ICO (Initial coin offering), as the coin has two sides, so do this crypto coin basedapplication. No good is 100 % good in this world. Even the most robust internet technologyfaces some serious flaws. This drawback should not stop us from trying new technologies,new innovations. All we need to do is to follow Kaizen process that is continuousimprovement.
As we all are hearing a lot of criticism regarding ICO’s related to scams,deregulated nature, speculative and its whaling time. But as we are at ground zero stage ofthis application, it is not fair to resist ourselves appreciating such a potential technology justbecause it has some flaws.Let us first, we will try to understand what is ICO? As we know many start-up'ssuffered greatly due to insufficient funding. Because of this, many of the innovations aredying in the early starting stages just because there is hardly any source of people/investorswho could believe in their ideas and vision. There is a period of a start-up’s life when theyhave to spend a lot of time hawking themselves round VC (Venture Capital) firm’s to raisemoney and they have got better things to do than this. Also in VCs, they have to give up theirpart of the stakes, through which they play a decisive role in many of the important decisions.All these problems have disappeared by a magical wand that is Initial coin offering.
The ICO is the application of the block chain which uses peer to peer crowd sale forfundraising through cryptocurrencies issuing tokens to the investors. Now with these ICOs,it’s like democratic funding, where everyone comes together and fund and you need not givethem a share or equity in the company as just like in case of an IPO (Initial Public Offerings).When a company wants to go for ICO, they just have to print a white paper whichcontains details of the project, whereas in VCs and IPO we have to go through an incumbentsystem of huge paperwork. After this white paper, they issue tokens, which are created for apurpose, to perform an automatic refund in case of the target not reached, if reached tokensreleased to investors, purchased tokens can be freely traded on cryptocurrency exchanges.Here Investor gets profit when the company performs well, which in turn increases the valueof underlying cryptocurrency.Thus, this robust technology is enabling the companies to raise funds in minimal time,for example, BAT ICO was able to raise $35 million in 24 seconds. This is the reason, thoughthe initial ICO master coin was launched in 2013, and 2017 has been very promising forICO’s which has raised around $3.
6 billion through 234 ICOs. Also, according to a report,ICO funding exceeded VC’s by 4 times, this shows the future potential of ICO’s.Also, we have to talk about liquidity in case of ICO’s compared to VC’s or IPO’swhere we need to wait so long to reap profits but ICO’s investors can see gains more quicklyand can pull profits out more easily. Many of them even spoke about not giving dividends,but when we observe Wandx an Indian based company which has recently raised $4.
3 millionthrough ICO is sharing part of the payout each time car is rented out, in this way they are alsosharing the profits as in the case of securities.Also when we consider the loss to investors due to the failures, no statistics of start-ups failures can be changed through any kind of investment method, as the true nature of theexperiment is to fail as many times as possible before succeeding. Even venture capital withdue diligence process is not the sure-fire of success. Considering the frauds that arehappening in ICO’s even in most advanced and regulated SEBI has some frauds going on,even when the internet was in initial stages everyone criticised that this would be dangerousand a disaster.
Even when wright brother dreamed of flight, everyone laughed at them andsaid its dangerous. So there is a requirement of intense research and modifications need to bedone on ICOs in order to make it scalable, reliable, and trustworthy. Even in IPO there is arisk, there is nothing in this world we will get without risk, it’s just that you have to be avisionary to see the change, understand it and imbibe it, rather than rejecting simply becauseit is complicated and risky today doesn’t mean that it is not fruitful tomorrow.
Finally, as we live in the world of evolution and continuous learning. Everything hasto go through the process of evolution, the way internet, space technology, and scientificresearch have evolved. So this is the era of evolution for Blockchain based technologies wehave to wait little longer to know the true potential underlying this technology.