What Is ICO (Initial Coin Offering) And Why You Should Care?
When talk about Blockchain Technology, it's unavoidable that we need to mention Cryptocurrency (like Bitcoin, Ethereum etc..), when talk about Cryptocurrency, it's unavoidable that we need to talk about Altcoins, short form for Alternative Cains (i.e. coins other than Bitcoin), when talk about Altcoin, it's unavoidable that we need to talk about ICO (Initial Coin Offering), which is the topic of this post.
What is ICO (Initial Coin Offering)?
Think of ICO like IPO (Initial Public Offering) which is used by companies to raise funds, with the following key difference:
1. Unlike IPO, you can "invest" into ICO with fiat currency (like USD) as well as selected major cryptocurrencies like Bitcoin or Ethereum.
2. Instead of with an established and proven financial strength, ICO issuers are usually from with an idea (in the form of product or service) to solve an existing "problem". Think of it like an a kick-starrter.
3. Instead of taking partial ownership of the company, you are getting the corresponding altcoins (whatever it is being called) which can be used within the ecosystem or trade it in selected crypto exchanges at a later date.
Why is ICO so popular among the Fintech/Blockchain startups?
Two important features of ICO is that it is not regulated (at least at the moment) and it can be set-up quite easily (under the Ethereum Blockchain, technology, which is the main underlying technology in most ICOs), hence, issuers can raise funds in a quicker and simpler manner. This is also the reason why potential "investors" need to be careful and make sure to due sufficient research before plunging in as not all ICOs are created equal.
Why is ICO important for the future development of Web/Internet?
In the near future, AI (Artificial Intelligence), IoT (Internet Of Things), Machine Learning, Big Data etc.. will change the way we do thing online (either through internet or mobile) and I believed Blockchain Technology will be an integral part of this future. Of course, Blockchain Technology in itself is still at its infancy and there are many improvements (e.g. scalability, block transaction time, energy consumption etc..) need to be done before it can reach its potential. Hence, better and improved version of cryptocurrencies are expected to be launched via ICOs.
Is the risk of investing in ICO high?
The simple answer is YES! Just like in any kind of start-ups, majority of them will fail and some will fail fast. Having said that, there are also promising ICOs/startups that will make huge returns within a short period of time (like Ethereum, Ripple etc..). Hence, diversification is important to spread the risks among different ICOs.
Should you invest in ICO now?
I think only you should answer this question, if you believe in Blockchain Technology have high tolerance with market volatility. probably ICO is the new asset class that you can explore further. Having said that, please make sure to do your own due diligent by doing the homework (through their Whitepapers, something like IPO Prospectus but thinner and usually in Powerpoint Slide/PDF format) and remember to invest only with your casino money, i.e. the money that you are prepared to lose all.
To me, investing in ICO is like supporting/contributing to an idea that you believed in that will make a difference (whatever it is to you). I do participate in one ICO called Crypterium, for more details of this ICO and why I invested (minionly) in this ICO, check out my other blog here.
Note: Investing in ICOs is risky, do your own due diligent and this is not an advice/encouragement to invest in any of the ICOs mentioned.