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Initial Coin Offering (ICO)

Initial Coin Offering (ICO)

Initial Coin Offering (ICO) is a way to attract investment in a crypto project by selling tokens (digital assets). The method was copied from the procedure for the initial public offering (IPO), but adjusted for the digital sphere.

History

Generally, tokens for the new cryptocurrency are sold to raise money for technical development before the cryptocurrency is released. Unlike an initial public offering (IPO), acquisition of the tokens does not grant ownership in the company developing the new cryptocurrency. And unlike an IPO, there is little or no government regulation of an ICO. The first ICO was for Mastercoin in 2013. Ethereum raised money with an ICO in 2014. As of May 2017 there were currently around 20 offerings a month, and a new Web browser Brave's ICO generated about 35 millions under 30 seconds. In 2016, a total of $102.5 million was raised in dozens of major ICOs.

Pro and Cons
Pro
  • A way to get funding for your crypto project. Some of the most promising projects from the point of view of investors receive funding for tens and millions of dollars.
  • A way to involve people in the process of developing a crypto project. If no one uses the product of the development team, then the chances of growing into a large company are very small.
  • ICOs also help build communities around the crypto project. This allows you to find like-minded people who will further help the project develop.
Cons
  • Lack of legislative regulation. Each project can hold an ICO at any stage of its project: ideas, MVP, market expansion. Thus, many investors invest money without realizing that the profit can only come in a few years.
  • Fraud. On the Internet, it is not uncommon for a project to be promoted due to a competent advertising campaign, and after investing money in it, it is closed. So, for example, the creators of the NFT Frosties series of pictures disappeared along with $ 1.3 million they received from investors.
  • After the ICO is held, the project itself can change the conditions: postpone previously published release dates, change tokenomics, change the working conditions of the project, or even completely modify the project itself.
In the World:
PayPal

The fintech gigant confirmed its plans to ICO its own stablecoin. The name this project is PayPal coin. It pegged to the US dollar currency exchange rate.

"Developer Steve Moser was the first to detect the development of an in-house digital coin in the source code of PayPal's iPhone app. Later, Jose Fernandez da Ponte, PayPal's senior vice president of crypto and digital currencies, confirmed the developer's assumptions. Earlier, the company had already launched a number of features that allow users to buy, store and exchange some digital coins".

Acala

DeFi protocol Acala raises $400M in crowdloans during first Polkadot parachain auction. Unlike typical crowdfunding rounds, Acala's financing mechanism is a crowdloan, which means it will eventually need to pay back the "crypto debt" it has solicited from investors.

Timeline

Patents

Further reading

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Initial Coin Offering (ICO)

Jake Frankenfield

Web

Documentaries, videos and podcasts

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References

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