Nowadays, you can’t speak about the state of the blockchain industry without at least mentioning ICOs, or initial coin offerings.
They’re a way for new projects, startups, and companies to sell their underlying crypto tokens in exchange for investors’ money.
Think of ICOs as Initial Public Offerings, but instead of investors purchasing shares of a company, they purchase the coin underlying a new project.
ICOs are very different from equity.
Having a new project’s coin doesn’t give you ownership of the project, but instead enable you to use the project when it becomes available.
Thereby, by buying into an ICO, it shows that you are interested in this new project.
This incentivizes others to do the same, showing that the project will probably be widely used, since without the associated token, you can’t use the project.
For example, here are a couple famous ICOs: Bancor ICO raised $150 million Tezos ICO raised $200 million Filecoin ICO raised $253 million ICOs are permissionless and enable ANYONE to invest in a project that they feel will be successful.
We put emphasis on the word ANYONE because of the open and public nature of these cryptocurrencies.
And when you think of it, it’s pretty wild.
From this tweet:
“95% of Americans are not allowed by law to invest in start-ups.
Only ‘accredited investors’ are entitled to do so, but you can buy lottery tickets all you want or go to Las Vegas to gamble” This shows that ICOs are leveling the playing field for investments.
Normal people now can invest in any blockchain project they want to.
[Explosion of altcoins] And with so many new projects coming out, some with more potential than others, the community needs some way to support them.
That’s where ICOs come in.
As a comparison: In Q3’17, ICOs have raised $1.3B with 150 ICOs while seed/angel investing across all tech sectors has raised $1.4B across 1602 deals.