This article was first published in April 2018.
It is no secret that cryptocurrency has the potential to be a major disruptor in the world of finance.
A year ago, the Bitcoin Foundation announced a $100 million fundraising campaign, and the blockchain technology is a powerful tool for companies and organizations seeking to secure, verify, and distribute digital assets.
Now, with a new ICO, investors can purchase tokens that promise to be traded on the Ethereum blockchain, a decentralized network of computers.
For some, the token sale has the added benefit of being a quick and easy way to fund their cryptocurrency projects.
For others, however, it’s more than just a way to raise capital.
Many ICOs are designed to be securities for the purpose of creating new coins and token offerings.
These offerings are typically designed to increase value by offering investors a better chance at gaining access to new or previously unknown digital assets, including digital currencies.
In an interview with CoinDesk, Jason Denton, CEO of blockchain startup CoinLab, explained the appeal of creating ICOs for digital assets and the challenges that the new token sale will pose for investors.
“It is a very exciting opportunity for people looking to fund ICOs,” Denton said.
“The platform is quite a bit more transparent than some of the ICOs that we’ve seen.”
Denton said that investors should be wary of the tokens they buy.
The ICOs they invest in have typically been sold to existing holders and are essentially being bought to hold onto for as long as possible.
Denton pointed to the recent sale of the token-selling platform ICOExchange as an example of a token offering that had a poor track record.
“We see ICOs as one of the great scams out there, because people buy tokens that they haven’t even spent, which is the most common scam that they see, so people don’t know what’s going on,” Dontonsaid.
Dontonsays ICOExide token sale failed to meet its goal of raising $3 million.
The company that launched ICOExus said that it was “in the midst of rebranding and marketing to help attract new investors,” but the company said that the initial funding goal of $3m was exceeded.
Denton noted that the token offering has the benefit of generating “cash outflows” to the platform, which allows investors to continue to accumulate coins and tokens.
He said that ICOs also make sense for investors because they provide an easy and cheap way to get involved in new projects.
“People are always interested in the future of the technology and want to get in on the ground floor,” DNTan.DNTan added that ICOExides token sale is an example that he has seen many investors turn to, saying that he believes it will be “a game changer for the crypto-space” as well.
“This is something that is really cool,” Dnton said.