The latest abbreviation in finance and crypto-world is ‘ICO’. A word that gives both local and global financial authorities like the U.S. Securities and Exchange Commission (SEC) nightmares for several reasons.
Not to be confused with Initial Public Offering (IPO) which is used by firms to raise cash through the issuing of shares to the public. An ICO (Initial Coin Offering) serves the same function and works like crowdfunding , but for digital currency and tokens only.
We recently covered a feature on raising funds and capital for a business but missed out on one relatively new method. More and more companies are using ICOs to raise capital for their businesses.
The concept of an ICO works similarly to how a company raises capital through shares in that it is all based on contrived value.
Funding raising in effect boils down to sales! If your actual product or service has nothing substantial or intrinsic to offer a client base, then it is nothing more than a scam.
Launching an ICO is quite easy, and to an extent, many tech companies are now catching onto it.
An ICO is the cryptocurrency space’s rough equivalent to an IPO in the investment world. ICOs act as fundraisers of sorts; a company looking to create a new coin, app, or service launches an ICO — Investopedia.
The alarming spurt rate of ICOs often brings with it a scourge of potential scammers. The SEC and other institutions have to step in to monitor and regulate them.
Social media Platforms like Facebook and Google – which house a bounty of users (potential investors) have banned ICOs ads due to possible prey on unsuspecting investors; exposing them to con artists.
Basically, the scammers use fancy websites, laden with impressive figures and terminology to con users into buying into their coins or tokens.
Though the tokens barely even cost a cent, it adds up if they have millions of people buying in. Once they have reached a certain amount in funding – they close shop and disappear!
Hypothetically speaking if one wanted to create a new coin called ‘DebunqedCoin’, these are the steps:
Create a product concept or Business Plan for the coin or what is called a Whitepaper. This describes in great detail what the coin or token aims to do; the core technologies behind it; the team and their qualifications; the product’s lifecycle/growth path etc.
Once completed and water-tight, the whitepaper would be submitted along with an application to one of the best Cryptocurrency Exchanges for review.
Naturally, the business would need some initial working capital for liquidity. Some of this is raised by the owners and other institutions (through loans) etc. These will serve as collateral/insurance that there is indeed genuineness in the venture for all stakeholders.
You must then assure your investors of a solid return on investment (ROI) and deliver – which goes back to sales and growth. Unless your offering is a scam you actually need to do some work! This comes with regular updates (marketing campaigns can have a tremendous or adverse impact on the uptake and price) on milestones reached.
The above is necessary to keep the investors abreast with progress and in the process, getting them to possibly increase funding. Growing interest and addition of more funds creates demand for the coin/ token which, in turn, drives up the price and market capitalization.
Voila! you would then be in business!
Here are some of the most successful ICOs of all time
Known as “China’s Ethereum”, and backed by Microsoft, Alibaba and the Chinese government, NEO uses smart contract applications. It does so, however, with the addition of decentralized commerce, digitized assets and identification.
It enjoyed a considerable hike in token value from $0.03 to $88.20, NEO has big things coming with a 294,000% ROI.
Unlike Bitcoin, the second-most valuable cryptocurrency in the world has more functionality than just being a coin. Its ledger technology is used to build and deploy decentralized applications a.k.a. “smart contract” technology.
Ethereum’s ROI has been nothing short of jaw-dropping at 230,000%. Having sold its tokens at $0.31, an Ether token now sits at a whopping $713, second in value only to Bitcoin.
The “premier privacy-focused cryptocurrency” enables users to send and receive currency worldwide with total anonymity. It is currencies like SpectreCoin that have most government tax offices quaking in their boots.
If you had repurchased a token in November 2016, that puny $0.001 would be worth $0.64 today, or an ROI of 64,000%.
The prospect can be daunting for a cryptocurrency investor looking to make money off new investment opportunities, while remaining cushioned from fraudulent ICOs and dodgy coins and tokens.
As there is no guarantee that any cryptocurrency or blockchain-related start-up will be genuine or successful. One simply needs to be vigilant and take steps such as getting to know the core team, poring over the whitepaper with a big magnifying glass. Naturally you should be monitoring progress of the token sales.
Most importantly, one must just using common sense to gauge just how feasible the project is to ensure that you’re not falling for a scam.
Remember, if it’s too good to be true, then it isn’t true!
On August 11 2018, the Bitcoin dominance level (market share) touched 50% for the first time in 2018. However, the move didn’t come amid a Crypto market rally. In fact, the cryptocurrency space has been in free fall until mid-August, moving in a sideways trend since then.
As much as institutions, risk-averse, or simply skeptical people have downplayed the new digital currency revolution – it still, a decade after coming to public light, remained resilient.
Bitcoin now gets a regular mention in daily news and stock market reports. It is also being traded by several established investors and even included by fund managers as (naturally) high-risk portfolio instruments.
We all by now, have heard the old rhetoric of high volatility and use for criminal activity when it comes to Bitcoin and its crypto-family.
Billionaires Warren Buffet and Bill Gates were two of the most recent financial ‘institutions’ to weigh-into this by publicly lambasting Bitcoin – with Buffet equating the cryptocurrency to rat poison!
Such views back the ‘rationale’ for crypto’s inability to take over fiat money or become a major form of currency.
Be it may, the digital currency, however, does have its unbeatable benefits and functions: ones that are difficult for even the most hardcore anti-crypto audience to ignore.
Here are three functional attributes and trends that the digital revolution has created since coming to the mainstream:
1. Financial emancipation.
Bitcoin and ‘altcoin’ investing have created a new wave of financial investors.
These are retired bankers; naturally the ‘millennials’ – who instinctively jump on-board a new discovery that has creative destruction-like tendencies; and then the plumber, bartender and the average man on the street.
Its ease of access, use and potential to turn a few dollars, euros or local currency into hundreds, thousands or millions more, makes it a high appeal for those who typically would be excluded from owning an investment portfolio.
Based on their returns many have taken to social media (via groups, profiles and communities) to share their success stories. But this is also a reason to heed caution when taking counsel from anyone claiming to be an expert in cryptocurrency investment.
It is new and while volatility is not new to trading – it is constantly on a rollercoaster ride making it hard for even seasoned trading experts to predict using traditional market analysis tools.
New analysis tools
A recent development termed Hodl Waves attempts to track and predict Bitcoin movements via complex usage history – comparing behavioural patterns of what people do when they have the coins and when they choose to reinvest them.
Cryptocurrencies have nevertheless, got more people thinking about making profits, looking into tax implications and anything financial for that matter!
Crypto investors are now constantly planning for their future while matching their ‘block’folio performance to capital gains not only from rival coins but also against traditional (lower yielding) investment instruments.
Blockchain technology has also spurred a new path of careers and industries as more companies globally, for instance, look to acquire the lucrative Crypto exchange license to operate.
From account managers, technical advisors, software programmers, to customer service agents and the accompanying social media marketers needed to promote the various exchanges.
Governments as well will benefit from their operations and while there are still discrepancies in most countries about how to tax individuals, fiscal authorities will get a lion’s share of income from taxing these exchanges.
2. The way money is transferred.
We all have undergone the painful stress of waiting for funds to clear so your rent gets paid or waiting to receive money from abroad for an emergency.
But the standard “3 to 5 working days” in which most (if not all) banks guarantee for something as simple as an inter-bank transfer is simply not good enough especially when there are public holidays involved.
With cryptocurrency, the aim is to be not only the most secure form of funds transfer – but the fastest.
Converting cryptocurrency back to fiat money, however, remains the only potential bottleneck as it would require institutions to adopt or directly accept payments in the cryptocurrency to avoid one going through another step to receive goods and services.
Cryptocurrencies nevertheless still cut down transfer time significantly compared to traditional electronic fund transfers of fiat monies – which becomes even more of a logistical quagmire of time wasting and high costs if you must switch currencies before the transfer can be made.
To reiterate, all of this can and be avoided once more and more companies accept payment in one or more types of cryptocurrency.
The onus is thus on the creators of the digital coin or token to prove that their digital currency is reliable enough and readily available to be used as a form of legal tender.
There are several reports nevertheless of known, well-established financial institutions and companies using currencies like Bitcoin, Ripple, Verge for fund transfers or even direct exchange for services.
One that cannot be omitted, is the reduced costs associated with dealing with money you have (hopefully) earned form hard work.
Even inheritances are gained because of the toils of the giver’s hard work. So, it wouldn’t be fair for a group of a few companies headed by executives to siphon it from you all in the name of ‘providing you with a service’.
We all pay for Internet use (and the security software associated), for smartphones and computers.
We, therefore, have the technology to make transactions ourselves without having to rely on others to charge us for things we can do ourselves.
The financial institutions have long preyed on people’s ignorance, obedience, and unquestioning trust while they brazenly burn cash dabbling in equally questionable high-risk investments like derivatives and futures.
A new wave arises
It is only a matter a time before the banking institutions and big companies get on board to benefit from the high-level encryption and speed provided by digital currency.
They would even if it meant creating their own blockchain and not bowing down to the pressures and potential competition that these altcoins pose to their modus operandi.
To conclude, the ‘wait and see’ mantra all that we can exercise when predicting the future of digital currency.
But for now, it is a bright one considering the three points mentioned above.
There are, however, concerns on how secure the encryption can remain with the advent of quantum computing. This ground-breaking tech has the potential to make calculations at millions of speeds faster and thus able to crack the toughest data encryption.
Regulation, however, while feared by hardcore decentralization pushers, would be required in some form to keep Crypto prices stable. This is in addition of helping to manage the daunting task of keeping cryptocurrencies away from criminal exploitation.
History has taught us that a fully centrally controlled government system fails completely – well, in the long run.
The idea of a communistic system has its merits and would still work in some sectors of an economy. It, however, omits the very thing that was provided to us as human beings – choice.
Knowledge is empowering – but the power to do the things you would like to do (provided it conforms with ethical norms) and effortlessly without fear of error.
This shared knowledge emanates from scientific, biological or financially proven theories and tests.
They can help you make the right investments, save money on the best deals, obtain rights to certain social benefits, travel to great destinations or just help other people achieve their personal and spiritual goals.
Those that cling onto knowledge though, serve their interests alone and should not be revered but rather shunned for power-hogging.
Sadly, some governments monopolize access to information, basic services, resources and even education to create an artificial demand for ´their services’.
This forms the basis of a centrally controlled or outright communistic state.
In business, this is a common practice of a monopoly to control the price of their good or service as they are the only ones providing it.
The quality of that good or service, however, can and will be determined by them and them alone!
Can you imagine then, based on the previous sentence, a situation that only governments have this power to dictate a basic service such as healthcare or education for you?
Scary thought and if you look at most developing countries, the evidence of this is overwhelmingly sad.
But we are not here to talk about the governments as there would be several cases to point out and this is not a political platform.
Case in point, the concept of centrally controlled system nevertheless is less efficient and prone to failure to disseminate the very items it sets out to provide.
Deploying software by a global firm like IBM, via a centrally stored-located server would be absurd because the infrastructure of the recipient regions or end-users might not be well equipped to handle it.
So one begs to question, why would you do it for social services for instance?
Decentralizing a system can improve efficiency because it gives options to get the best quality possible. It also removes power from one or a few providers and shares it equally amongst other stakeholders.
This way all will stand to mutually benefit from a working system indirectly rather than just the state collecting monetary compensation or tax and deciding what to do with it alone.
Centralized systems can learn from the blockchain to efficiently provide services.
Let’s take the now “illegal” peer-to-peer file-sharing and downloading software such as eDonkey/eMule(supposed developed by Microsoft).
Or take BitTorrent for example: you could with them, build together any file by downloading “bits” of the file by many connected servers or PCs (peers).
This system leads to faster downloads and allows one to source from the best quality of the available digital bits to get the data to form the e-book, music track or movie that you were after.
Leaving your download running could then allow others to get the files you have already amassed (you then reciprocally upload the files). The cycle continues until everyone hopefully acquires the same great quality file (if required) from the best ‘seeds’.
Downloading from a singular server for the same product, on the contrary, could crash the server.
Let’s not forget the delays due to operational differences in time-zones, or complete failure to download if the file source is corrupted or the file quality is bad.
Application of decentralised systems
Naturally, the entertainment industry put a stop to this because it meant that people could attain their copyrighted material – without parting with a cent. Many fines and warnings were dished out to individuals as well as companies hosting the sharing servers.
It is, however, still possible to access them via carefully planned entry gateways to hide your IP address using VPNs, or via (old-school backend protocols)FTP.
BitTorrent -> Bitcoin…Torrent -> Tor ..anyone seeing a pattern here?
Such protective software are already in the pipelines thanks to the advent of blockchain technology.
Decentralizing services such as money transfers in the advent of Cryptomania removes power (monopoly) from regulated financial institutions. They tend to charge high fees for sometimes slow and error-prone services because they can.
So, swiftness and security are a prime reason for the adoption the Blockchain technology. Everything else such as the price of digital alternative coins or ‘altcoins’ boils down to basic supply and demand for it.
Back to service delivery and the running of decentralized systems: governments, and other institutional service providers can take a leaf out of the blockchain technology tree and its true intention.
The aim would thus be to decentralize the provision of a service to enable access to it; reduce associated costs of using it and improve efficiency!