{"id":1024,"date":"2019-05-07T11:42:16","date_gmt":"2019-05-07T11:42:16","guid":{"rendered":"https:\/\/coindeveloperindia.com\/blog\/?p=1024"},"modified":"2019-05-07T12:09:49","modified_gmt":"2019-05-07T12:09:49","slug":"initial-coin-offering-raising-millions-in-seconds","status":"publish","type":"post","link":"https:\/\/www.coindeveloperindia.com\/blog\/initial-coin-offering-raising-millions-in-seconds\/","title":{"rendered":"Initial Coin Offering – Raising Millions In Seconds"},"content":{"rendered":"\n

If you want to see the biggest change that took place due\nto cryptocurrency than it will definitely be the ICO (Initial Coin Offering).\nIt came into trend when altcoins made their appearance which consequently, made\ngenerating crypto tokens very easy. It was instantly picked up by those were\nseeking an opportunity to work on a new technology or business idea and needed\nfunding for that.<\/p>\n\n\n\n

In the year 2017, this instrument of crowdfunding saw a meteoric rise with a whopping sum of $5.6 billion<\/strong> raised collectively by all the projects. It continued to grow even in 2018 and stood with of $6.3 billion<\/strong>. <\/p>\n\n\n\n

See the chart to check the difference in the growth of ICO in two consecutive years:<\/strong><\/p>\n\n\n\n

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These stats show how impactful this instrument has been\non the market. It continues to grow and reach higher number of investors across\nthe globe. This article will give an overview about ICO, its trends and\nspeculations on future.<\/p>\n\n\n\n

What is Initial Coin Offering?<\/strong><\/h2>\n\n\n\n

ICO is nothing but a crowdfunding event under which\ntokens are sold and raised funds are used to start blockchain-based tech\nventure. The project could belong to any industry and they have made many feats\nachievable:<\/p>\n\n\n\n

The funding for the development of DAPP has been possible\nonly with ICO.<\/p>\n\n\n\n

Anyone can launch his\/her project and anyone can participate\nin it. There is no restriction of boundaries as well, you can in any offshore\nand onshore project.<\/p>\n\n\n\n

It become publicly known in the year 2014 when the\nEthereum ICO raised $18.4 million and began a new revolution based on\ntechnology.<\/p>\n\n\n\n

In the beginning, ICOs were launched only for the\ndevelopment projects of new cryptos. Tokens that have been created and all\nsought by the investors can be easily sold.<\/p>\n\n\n\n

After Ethereum succeeded as a cryptocurrency, it quickly\ntook over the market and became the most prominent method for developing new\ncoins. Its unique ecosystem makes mass manufacturing of coins possible without\nspending large quantum of GAS.<\/p>\n\n\n\n

A Brief History of ICO<\/strong><\/h2>\n\n\n\n

According to the records, the first cryptocurrency\nintroduced by ICO was Ripple. The project was spearheaded by the Ripple Labs in\n2013. They created around 100 billion and sold them to raise funds for\nsupporting the development of Ripple platform. <\/p>\n\n\n\n

In the same year, Mastercoin introduced its own project\nfor creating a layer over Bitcoin for tokenizing the transactions and\nintegrating smart contracts. The project ended up raising $1 million through\nthe sale of Mastercoin tokens against Bitcoin.<\/p>\n\n\n\n

There are many other cryptocurrencies which were funded\nwith ICO. In 2016, Lisk was introduced and it managed to raise around $5\nmillion. However, the most successful cryptocurrency introduced through ICO has\nbeen Ethereum. It was sold at the price of 0.0005 Bitcoin each and raised\nnearly $20 million. So far, Ethereum has been the biggest success in the\nhistory ICO-based projects.<\/p>\n\n\n\n

After making smart contract an integral part of its\nmechanism, Ethereum became a pioneer in the ICO sphere.<\/p>\n\n\n\n

Ethereum \u2013 The Crowdfunding Machine<\/strong><\/h3>\n\n\n\n

The landmark feature of Ethereum is that any token\ncreated on its smart contract system can be transacted on the blockchain as\nwell. The introduction of ERC20 standardized these types of contract. It also\nmarked Ethereum as as a host of wide varieties of ICOs, it soon became a part\nof every crowdfunding campaign. <\/p>\n\n\n\n

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The DAO platform has been the most influential\ndemonstration of Ethereum and its smart contract\u2019s potential. When the\ndistributed investment company was launched, it received Ether worth $100m. In\nreturn, the investors received enhanced market price for their own shares and\nalso participated in management of DAO. However, the idea failed after the\nplatform was hacked. <\/p>\n\n\n\n

As mentioned before, Ethereum became a default choice\nevery project projects and it is still reigning this sphere. Apart from that,\nit is very easy to develop the tokens using its ecosystem. You just need to\npast the contract in your wallet after transferring ETH and that\u2019s it. The\ntoken appears in your wallet and enables you to transfer it wherever you want.<\/p>\n\n\n\n

Before heading further, we need to understand the basics\nof the token.<\/p>\n\n\n\n

Token = Cryptocurrency<\/strong><\/p>\n\n\n\n

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These days, the word \u2018token\u2019 is used a lot, there are\nonly a few who know what this term truly means. It is actually very hard to\nsettle on one definition as token can be explained in various other ways. But\nwe can try to understand it with broad definition:<\/p>\n\n\n\n

A tokens holds a certain value in its distinct ecosystem.\nIt comes with different functions such as voting rights, valuing and staking as\nwell. The functionality of token cannot be limited to some certain extent,  it can have diversified role in its own\necosystem.<\/p>\n\n\n\n

However, cryptocurrency coins and tokens are two\ndifferent things. Bitcoin, Bitcoin Cash and Ethereum are cryptocurrency coins\nbecause they possess a certain even outside their ecosystem. <\/p>\n\n\n\n

On the other hand, projects such Golem and OmiseGo are\ntoken because have a value only inside their own smart contract platform like\nEthereum.<\/p>\n\n\n\n

As per the directive of Securities and Exchange\nCommission of US, tokens are classified into two types:<\/p>\n\n\n\n

Security Tokens<\/strong><\/p>\n\n\n\n

Utility Tokens<\/strong><\/p>\n\n\n\n\"\"

Security Token<\/strong><\/a><\/p>\n\n\n\n

Howey Test is the method to determine if a particular crypto token could be considered a security token or not. There are conditions which have to be met by the token to pass this test:<\/p>\n\n\n\n

Can it be considered an investment of money?<\/strong><\/p>\n\n\n\n

Is investment taking place in a common enterprise?<\/strong><\/p>\n\n\n\n

Can profit be expected from the work of promoters or the third party?<\/strong><\/p>\n\n\n\n

Note: The term \u201cCommon Enterprise\u201d has been under\ndiscussion for a while now. However, \nmost of the federal courts consider it a regular venture in which\ninvestors can pool.<\/p>\n\n\n\n

The very essential nature of ICO makes it an investment\nopportunity and therefore, the tokens launched under it are classified as\nsecurity. Moreover, they are subjected to federal regulations and securities as\nthey obtain their value from extraneous tradable assets.<\/p>\n\n\n\n

Utility Token<\/strong><\/p>\n\n\n\n

Tokens that pass Howey Test are classified as security\ntokens and those who fail are considered Utility token. These tokens are just\nconcerned with certain products or services and gives users a few privileges:<\/p>\n\n\n\n

Enabling holders to use a specific network.<\/p>\n\n\n\n

Empowering holders with right to vote for taking\nadvantage of the network.<\/p>\n\n\n\n

Hopefully, we have been able to make ICO and token clear\nto you. Lets peek into the mechanism and see how they work:<\/p>\n\n\n\n

There are smart contract platforms such as Ethereum and\nNeo that let developers create Dapps using their architecture. You can compare\nthem with with supercomputers that are empowered with Dapps which executable\ninside the mechanism.<\/p>\n\n\n\n

For the purpose of raising funds for the project, only a\nlimited amount of tokens are released. There are few reasons which make\nlimiting the number of token necessary:<\/p>\n\n\n\n