ICO Fever: How Crowdsales Are Taking Over Cryptocurrency

Cryptocurrency crowdsales, or Initial Coin Offerings (ICO), can be a contentious subject. But there are a lot of ICOs on the crypto-landscape lately. Many exist on larger platforms, such as Bitshares and Ethereum.

Also read: An In Depth Interview With OpenBazaar’s Chris Pacia

Crowdsales & ICOs Are Growing More Popular

Lately, in the cryptocurrency news cycle, all you hear about is some new ICO or crowdsale raising millions. These funding rounds begin with developers attracting investors to start the project.

Funding comes from speculation on the company’s ability to generate future revenue. These funds are then used to maintain the project and further its development.

These tokens represent a form of shares in the project. Crowdsales remain popular, existing in the cryptocurrency industry since Bitcoin’s inception.

This year, though, crowdsales have been particularly huge. Anyone reading Wikipedia’s “List of highest funded crowdfunding projects,” will notice quite a few crypto-ICOs. Many stem from the Ethereum project. The Wikipedia list contains projects such as the infamous DAO, Waves, ICONOMI, Lisk and the DigixDAO.

Issues With Crowdsales

Some in the cryptocurrency community take issue with crowdsales. They believe many of these projects could be misleading or even fraudulent.

Hivemind developer Paul Sztorc, for instance, penned a warning against these types of sales. In a post titled “Against Crowdsales”, Sztorc explained:

Does your ScamToken have a future? No? Then, at least be honest about it.— If you ever “invested” in a crowdsale, you made a big mistake. It’s OK, maybe you didn’t know any better. Until now.

Sztorc and other cryptocurrency community members like Daniel Krawisz have been very vocal about calling these fundraisers and altcoins “Snake Oil” sales. However, altcoin proponents say their opinions are simply “Bitcoin maximalism”.

Others point out that crowdsale success has been limited, and these fundraisers often target inexperienced investors.

Then there are sales such as the recent DAO debacle, which saw a significant weakness unintentionally built into the code. It’s important to note the DAO project was an Ethereum-based smart contract — and many other projects still use this autonomous protocol. While investors lost millions in the DAO fiasco, the project was the crypto-community’s largest crowdsale so far.

Some ICO Investors May Get The Last Laugh

Other crowdfunding projects have been more successful. The DAO was a catastrophe, but the DigixDAO is doing well. The project tethers gold to cryptocurrency, and the digital asset is the 11th highest capitalized crypto-project.

The Ethereum project itself, which gave birth to many of these crowdsale tokens, is still going. While it issues in the past with a hard fork stemming from the DAO incident, it has remained the 2nd most popular cryptocurrency.

Ethereum had an initial coin offering that was well below what each Ether is worth today. One Ether is worth roughly $13 USD at press time, and the network has a market cap of over $1B. For a crowdsale project, many believe this was a lucrative investment.

Many view Initial Coin Offerings skeptically, saying creators are just trying to get rich quickly. Projects often never come to fruition, and lots of investors can get burned.

On the other hand, while some projects are successful, it’s because the project either matured or has an actual use case. Investors should always invest what they are willing to lose, because in the long run projects like these could just be a memory.

What do you think about the growing amount of ICO’s within the cryptocurrency community? Let us know in the comments below.

Images courtesy of Shutterstock

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