The name reminds that of IPOs or Initial Public Offerings (IPO) where stocks of a private company are offered to the public. ICOs or Initial Coin Offerings are quite the same but instead of stocks, blockchain or non-blockchain based coins or digital tokens are offered to potential investors.
The Blockchain ecosystem has seen many ICOs so far: probably not many people know that Ethereum was funded after an ICO where more than 8000 contributors bought the eth pre-sale tokens (1 Bitcoin for 2000 Ether). Before Ethereum was founded by Vitalik Buterin, many blockchain developers tried to modify the Bitcoin source code to create a different digital token and sell it to the public via ICOs. Most of those alternative coins turned out to be so-called pump and dump schemes because no real value was attached to those projects.
Today, it is possible to issue and manage digital tokens inside the Ethereum protocol and for this reason we are seeing a huge rise of ICOs on this platform. The last one, Status, has been so successful that it congested the Ethereum blockchain for days.
Why are ICOs so popular?
Initial Coin Offerings are getting all this popularity since they address a very simple issue: the lack of funds and capital for start-ups outside the VC world. It should be noticed that there’s also a lot of speculation on new ICOs as they start hence new investors should be aware about the projects they are investing into.
To conclude, due to this increasing demand of capital it is legit to ask whether this funding option is sustainable or not in the long term. For the moment, it seems clear that ICOs will continue to see a lot of interest.
Image via Hongkiat