The crypto industry continues to develop thanks to exciting ideas. It is worth mentioning that one of the major trends that emerged during the 2017 crypto boom, remains quite popular to this day. The Initial Coin Offering or ICO. Interestingly, ICO operates somewhere between an Initial Public Offering as well as a crowdfunding campaign. For example, in 2017, more than $300 million was raised for ICOs.
However, there are certain problems as well. People should take into account that the problem is that many ICOs were badly designed, suspect, or only outright scams. Let’s have a look at the advantages and disadvantages of a fundraising tool.
Interestingly, an ICO is somewhat similar to an initial public offering in that it allows investors to purchase a “share” (or token) in a new idea or project. They often take place over 30 days and represent the primary source of funding for some cryptocurrency startups. However, most ICOs are not regulated, and there are few or no protections for investors.
Nevertheless, thanks to ICOs, it is possible to provide new revenue streams for promising startups, while also allowing ordinary investors to take part in this process. However, the situation is more complicated. Notably, there have been many legitimate, successful ICOs. For example, let’s have a look at Ethereum. This cryptocurrency provided an incredible 106,614% return for its early investors.
Initial Coin Offering and risk factors
Unfortunately, there is no lack of risk factors. Unfortunately, the unregulated nature of the market created the perfect environment for bad ICOs to flourish. For example, the ICO Prodeum. This ICO promised to bring blockchain technology to the fruit and vegetable market. Moreover, it had all of the hallmarks of a legitimate ICO.
Furthermore, the team appeared to consist of well-known cryptocurrency names. Also, the white paper seemed to be legitimate, but then out of nowhere, Prodeum suddenly disappeared with all of its investor’s money. They left only a small amount of money.
Unfortunately, all the big cryptocurrency names had been victims of identity theft. This is not the end of the story and let’s have a look at another interesting detail. Moreover, fans who wrote Prodeum on their bodies received money from the freelancer platform Fiver, and all money vanished.
People should keep in mind that Prodeum was not the first ICO scam. Moreover, it won’t be the last one. Moreover, Prodeum is a strange example because of the amount of effort that went into creating the appearance of the professional website. For instance, there are a huge number of ICOs that spend less time and energy. Nevertheless, they still receive funding. A lot of people do not pay attention to such details. As a result, they may lose money.
ICO and new opportunities
As stated above, there are numerous risk factors ICOs are an important fundraising tool. Moreover, thanks to them, people have the opportunity to invest in new and revolutionary ideas. As a reminder, they helped to raise more than $3 million in 2017. This fact once more underlines the importance of initial coin offering.
Despite all challenges, it has the potential to play an important role in the modern world. However, there is a need to regulate ICOs. Nevertheless, heavy-handed regulations could kill a highly promising fundraising tool. In this situation, the best approach is to find a perfect balance between regulations and an excessive amount of regulations. It won’t be easy to complete this task. Authorities should work with companies and individuals to fulfill this goal. Moreover, private as well as governmental organizations from around the world should join forces to find the best solution.
