The Perfect Storm

Since their initiation in 2013, initial coin offerings (ICOs) have steadily gained steam as a valuable and innovative method of raising funds for projects on the blockchain platform. Yet while ICOs had been in motion since then, 2017 marked a momentous shift in project fundraising. In 2017 alone, organizations raised $5.6 billion through ICOs thanks in large part to the staggering net accumulations of sales such as Bitcoin, Ethereum, and Filecoin.

An ICO is a digital token sale made by an organization to public investors in an effort to crowdfund research and development initiatives vital to the rise of the project. Despite their headway in the business sector, ICOs have come under scrutiny due to concerns regarding the lack of regulation around token sales, which may be risky for investors. This negativity often harms projects that are worth supporting given the inherent skepticism surrounding the limited regulatory landscape of ICOs. It is therefore essential we mitigate the regulatory risks of ICOs, while incentivizing their promising innovation potential in the development of open-source blockchain technologies.

Investing on a Global Scale

We live in an increasingly globalized climate. Investors on an international level now have the freedom to buy into projects that in the past may have been concentrated in the major tech centers of the world — Silicon Valley, New York, London. In essence, this allows for any willing individual to contribute, void of geographical limitations. Experts estimate this allows for a 20% — 25% increase in potential buyers compared to the model of traditional shares. The democratization of the investment process therefore allows for a wider range of potential investors. Rather than a few influential figures, ICOs are open to the entire blockchain community. The digital age is providing the foundations for small-time investors to gain entry into an organization’s development and long-term success, a transition that will transform business in global proportions.

Safety First

In November 2017, the cryptocurrency startup, Confido, raised nearly $400,000 from its ICO only to vanish before its investors’ eyes. Shady projects and downright scams are sure to remain present on the blockchain platform, but certain steps can and should be taken to ensure early investors and token holders are not victimized by financial fraud. Smart contracts are digitally facilitated verification systems that enforce credible relationships between organizations and investors. More and more startups are implementing Anti-Money Laundering (AML) and Know Your Customer (KYC) directives — backed by leading AI technology — to bring about a level of regulation that will establish a system of trust between all those involved. By encouraging authenticity, transparency, and honesty, organizations assure a token launch model that aligns users in the best possible position for success with a guaranteed financial benefit for early adopters.

The Liquidity Premium

Perhaps the foremost appeal in ICOs stems from their glowing liquidity rates. ICOs provide rapid market liquidity, free from traditional regulatory measures. This allows individuals to invest and divest at will, based on the startup’s execution in the marketplace. In the realm of cryptocurrency exchanges, we have observed projects exceed expectations at shocking proportions. Over the course of three hours in June 2017, the Bancor Foundation raised $153 million. Similar token sales with exceptional time-to-liquidity access include the $25 million raised in 15 minutes by Aragon and $12 million raised by Gnosis in 10 minutes. This liquidity advantage is key to the avant-garde benefits of ICOs and a boon for consumers and investors alike.

Though consumers and businesses share mixed feelings about the sustainability of ICOs, their regulatory landscape, and contrasting nature to the traditional means of project fundraising, it is indisputable they have surged on an international scale. They possess bountiful merits for both organizations and investors and financial potential that far exceeds conventional venture capital investment. So long as the necessary precautions are taken to secure transparency and credibility, while hindering attempts at fraud and deceit, ICOs present a sensational opportunity for businesses to thrive and investors to prosper.

Learn more about WOM Token and the future of marketing

Join the WOM Token Telegram group for the latest discussion