Everybody is talking about Initial Coin Offerings or ICOs. Whether it is the expert analysts or the mainstream newspapers, there is a buzz around issuing new digital coins. And no wonder – startups around the world are raising hundreds of millions of dollars through ICOs.
Richard Kastelstein, a partner at Cryptoassets Design group, which helps companies launch ICOs, told Business Insider in July 2017 that half a billion dollars had been raised since the start of the year. It’s a sensational sum of money, given that ICOs didn’t even exist five years ago.
Raising millions in minutes
And, get this, Gnosis, a prediction market for digital currency Ethereum raised $12 million in 10 minutes in April this year. Brave, a new web browser started by the founder of Mozilla, raised $35 million in 30 seconds by selling ‘Basic Attention Tokens’.
April 2017 is being cited as the month that ICOs really caught fire and financial experts believe they will get bigger and bigger. So, how do you set up an ICO?
Setting up an ICO
It’s quite simple really. To raise money through an ICO, a company issues a new digital currency that can either be spent within its ecosystem, a bit like Disneyland dollars, or used to power part of the business, like the fuel you put in your car. And as one ICO expert pointed out: “With tokens/digital coins you can get thousands of engaged supporters who are extremely motivated to see your company succeed.”
Foe example, Jan Isakovic, CEO of ICO platform Cofound.it has a token that is used on its platform by all the startups applying to join the platform. He raised $14.8 million in June this year through an ICO and this is funding the construction of a platform to connect ICO-funded companies with experts who can help grow their business.
Better than venture capital
Isakovic prefers ICOs because of poor experiences with the more traditional ways of raising funds, such as venture capital. As he says, this method is slow and startups don’t always get the support they need, but with an ICO, the funding comes in fast and all the people who put their money into it are engaged and energised to make it work.
Setting up an ICO is relatively simple, and most companies use the Ethereum blockchain network that allows people to write ‘smart contracts.’ Isakovic explains: “A smart contract is effectively a piece of software, a piece of code. In our smart contract, it says we are selling 125 million tokens, our cap is at 56,000 Ether or something. The ICO lasts until the cap is reached or until four weeks is done. Calculate the contribution and then send tokens. It’s two or three pages of programme and Ethereum does everything else.”
And there is another advantage: unlike buying shares in an early stage company, investors in ICOs can trade the coins almost immediately on a number of exchanges, rather than waiting for a company to list on a stock market. This attracts investors looking to make money, and this is pushing up valuations.
When you look at kript.io, a decentralised mobile app and social network for investing and trading in ICOs, you realise the phenomenal array of investment opportunities that are available, the simplicity of the concept and its security, because the Ethereum platform used for ICOs has proved itself to be bomb proof.
A booming market
The market capitalisation for cryptocurrencies has been steadily growing since the beginning of 2017; in fact it has multiplied by 1.5 times. Without doubt blockchain technology is going to be the future of the financial market and ICOs are going to play a massive role in fund raising. ICOs really are the trend to watch.