The hot financial trend of 2017 calls ICO: the issuance of virtual currencies. Investors are storming, and the company's currencies without a product it issued in April are already worth $ 2.5 billion. Critics say this is a pyramid, while entrepreneurs talk about a revolution similar to inventing the Internet
"Do not use ICO if you do not want to go to jail," says Bitcoin entrepreneur Margo Avidisian. She's only half joking. Avedisian is not the only one who explains to Calcalist that anyone who is really active in the hot arena of issuing virtual currencies prefers not to use that charged term. "He lights warning lights at the Israel Securities Authority, which is not very friendly to the industry, and we do not want to draw too much attention to it."
But even if the entrepreneurs themselves were interested in industrial quiet, the term ICO, the initials of the "initial coin offer", has been credited with a crazy frenzy in recent months. And no wonder: through such offerings, more and more start-ups manage to bypass the traditional investment industry as well as the regulators and raise millions of dollars. Not only that, but in a large number of cases, the entrepreneurs who raise the money are required to present to investors only a short technical article describing the vision - along with the promise to be part of a new movement that will reshape the world, especially the financial system. It is enough to raise huge sums in seconds.
In recent months, currency issues have gained momentum, and today millions are being raised at a dizzying pace. Israel's Bancor raised $ 153 million in three hours a week to develop a currency exchange protocol; Gnosis raised $ 12.5 million in 10 minutes to build a platform for forecasting events; Brave raised $ 35 million in 24 seconds for browser development; Aragon raised $ 25 million in 15 minutes for a corporate decentralization project. The one who might overshadow them all is Tezos. According to some estimates, its currency issue next week is expected to reach hundreds of millions of dollars.
Who see the wave of currency issues as an old-new kind of fraud, a kind of updated pyramid for the Bitcoin era. But the field attracts well-established and well-known investors, such as American billionaire Tim Draper. Draper, a veteran venture capitalist who was one of the investors in Skype and Beidu, made headlines when he purchased 2014 Bitcoins, which the law enforcement authorities confiscated from Silkroad, and last week was among investors in Bancor. Calcalist explains that as far as he is concerned, there is a clear economic and social logic in the recent wave of issues. "The success of Bitcoin and ICO like Bancor," says Draper, "only demonstrates how those who do not enjoy the services of the banking system are desperate for such services, and thus survive through an economic platform that governments do not currently provide."
"Every investment is risky, and investment in these currencies can be viewed as speculation," adds Avidisian. "But I would like to believe that the upsurge in the popularity of these issues stems from the desire of people to support the change represented by the Blockkin technology -" we will return to this technology "- and take part In a movement that can change the way the world works. "
Coins for free
It is not by chance that an ICO (Initial Currency Offer) rings like an IPO. The idea is similar: a company raises money from the public for an asset that may provide a future yield. But that is what imagination is all about. In the case of the share issue, investors buy a share from an existing company whose books have been carefully examined. In issuing coins, investors buy digital money created and controlled by developers, and are supposed to be used for a project that has not yet been developed. And the main difference: their money does not buy a share of the company.
In fact, the currency issue can be seen as a combination of two of the most prominent financial developments of the 21st century. On the one hand, mass funding on the Internet. This is the idea, for example, behind the Kicksterster campaigns, which allow the general public to support and sometimes get creative projects, such as a digital cooler or a smart watch. On the other hand, virtual currencies, such as Bitcoin, for example. When they are joined together, they receive mass funding by issuing coins.
These currencies, as stated, do not represent a holding in the company, like ordinary shares. They do not represent a contract that guarantees investors interest and principal payments on fixed dates, such as bonds, and they do not resemble state-backed currencies (so-called "Fiat" money). The day will come when the currencies will be used, because of the project they are integrating into, and therefore the real value, or the participants in the issues simply believe that they can sell these currencies to someone else at a higher price.
And there is another important difference between issuing shares and issuing coins. When a company like Snap or Facebook raises shares on the stock exchange, it does so for dollars that go into its coffers and to the owners' pockets. But when the start-ups who issue coins announce a tens of millions of dollars in funding, they do not really raise dollars. In exchange for the new currencies they have issued, the developers receive other virtual currencies, mainly Bitcoin or Athar. Thus layers are created on layers of digital currencies, which are traded in a closed circle of virtual exchanges. complicated.
"It's not something I can explain to my mother on the phone," says Avidisian, a serial entrepreneur and co-founder of Nosys and Athrium, and came to Israel last week for a conference D10e related to decentralization. She stood out among the participants. "In 2013 they named me the leading woman in Bitcoin," Abidisian laughs. "The truth is I was the only woman in Bitcoin."
Perhaps it is preferable that this field be accessible to your mother and the general public at large?
"I do not know why you want to invest a lot of money in this, things that have not yet been tried, for example, I invested only half of Bitcoin, which in the end turned into a lot of money, but it was only a small experiment with a relatively small investment. Something I would recommend. "
Supervision? What is supervision?
Avidisian had fallen into the field by chance. "In 2012 I met at the party the founder of Treadhill (one of the first platforms to convert virtual currencies). He was looking for a business development manager, was on his way to a meeting in San Diego and had an unnecessary flight ticket. "Five years later, Abidisian is already known as the" Batkin Queen. "In general, there are quite a few titles in the scene: Yani Malahov, In a $ 30 million round of currency auctions for aeternity project, he calls himself the godfather of the Atrium project, which has been in the field for four years.
In fact, the entire virtual coin scene is less than a decade old. The Beatkin performance, the defining moment that gave rise to this scene, took place only in 2009. Hence the logic of all the appellations: in such a young field, there is no one to serve as a consensus figure. Instead, the community is replete with those who have declared themselves professional, and others who have received nicknames that imply a kind of reputation.
But when we talk to the various entrepreneurs in the field, everyone is still talking about the same revolution: the Blockkin. This is the technology on which the various projects that now raise money are based on currency issues. This is also the technology on which Bitcoin is based, and its competitor, the Ether coin. In short, blockchine technology enables the management of a distributed database. Instead of one central computer, this database runs simultaneously on the users' computers, and updates everyone. Thus, the need for intermediaries to connect the various users, including central management, disappeared. There is also an explanation of the name: Blochein consists of blocks (blocks) of verified information. Each block contains the new information, as well as the information of the block created before it. This creates a connection between the various blocks, creating a kind of chain (Cheyenne) that makes the information protected from cheating.
So far the technical explanation. But Blocchine is "a lot more than an information technology product," says Dreh Seymour, founder of Sphre, an information security expert who has worked with giants such as IBM and HP. "We want to be part of the movement that will create a fair Internet that will stop exploiting the private information of people," he says of his company.
so what do think??