Initial Coin Offering

Description

Ian Bogost:

"Why tout a private, distributed-ledger currency as an agent of liberation when it amounts to a complicated, software-backed, company-town store? One answer: It could give the workers a stake in the company store. In the world of cryptocurrency, this is known as an ICO or Initial Coin Offering. ICOs incentivize the use of an unproven platform, like Kik’s, by distributing an initial batch of cryptocurrency to early adopters. In theory, that value will increase if the platform becomes popular, creating a valuable base investment for its initial users.

In the extremist libertarian aspiration, smart contracts would allow anonymous actors to trade anything whatsoever in an untraceable way, via unregulatable markets. Instead, actual smart contracts, ICOs, and distributed ledger-backed devices mostly offer new ways to interface with the private technology industry. For example, in Brooklyn, a solar microgrid startup called Transactive sells clean energy to a community via Ethereum. And Toyota just announced a partnership with MIT to develop distributed ledger-based infrastructure for future autonomous vehicle services." (https://www.theatlantic.com/technology/archive/2017/05/blockchain-of-command/528543/)

Discussion

"Only a few years ago, digital currency entrepreneurs, like other Silicon Valley peers, had to line up to pitch their ideas to venture capitalists, who controlled their destiny as virtually the only source of funding.

So-called initial coin offerings (ICOs), where new tech companies using blockchain technology can raise millions quickly by creating and selling digital "tokens," with no regulatory oversight, have turned traditional relationships upside down.

"The day when VCs were the elusive elite and primary source of capital for startups has ended," said Jamie Burke, founder and chief executive officer of VC firm Outlier Ventures, which specializes in blockchain and other technology investments.

"When a startup can raise $35 million in 30 seconds without any dilution, the genie is out of the bottle and it isn't going back in," he said, referring to Brave, an open source web browser that blocks ads and trackers, which sold its Basic Attention Token in June.

...

"Tokens can galvanize a community: lots of individuals and corporations are able to work together and improve a decentralized network," said Ryan Shea, co-founder of tech start-up Blockstack in New York." (http://economictimes.indiatimes.com/articleshow/59733522.cms?)

Status

"By mid-July, tech firms raised about $1.1 billion in 89 coin sales this year, roughly 10 times more than that in the whole of 2016, according to data compiled for Reuters by crypto-currency research firm Smith + Crown.

Coin sales have already eclipsed funds blockchain firms received from venture capital, which invested over $300 million in equity in the sector in the first half of this year, Coindesk data showed.

...

Venture capital firms' digital currency investments still account for only a sliver of the roughly $19.3 billion they have invested in tech-related sectors in the first half of 2017, according to data from consulting firm PwC and research firm CB Insights.

According to tokendata.io, a new website that tracks initial coin offerings, these tokens trade on the exchanges at 20 times their initial sale price on average. That number is skewed by high-performing outliers and the median multiple is three." (http://economictimes.indiatimes.com/articleshow/59733522.cms?)