Why ICOs? What’s Bringing So Many to the Token Sale
September 21, 2017
In 2016, ICOs, or Initial Coin Offerings, raised a total of $103 million, leading sites like coindesk to declare 2016 “The Year Blockchain ICOs Disrupted Venture Capital.” It turns out that this was just the beginning. From January to early September of 2017, ICOs have raised $1.7 billion, according to the website TechCrunch. ICOs have been so successful that mainstream financial institutions and governments can no longer dismiss the token sale as a passing fad. This begs the question: why are so many drawn to ICOs?
One of the main factors in the extraordinarily fast rise of the ICO is that the market was almost entirely unregulated in the beginning. This made ICOs very appealing to startups and investors, since both sides could get involved quickly and easily. Although some governments are cracking down on token sales (you can read more here: “What Does the Dao…”, ICOs are still muc h more unregulated than other traditional capital raising events.
Even if many more restraints are imposed on ICOs, they have other benefits that may make the market robust enough to weather such a change. For one thing, each ICO helps to create an ecosystem fueled by their particular cryptocurrency. Because investors buy the new crypto during the ICO, each has a personal stake in seeing the project and startup succeed. This stake is important because many participants of ICOs tend to be active members of various online crypto communities on Reddit and elsewhere, and so they create buzz for the crypto, which might convince other investors to buy, which increases the value of the currency. On the other end, crypto creators are incentivized to market their project extensively before an ICO, which increases the chances of their project being successful.
With the kind of momentum ICOs have seen in 2017, one wonders whether the headlines of 2018 will be full of even more ICO success.