Can Regulators Curb The Risks?
Initial coin offering is an unregulated cryptocurrency fund raising venture. ICOs are easy to structure with blockchain technology the ERC20 Token Standard , which abstracts a considerable measure of the improvement procedure important to make another cryptographic ass. After the ICO the investors or users receive their tokens and upon a listing on an exchange they can be traded.
ICOs create new cryptos, there are already thousands of cryptos, yet there are only so many crypto users and only so much money. Many would say that investing electricity in mining for bitcoin, was the way to launch bitcoin's initial coin offering, since investors would pay for electricity in order to secure the network, and in return they would get a reward.
When a cryptocurrency startup firm wants to raise money through an Initial Coin Offering (ICO), it usually creates a plan on a whitepaper which states what the project is about, what need(s) the project will fulfill upon completion, how much money is needed to undertake the venture, how much of the virtual tokens the pioneers of the project will keep for themselves, what type of money is accepted, and how long the ICO campaign will run for.
The sheer volume of token sales, coupled with some improperly designed token sale models, have created congestion in the number of transactions on the Ethereum network.4 This has led to a number of issues which includes delayed distribution of tokens, extreme Ether price volatility, halted or slowed functionality of Ethereum-based Dapps, and exceedingly high gas (the embedded transaction fee) prices5 that inflate the token value.
If they release too many tokens, they run the risk of pump-and-dumpers purchasing tokens en masse with the hope of flipping them once the coin hits the first exchange. Project owners may disappear with the money and the funds may be irrecoverable. If this deal doesn't pull off as planned, they're in good company: a recent analysis by found that 59 percent of 2017's ICOs are already either dead in the water or well on their way there.
Once it's listed those people that didn't get into ICO will rush in to buy tokens as they anticipate the price to go up by 10x. Investors buy them using established cryptocurrency to fund new projects. I don't hate on cryptocurrencies but I think it should be blatantly obvious to anybody that this ICO system, as it is today, is a "get rich quick" scheme that should raise all possible red flags.
Recently, an increased attention has been drawn to developers, businesses and individuals using cryptocurrency offerings, such as initial coin offerings (ICO) to raise capital. The term initial coin offering (ICO) is borrowed from finance and upgraded to conceptualize the initial sale of cryptocurrency or blockchain powered tokens.
Like an initial public offering (IPO) of stock, from which its name is derived, an ICO is a way that cryptocurrency startups - and even established manufacturing companies - can raise money. With only” about 1,000 Bitcoin the ICO of BlockPay was one of the smaller ICOs.
We strive to provide the most useful and transparent information on ICOs, protecting users from fraud and helping them find projects that have a great potential for success. The analogy to ‘mined' here is ‘minted' with fiat currencies: When the US Mint creates a new batch of pennies, think of that as roughly analogous to ‘mining' a new batch of bitcoin or other cryptocurrency.
It worths to mention that cryptocurrency ecosystem is experiencing a tremendous rise, with Bitcoin market capitalisation growing from $11B to $47B in one year. ICO prices are generally discounted from expected market prices, and are determined cryptocurrency by the creators of the economy, project or DAO.
Given crypto coins differ from traditional equity or common shares, they are priced based on the market perception of value and increased adoption of the platform. The Ethereum project was launched and the ICO initial coin offering raised $18 million in Bitcoins ( $0.40 per ether).