You may have heard of Bitcoin, Ethereum and other various cryptocurrencies in the news recently. Now, entrepreneurs have officially got their hands on the market for fund raising purposes.
Just the other day, Bancor raised $155 million in cryptocurrency equivalent in what is now the largest crowd funding campaign in the history of the world.
What is an Initial Coin Offering (ICO)?
An initial coin offering is done when a company wants to fund their company through cryptocurrency. People can “back” the ICO by contributing other cryptocurrencies such as Bitcoin or more commonly, Ether (the name for Ethereum’s coins/tokens.) It is basically a crowdfunding campaign that instead of using Kickstarter using the Ethereum platform’s smart contracts to allow people to exchange other cryptocurrency for the new native coins.
The coins can then later be sold and purchased on cryptocurrency exchanges (once listed) or held long term for potential profit. Additionally and often times, the coins themselves could be exchanged or used for the companies native product or service, like in the case of Steem.
After the company creates their own native currency (referred to as coins or tokens) the price of the new coins varies from fractions of a cent to hundreds of dollars.
ICOs are very attractive to investors considering the average listed ICO here is doing over 1,000% return in under a year. What other kind of investment would ever get those kinds of crazy returns? That’s a 10x return in a year or sometimes less.
The largest ICO % return is with a cryptocurrency and blockchain tech company called Stratis (STRAT) that has done 110,912% return in about a year as of the time of writing. That means that if you bought $1,000 worth at their ICO, you would have made a total of $1,109,120 to date.
Who should get involved?
The age old saying holds true, “don’t invest what you aren’t willing to lose.”
If you are interested from an investment perspective, then hopefully you make a lot of money. Considering the average return so far it seems quite tempting. And for entrepreneurs, its like raising money via Kickstarter, except you don’t have to ship out physical items and you can quickly fund your startup or company. Bancor reached their $155 million funding in about 2 hours. Additionally, the money raised can be stored in coins which have been appreciating in the value quite quickly. So the money you raise also makes you more money. Sometimes many multiples of what it started at.
TenX is an example of an upcoming ICO that has been highly anticipated.
TenX is essentially a debit/credit card that gets rid of the need for banks for cryptocurrency holders. Instead of having to exchange your cryptocurrency into fiat (government issued currency like USD) you can simply put it on your TenX debit/credit card and it will instantly convert it to your native currency when you go to spend money.
It has features just like a points system on a credit card. The card adds incentives to use your card more often. When you spend on it, it gives you a kickback % just like points on a credit card.
What problem does this solve? TenX solves the (big) problem of having to sell off and convert your cryptocurrency back to fiat if you want to spend it in a physical or traditional environment that is not yet accepting cryptocurrency as payment.
What I’m getting at is that these ICOs are no different than any other startup in the world. If it’s going to be successful it needs to solve a problem worth solving. And for that reason, TenX could be one of the biggest ICOs because it solves a huge problem that up until this point has not been successfully solved by any other company in the cryptocurrency community. And it’s in a huge expanding market that’s growing by billions (market cap) almost daily.
The trend for ICOs is just heating up. Startups all over the world are looking at ICOs as a serious way to raise a large amount of money quickly.
Here is a full list of upcoming ICOs.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.