Updated: Mar 7
While researching the Ethereum website for my previous blog, the concept of tokens caught my attention. I found that tokens are mostly linked to Initial Coin Offerings (ICO). ICOs are a way for entrepreneurs to find funding for new projects, as explained by CNBC in this video.
Nowadays it is more common that people are interested in being self-employed. The most common way to do this is through a start-up. Creating a new and innovative project is what everyone is pointing towards in hopes of becoming the next Facebook or Google. According to an article in Fortune, the data of the Bureau of Labor Statistics (BLS) showed that the number of self-employed people in the U.S. has grown by nearly 150,000 since 2014; thus, it has increased to 8,751,000, up from 8,602,000 by the end of 2016.
Understanding an ICO:
“The team that is developing a project asks for funding through an ICO. The funds are paid via Ethereum or Bitcoin and, in exchange for these funds, the investors get back tokens. The token can either be used as native currency or it can also give the holders various benefits within the project” -Huffington Post.
First of all, you need something called a white paper. This is basically a paper written by entrepreneurs in which their project is explained. This works as a tool to let people know about your project in more detail. Releasing a white paper is rather important because if you need funding, people are going to want to know what is the idea being funded. There are different internet sites where you can publish a white paper for free.
Most start-ups require money in order to start developing their project. Usually, the funding comes from loans, selling a portion to a partner, or participating in a government-funded contest. This new way to create capital through an ICO opens up a great way to make money and still own more than 50% of your company while doing it. You can generate funds by creating a digital token or coin and selling it to investors online for cash or crypto.
Investors can purchase a new coin that is backed up by the project or by a token. A token can hold a certain value linked to a specific digital currency or it can give you access to certain things within the projects. This depends on the person who coded it and the access they want to provide within a specific token. Tokens can be generated on the Ethereum network. Purchasing a coin or token does not give the investor ownership of the company; that’s good news for these new start-ups.
One of the things I like most about this digital world is the fact that people are given different possibilities. They have the chance to choose different options, like ICOs, rather than just sticking to what is imposed by our current system. ICOs are giving start-ups the possibility to choose a different path to help launch their ideas, thus, being able to share their vision worldwide and not just locally.
At first, I did not believe something like this would work, but according to Huffington Post, “The Ethereum ICO is easily one of the biggest ICOs of all time, both in terms of the fund raised and the potential of the project itself. The Ethereum ICO ran from July 20, 2014, to September 2, 2014, for 42 days and raised $18.4 million in the process. From then on, Ethereum has gone on to become one of the most innovative and powerful cryptocurrencies in the world.”
Like everything good in this world, there is always going to be a downside. Unfortunately, some have used ICOs to scam people, creating fake projects and white papers. Actions like these ruin it for many entrepreneurs who are trying to use this initiative for something positive.
Hope you enjoyed it! Feel free to comment.