ICOs: an innovating system in the finances of Startups.

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Marketing And Growth Hacking

10 min readSep 1, 2017

There is no doubt that the revolution of the internet that has been taking place since the last twenty years has brought up a new era, in which we have changed significantly our lifestyle, innovating the way we communicate with others, get to know the world, generate and receive information, and of course: the way we make business.

Having said this, you have surely heard already about the cryptocurrency, a new monetary system that uses cryptography to create coins and verify transactions (it is entirely digital), and has a decentralized system, that is to say, it is not controlled by any financial institution, like a bank, or a government. If you still don’t know what I’m talking about, maybe the mention of Bitcoins (the most popular cryptocurrency until now) might give you some clue.

So, it is important to note that this new type of currency has been becoming more relevant in the last five years, especially since 2013, when the Bitcoin’s value got a boost and started to be in the spot of the media. Here it enters a new phenomenon that has revolutionized the business world as well, which is known as an ICO, abbreviation for “Initial Coin Offerings”.

Basically, an ICO consists in a new kind of crowdfunding, in which the main characteristic is that the developer of a project offers to investors the possibility of buying a new token (aka, a cryptocurrency developed by the enterprise) before its release, so that they can gain a profit when its value rises after being introduced to the market.

Investing on ICOs, why it is important to know about it and how much money it has raised?

Of course, the novelty of this system still generates some caution among investors, but the innovations that it has brought to business and the great success that some ICOs have had make it look like a juicy opportunity to them.

To get an idea of how much someone can benefit from this, we can take a look at Etherum, the most successful platform until the moment that has used the ICO method. When its token, called Ether, was first released, people just paid $0.3 per coin. At the present date, the ether has raised its price to nothing less than $230. Imagine how much money the investors of that project have gotten!.

But what is remarkable about this system is not only how much an investor can benefit from that, but also the amount of money that startups can get via ICO.

Of course, this has caught the attention of businessmen. For example, the platform that we just mentioned, Ethereum, raised in 2014 $18,000,000 through ICO. Some other platforms that have raised huge quantities of money have been The DAO, with $155,000,000, MobileGo with $50,000,000, Brave with $35,000,000, Storj with 29,200,000, and Aragon, with $25,000,000.

Although there is some uncertainty yet with the future of the cryptocurrency system, there are some factors that might indicate a continuous boost of their value. For example, the rigorous control of the government over the finances in China, summed up to the constant devaluation of the yen, encourage Chinese investors to buy digital coins, so that they can have a currency which value is stable in time. This factor has influenced significantly on the value of tokens. On the other hand, transactions made by these kind of coins are far simpler that those made by the traditional means, and its mathematical system and encrypts assures a high level of security to the clients.

Finally, if companies such as Amazon started to use cryptocurrencies, we would be able to talk, for the first time, of a replacement of the traditional monetary system. If this happened, the demand for tokens would raise considerably, along with their value on the market, which would also increase the chances of success for startups using this method of crowdfunding.

In summary, if we consider the increasing importance of technology in the way we make business, we might expect a good forecast for those who invest and crowdfund with ICOs.

Big changes and ruptures in the financial world caused by ICOs.

You remember how revolutionary and innovating were social media such as Facebook or Twitter to us at some moment? As well as these companies succeeded in changing the way we communicate with others, the ICO’s and the blockchain system have come to change the finances.

The most significant innovation that this system has granted is its decentralization. Some analysts even think that this might be the beginning of the “democratization” of finances. Traditionally, there is an intermediary that participates in the exchanges of money and gets a profit from this, meaning that you’re going to see yourself obliged to pay fees. For the very first time in finances history, we are able to see a “peer to peer” transaction that is only regulated by mathematics protocols that ensure the security and success of this transaction.

This fact allows a lot of people to participate in this process in a more democratic way, letting behind many bureaucratic regulations and having lower costs to raise, save, and exchange money.

Because of all of this, both investors and startups see themselves benefited from that. The investors have the chance to use an innovative kind of currency, be part of a community; have transparency about the project that they’re backing, have more liquidity and the lack of governmental intervention in their finances. By the way, the startups are able to fund from investors scattered in the whole world without the inconvenient of having to deal with the several fees that appear when the crowdfunding is done through a centralized institution.

All these characteristics might build a new way to establish the concept of finances and business in the future if the cryptocurrency gets to have more relevance soon and if it becomes the new traditional system.

The fears in the system, are we seeing a bubble growing in cryptocurrency?

Despite all these positive things that we just said about the ICO system and its success in the financial world, not everything is that beautiful. At the present date, some analysts talk about the imminent crash of the bubble in the world of cryptocurrency.

The reason to be afraid of this is the incredibly accelerated increase of the cryptocurrency value. For example, Bitcoin augmented its value a 137% only from January until the present date. At the beginning of this year, the Bitcoin was coticed in $970, whereas its current price is $2500.

While some people think that we won’t see the equivalent of the 2008 crash in cryptocurrency, we have to remember that the number of people who actually own huge amounts of cryptocoins is still very low, and the majority of them are not willing to sell these assets. If cryptocoins keep increasing their value, we might see soon a boost in the demand along with a very low offer, which is usually a synonym to collapse.

If there is going to be a crash in cryptocurrency or not is quite difficult to predict, as long as this system is too innovating and new. But there is no doubt that the possibilities of seeing this happen is something that we must take into account before investing on ICOs.

The satiric side of ICOs

Maybe because of its unusual and kind of controversial nature, ICOs have also awakened critics and satirical reactions among people. So, while we have serious developers and startups that work with serious tokens like those that we mentioned before, some others claim that the ICO system is rather nonsense and absurd.

In response, they have developed hilarious tokens that somehow depict the absurdity of the phenomenon and the exaggerated attention that the media has given to it. Some examples of this are “Coinless”, “FOMO coin”, “Useless Token”, “Fuck Token”, and even “DogECoin”, that uses the doge meme as its token.

What might represent the biggest success of this way of satire is the fact that these absurd tokens have raised thousands of dollars.

No kidding. For example, the UET (Usless Ethereum Token) was able to raise $40,000 in just three days, the Jamaican bobsled team that participated in the winter Olympics raised $30,000 in DogECoins, and Fuck token has a value of 0,2 Ethers while FOMO coin is cotticed $6.05 in the market right now. On the other hand, the Coinless ICO will start this month on July 28th. From now on, it is a matter of waiting and seeing how much money it funds.

The funniest thing is that these tokens are not even based on a project. The creator of FOMO coin, for example, explained in an interview that he created this token as an experiment to see if people were willing or not to buy his coin. Also, the only purpose of the UET is to make transactions with this token. Besides that, it hasn’t any other purpose or technological innovation.

If you take a look at the Coinless portal, they present their token saying this: “Introducing COINLESS, the best way to invest in nonsense and still make some money out of it.” So, it is a cryptocoin which only aim is to make fun of ICOs through an absurd coin. In other words, you won’t be backing any project by buying these tokens. You will only spend money in nonsense. They also offer to retribute with “absurd profit”, whatever this means, which actually could “make sense”, if we take into account the current state of ICOs.

Still, we see how some people spend even thousands of dollars on these kind of cryptocoins.

Basically, these developers have known how to criticize with satire that a lot of people enrich themselves by buying tokens and without actually paying attention to the project that they’re backing, something that they find kind of absurd.

The ICOs and the great advantages that it brings to startups

Finally, once we have taken into account the positive things of ICOs, their breakthrough in finances, the fears that have appeared in this market, and even its satiric side, it is time to talk about the greatest advantages that the ICOs represent to startups.

As we said before, it is far cheaper than using the traditional means of crowdfunding, like IPOs (Initial Public Offering), in which they have to pay fees to a centralized enterprise. Basically, the ICO process allows the developers raise millions of dollars just using a white paper, a cryptocoin, and a blockchain. And not only that; as the process of crowdfunding is far quicker and simpler with this method, it allows to contact more investors from different parts of the world in an easier and even more “democratic” way than before. In other words, there are more people investing varied quantities of money in your project rather than counting in with just a bunch of investors, which makes the process of crowdfunding quicker and with more earnings.

But the advantages are not only economic, but also social. The decentralized system of ICOs allow the startups to build a community that is not connected by the traditional intermediaries, which creates, at the end of the day, a network based in trust.

And maybe the most important point, the startups are not only able to develop their project thanks to the crowdfunding resulting from the ICO, they also get a lot of exposure in the media if their token is successful, which is a great way of promoting their platform.

Plus, they can count in with a valuable coin, which also raises the value of their company’s assets. This gives a lot of prestige to their project and an alternative currency that they can use for their business.

So, even if we’re not completely acquainted with this system yet, it is definitely something that we can’t ignore because of the many important changes that it has already brought in, and there is no doubt that this system is going to have even more attention from the media in the future, and, why not? Maybe we all are going to use cryptocurrency in the future. It’s just a matter of waiting to see what happens next.