ICOs: Are they the future of startups?

What is ICO?

In the investment circles, ICO or token sales is understood as a form of funding which favorable for companies in their early stages of operations.

Based on the blockchain technology, ICOs are taken by the risk-taking cryptocurrency investors and forward-looking entrepreneurs who place their bets on possible breakthrough business ideas.

The emerging business concepts are normally valued through the currencies that are artificially created, and they can be quantified in wealth terms in future when the business idea starts making money for investors.

Why do ICOs matter to the Business Startups?

Undoubtedly, they are currently so popular, both with fine tech starts and individuals from all walks of life. It seems that ICOs are ideal for all people after raising capital quickly for their business start-ups.

Many reasons exist for such:

  1. Benefits to the Start Up business
  2. Speed of raising money

It is the speed at which one can raise money for a project that makes ICO most attractive to business startups.

  1. No Thorough examination of business dynamics

ICOs are different to the other investment where investors are forced to conduct a lot of examination on the dynamics of the management potential risks and market size.

  1. Unregulated field

Since the field is unregulated ICOs have become attractive in terms of there being no of few duties and compliance costs. For instance, ICOs do provide their issuers with different fundraising rounds with few intermediaries, if any.

  1. No direct Taxation

Token sales also are not subject to direct taxation, and investors only pay capital gains tax depending on the jurisdiction they come from. The process is more appealing because of the cryptocurrency ease of creation, exchanged easily, used in transactions, thanks to the growth of technology.

Benefits to the investors

The entrepreneurs are not the sole winners. Investors can enjoy participating in the ICOS for specific reasons.

Such includes the chance of making profits which may be witnessed by the returns in 2016 from NEM and Monero startups.

ICOs offer higher liquidity that is not available readily in the VC funding where the options of exit can be minimal. Profits, here, may be pulled out easily by simply converting the cryptocurrencies into ether or Bitcoins and fiat money.

The platforms like Kraken, Coinbase, Yunbi, Poloniex do allow the investors to easily sell their wealth and get quick returns on their investments as the prices fluctuate throughout the day.

The Mechanics of ICO

ICOS occur in the intangible network where there s creation exchange and deposition of money in the cloud. Essentially, such is because ICO is a crowd funding for startups of cryptocurrency, with Bitcoin being the most common cryptocurrency.

Cryptocurrencies are just the set of entries in a database existing on what is called decentralized peer to peer electronic cash system. 

The transactions entries are always created and stored in what is called blockchain technology with the techniques of encryption used for restoring the creation of monetary transfers and units.

Do ICO tokens operate like FIAT money?

ICO tokens are different from fiat money other commodities because of the following reasons:

  • The cryptocurrencies lack intrinsic value.
  • Cannot exist in physical form.
  • They do not depend on the central bank for their supply.
  • They are just the transactions, which are initiated, accepted by people, confirmed and then shared by peers in the crypto world.

A stat up that wants to invest in ICO can create their own cryptocurrency when they utilize the protocols such as an Open ledger, counterparty, and Ethereum and the set up value based on the money they have for the project. They will have to get the roadmap that is written on the white paper.

How can you get investors?

According to Forbes magazine, what is crucial is getting the market to love and believe in the idea, despite the fact that nothing exists in intangible form to show future prospects or feasibility. People across the world will then be forced to purchase the created token in exchange for the other common cryptocurrencies like Bitcoins and ether.

The investors interested can open their accounts on the platforms of the digital currency exchange and start ETC or BTC for a different token of the established projects.

Usually, ICO will work at least for a week, where the price of the token is going to vary depending on the structure that is set up by the issuers. For instance, the price may remain static in achieving a particular goal of fund a specific project.

However, issuers can ask to match static supply using dynamic pricing whereby the tokens prices will rise in tandem with the amount of funding recovered. Another model can have a static price that is set to the dynamic supply. Such will go on until the start up will be able to achieve the funding target.

ICOS may involve numerous funding amounts with particular coins or tokens on offer increasing in value when it is close to the date of release. Such forces the investors to invest in as early as possible so that they will reap maximum profits.

Are investors entailed to ownership and voting?

What is critical here is that the token will not give the investors the right to ownership or claim of assets like ICOs. On the contrary, they act as the instruments of the bearer, which gives users rights linked to the particular project, not the company launching the project.

Even though the token swill does not entitle investors to vote on the project direction, such rights are found in the ICO itself whereby the participating investors will give input throughout the lifespan of the project.

Users can be paid when the correctly predict the contributed content throughout the proposal. Investors will participate in such activities anticipating that the value of the tokens, which belong to successful projects will drastically rise and generate higher profits on the investments.

Bottom Line

The ICO market is growing at a faster rate. According to Cruchbase website, there is worry that this could be a bubble (same to the dotcom in 200) has raised eyebrows. Regulators think that this one market can be subjected to extreme volatility. It is simply a dynamic area where many tokens may be created and done away within a day.

However, negative speculation should not instill fear in the potential investors. The funding you decide to choose for a start up, you should remember that ICOS and VCs are not mutually exclusive.  In fact, an investor can combine both two sources of funding their companies increasing their profitability chances. Thank you for reading this article. Visit our website for more information. Until next time…

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