Ever wondered how a random blockchain company is able to raise millions of dollars in less than 24 hours? They make it possible via Initial Coin Offerings (ICO)- which simply refers to sale of cryptocurrency tokens to investors. To make this possible, companies have to:
- introduce a digital currency at any point in time.
- hold the rights to mine coins of such a currency with themselves.
- associate any services or goods that can be bought with those coins.
- release more coins when the market demand and their performance is high.
While IPOs deal purely with investors, ICOs have the potential to deal with supporters that are keen to invest in a new project much like a crowdfunding event. Unlike IPOs, which are heavily regulated, the latter have little regulatory oversight and are used to fund projects that only exist on paper. It is also important to note that unlike an IPO, investing in ICO won’t result in you having an ownership stake of the company.
A relevant example of ICOs is that of a privacy-based browser called Brave which rewards users with a currency called Basic Attention Token (BAT) based on the time they have spent on viewing ads and sponsored content. Once a significant amount of such tokens are accumulated, users are able to access premium content or advanced features on other platforms. BATs can also be used as a token money that is paid to authors for a great write-up. About an year ago, Brave had raised $35 million in 30 seconds by selling the BAT cryptocurrency to just a handful of 130 investors!
An interesting tool called ICO Tracker can help you analyze how the investment and interest on this topic has grown over the years.
This content was originally published for my TechTuesday’s initiative on LinkedIn.
