What is An Initial Coin Offering? Raising Millions In Seconds
Last Updated: 21 Feb 2019
Initial Coin Offering (ICO) is the cryptocurrency’s world public crowdsale. Whenever a project wants to launch a new coin or dApp, they can conduct an ICO to attract investors into their ecosystem. The most alluring part of ICOs is the lack of red tape and formality. More often than not, a company simply has to submit a whitepaper to qualify for an ICO. Companies have been able to raise millions of dollars in mere seconds, thanks to ICOs.
In fact, the amount of money that ICOs have raised over the last two years is truly astonishing. In 2017, ICOs raised a total of $5.6 billion. If that sounds shocking to you then think about this.
ICOs have already raised $6.3 billion, alone!
After seeing all these stats, it makes sense as to why more and more people are getting intrigued with ICOs. Our guide gives an overview on Initial Coin Offering- ICO and presents the hottest past, current, and future ICOs.
What is An Initial Coin Offering?
ICOs are basically blockchain crowdsales, the cryptocurrency version of crowdfunding. The ICOs have been truly revolutionary and have managed to accomplish many amazing tasks:
- They have provided the simplest path by which DAPP developers can get the required funding for their project.
- Anyone can become invested in a project they are interested in by purchasing the tokens of that particular DAPP and become a part of the project themselves.
It was in July 2014 when ICOs well and truly came into the public’s attention. That was when the ICO Ethereum raised $18.4 million and ushered in a new age of ICOs.
Since 2013 ICOs are often used to fund the development of new cryptocurrencies. The pre-created token can be easily sold and traded on all cryptocurrency exchanges if there is demand for them.
With the success of Ethereum, ICOs have become the de-facto method of funding the development of a crypto project by releasing a token which is somehow integrated into the project.
Short History of Initial Coin Offering
Maybe the first cryptocurrency distributed by an ICO was Ripple. In early 2013 Ripple Labs started to develop the Ripple called payment system and created around 100 billion XRP token. The company sold these token to fund the development of the Ripple platform.
Later in 2013, Mastercoin promised to create a layer on top of Bitcoin to execute smart contracts and tokenize Bitcoin transactions. The developer sold some million Mastercoin token against Bitcoin and received around $1mio.
Several other cryptocurrencies have been funded with ICO, for example, Lisk, which sold its coins for around $5mio in early 2016. Most prominent however is Ethereum. In mid-2014 the Ethereum Foundation sold ETH against 0.0005 Bitcoin each. With this, they receive nearly $20mio, which has become one of the largest crowdfunding ever and serves as the capital base for the development of Ethereum.
As Ethereum itself unleashed the power of smart contracts, it opened the door for a new generation of Initial Coin Offering.
Ethereum – The Initial Coin Offering? ICO Crowdfunding Machine
One of the easiest application of Ethereum’s smart contract system is to create a simple token which can be transacted on the Ethereum blockchain instead of Ether. This kind of contract was standardized with ERC#20. It made Ethereum host of such a wide scope of ICO that you can safely say that Ethereum found its Killer App as a distributed platform for crowdfunding and fundraising.
The most prominent demonstration of the potential of Ethereum’s smart contracts has been The DAO. The distributed investment company was fuelled with Ether worth $100m. The investors received in exchange against Ether Dao Token which had their own market price and enabled the holder to participate in the governance of the DAO. After it was hacked, the DAO however failed.
The concept of funding projects with a token on Ethereum became the blueprint for a new and highly successful generation of crowdfunding projects. If you already tried out, you know that investing in token on top of Ethereum is charmingly easy: You transfer ETH, paste the contract in your wallet – and, tata: The token appear in your account and you are free to transfer them as you want.
Before we go any further, let’s understand what tokens mean.
Tokens = ICO Cryptocurrency?