The pace of technological change and innovation emerging from the cryptocurrency world is immense, and seemingly impossible to keep up with.
Many of these technologies have leapt out of the hype-filled world of digital currencies and are being put to broader, real-world use. Blockchain is one such example, which has applications beyond financial services such as in health and real estate. Blockchain was one of the most talked-about subjects at this year’s SXSW Interactive event, not because of the cryptocurrency it underpins, Bitcoin, but because of its revolutionary potential.
Initial coin offerings, or ICOs, are one of the developments that have gained traction in the market over the past year. There are various type of crypto assets that are offered via ICOs including utility tokens, asset backed tokens or security tokens. While each type has different considerations, from regulatory to tax, they generally consist of companies offering to willing purchasers tokens that in many cases provide access to their ecosystem (somewhat like a private club membership) as a way to fundraise for a specific project.
While conjecture continues to surround the cryptocurrency market, ICOs have come under particular scrutiny, due in part to some fraudulent activity. In the US two men were charged after they raised US$32 million through a fake startup, which celebrities, including boxer Floyd Mayweather and musician DJ Khaled, promoted via Twitter.1 Other stars that have publicly endorsed offerings through social media are now being warned by regulators against doing so.2
To date, the regulation of ICOs varies dramatically, however. They have been outright banned in countries including China3 and South Korea. Yet Japan has recognising their legitimacy and even authorised cryptocurrency exchanges.
As this infographic from our colleagues at Next In Tech shows, ICOs raised more than US$5 billion in 800 deals last year, so it’s probably time then to start paying more attention to the projects that emerge from this space.
In the meantime, consider this your ICO cheat-sheet.
with thanks to Henri Arslanian