It’s no secret that Ethereum’s ICO was a resounding success. In less than two months, the project raised over $18 million dollars, making it the second most successful cryptocurrency crowdsale to date. But what exactly is an ICO? And is Ethereum’s success a sign that ICOs are the future of fundraising?
An ICO, or Initial Coin Offering, is a new way of raising capital for startUPS. Unlike traditional IPOs, which involve selling shares in a company to investors, an ICO involves selling digital “tokens” to supporters.
These tokens can be used to access the services of the startup, or can be traded on cryptocurrency exchanges.
The popularity of ICOs has been fuelled by the success of Ethereum. The Ethereum blockchain platform was itself crowdfunded through an ICO in 2014, raising over $18 million dollars.
The platform went on to become the most successful blockchain project of 2017, with its native currency, ether, rising in value by over 9,000%.
The success of Ethereum’s ICO has led to a boom in new projects looking to raise funds through token sales. In the first quarter of 2018 alone, ICOs raised over $6 billion dollars.
This figure is expected to rise as more and more startUPS look to take advantage of this new fundraising method.
So far, the majority of projects that have raised money through ICOs have been based on the Ethereum blockchain. This is because Ethereum’s smart contract technology makes it relatively easy to launch an ICO.
However, other platforms such as Stellar and EOS are also beginning to gain traction as platforms for token sales.
It remains to be seen whether ICOs will become the dominant form of startup funding in the years ahead. However, there is no doubt that they have revolutionized the way that early-stage projects can raise capital.
And with billions of dollars being raised every year, it’s clear that investors are confident in the potential of this new funding model.