Since the first of ICO in 2013 by J.R Willett, it has quickly captured the vast majority of investors, influencers, and cryptocurrency enthusiasts. Initial Coin offerings have become the funding base for many startups with aims at becoming a blockchain based company.
From Willett to EOS
Since Willett and co, companies have been raising sums in the millions through ICO campaigns. DAO (distributed autonomous organization) topped the bar by raising $150 million worth of ether until it later reported an attack that exploited the code behind DAO. The thieves ran off with roughly $50 million in ether.
The larger ICOs in recent history have taken full advantage of the platform to launch their thriving companies. The likes of Stratis, for instance, raised around $600,000 worth of crypto coins and more notably, Ethereum raised $16 million in 2013.
Another company that runs counter to Vitalik’s organization, IOTA, recorded a return on investment of 60,000 percent. Two other additions include Antshares, who sold 17.5 million tokens and recently Bancor raised $140million in just a few hours.
All of these companies have paved the way for a substantial rise in crowdfunding campaigns.
The massive boom of ICOs in 2017 has naturally brought the most attention to the subject. In April, the fundraising structure had a market value of $103 million, then rose to $462 in June followed by another increase to $574 million in July.
Collective data of the total value for ICOs in 2017 accounts for $3.2 billion. Along with Bancor, big projects like Tezos ($232 million), Filecoin ($262 million) and EOS ($180 million) all point to a highly profitable and efficient way of earning quick startup capital.
ICO Ruling – Clean Up Time
As the money began flowing in by the boatload, the SEC started to step in and make rulings regarding crowd sales. The strictest mandate came out of China, who launched a sweeping ban on all ICOs nationwide. South Korea, though less stringent, has still made clear their conservative regulations when raising money through token generation.
The existence of these regulations and the fear of upcoming rules from other nations has kept many blockchain-based startups on their toes.
In the US, projects like SAFT (Simple Agreement for Future Tokens) are being created to help companies remain compliant. It’s becoming more and more clear that it’s better to be on the side of the SEC in the wild west of the cryptosphere.
Breaking Down The ICO Procedure
Companies initiating ICOs portend a great deal of hype initially and strive to boost their presence. Accordingly, they strategize to offer exciting discounts to early participants. With some discounts and offers, investors and influencers are likely to support the project.
In the beginning, an ICOs coin guards an incredibly low level of value on exchanges. It is the hype generated by marketing strategies and influencers that ultimately boost the value of said coin. The difference is then sold off for profit, or used within the company’s ecosystem.
While the growth of this fundraising approach has taken center stage, the rise of scams is also noticeable. In the summer of 2017, the SEC (Securities and Exchange Commission) allegedly charged two ICOs.
REcoin, a real estate blockchain based firm and DRC World which is a diamond company. The commission accused the two groups of selling unregistered securities coins that, in the end, did not exist.