Is There Still a Place for Initial Coin Offerings (ICOs)?
With the development of technology, it is nearly impossible not to keep up with digitalization. Nowadays, everything is getting digitized, even money. While these changes are taking place, it cannot be ignored that a lot can be done with digital currencies. Initial Coin Offerings (ICOs) are one of the benefits that changing and developing technology provides for entrepreneurs and investors.
Anyone can create a digital currency for ICOs, so currently there are thousands of cryptocurrencies in circulation. The value of all the cryptocurrencies types has reached $0.25 trillion since the invention of Bitcoin in 2009. Also, today there are 1.7 trillion USD and 1.4 trillion Euros in circulation.
The top-performing ICO’s are listed below:
Ethereum is one of the first ICOs to hit the market at $0.31 in 2014. In just over a month, its value reached approximately $18 million. Now one Ethereum token is worth $700 in December 2020. Unlike Bitcoin, Ethereum is a digital currency and a technology that enables decentralized applications with smart contracts. Ethereum tokens have provided a 200,000% or more return on investment to investors.
NEO is a blockchain project based in China known as "China's Ethereum." While its first ICO in 2015 had a token price of just over 3 cents, it increased to $180 as of January 2018. In 2016, this amount reached 4.5 million USD.
Although Spectrecoin is not known to as many people as NEO and Ethereum are, it would be unfair to ignore its success. The most crucial feature of Spectrecoin, which was first released as "privacy-oriented," is that it can be sent and received anonymously to anywhere in the world. Its investment of $0.001 per token in late 2016 has reached a value of $0.60 today.
In 2015, IOTA collected around 400,000 USD during its first ICO. IOTA’s popularity is thanks to how it combines elements of blockchain technology and IoT (internet of things). In addition to being a free platform for transactions that do not require an actual blockchain, the transaction ledger also has a decentralized structure.
Released by BCNext in 2013, NXT was one of the first ICOs and among the most successful. It is designed as a blockchain platform providing financial services. With tokens sold for USD 0.0000168 in its early days, NXT's developers earned 16,800 USD worth of bitcoins with the ICO. Besides, it provided a 1.477.000% return to investors.
Ark, whose initial token price was 0.04 USD during the ICO, peaked at $11, bringing a 35,000% return to investors.
How Does An ICO Work?
Initial Coin Offerings enable fundraising for an initiative or project from the internet. ICOs provide funding for particularly experimental projects at a very early stage or have not yet started. Investors invest in ICO by sending money in the form of cryptocurrency to a blockchain project and are then eligible to buy digital tokens in return.
There are three types of tokens; payment tokens, utility tokens, and security tokens. The Stellar and Ripple are examples of payment tokens; they do not give any rights to the exporter. Utility tokens are provided to utilize the exporter's services. The security tokens are mobile electrical devices that include personal information security and authenticate people's identity.
If the project goes viral and proves successful, it has high likelihood to be a very profitable investment for early adopters of the ICO. When the project is completed and presented, it takes its place in the cryptocurrency buying or selling markets. Here, it has a price according to supply and demand and starts to be bought and sold. Other projects begin to use the new ICO project's opportunities by integrating them into their projects thanks to the provided APIs.
The Future of ICOs
An ICO is the most effective and easy way to find funding for new projects. Moreover, the Initial Coin Offerings model has provided funds for a lot of successful projects and entrepreneurs for years. While this crowdfunding reached 5.1 billion dollars in 2013, this number increased to 16 billion dollars in 2014 and 34 billion dollars in 2015.
In recent years, the use of ICOs has increased, as online shopping has become more mainstream and digital currencies have become very popular. In 2017, entrepreneurs and companies raised nearly $7 billion, because of ICOs. And thanks to the rapid rise of blockchain technology, this amount had doubled by 2018.
What cryptocurrencies have achieved in such a short span of time strengthens the possibility that physical money will, someday, be abandoned in the future and contactless technology combined with digital currencies will be used. We are noticing that with the continued impact of the Covid-19 epidemic, people are becoming more willing to pivot to contactless and even convenient payments (preferably decentralised as well) as much as possible and these digital currencies may disrupt the traditional market as this traction continues to build up.