Digital Transformation Technology and Innovation

Is ICO a game changer of funding?

rhirano
Written by rhirano

Ever since Bitcoin was created, a lot of people have been investing in cryptocurrencies, and the number of investors is still increasing. They are eager to become millionaires and they believe that investing in cryptocurrencies will make their dreams come true.

However, Bitcoin and Ethereum, also other altcoins are already at high prices. So, even though those cryptocurrencies are still expected to become more expensive, it might be difficult to have high volatilities with them like before.

Therefore, a lot of investors of cryptocurrencies are now going for ICO (Initial Coin Offer) to have a big volatility to become a millionaire with a small investment. And ICO is changing funding

What is ICO?
ICO is a way of funding for projects which use cryptocurrencies (tokens) on blockchain technologies. When companies or project teams need to collect funds, they open an ICO
to offer investors to invest in their projects, and investors will receive the tokens in return.
Those tokens are expected to be used on their blockchain systems of their projects, and those token prices may be going to be higher than ICO price in the future, with big volatility.
There are some examples.

  1. NEO (AntShares)
    NEO (formerly AntShares) is developed by Chinese start-up. NEO is a public blockchain which realizes
    a high-speed authorization of transactions with smart contract and provides the application platform
    using blockchain technology.,
    The ICO was held in 2015, and the price was $0.032 per a token, and the current market price is $85.63.
    Therefore, the ROI is currently 276,100%

    (03. March 2018, CoinGecko)
  2. IOTA
    IOTA is the project using “Tangle” technology to solve cost and security problems of IoT.
    IOTA realizes less transaction fees and faster transaction thanks to “Tangle”. Also, it can keep the track of data of IoT.
    So, IOTA meets the need of micro transactions without losing contract data.
    The ICO was held 2015, and the price was less than $0.001 per a token, and the current market price is $1.33.
    Therefore, the ROI is currently more than 133,300%

    (03. March 2018, CoinGecko)

What’s the difference between an ICO and an IPO (Initial Public Offering)?
Probably, you noticed that ICO seems like IPO. However, there are some differences.
So, I will introduce the advantages of ICO.

  1. Investors can easily participate
    Regarding ICO, investors can invest with Bitcoin or Ethereum, some cryptocurrencies instead of fiat money. Also they don’t have to open any accounts. They can directly invest in ICO from their cryptocurrency wallets and they pay just transaction fees to invest
  2. Everybody can hold ICO
    To be compared with IPO, there are less regulations of ICO, so it’s not necessary to hold ICO through managing underwriters. Therefore, everybody can directly collect funds from investors anytime.
  3. ICO is a trend
    Nowadays, a lot of investors are into ICO because they expect the big volatility of cryptocurrencies. That’s why ICO is a big trend now, and Google Trends also show it.

    (03. March 2018, Google Trend)
    Since 19th of November 2017, ICO has been getting more interests than IPO has.
    And thanks to this trend, there are ICOs that incredibly succeeded.

(1) Centrality
Centrality is a platform based on blockchain technology, which is for “Decentralized Applications” (DApps).
Developers can develop DApps on the platform and the token (CENNZ) will be used on the platform. For example, to purchase the development modules of the platform, to purchase the applications, etc. The ICO was held on 15th of January 2018, and the tokens were sold out within 6 minutes.
And they got $80 million in that moment.

(Images of Centrality from  official HP )

(2) Medicalchain
Medicalchain is dedicated for healthcare industry. It’s expected to facilitate complexity of managing information and transactions, and so on
in the healthcare industry for all stakeholders of healthcare. And the token (MTN) will be used on the platform.
The ICO was held on 5th of February 2018, and the tokens were sold out within 2 minutes, and the total funds were $24 million.


(Medicalchain official video)

Risk of ICO
So far, ICO might seem flawless for companies and investors, however, there are still some big risks, especially for investors.

  1. No protection from frauds
    The cryptocurrency market has been growing really fast, that’s why most countries have scarcely regulated this market for now.
    Therefore, there are no regulations that protect investors from frauds. Also, anybody can hold ICO without any audits, that’s why
    there are a lot of fraud ICOs which just stool money from investors.
  2. Big rule change might happen
    As I mentioned above, there are few regulations in any countries. And nowadays, a lot of countries have started to consider it.
    For example, China, which was one of the biggest crypto currency market, recently decided to ban cryptocurrency exchanges
    and ICOs in China. Also, Chinese people are now forbidden to access even some foreign exchanges.
  3. ICO project can fail
    According to Bitcoin.com, 46% of last year’s ICO has already failed. So, even if the project isn’t fraud at all, it’s possible that investors
    lose big amounts of money. It’s very difficult to find good ICO to invest in because anybody can hold ICO without even products or services. (Generally,
    they prepare just whitepapers & websites for investors)

Conclusion
It might have become easier to collect huge funds in short term thanks to ICO, they could get enormous funds in short term.
Because blockchain technologies and cryptocurrencies are steadily growing,
and it makes us expect that those technologies will change our lives. Also, investors can’t help expecting big ROI of ICO.
As long as this trend keeps on going, we could benefit from ICO regarding collecting fund, and ICO would remain as a game changer of funding.
However, investors mustn’t forget that the market and almost projects are still unstable, and I hope that those breakthrough won’t end up just money game.

 

About the author

rhirano

rhirano

Japanese living in France