Initial coin offering ICO list, information, interviews, analysis and much more.
ICO Live Now
|A platform to carry exchanges for the publishing economy|
|Read our interview with Publica|
ICO Live Now
|A virtual world bringing the next level of online interaction|
|Read our analysis of Deep|
What is an Initial Coin Offering?
An Initial Coin Offering, or ICO, is the process of crowdfunding a new cryptocurrency project. Sometimes referred to as a token sale, the cryptocurrency project receives money to finance their operations while, in return, individuals who invested receive a portion of the project’s tokens. Initial coin offerings generally last between a few weeks and a month.
The term initial coin offering (ICO) is borrowed from finance and upgraded to conceptualize the initial sale of cryptocurrency or blockchain powered tokens.
There are different types of ICOs. Some may resemble crowdfunding campaigns, and others may resemble stock exchange style IPOs. However, an ICO is unique in the mechanisms it uses to reach the market, and the nature of what it offers.
There are a few critical characteristics that define an ICO. The following is a short list of these characteristics:
- An ICO sells participation in an economy, project or decentralized autonomous organization (DAO, which is an organization that is governed by smart contracts and has no central authority).
- Generally, coin ICOs sell participation in an economy while token ICOs sell a right of ownership or royalties in a project, or DAO.
- Owning tokens for royalties or dividends may or may not entail the right to a vote on the direction of the project or DAO. That depends on the way the initial coin offering is structured.
- Most ICOs depend on a pre-mined digital asset, which is basically ‘minting’ a certain amount of coins or tokens before the sale – which contrasts with traditional cryptocurrencies like bitcoin or Litecoin.
- The value of the initial coin offering – not the price of the coins or tokens – is defined by the underlying benefit that an economy, a project or a DAO it is enabling.
- ICO prices are generally discounted from expected market prices, and are determined by the creators of the economy, project or DAO.
- ICOs can have multiple funding rounds leading to the launch of the economy, project or DAO, with each round making the coins or tokens it offers more expensive until the release date.
- ICOs are over once the coin or token is released for everyone else to buy at market price.
Why do ICOs Exist?
ICOs exist mainly to raise funds, but also to jump-start the sale of the service that the creators want to market, or to jump start the use of a new cryptocurrency. Initial coin offerings help blur the line between investment and consumption, because most of the times, the investor becomes a consumer of the service that the ICO offers.
On the other hand, it is the best way to get people acquainted with a blockchain project. Users can then take their tokens or cryptocurrency and use them within the eco-system that the blockchain project created. Often times, the initial coin offering allows people to buy tokens or cryptocurrency at a discount, but this is not always true. The price of the token or cryptocurrency is governed by pure demand and supply once it is released. Prices may drop below initial coin offering levels.
How does an ICO work?
In broad terms, cryptocurrency creators design their blockchains, protocols and rules under which their cryptocurrencies and networks will operate. Then they set a date for the initial coin offering. In most cases, they will start mining for coins to sell during the ICO. The next challenge is to get a critical mass of people to be ready to buy the coins on that date and start using them. In the meantime and up until that date, cryptocurrency creators make the final adjustments to their blockchains – which hopefully they have already checked and debugged thoroughly by the time they sell their project to the public.
Cryptocurrency creators also need exchanges to take up their cryptocurrency. These exchanges serve as brokers, and play a role similar to that of the stock exchange during an IPO. Then when the countdown to the ICO reaches zero, people who have an account at these exchanges, are able to buy the new cryptocurrency with other cryptocurrencies or with fiat money.
ICO vs IPO
Those who are familiar with IPOs – Initial Public Offerings – will see many similarities between the ICO and the IPO. Both processes are different nonetheless, but comparing them will help readers understand how an initial coin offering works. In order to go ahead with the comparison, let’s define IPO first.
According to Investopedia, an IPO is “the first time that a stock of a private company is offered to the public”. Furthermore, IPOs are “often issued by smaller, younger companies seeking capital to expand, but they can also be done by large privately owned companies looking to become publicly traded”.
What is the relationship between Crowdfunding and an ICO?
Some investors may shy away from ICOs as much as they shy away from crowdfunding efforts. This is due to the similarities between both of the mechanisms in terms of the risk. Nevertheless, crowdfunding of projects on sites like Kickstarter may not be taken to be as risky as an ICO. Yet there are a few other similarities between crowdfunding and initial coin offerings. In essence, an ICO is the crowdfunding tool of the blockchain world. The aim basically is to get investors to fund the development of a given blockchain project. In order to do that, they are offered a piece of the pie which is also the product of the blockchain. Just like with crowdfunding, which often offers investors a unit of whichever product that company seeks to produce, an ICO offers tokens or currency for the new blockchain project to its investors.
This is exactly where the similarities between crowdfunding and ICOs end. It is important to understand that most crowdfunded projects are centralized, in the sense that funds flow from the investor to the owner, but the owner keeps control over the project. In most cases an initial coin offering has funds flowing from investors to blockchain project developers, while at the same time tokens or cryptocurrency flow back to the investors in exchange. This almost always guarantees loss of control by the developers in favor of the investors, while making the investor an active stakeholder of the project to a certain degree.
Why wasn’t Bitcoin launched through an ICO?
Pre-mined Coins vs Bitcoin
Most people would agree that the creation, launch and adoption of bitcoin (or even Litecoin) will never be recreated for another cryptocurrency or blockchain project. This means that most ICOs will necessarily have to pre-mine part of their coins in order to launch their project. There are some exceptions like Zcash. This cryptocurrency was not pre-mined for its initial coin offering, but that affected its price afterwards. Since the demand for the coin was high but the supply was low due to the absence of pre-mining, price skyrocketed to $5,292 USD per coin just one day after the initial coin offering. Zcash price subsequently crashed.
Although cryptocurrency purists would like to see more ICOs mimic the way bitcoin launched, there is value in having a certain degree of pre-mining before the cryptocurrency launches. In any case the creators will always have the first mover advantage, and will likely have a sizeable stash of coins stowed away. Even Satoshi Nakamoto is known to have 1 million bitcoin, so any exercise in limiting the amount cryptocurrency creators can keep, is pointless. Nevertheless some developers promise to “burn” part of the pre-mined coins once they launch an ICO. This is an effort in self-regulation that might make a given project more appealing. Users will then be able to corroborate that the coins were “burned” or disappeared through various verification mechanisms.
Where can I find ICOs?
We believe that BitcoinChaser is the best place to start. We are constantly updating our index with the most interesting and exciting initial coin offerings as they are announced.
For upcoming ICOs, the best to start is our list of upcoming ICOs here.
If you are looking for live, ongoing initial coin offerings then please head over to our ongoing ICO section here.
With less than a day to go for its ICO launch, we interviewed the Peerity team to learn more about their project. In the evolution from web 2.0, centralized social media platforms to a truly decentralized internet, projects like Peerity will be the pioneers. Taking...
Pareto, the platform that allows anyone to create & distribute actionable financial information about digital currencies and get rewarded for it, has announced the launch of their upcoming Token Sale.
While the SegWit2X contentious hard fork is dominating the headlines, Ethereum’ own hard fork came and went without any major complications. Unlike Bitcoin’s forks, the Ethereum Byzantium fork was widely expected and belongs to a series of planned steps to turn the...
One of the biggest challenges that the pharmaceutical and healthcare industries face, is drug counterfeiting efforts. Counterfeiters can affect any stage of the supply chain on any given drug through raw materials all the way up to finished pharmaceutical products...
While we were all busy following the progress of blockchain projects and keeping a hand on the pulse of ICO markets, a small team of developers was busy bringing the next generation of blockchain-powered services. They managed to keep their project under the radar for...
It took only 4 minutes and 42 seconds for Viberate to complete its ICO selling 120 million Vibe tokens, and in the process raising more than 10 million dollars. Vibe tokens will be listed on LiveCoin.net starting on October 6, 2017.
Every ICO has a number of characteristics that a team determines prior to the token sale start. These technical details influence the outcome of an ICO. The Storifier team break them down.
There is a point at which we will have to look back and assess whether all the ICOs that came to market over the recent ICO boom, succeeded. Nevertheless, there isn’t a set of objective parameters under which we could be able to determine as much. In a simplistic and...
If the Bitcoin Cash fork was supposed to set an ICO-busting precedent, then the Bitcoin Gold fork should have yielded a new altcoin with rising prices, which would have landed softly eventually. But not all forks are created equal. Bitcoin Gold price came crashing...
The storifier team look at what a typical ICO timeline looks like and why they relevant, as well as a highlight the components you should look out for in an ICO project,
Since the advent of blockchain technology, some of us have been waiting for a project that would revolutionize the book publishing industry. Publishing is an industry in need of decentralization. While self-publishing and e-books have taken great strides in...
Recently, there has been an explosion of financial service ICOs. Projects offering next generation banking solutions, turned to this innovative crowdfunding instrument with the aim to gain a foothold in the blockchain space. Cryptopay however, is an exception. The...