What is Initial Coin Offering (ICO)?
An initial coin offering (ICO) is a method of raising funds through the use of cryptocurrencies. Its use is most popular in projects that have not yet fully developed its blockchain platform, product, or service. Payment is generally made with Bitcoin or Ethereum, but in some cases, fiat currency is also accepted.
Investors participate in the Initial Coin Offerings in the hope and expectation that the company will succeed, driving demand and causing the underlying tokens to rise in value. In other words, they hope to get a good Return on Investment (ROI) as early supporters of that particular cryptocurrency project.
These cryptocurrencies, like the other existing ones, can be freely exchanged. It can also be freely bought and sold. And it is the market that sets its price based on supply and demand. This allows that, if you buy at one price and sell at a higher one, you can generate benefits.
What are the differences between the ICO and IPO (Initial Public Offering)?
Let us find out how is this new type of cryptocurrency investment different from the usual IPO?
Firstly, ICOs are related to the world of cryptocurrencies, while IPOs are related to stock exchanges. Another thing to keep in mind is that IPOs in the world of stock exchanges is a method of funding a project, a company that offers certain services to society, just like ICOs do.
This is because while the profits obtained through the IPO companies, not all go directly to the investor, but they receive it through fixed dividends.
In the case of ICOs, we will obtain their profits directly, in proportion to popularity. And the growth that the company achieves, as this fact will be reflected in the value of the tokens, which we can sell for dollars on multitudes of cryptocurrency exchange platforms.
Another important difference between them is the fact that while IPOs are subject to different socio-economic factors, such as the economic development of a state or its policies. ICOs use a decentralized market system. Thus, ICOs are much more independent than IPOs.
Ethereum most popular blockchain for fundraising and token creation:
Ethereum is currently used as a platform to launch other cryptocurrencies. Starting with the ERC20 token standard, defined by the Ethereum Foundation, any developer can issue their token versions and collect funds with an ICO.
In this way, fund collectors establish their fundraising strategy, the goal to be achieved, and receive Ethers in return during said collection. With that financing model, Ethereum has raised billions of dollars for ICOs on its platform. Even EOS, one of the most valuable cryptocurrencies in the world, is an ERC20 token.
ICO Boom in 2017:
Undoubtedly, new technologies and digitization have generated new financing formulas such as initial money offers. Despite being a young investment model where evolution is unknown and lacks regulation since 2017 there has been a real revolution with ICOs.
The boom in this type of crowdfunding did not start until the end of 2016. These are some data that highlight the exponential development of ICOs:
ICOs in 2017 and early 2018:
– In 2017, 700 ICOs were held.
– 6.1 trillion dollars is the growth of ICOs in 2017.
– All the ICOs created had an average collection of $ 16 million. Some initial coin offerings raised more than $ 150 million such as Bancor has raised $ 153 million and EOS has raised $4.1 billion.
Top 10 biggest ICOs:
1. EOS: $4.1 billion raised
This is a decentralized blockchain that uses Proof of Stake (PoS) and its governance system is governed by block producers, who can vote to confirm transactions, modify applications, and change the code. Its native cryptocurrency started as an Ethereum ERC-20 token, only representative of future independent tokens in its chain.
The main purpose of its platform is to make creating decentralized applications easier, by providing a set of tools similar to those of a computer, including RAM and storage. It also aims to become much more scalable than Bitcoin or Ethereum.
2. Telegram: $1.7 billion raised
As many already know, Telegram is an instant messaging application similar to WhatsApp. Its administrators decided to go one step further to bring to life their Telegram Open Network (TON). It is a blockchain that would work with PoS to bring decentralized applications, greater scalability, and “a new generation of cryptocurrencies”.
3. Dragon: $320 million raised
Based on Ethereum, this platform aims to become a solution for the gaming industry, focused above all on casino VIP clients. The general idea is that the DRG. Its native ERC-20 token can be exchanged both for fiat money and for Dragon Global Chips (DGC), a kind of fixed value token designed for the game.
In this way, costs would be reduced and benefits would be increased for both parties involved, both the casino and the player.
4. Huobi: $300 million raised
This crypto active is presented as a very similar approach to that of Binance coin. It is characterized by being an integrated point system. And it is based on both the distribution and the blockchain management of Ethereum as an ERC-20 token.
This crypto activity can be used in various ways, but the most common is through the discount of commissions through negotiation.
5. Hdac: $258 million raised
This firm backed by Hyundai aims to create a private blockchain that can interact with public blockchains and enable authentication, interconnection, and transactions between the Internet of Things (IoT) devices.
In other words, they plan to mix blockchain and IoT to make smart homes safer and more versatile. For this, they have the HDAC token, which would work within this same blockchain allowed with the ePoW algorithm, a new type “based on trust”.
6. Filecoin: $257 million raised
Filecoin’s main purpose is to create a new blockchain, only in it, instead of using Proof of Work (PoW). By using them, the blocks are created by “miners” who provide not computing power, but storage capacity. And that is Filecoin’s offer: file hosting.
Their ICOs took place between August and September 2017, and at the time, they held the historic fundraising position with $ 257 million, priced at $ 0.75 per token.
7. Tezos: $232 million raised
This is a PoS blockchain that allows the use of smart contracts to create decentralized applications. But, perhaps its most outstanding feature is its governance method, where depositaries can vote on protocol amendments and the so-called ‘Self-Amendment’ is used, a mechanism that allows the network to update without reaching forks.
8. Sirin Labs: $157.9 million raised
The long-term vision of this company is to become the leader in secure, open-source smart electronics, and thus “close the gap between the mass market and the blockchain economy.”
Their first steps to achieve this were to create an operating system based on the IOTA Tangle network, specifically for using decentralized applications and cryptocurrencies in a mobile environment and, most strikingly, build a cool wallet smartphone from scratch.
9. Bancor: $153 million raised
This is an Ethereum-based platform, whose main offering is the so-called “smart tokens”. These ERC-20 tokens calculate their prices and allow a single party to exchange one token for another, without the need for a second party.
This is accomplished through a built-in smart contract that instantly processes buy and sell orders, driving the “price discovery” process. Once someone creates a new coin and sets its price parameters, it becomes liquid immediately.
10. The DAO: $150 million raised
A DAO or Decentralized Autonomous Organization refers to a revolutionary way of organizing and operating organizations, making use of smart contracts and blockchain technology to provide transparency, immutability, autonomy, and security to them.
DAOs are not linked to any particular regulation or law due to the decentralized nature where the smart contract is executed and coordinated by the organization, the blockchain.