The ICO is a short supply of initial coins. When launching a new cryptocurrency or token, developers offer a limited number of units to investors in exchange for other major cryptocurrencies such as Bitcoin or Ethereum.
ICOs are amazing tools for developing funds to help new cryptocurrencies rain fast. Tokens offered at an ICO can be sold and traded on cryptocurrency exchanges, assuming there is sufficient demand for them.
Ethereum ICO is one of the most notable successes and the popularity of the Initial Coin Offerings is growing as we speak.
A brief history of ICOs
Ripple is probably the first cryptocurrency to be distributed through an ICO. In early 2013, Ripple Labs began developing the Ripple payment system and generated approximately 100 billion XRP tokens. These were sold through an ICO to fund the development of the Ripple platform.
Mastercoin is another cryptocurrency that has sold a million tokens in an ICO, also in 2013. Mastercoin aimed to tokenize Bitcoin transactions and execute smart contracts, creating a new layer on top of existing Bitcoin code.
Of course, there are other cryptocurrencies that have been successfully funded through ICOs. In 2016, Lisk raised about $ 5 million in its Initial Coin Offer.
However, Ethereum’s ICO in 2014 is probably the most notable so far. During their ICO, the Ethereum Foundation sold ETH for $ 0.0005 per Bitcoin, raising nearly $ 20 million. Leveraging the power of smart contracts, Ethereum paved the way for the next generation of early coin offerings.
Ethereum’s ICO, a recipe for success
Ethereum’s smart contract system has established a standard ERC20 protocol that sets out the basic rules for creating other fillable tokens that can be traded on Ethereum’s blockchain. This allowed others to create their own tokens by complying with the ERC20 standard, which can be traded directly in exchange for ETH on the Ethereum network.
DAO is a prime example of successful use of Ethereum smart contracts. The investment company raised $ 100 million in ETH and gave investors a chance to participate in the governance of the platform in exchange for DAO tokens. Unfortunately, the DAO failed after the hack.
Ethereum’s ICO and its ERC20 protocols have defined the latest generation of crowdfunding blockchain-based projects through Initial Coin Offerings.
It was also very easy to invest in other ERC20 tokens. All you have to do is transfer ETH, paste the contract into your wallet, and new tokens will appear in your account for you to use as you wish.
Of course, not all cryptocurrencies have ERC20 tokens that live on the Ethereum network, but almost any new blockchain-based project can launch an Initial Coin Offer.
Legal status of ICOs
As for the legality of the ICOs, it’s a bit of a jungle. In theory, tokens are sold as digital goods, not as financial assets. Most jurisdictions have not yet regulated ICOs, so assuming that the founders have a seasoned lawyer in their group, the whole process should be paperless.
However, some jurisdictions have been aware of ICOs and are already regulating them in the same way as the sale of shares and securities.
In December 2017, the U.S. Securities and Exchange Commission (SEC) classified ICO tokens as securities. In other words, the SEC was preparing to stop ICOs that are considered misleading investors.
In some cases, the token is just a token of availability. This means that the owner can use it to access a particular network or protocol, in which case it may be defined as financial security. However, stock tokens that value value are relatively close to the concept of security. In fact, most token purchases are made specifically for investment purposes.
Despite the efforts of regulators, the ICOs remain in a gray legal field and until a clearer set of regulations is in place, entrepreneurs will try to take advantage of the Initial Coin Offers.
It is also worth noting that when regulations are finally in shape, the costs and efforts required to comply may make ICOs less attractive compared to regular funding options.
For now, the ICO continues to be an amazing way to fund new cryptography-related projects and has been a resounding success with more to come.
However, keep in mind that everyone is launching ICOs today and many of these projects are scams or lack the solid foundation they need to move forward and be worth the investment. This is why you should definitely do some in-depth research and research the background and background of any crypto project you want to invest in. There are several websites that list ICOs, do a Google search and you will find some options. .