How to raise $153 million in approximately 3 hours? The answer is “ICO”. But what is “ICO”?
ICO – Initial Coin Offering is a fundraising mechanism in which new projects will sell their token in exchange for either Bitcoin or Ether or simply circulate their money. It can be considered that ICO is similar to a public investment such as IPO in which investors buy shares of the company.
ICO is a relatively new phenomenon but has quickly become a dominant topic of discussion in the blockchain community. Many projects that view ICOs as unregulated securities allow founders to raise many irrational capital, while others regard it as an innovation in comparison with traditional venture capitalist models. The US Securities and Exchange Commission (SEC) has recently reached a decision regarding the status of tokens issued at DAO ICO that has forced many projects and investors to reconsider their funding in many ICOs. The most important criteria to consider is whether or not pass the Howey test.
ICOs are easy to create by technologies such as the ERC20 – Standard Code, which greatly outlines the development process required to create a new encryption asset. Most ICOs work by having investors deposit money (usually Bitcoin or Ether) into smart contracts with storing funds and distributing the equivalent value of the new token at a later point in time.
Investors in ICOs who are knowledgeable in a multidisciplinary field, particularly in economics and technology, may have a keen intuition to synthesize all information before making any decisions to put money into an ICO. A fundamental problem with ICOs is the fact that most of all investors are on the front page of the product. This makes the investment extremely speculative and risky. This fundraising style is especially useful (even necessary) to encourage the development of protocols.
Of course, it does not mean that investing in ICOs is risky because there are so many surprises that no one can know for sure. Some projects use a crowdsale model to try and fund their development in 2013 as Ripple made an initial sale of 1 billion XRP tokens and sold them to investors in exchange for legal money or Bitcoin. Ethereum set a target of less than $ 18 million at the beginning of 2014 but the result reached its greatest ICO record at that time. The use of Ethereum to launch a token is still much easier than pursuing seed round through traditional venture capital models. Specifically, the ERC20 standard makes it easy for developers to create their own token on the Ethereum blockchain.
Are ICOs legally accepted? The short answer is probably. Legally, there already existed a controversial issue with ICOs because it is difficult to control and has no legal instruments to regulate them. From the recent SEC decision, they are willing to manage the data related to ICOs to shed some light on that area. In some cases, the sign is simply a gadget tag, which means it gives the owner access to a particular protocol or network; therefore, it cannot be classified as a financial security. On the other hand, if the token is a sign of equality, meaning its only purpose is to appreciate the value, then it looks very secure.
While many individuals purchase tokens for access to the underlying platform at some point in the future, it is difficult to deny the idea that buying the token is most likely for speculative investing purposes. It is easy to determine the value proposition for many projects that have not yet released a commercial product.
However, it’s undeniable about ICO’s most positive side is that it allows unique and quality ideas to be approached more quickly and without any third parties. Now the development of Ethereum has opened up a new direction for the online business model. Developed from that idea, JCW Blockchain Ventures is focused on investing in startups/products based on Blockchain, which serves the goal of developing a global decentralized e-commerce ecosystem. The notable feature of JCW is the application of Blockchain’s benefits to creating core tools to support startups such as electronic payment gateways, loyalty rewards, and smart contract modules. JWC will start its token sale in 2018 from January 16th to February 11th.