We have heard about the achivements of ICOs, but IPO or Initial Public Offering are much more distinct then the formers. IPO is when for the first time the company goes public and enters the world of buy and sell. Some difference between the two are as follows-
- ICO is the distribution if digital tokens used for a public ledger through blockchains, but a IPO is a distribution of the shareholders through banks and underwriters to provide investments.
- IPO is a accredited investment provided upon subscription and claim of an asset. The investors has the full right and say in the company and the project. Where as in ICO, the investors have no say in the workings and functioning of the company but deal with the end product.
- IPO doesn’t establish in every project like ICO but acts in well off private companies.
- In ICOs the companies mostly don’t have a end product to show to the investor but in IPOs, since the consultancy of the investor is involved, each and every process is out in the open.
- IPOs offer dividends from company profits but on the other hand, ICOs provide tokens at a nominal price.
- In a nutshell, IPOs work well under a rule made funding regulated by the corporation where as ICOs function well when it’s through an open source with no particular central authority.
Smart contracts are designed to bring greater transparency and security to the existing crowdfunding platforms. A contract can have pre-specified conditions for refund, release rate to the creators and thus better control to donors. By eliminating need for trusting the intermediaries like crowdfunding platforms, this can enable many more creators and their supporters than what has been possible traditionally.