An ICO, initial coin offering, is a fundraising mechanism in which project developers offer their own token in exchange for other well established crypto-assets such as bitcoin and ether rather than selling equity to fundraise.
In the traditional economy, typical access to forms of funding consist of venture capital, public equity sales or private and public debt borrowings (bank loans and bonds). Whereas traditional fundraising mechanisms grant a participant shares in the firm and the decision-making power that derives from these very shares, tokens may carry out several functionalities within the platform being developed.
ICO projects can avoid the many inconveniences associated with these fundraising processes that may range from dilution of ownership and control over the company, to inflexible and costly repayment schedules. In doing so, ICOs reduce the costs related to compliance regulations and trusted intermediaries.
This innovative alternative to fundraising has witnessed an exponential boom demonstrated by the following numbers
- In 2015, only 3 ICOs raised 6,084,000$.
- A year later, 94,009,144$ were raised by 30 ICOs in 2016.
- 2017 saw a total of 884 ICOs that altogether, raised a cumulative total of 6,073,707,934$.
- Early May 2018 saw 616 ICOs raised 3,923,076,641$.