The ICO Effect

ICO Boom

Ever since the ICO (Initial coin offering) of Ethereum, the world of cryptocurrency hasn’t been the same. It wasn’t the first ICO ever, but it put the term on the map.

Initial coin offerings are public offerings that function in ways similar to IPOs (initial public offerings), but they use the advantages that blockchain technology presents.

Initial public offerings have the burden of hiring underwriters as well as other tasks related to corporate finance to get the process started. ICOs, on the other hand, don’t require so many hoops to be jumped through before launching. This is because of the different ways each offering is funded. ICOs use blockchain technology to process transactions. This provides much anonymity to transactions, in some cases more than others.

Sometimes entities aren’t able to contribute to an IPO due to the way the money is tracked. In Canada, someone with over $10,000 in cash couldn’t go to a bank to deposit to participate in an ICO without being audited. In the cryptosphere, it’s possible to trade immense volumes of cash for crypto, convert to whatever crypto-asset the ICO’s accepting through an exchange, and participate in the ICO. The anonymity allows for sources of funding that wouldn’t otherwise be available to be used.

Legal Woes

There has been controversy in determining where cryptocurrencies stand legally, which makes it easier for startups to create ICOs. Conceptually the process is simple: Pick a project to be crowdfunded, write a whitepaper for it, market it like its innovative or going to be the best of its kind, create a coin or token associated with the project, and create a website for the project, with a splash page for the ICO, usually with a countdown timer.

Creating a new coin or token and designing a website can be difficult from a technical standpoint. As ICOs grew in popularity, services emerged to help those who are not so tech-savvy but that had a concept to create their own ICOs, such as AmbiSafe (https://www.ambisafe.co/)). Ever since these services rolled out, the ICO boom has been in full steam.

With a slew of ICOs being released, and a fraction of them turning out to be scams such as ponzi schemes, it wasn’t long before governments took notice. China had outright banned all ICOs in early September this year. Other nations have followed suit, like South Korea, while others have decided to take a more lenient and open-minded approach, like Switzerland and Singapore.

Regardless an individual nation’s stance, the attention the ICO boom of this year has drawn is great for cryptocurrencies as a whole (controversy is great for attention, you just have to hope that the solutions fall closer to ideal), and it’s fascinating to see so many startups get funded so rapidly.

Originally published at ChainReport.