Photo Credit – JVLTax
Initial Coin Offerings (ICOs) have brought $7 billion dollars up in 2018 till now, a number so fast to showcase that the market is being marketed following the cryptocurrency trend.
Initial Coin Offerings (ICOs) give new companies and startups an elective strategy for raising capital contrasted with the customary procedure including banks, private value, and investment firms. These organizations, referred to as crypto ventures, issue tokens of their initial coin supply instead of stock in return for money to financial specialists who have given them capital for their task improvement and growth of the project.
ICOs routinely happen before a project is even finished on the grounds that the raised assets enable the organization to scale and cover costs. Like a customary stock portfolio, the potential for enormous future adjustments boosts financial investors to purchase tokens, trusting that the tokens initially purchased will bring rise in value.
It’s not difficult to perceive any reason why numerous crypto-ventures incline toward ICOs to conventional capital raising. Ethereum, a blockchain application in 2014 worked to upgrade smart contracts, brought over $18 million up in Bitcoin during its ICO and as of now it has a market capitalization of over $19 billion.
HISTORY OF INITIAL COIN OFFERING
The primary first token sale ICO was held by Mastercoin in July 2013. Ethereum project raised with a token sale ICO in 2014, bringing 3,700 BTC up in its initial 12 hours, equivalent to roughly $2.3 million at the time. In April 2014 an ICO was held by Karmacoin for its Karmashares venture.
ICOs and token sales wound up well known in 2017. There were more than 18 websites following ICOs before mid-year. In May, the ICO for another new internet browser called Brave produced about $35 million in less than 30 seconds. Messaging application Kik’s ICO in September 2017 raised almost about $100 million. Toward the beginning of October 2017, ICO coin dealt worth $2.3 billion had been led during the year, in excess of ten times more of 2016. As of November 2017, there were around 50 contributions a month, with the most noteworthy earning ICO as of January 2018, being Filecoin raising $257 million in just over an hour.
Ethereum is the main leading blockchain stage for ICOs with over 80% market of the overall industry. Tokens are for the most part in view based on the Ethereum ERC-20 standard. Since after that ICOs have brought about extensive phishing, Ponzi plans, and different scams, representing around 10% of ICOs.
In January 2018, Facebook restricted advertsing commercials for ICOs and also for digital cryptocurrencies and binary trading options. By April 2018, ICO publicizing has been prohibited by Facebook, as well as by Twitter, Google, and MailChimp.
SEC Rules and Regulations
Numerous financial investors have grasped ICOs by bouncing in head-first, others stay incredulous – refering to security, lawful, and extortion issues. The Securities and Exchange Commission’s (SEC) are now examining the new direction in the control of fake and fraudlent cryptocurrencies.
Keeping in mind the end goal to set up better security and stifle the instability around the value of these ICOs, the SEC has issued an announcement to recognize ICOs as either an functional coin (utility) or a raise (security).
With rules and regulations now SEC urges organizations/crypto ventures to enlist with the SEC to decide if the ICO is a security. On off the chance that the token is esteemed a security, the ICO must comply and fit to SEC directions since they are in fact thought to be a investment speculation.
The ICO must follow SEC regulations since they are actually thought to be a investment speculation. Tokens not considered securities/ventures might not need to enroll with the SEC. These are tokens regularly gained with practically zero desire for benefit.
The SEC’s decision is an endeavor to furnish planned financial investors with their tools and objective helping them to keep away from fraud and scams by conveying regulation to a formerly unregulated market center.
ICO Pros and Cons
ICO improvement requires an entire scope of ICO administrations, from conceptualization of token plan and smart contract working to promoting marketing outline, digital advertising and giving funding framework to ICO campaigns. Here are a few advantages & disadvantages of ICO :
Pros of ICO –
(1) Offers chances to invest in promising projects
(2) Doesn’t require superfluous paperwork
(3) Blockchain Network building
(4) Introduction and exposure to new ventures of projects
(5) Early access to possible profitable tokens
(6) Motivating force and getting paid for its innovation
Cons of ICO –
(1) Investors are buying coins for a project that doesn’t even fully exist yet which are scams
(2) Sometimes project may be hacked during ICO tokens with fraudulent behaviour.
(3) Prices of tokens may change in decrease and drastically, making a loss for everyone who invested.