10 questions about the ICO, tokens and prospects of development kriptoindustrii
Get Rich / / December 20, 2019
Paul Kravchenko
Ph.D., founder of Distributed Lab. Profile on Facebook.
What is a ICO?
ICO (Initial Coin Offering - initial public offering of coins) - a presale startup of its own currency (the token). In fact, this format kriptovalyutnogo (ie using digital currencies, bitcoins, Ethereum and others) crowdfunding. Investors acquire a certain price for the coins, which are traded only within a project.
Token Value depends on the number of future users and their activity and may increase exponentially due to the limited emissions and increasing demand.
One example - the start-Brave. The new web browser launched American programmer Brendan Eyh. The project entered its cryptocurrency BAT (Basic Attention Token), the cost of which was estimated at Ethereum. For sale was billed the maximum number of BAT - 1,5 billion units. 30 seconds start-up collected $ 35 million.
You can read more about the tokens? What can be done?
The token may perform one or more functions:
- Action (lobe) in a specific startup.
- accounting tool (the number of API-calls, the amount of upload to a torrent).
- Digital asset (digital rights ownership of the land, tomatoes stock, and so on).
- compensation method miners (A prime example - bitcoin).
- A method for preventing attacks (Commission Bitcoin network).
- Currency, means of payment between the parties.
- The fee for using the system.
ICO Why suddenly so popular?
ICO seems simple way to raise money without doing lengthy negotiations with investors. Moreover, the legal consequences for the startup in case of failure are not available.
But if there is a risk of losing everything, why do people invest in ICO?
I was able to identify four causes (Descending)
- The desire to make money, while there is a wave.
- Others, too, are investing in it - why not?
- The desire to feel investor
- Belief in a startup.
Many of those on the market, or closely watching him, confident that the old model of venture investment dies. And there are cases when investors are not really willing to invest in start-up, ready to be happy to participate in its ICO.
This, in my opinion, can only be explained by the fact that they believe in the existence of a sufficient number of people who are willing to buy at a higher price.
Whether on the ICO to sell some of their shares?
Yes. This can be done more or less legal in Singapore and Switzerland. Investors still have to go through the identification (KYC) when buying and selling. But as far as I know, until the regulators turned a blind eye to the secondary market.
Should I do it?
It's a difficult question. On the one hand, now buy any tokens hyped ICO.
On the other, the growth of the value of shares may not be as rapid as growth in the value of the token (as it is usually necessary to carry out any action on the platform). This greatly reduces the attractiveness of ICO for speculators.
What is the ICO innovation?
In the future, the majority of businesses will be financed through the ICO-like mechanisms. This has several reasons:
- Simultaneous participation of many investors to determine a balanced share price (at the expense of the auction).
- The presence of a liquid secondary market at the time of completion of the sale.
- Reduced requirements for investors (currently only accredited investors may invest in the US).
- Reduced legal registration due to the standardization of costs.
- Cheaper infrastructure for storage, trading and accounting of shares (Ethereum virtually all of this gives free).
What risks are investors in ICO?
The main risk - is the loss of funds, if the start-up closes. According to statistics, this happens with 99% of start-ups.
I do not think that a new principle of investing is somehow change the alignment for the better. Unfortunately, most startup sees gathered at the ICO as a means of money for which will not have to answer.
The second most important risk - is the loss of keys. For example, if you keep the token on the stock exchange, and it was hacked, the funds will not return.
And another important point: for businesses that are not entirely virtual (and it the vast majority of them), there is no way to guarantee a profit to distribute between the owners of the tokens.
And it would look like the ideal case?
Take an online game with multiplayer (for example, Warcraft). game developer can release its decentralized version, in which each player has at full copy. All copies are networked.
The game has domestic currency (gold), and many items (swords and shields), which can be traded. As well as the exchange on which you can start the real money. Accounting for gold and game items is conducted on blokcheyne, which is distributed among all players.
We also have a developer account in gold. Game author may initially establish a rule that for each transaction between the players (in gold or items) you have to pay a small fee, which is accumulated on the developer's account. In fact, it will gain a virtual enterprise.
And now the most important thing. The developer can issue tokens that represent the action of the game, and the program in proportion to the distribution of profits among the owners of the tokens. These shares can be sold before the start of the development of the game itself.
Important implications:
- The company has no servers.
- The company may be completely virtual and is not registered in any jurisdiction.
- The company's profit is generated completely transparent to all players and investors.
- The project investor is guaranteed a profit, since its distribution is no longer controlled by the developer.
In such ICO and will invest most of the funds. Each project actually creates a closed economy. In general, the randomly selected businesses can not use the same scheme, because it operates in an open economy.
That all the same will happen with the ICO-industry?
ICO-market will pass through the obligatory step euphoria, frustration, regulation and stable development. The main consequence is that regulators will ease the requirements for investors and legal formalities, which greatly reduce the cost of the entire investment process.
With regard to the exorbitant profits that now the number of those wishing to invest in projects promoted exceeds the number of these same projects. Sooner or later the balance, everything will fall into place. Investors will be engaged in Due Diligence again (collect objective information and make an expert assessment of the project). And the founders of start-ups will have to explain how they are going to make money, and if they have an understanding of what they are doing.