ICO
What is ICO
Initial Coin Offering - Also known as “token sales,” this new fundraising phenomenon is being fueled by a convergence of blockchain technology, new wealth, clever entrepreneurs, and crypto-investors who are backing blockchain-fueled ideas. ICOs present both benefits and disadvantages, as well as threats and opportunities, to the traditional venture capital business model. Why VC firms care
How an ICO works
A new cryptocurrency is created on a protocol such as Counterparty, Ethereum, or Openledger, and a value is arbitrarily determined by the startup team behind the ICO based on what they think the network is worth at its current stage. Then, via price dynamics determined by market supply and demand, the value is settled on by the network of participants, rather than by a central authority or government.
Why is an ICO interesting
- 1. One is profits — cryptocurrency investors made some massive returns in 2016
- 2. Liquidity of cryptocurrencies
Why an ICO scares off
- 1. regulatory uncertainty;
- 2. the high valuations;
- 3. over-capitalization;
- 4. the lack of control over financials, strategy, and operations;
- 5. and the lack of business use-cases;
- 6. And like any industry, the ICO arena has had its fair share of outright scams, pump and dumps, and blatant Ponzi schemes.
