The onset of Blockchain into the world’s financial markets has brought with it many new ideas, introduced rapidly to wide-eyed market participants over the last few years. Despite how far we’ve come, however, all the progress we can currently boast about was predated by a simple product called Bitcoin.
Revolutionary at the time (and still today), Bitcoin showed people that a safe financial ecosystem is possible without centralized authority figures, and that cryptocurrency is a great way to invest and trade. The idea caught on like a brush fire, and a new industry was born that seeks to forever change how we define money.
Bitcoin quickly spurred other projects like Litecoin, a more efficient clone, and Dash, which added a governance model and instant transactions. The industry stayed quiet until around 2015, when developers who recognized the Blockchain model’s wider applications introduced Ethereum. This was seven years after Bitcoin first hit the scene, but began the revolution anew. Since then, Ethereum has built its own loyal following and has even spawned new ideas of its own, unrelated to Bitcoin.
Sifting through a sea of ICOs
One of the most important functions of Ethereum is its ability to launch other cryptocurrencies. In what’s called an initial coin offering (ICO), companies can sell their own tokens, each with proportional relative value to Ethereum, and allow angel investors to exchange their Ethereum for these new tokens. Ethereum itself has value relative to fiat money, so launching an ICO became the new standard for startups that wanted to crowdfund cash fast.
ICOs boomed in popularity because of many factors. One important component was accessibility. The lack of regulations and ease with which anyone can buy cryptocurrency made the identification of willing investors an easy task. A second factor, speculation, encouraged these ICO investors to participate. Speculators and investors saw ICOs as cheap, high-potential investments. Early launches only solidified these expectations, with investors piling haphazardly into new ideas just to sell their tokens for large profits once the rest of the crowd caught on.
It’s important to remember that startups which launch an ICO owe their investors nothing, except the appropriate number of tokens promised. No equity needs to be sacrificed for funding, as investors expect nothing other than a business that keeps its promise to create a good or service, one that makes its tokens valuable in turn.
This potent value proposition has made ICOs the way to go for any new company, with ICO funding surpassing venture capital (VC) funding in 2017. However, despite the advantages of the ICO model, installing checkpoints and milestones into this untamed world helps filter out Blockchain startups that detract from the young industry’s delicate image…