WTF is an ICO? - for dummies
It wasn’t very long ago that bitcoin felt nascent, laughable and small.
An ICO is a fundraising tool that trades future cryptocoins in exchange for cryptocurrencies of immediate, liquid value. You give the ICO bitcoin or ethereum, and you get some of Billy’s New Super Great Coin or the infamous CrunchCoin.
The Financial Times calls ICOs “unregulated issuances of cryptocoins where investors can raise money in bitcoin or other [cryptocurrencies],” which is accurate, especially if you underline the word “unregulated.” We’ll get to that in a moment.
Sticking close to the older financial publications, The Economist also took a look at the financing mechanism, describing what you buy in an ICO in the following fashion:
ICO “coins” are essentially digital coupons, tokens issued on an indelible distributed ledger, or blockchain, of the kind that underpins bitcoin, a crypto-currency. That means they can easily be traded, although unlike shares they do not confer ownership rights. […] Investors hope that successful projects will cause tokens’ value to rise.
The referenced value increase is critical to understanding the appeal of ICOs. These are not transactions of love. They are investments made in hopes of quick, strong returns.
Notably, not all ICOs are for cryptos that will maintain their own blockchain. According to the crypto-focused Smith + Crown research group, some ICOs are actually “launching ‘meta-tokens’ built on Ethereum, Bitcoin, NXT or others.”
After all, why not.
So ICOs can be coins on top of coins funded by the transfer of other cryptos to accounts in the hunt for what’s next. That might sound crazy, but it’s hot times in the crypto world.
And that heat is keeping ICOs bubbling. The same Economist piece, published in April of 2017, notes: “[n]early $250m has already been invested in [ICOs], of which $107m alone has flowed in this year,” a metric that it attributes to the aforementioned Smith + Crown.
That is a lot of money, making ICOs large in terms of their sheer dollar-scale. It’s therefore not hard to understand why more traditional business publications are paying attention. Following the money is their jam.
In short: ICOs are the new funding slingshot by which nascent cryptos are flung into the world.
Upvoted and followed, thanks for sharing! I got into the BNT ICO, but only bought 2 ETH's worth (200 BNT). Value is up from where I bought; so far, so good. :)