Discover in this article titled “Understanding ICOs”, how Initial Coin Offering could return the network effect that is at the heart of the success and monopoly of players such as Facebook, AirBnb, BlaBlaCar. To understand the ICO, and their importance, we must keep in mind that the ICO are based on the funding mechanism crypto currencies to develop applications Blockchain or even Blockchain itself. Investors interested in the ICO of a start-up who wants to finance themselves, will acquire tokens. They can then exchange these tokens against a cryptocurrency, or use them to offer the services of the young shoot.
ICOs are one of the hottest topics of the moment, as this mechanism is shaking up the traditional rules of the digital economy, and announcing a possible paradigm shift in the way FinTech’s start-ups are financed. So much so that some do not hesitate to qualify the ICO, the first Killer App Blockchain. Indeed, the mechanism of the ICO, or dirty token can potentially fulfill one of the promises of the Blockchain, giving equal access to financing FinTech future unicorns.
Is it risky to invest in an ICO?
ICOs are at the root of a paradigm shift
However, if it is true that thanks to this mechanism anyone can invest in a promising young shoot. The ICO is an indispensable brick for exponentially increasing the chances of developing a DApp killer. (A dApp is a decentralized application, in the Blockchain vocabulary). Talented start-ups from around the world can now fund themselves properly without knowing how to go through the fundraiser’s journey of fundraising via traditional routes.
The ICO, by reversing this network effect, allows digital services that expand the Blockchain ecosystem to emerge more easily. Indeed, ICOs allow Blockchain-based protocols to be developed more rapidly, with a radical overhaul in terms of value capture. The GAFA Google Amazon Facebook Apple who have largely contributed to the advent of the Internet and the social Web, aggregate much of its value. However, with the advent of CI to this logic is about to be reversed, because it dismantles the invisible wall between professional investors and private investors. Anyone with cryptocurrency, most often bitcoins (electrum wallet bitcoin Zero fork) or ether, can invest in promising projects, applications and services.
Storj, a $ 30 million ICO school case
Storj is a decentralized cloud storage service, this project funded through Blockchain via an ICO, raised in early 2017 the equivalent of $ 30 million. Their token which has been baptized Storjcoin, makes it possible to buy space on the Storj storage network. It also allows to rent on the network, the free space available on the hard disk of your computer, against remuneration in Storjcoin.
Investors who have acquired the token issued at the ICO of the start-up Storj, can therefore choose to buy storage space, sell their storage space against Storjcoin or simply keep them for resale more expensive later. (1 Storjcoin = $ 1.37 at the time of writing this article).
Examples of record fundraising at ICO
Beware of speculative phenomena on ICO
The amounts raised are respectable, especially considering the level of progress of the projects, some not being at the stage of prototyping yet. Indeed, controversies exist indeed about some ICO pointed at for their greed. Making the right choice of investment in an ICO, therefore requires a real understanding of the project of the start-up, the viability of its model.
ICOs have undeniable assets, however the risk is present whether for investors or project holders. Because there is legal uncertainty and regulatory uncertainty around ICOs. Financial regulators like the Securities and Exchange Commission (SEC) in the US have begun to address the issue of the nature of ICOs. Thus, the American regulator estimates the Token project TheDAO 2016 should have been considered Securities.