What are Initial Coin Offerings?
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This course covers a hot topic in the world of cryptocurrencies: investing. We look at which investment strategies to consider and which to avoid. We also look at initial coin offerings, tokens, and how to track the cryptocurrency markets.


In this lecture, I want to help you understand the term ICO that you may have heard thrown around or heard about these crazy fundraising events, where people were able to raise literally hundreds of millions of dollars in a matter of hours. In this lecture, we're going to talk about ICOs, what they are, and a little bit about how they work. At their core, ICOs or Initial Coin Offerings offer potential investors such as you and I, pieces of their new cryptocurrency or cryptocurrency token in exchange for another currency such as Bitcoin or ETH. These ICOs are often put together to help fund these new cryptocurrency based projects whilst they're in the development stage, which is generally time and resource-intensive. What you can then do with these pre-created tokens is trade them on cryptocurrency exchanges such as Poloniex, providing they're listed on them, which gives you a chance to profit, while supporting projects you believe in. Now, these ICOs can be deployed in different ways. All similar in their approach, but their funding can be static or dynamic depending on how the project creators decide to deploy their ICO. Let me explain. So, an ICO can be set to achieve a specific funding goal, and every token they sell will have a predetermined value that will not change during the period of the ICO. This also means the token supply will be static. But there are also ICOs which are much more dynamic in their approach, where the more funds the project receives, the higher the token price will be. On top of that, it's also possible to create a new token upon the purchase of a token, with the limit being set as to how many times this can be done. So, as you can tell, the deployment of ICOs are pretty flexible, but also a little confusing. Now, in terms of profitability, many investors have experienced great returns on their ICO investments. But it's also true that many investors have been left short-changed by shady ICOs overhyped with no real substance to them. For example, if you got in with the Ethereum ICO, which was sold at 0.0005 Bitcoin for their new currency ETH, you could be experiencing one amazing return on investment. As ETH did top out at 1.14 Bitcoin, so that would have been a return of 280%. But like I also touched on, there are many ICOs which don't end in such profitable circumstances, so you need to be careful about what ICO you get involved in. Don't be fooled by fancy websites and the promise of the next big Blockchain-based project. Do your homework. You want to know key things, such as the history of the team, what the project aims on doing, what are they saying about this project online, have they had any past successes, and so on. Homework is key with getting involved in the initial coin offerings. Just a touch on the most notable initial coin offering. Once again, I'd say by far it's Ethereum, which we touched upon, which raised approximately $18.4 million in Bitcoins, and it ran from 20th July 2014 to 2nd of September 2014. The funds raised during the ICO then helped fuel the development of Ethereum and it really did shine a spotlight on just how powerful ICOs were. Now, I did just mention that the Ethereum ICO was the most notable. I stand by that, but that doesn't mean it raised the most during its ICO period. That crown currently goes to IOs, which raised a staggering $185 million in just five days. And Telegram was also rumored to have raised a billion dollars but that sale never actually went public. But let's now move on to discussing the legality of initial coin offerings, because it's a real gray area, it's not clearly defined. So, over being sold as a financial asset which will be tightly regulated, ICO sold as digital goods. Essentially as discounts to the cryptocurrency, and that's the reason you see ICOs referred to as crowd sales, is to get around that legal regulation. Although don't be fooled into thinking that regulators are just ignoring the explosion of ICOs. Some courts of law do regulate them in the same way as they would do with the sale of shares and securities. So, whilst it's a gray area in most parts of the world, do expect that to change as time goes by and regular is imposed regulation upon them. But as mentioned, it is a gray area in most parts of the world right now, because ICOs don't clearly fall into one regulation. One thing that's very intriguing at the moment, is the amount of interest that ICOs are getting from venture capitalists. One of the key reasons for that is because of the liquidity cryptocurrencies provide. These VCs could see substantial returns far quicker than they would do with building a company up to get acquired or go for an IPO. One VC firm to keep an eye on in this space is Blockchain capital. They raised $10 million in just 6 hours with their ICO. Making it the world's first digital liquid venture fund. Their cryptocurrency token is known as BCAP. As mentioned, there is a lot of interest from VCs, but for more let's say traditional investors, they're kind of shying away from ICOs at the moment, simply due to the regulatory uncertainty, high valuations and lack of control. Some cited as ICO is currently being in a bubble. Hence that links back to my point earlier, do your homework before investing, so you don't get caught in a Ponzi scheme because they do exist in the ICO world. Now, before I end on this lecture, be sure to check out these sites which will provide you more information on ICOs. They're super helpful. ICO list, token market, cyber fund, and Smith & Crown. So, that's all about ICOs. And now you probably know even more about them than many of the people pumping money into them. I look forward to seeing you in the next lecture, where we'll discuss more about ICOs. See you there.

About the Author
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Ravinder is an expert instructor in the field of cryptocurrencies and blockchain, having helped thousands of people learn about the subject. He's also the founder of B21 Block, an online cryptocurrency and blockchain school.