The last two years produced more innovation in technology funding mechanisms than the last two decades. Thanks to the Blockchain technology, a new powerful way to raise funds emerged: Initial Token Offerings (hereinafter “ITO”). An ITO consists in proposing the acquisition of tokens in exchange of cryptocurrencies (BTC, ETH, etc.) or in compensation for the realization of actions in favor of the project (promotion, audit, test, etc.). Token issuance allows to raised funds in order to finance the development of a product or service.
Token based fundraising mechanism can be carried out by any type of company regardless of size, age, geographical location or legal structure. It’s particularly attractive for SMEs who suffer from lack of investment.
One of the first chapter in the history of this new method of fundraising was written by the core team of the Ethereum blockchain. At the time, the team was looking for a way to finance the development of his new blockchain protocol by proposing to acquire Ether (ETH) against Bitcoin (BTC): Ethereum at the end raised more than 18 million in 42 days (July 20th to September 2nd, 2014).
After the deployment of the main net launched, we have seen a tremendous increase of issuing tokens to crowdfund projects through the use of ITOs smart contract, both in terms of the number of fundraising campaigns launched and the amounts collected: about sixty for more than $100 million. The Singular DTV and Golem projects were the major successes of 2016. They respectively raised 7.5 million in only 17 minutes and 8.6 million in 29 minutes.
The crazy period of ITOs reached his peak in 2017, with nearly 3 billion collected to finance several hundred projects in extremely varied fields: data storage, finance, development technology infrastructure, energy, art and music industry, health, video games, digital identity. The year 2017 also illustrates the passing of a new phase in terms of collection capacity more than a dozen ITOs have collected over 50 million. Filecoin and Tezos are now the two biggest hits with 257 million and 232 million respectively.
Unlike traditional financing methods such as the issuance of shares or bank loan, the ITO allows the initiator of the project to dissociate control of its financing. The development of the project can be carried out in complete serenity without having to concede a part of the rights on the product or to undergo a dilution of the capital of the company. Moreover, taking into the fact that it’s cross-border by nature, it makes it possible to solicit an infinite number of potential investors (retail and professional) located in all corners of the planet. The audience base is much broader than in the context of a traditional fundraising with investment funds, business angels or via crowdfunding.
From investors point of view, tokens are easily transferable, either directly between two people (Peer-to-peer), or through a specialized crypto exchange platform. This ability to exchange tokens makes it possible to give greater liquidity to this type of asset than the shares of an unlisted company. Cryptoasset market operates continuously 24/7/365.
In addition, the ITO is also a great marketing tool to give visibility to a future product/service and begin to federate a community that will contribute to the evolution of the project and its promotion.
The growing success of the ITOs makes this funding method a new and attractive tool that will revolutionize the financial system. Tokens will become the financial securities of tomorrow.
See more at https://tozex.io
