ICO is an initial coin offering used by its creators of a cryptocurrency to raise certain capital for them to run a business or for a future development and care of a cryptocurrency itself. It is an easy and effective way to raise funds without involving 3rd parties like banks and venture capitalists. It is an alternative to IPO which is initial public offering and it is used by firms which want to raise capital from people in exchange for a share in their companies. The disadvantage with IPO is when some company wants to go public in the stock market, they must fulfill a lot of rules, whereas in ICO there are none. So, it is an opportunity and a problem for people, because promising projects which can be successful in the future can do ICO anytime they want, and they can be successful, but on the other hand, there is a lot of people who take advantage of this fact and they create fake projects where they only raise money for themselves, take them, run away and scam a lot of folks for a lot of money.
The most successful ICO of all time still remains NEO, which is cryptocurrency also called “Chinese Ethereum”. NEO is the first Chinese open source blockchain which also uses smart contract applications, but with the addition of decentralized commerce, digitized assets and identification. NEO is currently the 10th biggest cryptocurrency by a market cap with almost $5 billion. This cryptocurrency went from $0.03 in 2016 to unbelievable $162.11 per piece at the beginning of 2018. That is an abnormal return in tens of thousands of percent.
The second most successful ICO is Ethereum even though it is the second biggest cryptocurrency after Bitcoin. Ethereum is more than just a cryptocurrency as it is a ledger technology used to build and deploy decentralized applications a.k.a. smart contract technology - a program that automates the execution of a contract when the correct conditions are in place. Ethereum was sold in 2014 at presale for $0.31 and peaked at $1389.18 at the beginning of 2018.
There are more examples of successful ICO as Spectrecoin, Stratis, Ark and more, but there is a lot more of those which were not successful, and a lot of money was lost. It feels bad for investors when they invest and it does not work out, so they lose some part of their investment, but what is worse is the fact when ICO is fake and creators only take the money and as a result investors lose the whole investment.
One of the most known scams in cryptocurrency world is OneCoin which was $350 million Ponzi scheme created by Ruja Ignatova. There was no evidence of any token created, no working prototype, team members that were previously linked to other scams and acceptance of funding in fiat currency instead of Bitcoin or other cryptocurrencies. Another scam was PlexCoin of which the creator Dominic Lacroix promised returns of more than 1300% in just one month! Luckily, SEC (Securities and Exchange Commission) froze the $15 million that PlexCoin had managed to raise before it was too late. There is a lot more examples of ICOs which were just scams where people would exchange their money for a dust, but how to solve this problem? Well, some regulations by big financial organs could help, but it will never be totally under control because the crypto world is based on anonymity and people can create coins without revealing their identity. People easily forget, and they will always be vulnerable to sayings about abnormal returns and how they can become rich and scammers use that against them.
The only solution for this problem could be some regulations on coins which are already big and existing, but it is impossible to control those which are small and scam people for only tens or hundreds of thousands of dollars. People should be generally aware of the risk they are taking, but when they only think about returns they forget about the risk and that is the unsolvable problem. As people cannot think rationally the big corporations as Facebook tries to solve this problem by banning all ads related to cryptocurrencies.
Please, give me feedback whether it is good or bad. I am a big boy I can take the truth. Thanks. Peace out.
Source: https://hackernoon.com/differences-between-ico-funding-and-venture-capital-funding-971e6fc2638d