ICOs: A new epoch for fundraising

200,000 years ago, came homo sapiens. 5500 years ago, homo sapiens invented the wheel. 319 years ago, the steam engine was designed. Nearly 14 decades ago, the electric bulb was developed. Less than a century ago, humankind saw the invention of the modern computer. Around 50 years ago came the internet and shook the world. What are we looking at this time?

According to Charles Darwin’s Theory of Evolution, evolution is a natural and inevitable process, and unhurried too, unless there is a change in the environment which accelerates the rate at which we evolve. What this implies is that even if we give up on all that we are doing right now and go on an indefinite vacation, we will continue to undergo a gradual natural process of evolution (unless of course, a meteorite hits our planet and annihilates our existence off the face of earth). But since humankind has been engaged in a lot of cognitive and creative processes since its advent, the evolutionary process has been faster than its natural rate. The wheel, electric generator, telephone, television, automobiles, airplanes, personal computers, smart phones, smart watches, and other technological innovations are all byproducts of human evolution, and each invention has contributed in catalysing the phenomena of evolution. The invention of Internet was the last game-changer, half a century later, we are at the dawn of another transformational change. This time, the revolution will be brought about by blockchain technology.

Blockchain is a decentralised database which facilitates peer to peer transactions and data exchange/transfer possible in a transparent and secure manner. And these attributes of blockchain are intrinsic, the tech doesn’t depend a central authority to provide these features. The goodness is inherent, and not externally imposed.

Major companies and startups are testing blockchain for a range of applications — record-keeping, payments and remittances, smart contracts, etc., and they are realising the massive efficiency gains of implementing this technology. It is a technology so disruptive, that it can render a major chunk of business operations redundant by eradicating the need for them. Just imagine, the resources, energy and time which will be saved can then be directed towards doing good for the world. We could be approaching a brave new world where people, recently liberated from performing superfluous activities, could be working together to improve traditional infrastructural framework.

Blockchain is not only making a lot of business operations seem needless now, but it has also pioneered a new business model…

Imagine a community which works on the principles of sharing and collaborative efforts. Let’s say, Bob has a brilliant idea for ensuring that customers who want to buy fresh, organic produce at supermarkets get only what they pay for. So, he makes a blueprint for a blockchain based system which will enable food products to be tracked from farm to fork. Bob pitches his idea to people in his town, and the people are delighted by it. They urge Bob to develop this product for them, and they chip in money to help Bob make this product. Bob, delighted with their response, starts working on the project and completes it to the best of her/his abilities. The product, created by the collaborative efforts of the community is controlled by no one, but benefits everyone. From there on, more people pitch ideas for building useful products for the community, and the community supports these ideas by contributing to them. Thus, everybody — the ideators, and the community, evolve together and live happily ever after.

Thus, thanks to Blockchain technology, such decentralised business models, popularly called decentralised applications or Dapps, are no longer a Utopian vision. The have removed the stumbling block of fund-raising for innovative and worthy projects. Earlier, the execution of such projects depended on moneyed patrons, who would only fund projects whose blueprints followed the patterns of existing successful businesses. New ideas did not get the support to actualise and flourish and they consequently died of neglect. But today, Geeks are overturning business norms with their remarkable ideas. Today, Dapps raise funds through initial coin offerings (ICOs). Techies first present the idea to the public through a detailed whitepaper, and publicise it through blogs on platforms such as Medium. Once they have roused the interest of the public in their project, they generate their own coins and sell those to contributors through a crowdsale. The coins are used for availing the services of the app, and they might also appreciate in value if the app becomes really successful. Thus, they arrange the funds to execute their business model, and they do it without spending money on elaborate events or even much direct interaction with the public. Ethereum, one of the world’s most famous blockchain platforms, raised funds through an online crowdsale, and so did other successful blockchain startups such as Waves and Golem Project. Tezos, a blockchain project, recently raised $232m in a record shattering crowdsale, and looking at this figure, one can well imagine the potential of blockchain technology and ICOs. Even prominent venture capital firms such as Andreessen Horowitz and Union Square Ventures have been investing actively in blockchain startups. The concept of raising funds through ICOs is barely a few years old, and yet, it has taken the world by storm.

Going back to Darwin’s theory of evolution, we have reached a moment in the modern epoch, where an environmental change, that is, the birth of an innovative technology, is going to bring about a sweeping change in the functioning of the society. This change is going to be led by Techies, whose revolutionary products and and services are going to be alter the socio-politico-economic dynamics of the world for good. And this time, these Techies, the agents of change, will not be impeded by what the ones in power think. They will not have to bother themselves with the cumbersome processes of traditional fund-raising methods. Lack of funds will no more choke their dreams, nor will they have to surrender their ideas to other companies, which will stamp their own name on those ideas and take all credit for them. Thanks to the rise of decentralised businesses, they can focus on building great products without having to worry about raising funds for their ideas. If their idea is powerful enough, it will automatically attract investors, like bees to a flower; all they need to have is the conviction to make it work.

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