Initial Coin Offerings (ICOs) are new cryptocurrencies seeking to raise funds. Most new ICO’s favor the Ethereum platform. NEO, ICON, Cardano, and EOS are all positioning themselves to compete with Ethereum. This will add diversity to future decentralized applications. Startups can use ICOs to enter the market at the proof-of-concept phase. They benefit by obtaining funds for development sooner.
In 2013, markets saw the first ICOs enter the crypto space. However, it was not until 2014 that the market would be forever changed with the Ethereum ICO. It facilitated the entrance of hundreds of new companies into the crypto space. Another market changing event is now taking place: regulators have begun instituting policies that will make starting an ICO more challenging.
The reason behind this change is that fraudulent operations thrived without regulation. Although the issue is not as prevalent as it once was, it can be an ongoing problem that impacts even honorable enterprises. Many within the crypto sphere believe new policies could benefit the industry. However, a rapidly changing world challenges securities regulators. Some believe Great Britain is a good example as to how to mix crypto policies with opportunity.
At the moment, the SEC is taking a hardline approach. This is important because most new ICOs take the form of securities, yet non-securities tokens are likely to be affected. In response, new crypto enterprises are looking for ways to claim exemptions to strict regulations. CoinList’s Georgia Quinn brought attention to an unfolding trend of merging sectors. This would aid registration and exemptions for some new ICOs within the newly regulated market.
Smart contracts popularized the Ethereum platform, as ICOs that utilize Ether can easily communicate with each other. The Ethereum Request for Comments #20, or ERC-20, allows startups to take advantage of a network of miners. These are the reasons that 70 percent of ICOs run on top of Ethereum. This aided ICO fundraising to the tune of $5 billion in 2017. Impressively, 25 percent of ICOs reach their funding goals. Angel investors and venture capital funded less than 1 percent of startups. Clearly, new companies have an advantage in the crypto space.
The commonality within the crypto space is a great benefit. Among their plebeian traits is that most ICO tokens have fungibility. In other words, they are readily exchangeable. For startups, this means that investors can view their assets as being more liquid than a conventional market entrance.