Revolution next door — a few thoughts on ICO 2.0
I wonder if you know that feeling a CEO of a growing company gets when they are forced to resort to external financing. Fear, uncertainty and weeks of preparation that lead to a 20-minute meeting, only to hear your business sucks, the business model is not scalable and nobody believes in your founding team. What happens next?
You dig deeper. You’ve heard so many stories about not giving up. J. K. Rowling spoke to dozens of publishers until someone finally believed in the story of a boy running around with a twig in his hand. The founder of Snapchat has been told by his professor that there’s simply no place in the world for an app with disappearing pictures.
What’s saddening is the fact that failure stories are of a magnitude higher in volume as compared to those with happy endings. What is the reason for that? Some would argue it ’s just meant to be this way. Others would refer to statistics, stating only a handful will succeed. And me? I think it’s worthwhile to combat these statistics. How? The answer lays in ICO 2.0.
Initial Coin Offering (ICO 1.0) — funding model that the community fell in love with.
I recall first ICO fundings: Ethereum, Augur, Digix. The valuations were a shock to many. $18,000,000 for Ethereum, $5,000,000 for Augur. As for Digix, it was a hot topic for weeks on end as the presale ended in a mere 16 hours! However, what was baffling in 2015 was nothing in comparison to the events of 2017.
Hundreds of millions of dollars collected in less than a minute. The funding members’ increasing promises had set the community on fire and the market seemed to be on an endless honeymoon period. I still remember nervously waiting for BAT’s (Basic Attention Token) presale, getting angry at the hardcap getting higher and higher only to realize that all tokens were sold out within seconds as the whole Ethereum network was overloaded.
Distributed cake eating — a short story about investment risk.
Most of the people looking at ICO fundings from the side keep wondering how on earth is it possible that such a a significant amount of money may be invested in projects that are largely based on a vision of the funding team. The answer couldn’t be simpler. Just like Bitcoin and blockchain both decentralized the payment model, ICO decentralized (or — in other words — distributed) the investment risk.
Imagine sitting at a table with 3 friends of yours. In the middle of it you see a huge, delicious cake. Your task as a group is to eat it. Despite the fact you see people whom you’ve considered solid players in the world of cake eating, you see a risk of failing at it, as the cake is humongous. You start eating, but it’s going slow. It turns out there are raisins buried inside and one of your friends is not a fan of them, to say it lightly. The challenge gets even more difficult — if not downright impossible — now that there are only three of you left. Now imagine a similar scenario but with 20 or even 30 people at he table. Everyone takes a piece and the cake is gone in a split of a second, regardless of the fact that a few participants took off in the process. Moreover, what if the cake turned out stale? Who’d suffer more, a large group of individuals who each took just a bite or you and your 3 friends who got sick of it?
Alright, but what is ICO 2.0?!
The ICO model is fine. Companies earn money, the community willingly buys tokens, but there’s still a significant issue. Participating in a presale, one should ask himself what does he get for trading his valuable hodled bitcoins? Is it shares? NO! Is it a token crucial to the survival of the said company? (In most cases: it’s NOT). Thus, isn’t it that we’re simply played here?
Purchasing tokens in ICOs is similar to investing in a steam machine. With the exception that you’re not investing directly in the steam machine and you don’t profit on its sales, but what you rather buy is wood to heat the water container so that the steam can work its way and start the machinery. You may quickly come to the conclusion it’s still a good investment since people will always need wood to use the machine. You’re right about that, but what’s going to happen when users abandon wood and start to use coal as the heating medium instead?
This simple example is a perfect analogy to what’s happening currently in the market. There are barely any projects that let you invest in the “machine” directly. They are rather based on “utility tokens” — namely, our “wood”.
ICO 2.0 are “equity” tokens, meaning a real company share bound to a cryptocurrency coin. Having such tokens, the company is required to pay you quarterly dividends. You’re a real company shareholder who, given the sufficient amount of shares, has a say in the direction the company is heading. And if an interested investor knocks by the company’s door, he also needs to buy your shares.
Imagine the world of decentralized investing in interesting, innovative companies. The investment risk is shared by thousands or hundreds of thousands of people. The world in which the most interesting ideas are financed by the John Does of the world, each holding chances for huge profits. How many more Instagrams, Teslas, Facebooks, Snapchats, Ubers there’s gonna be if only we gave more companies a chance? How positive will the impact be of an improved financing model, where securing cash flow is a matter of days/weeks rather than months? It should ALWAYS be about creating new tech rather than desperately looking for financing just to survive.
And now for the avid lovers of speculation and high returns.
Have you heard the one about the school in Saint Francis who secured an early stage funding for Snapchat?
In today’s world it all depends on good timing and information access. Thanks to ICO 2.0, we’ll have access to the best and the most interesting deals from all over the world. Here comes a completely new market for speculation. We will witness companies of all sorts getting tokenized. Coinmarketcap will be overflowing with new coins and financial institutions are already warming up to take part in the new revolution right from the very beginning.
A brief summary.
Don’t let the one of the biggest revolutions of the upcoming years pass you by. Huge VCs may loose their significant advantage the moment ICO 2.0 sees the light. I can’t predict when it’s going to happen, but it’s inevitable. It’s worth learning some more about Neufund as their team has a chance to ignite the transformation mentioned above. I’m excited just to think of all that waits round the corner for all of us. I strongly recommend, be a part of it!
~#Jarzombek
The Birb Nest is a facet of the CryptoBirb community. For more information please visit https://discord.gg/kUpraEH
