Technology and Finance: What is an Initial Cryptocurrency Offering?

An Initial Offering of Cryptocurrencies is a financing alternative for projects based on blockchain technology.

The project issues crypto assets or tokens on an existing blockchain platform (Bitcoin, Ethereum, Waves ...) and they are delivered to investors, who generally subscribe through cryptocurrencies.

It would resemble a crowdfunding operation, and ithese tokens do not represent social capital of the issuing entity.

In addition, the entire token distribution operation is coordinated and automated through smart contracts.

The first such operation was conducted in 2013 by Mastercoin and raised $ 500,000 in bitcoins.

From that moment on, various modalities have emerged (limited, unlimited sale, reverse Dutch auction) and it is estimated that between 2017 and 2019 the total amount of funds raised through ICOs reached 27,000 million dollars.

What is the value of the tokens?

The tokens are digital assets, which in the case of ICOs provide the investor with access to the product or service that the issuing project is going to develop. The value lies in what each user can receive, for their access to the service offered in a more or less exclusive

What types of products or services are entering the ICOs operations?

We mainly see platforms that offer products or services that take advantage decentralization, verification, and the absence of intermediaries, provided by blockchain. Managing transactions that are traditionally carried out through intermediation, sale of digital assets (NFTs), specific protocols, marketplace platforms, and gaming.

Interesting specific cases, among the last planned and completed ICOs:

Platforms to search for job opportunities for freelancers, eliminating intermediaries and their corresponding fees; virtual art galleries for the sale of digital assets, NFTs; decentralized cloud platforms for data integration and collaboration; games in which the ownership of assets is decentralized to users.

What use can investors make of the tokens received in exchange for their financing?

They can be used to acquire or make use in the future of the products or services provided by the issuing project. Or wait for a potential appreciation and monetize through its subsequent commercialization.

In the example of video games, the tokens can allow access to certain assets that are used during the game, characters of the game, etc. In other types of platforms, such as betting platforms, they can be used to carry out the same operations as in any traditional platform, with the advantage of the elimination of intermediation costs.

Current market

Target amounts for an ICO range from hundreds of thousands of dollars to several million.

The main characteristics of the Initial Cryptocurrency Offerings are their global accessibility from any corner of the world, as well as unlimited investment. There are no intermediaries, as it is managed through smart contracts.

We must consider the low existing regulation and although in some countries these operations are restricted, we are talking about a large community that is obtaining financing outside of traditional channels and frameworks.

There is a great multitude of services and products that can be financed through this alternative and many that may emerge, creating a new environment with multiple possibilities.

We have to be very attentive to the regulations that may arise, the evolution of this type of services, as well as the evolution of the different cryptocurrencies in the market, given their high volatility.