Daddy, What Is An ICO?
The ICO (Initial Coin Offering) has taken off like Irma! Crazy, wild and unregulated. An Initial Coin Offering (ICO) is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. In an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, but usually for Bitcoin. The long shot is individual paper currencies will become obsolete in exchange for a world digital currency, but no one knows who will be in charge of that currency. So, who do you trust?
The Ethereum Project went live in 2015-16 and had an “ether” value of market capitalization of over $1 billion. This is interesting because the definition of “ether” is:
a colorless, highly volatile, flammable liquid
So, you are not investing in cash with an expectation of receiving regular cash in return for your investment, you are actually purchasing digital coins as the reward with the concept of exchanging those tokens to purchase products or services in a world marketplace. Those coins can be called Bitcoin, tokens and fiat money which is based solely on the faith and credit of the economy – not based on physical tangibles like gold or silver.
A panel of attorneys at the recent Crowd Invest Summit discussed the longevity of the cryptocurrency market and most agreed until this exchange of cash for investment in ICOs become regulated by the SEC any issuer can take the cash and walk away — or go bankrupt. Or, backers could be holding the bag on all of the tax money not paid for the purchase/sale of these investments. The SEC may say the backer purchased coins in cryptocurrency and not in an investment offering.
Someone in my neighborhood invited me to an ICO investment meeting (remember all the multi-level marketing schemes back in the day?), so I attended out of curiosity. Someone in line at the door whispered “ponzi scheme” and I turned and went home.
There’s more to learn at the next Crowdfunding workshop in Encinitas on September 21st. The price goes up tomorrow night.REGISTER NOW!
We meet for 90 minutes the third Thursday of every month in Encinitas, CA.